Connect with CP&DR

facebook twitter

Follow us on Facebook and Twitter

Subscribe to our Free Weekly Enewsletter

Housing Market Switcheroo: The Affluent Go Downtown, The Poor To Suburbia

A few weeks ago, I attended an Urban Land Institute event dedicated to hyping Los Angeles's newfound urbanity. It was a panel discussion on the windy roof of an old office building at 3801 Wilshire Boulevard, just across Western Avenue from the historic Wiltern Theater and catty-corner to the Red Line stop at Wilshire and Western.

The 23-story building, a modernist building designed by architect Claude Beelman during the early 1960s as the headquarters for Getty Oil Co., has recently been renovated by Forest City Enterprises as condominiums. You can walk across the street to the Wiltern or a block or two to Koreatown stores and restaurants. The Red Line gives you immediate access to Universal City, Hollywood, and downtown. The Urban Land Institute event trumpeted "The Mercury," as Forest City has dubbed the building, as the epitome of car-free urban living.

If you can afford it. Forest City is selling the condominiums for about $700 per square foot. That means a nice two-bedroom condomium featuring windows on two sides and great views runs about $1 million.

A few evenings later, I found myself in the cramped living room of a single-family home in Ventura one of about 180 moderate-income, affordable units developed a decade or so ago by local developer Lynn Jacobs, now the director of the California Department of Housing and Community Development. Because of the affordability requirements, the homeowners bought their houses at a discount and can sell them only at a restricted sales price of between $300,000 and $400,000.

Recently, these homeowners said, the nature of their neighborhood had changed. New homeowners had more people especially more adults living in their houses. Four, five, six people were on the mortgage titles in order to qualify for financing. Seven, eight, nine cars were parked on the street in front of these houses.

The Southern California real estate market is increasingly driven these days by affluent people who want to live an urban lifestyle and poor people who want to live a suburban lifestyle. No one could have predicted this peculiar trend as recently as a decade ago. Rich people moving to a high-rise condo and riding public transit was simply unthinkable. But this situation is a fact of life today all across Los Angeles.

This is the opposite of what planners plan for. Planners generally assume that affluent folks want to live in large houses mini-mansions on large lots. They also tend to assume that starter homes will house nuclear families of one or two adults and a few kids who will bring with them maybe a couple of cars. They assume that rich people have lots of cars and poor people have none.

But this is where the striking change in the Southern California economy over the last 20 years comes into play. The simple fact of the matter is that metropolitan Los Angeles is no longer a middle-class place. It is a place where some people have a lot of money and most people have relatively little money the "working poor," as they have come to be known.

The affluent folks drive the market. They tend to bid up the price of everything, especially housing that they like or that is trendy. In a place like central Los Angeles, the cost of developing or redeveloping anything is so extraordinarily high construction costs alone run close to $200 per square foot that developers have little choice but to target the high end of the market. That's how a condominium in an office building that's been empty for a decade can cost $1 million.

Meanwhile, the less affluent folks struggle to keep up. Short-term trends aside, the cost of housing has consistently gone up over the last decade in Southern California while average wages have gone down. The median home price is 10 times the median household income the historic rule of thumb for a balanced market was 3 and, in many areas, home prices are more like 15 times the median income income.

So the working poor are doubling, tripling, and quadrupling up not to rent but to buy. And it's not hard to see why. If a $500,000 house requires $100,000 of income to qualify for a mortgage, then it only makes sense that multiple wage-earners making $20,000 to $30,000 each would join together to buy the house and live in it. They're living in overcrowded conditions, to be sure, but at least the occupants own and control those overcrowded conditions. That's much better,and probably cheaper, than renting a small apartment that they don't control.

And even among the working poor, most adults have their own cars, especially if they live in suburban areas, which puts a strain on driveways, lawns, sidewalks, and streets. The garage is usually out of the question, because it's used for living space.

This overcrowding trend among the working poor is coming on strong, of course, at the same time that cities and counties are under tremendous pressure to make new housing more affordable to this very same population by cutting parking ratios dramatically. Clearly, one of the many consequences of the current trend is a parking crisis in suburban neighborhoods all over Southern California. But that's only an indicator. Underneath will be considerable social and cultural stress as suburban neighborhoods change.

Over the next few years, home prices will level off and incomes though they've been generally declining might go up a little. This will relieve some pressure, but there's not much else on the horizon to indicate that this problem will get better. Overall, incomes will remain low and housing prices will remain high. Not very many rich people will want to relocate to large lots on the urban fringe. And the working poor are not going to live in overcrowded apartments without cars if they can possibly avoid it.

Once again, cultural change is running up against postwar planning assumptions in California. So California's planners will have to rethink once again what good planning means and what a good city or suburb is.

Search this site

NEW E-EDITION JUST PUBLISHED:

From our Authors: