Dear Mr. Krugman: You’re Wrong About Rent Control

RC 01 Apts

An open letter to economist Paul Krugman.

Dear Mr. Krugman,

I want to start off by saying that I’ve followed your column in the New York Times over the years, and I have tremendous respect for you. Since I have no background in economics, I appreciate your clear, straightforward approach to breaking down the issues. And more important, I appreciate the fact that you speak out against the dishonesty and fraud that are all too common in this country. There have been times when I really needed to hear the voice of reason, and you have been that voice.

But as much as I respect you, I have to say I think you’re dead wrong about rent control. In fact, I think most economists are wrong about rent control. Not that I have anything in my background to give me any credibility. You went to Yale and MIT. I went to LACC. But in spite of my utter lack of any credentials that would give me the right to talk about this issue, I hope you’ll read on at least a little further. Because when it comes to rent control, I think you, like the vast majority of economists, have failed to do your homework.

Just to give you an idea of the sloppy thinking that characterizes most discussions about rent control, let’s talk about Los Angeles. I live in LA, and I can’t tell you how often I’ve heard that rents are high in LA because of rent control. I’ve been repeatedly told it constrains new construction, which means we have low supply, which means we can’t meet the demand for new housing, and that drives prices up.

But there are a number of problems with this argument.

First, most of the people who talk about LA don’t even understand the difference between the City of Los Angeles and the 87 other cities that make up the County of Los Angeles. Some of these are embedded within the City’s boundaries. While the City of LA does have a Rent Stabilization Ordinance, there are only four other cities (Santa Monica, Beverly Hills, West Hollywood and Thousand Oaks) that have any kind of rent control. Median rents in Culver City, Burbank and Pasadena are as high or higher than the City of Los Angeles, despite the fact that these cities have no rent control ordinance on their books. And within the City of LA you’ll find considerable variation in housing costs. Rents in the corridor between Santa Monica and Downtown tend to be the highest. Rents in parts of the Valley (Arleta, Pacoima, Sylmar) and in the Harbor Area (Wilmington, San Pedro) are usually considerably lower. By itself, this seems to suggest that there are other factors besides rent control which may have a larger impact on rental costs.

Second, those who oppose rent control generally point to coastal cities like LA, San Francisco or New York, all of which have outrageously high housing prices. But absolute dollar amounts aren’t the best gauge of affordability. Really we have to look at prices relative to income, in other words we have to look at rent burden. According to a 2016 report by Abodo , the Miami-Fort Lauderdale-West Palm Beach area was at that time the most cost-burdened rental market in the US. A report from HUD the following year came to the same conclusion. While prices in the Miami area are well below those in New York or San Francisco, wages are also much lower, and renters are getting hammered. This is in spite of the fact that Miami has no rent control. Another report from Abodo that breaks down rent burden by generation finds that a number of urban areas in Florida appear high in the rankings, including Daytona Beach, Lakeland-Winter Haven, Cape Coral-Fort Myers, and Orlando. No Florida cities have enacted rent control, because state law prohibits them from doing so. Supply siders tell us that if landlords are allowed to charge whatever the market will bear, this will incentivize new construction which will generate more supply and bring prices down. That hasn’t happened in Florida. Renters there have been struggling for years, and somehow market forces have failed to bring relief. And while the Los Angeles-Long Beach-Anaheim area does appear on Abodo’s 2016 rent burden ranking, it’s interesting to note that it comes in at number five. None of the first four urban areas on the list have rent control.  (I should also point out that Long Beach and Anaheim do not have rent control.)

All the economists opposed to rent control insist that endless reams of research back their stance. Again, I’m not an economist, and I certainly haven’t spent as much time with the research as they have, but what I’ve seen doesn’t impress me. For all the talk of irrefutable data, the studies I’ve looked at seem very limited. They generally focus on a narrow selection of markets, sometimes just one market. They often base their conclusions on data that has a questionable relationship to rent control. They generally look at the housing market in isolation, without any effort to see rental prices as part of the larger picture. And they generally don’t acknowledge that there are a lot of different ways you can structure rent control.

No question, the forms of rent control used in the first half of the 20th century were a failure. I agree that setting absolute caps on housing prices stifles new construction and only encourages black market housing arrangements. But the forms of rent control adopted in some cities over the past 50 years are much different from their predecessors. For instance, in LA the Rent Stabilization Ordinance passed in 1978 only applies to apartments built before that year, so it doesn’t discourage new construction. It allows annual rent increases of 3%. Because the ordinance includes vacancy decontrol, rents are reset when a tenant moves out. It also has a mechanism that allows landlords to charge additional amounts to pay for capital improvements and major repairs. I have to laugh when I hear that rent control inevitably leads to poor maintenance of residential units, creating unsightly and unsafe slums. I often pass through Santa Monica, Beverly Hills and West Hollywood, all of which have a form of rent control, and I haven’t noticed any festering swaths of urban decay.

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Residents protesting gentrification in East LA.

While I can’t claim to have read every research paper on rent control published in the last 50 years, I have read a sampling, and as I said before, I’m not impressed. To go into specifics, I’d like to talk about a couple of papers that have been widely cited, and then another more recent study….

First let’s take a look at Gyourko and Linneman’s study from 1987, which analyses the allocation of benefits under rent control. They focus on New York City, and they use a lot of impressive formulas to compare the distribution of family income with the distribution of benefit-adjusted income under rent control. I don’t pretend to understand the math. I’ll just assume that all the numbers they come up with are absolutely correct. Their conclusion is that, “[I]f the primary social benefits of rent control are distributional impacts, they were not successful in New York.” They go on to say, “Economists have long predicted that racial discrimination could result in markets where nonprice rationing occurred. Blacks and Puerto Ricans in the controlled sector received lower benefits than their white counterparts.”

I’m sure they’re right when they say that calculating the dollar amounts shows an uneven distribution of monetary benefits. Unfortunately, they’re missing the whole point of rent control. It was never intended to ensure the equal distribution of monetary benefits. The purpose of rent control is to provide housing stability and to minimize the considerable economic and social costs of displacement. It does offer equal protection to all those who live in rent-controlled apartments, regardless of their race, which is why it blows my mind that the authors have the nerve to state, “Economists have long predicted that racial discrimination could result in markets where nonprice rationing occurred.” Are they kidding?! They’re saying rent control results in racial discrimination? Like discrimination never happens when we let the free market rule? This statement is so absurd it really calls the authors’ judgment into question. How clueless do you have to be to blame rent control for a social evil that’s woven into the very fabric of this country?

Another issue that comes up, not just in Gyourko and Linneman’s paper but in others, is the idea of a “rent subsidy”. This is the difference between the rent controlled price for a unit and what someone would pay on the free market. As an example, the authors say “…. if the monthly rent for a controlled apartment was $500 and this unit would have rented over $700 in the uncontrolled sector, the monthly rent control subsidy would be $200.” This is interesting, because it assumes that the free market price is the result of some kind of rational process. But is it?

Let’s look at a recent incident at an apartment complex in City Terrace. The building was sold to Manhattan Manor, a real estate investment group, and because it wasn’t covered by rent control, they decided to jack up the rents. One tenant had their rent go from $1,250 to $2,000 overnight, a 60% increase. Since the building wasn’t covered by rent control, and the tenants couldn’t afford the increase, the new owners started eviction proceedings. But the tenants fought back, and the case went to court. Far from siding with Manhattan Manor, the jury found that the unit had significant habitability issues and that the new owners had failed to make basic repairs. In fact, not only did the jury reject the owners’ bid to evict the tenants, they determined that the unit was only worth $1,050 per month in its current condition.

Now, in Gyourko and Linneman’s view, the new landlords were just exercising their right to reset the rent to what they believed they could get on the free market. And from the economists’ perspective, if the building had been rent controlled, the tenants would have been receiving a “subsidy” of $750 a month. But a jury, after looking at basic habitability issues, decided that the unit wasn’t even worth the $1,250 that the tenants had originally been paying. So the idea that the free market somehow sets fair prices through a rational process seems suspect. And this isn’t an isolated incident. Scenes like this are playing out all over LA, and I suspect, throughout the country. Real estate brokers routinely advertise “underperforming” properties, and in the current environment, with speculation running rampant, investors are happy to snap these buildings up. For many of these investors, the condition of the apartment isn’t a primary consideration in determining what to charge. All they care about is getting the highest possible return on their investment. Unfortunately, in many cases, deciding an apartment’s “fair market value” is just a matter of picking the highest number they think they can get away with.

But let’s move on to Glaeser, Luttmer, 2003. I give them credit. Their paper is one of the few I’ve seen that actually compares cities with rent control to cities without. They look at rental data in New York, Chicago and Hartford, and also create a baseline by taking a sample of Metropolitan Statistical Areas (MSAs) across the US. They even break the demographics down by income, household size and education. They’re certainly making an effort to take variables into account. And you could make the argument that the three cities they focus on are similar in a number of ways

Still, there are significant differences that could have an impact on Glaeser and Luttmer’s calculations. To start with, New York is unique. It’s by far the most populous city in the U.S., as well as a financial, educational and cultural center. It’s the point of entry for thousands of immigrants annually and its port is a global shipping hub. The authors use census data from 1990, when New York’s population was 7.322 million, Chicago’s was 2.786 million, and Hartford’s was 137,296. You could still make the case that New York and Chicago are major urban centers and roughly similar when it comes to income and demographics. But the comparison to Hartford, with a population roughly one fiftieth of New York’s, is really questionable.

And while I respect Glaeser and Luttmer for taking the trouble to look at MSAs all over the US to set a baseline, the vast majority of these urban areas have little or nothing in common with New York in terms of population, demographics, employment, income, housing stock, and climate. The idea that we can use the numbers for these areas to set some kind of “normal” to use as a comparison with New York just doesn’t make sense. If your main interest is in working out intricate math problems, the authors’ approach probably sounds great. But if you’re actually looking for answers to complex questions about housing affordability, it just doesn’t make it.

But the biggest problem when it comes to comparisons, even if we’re just talking about New York and Chicago, is density. In New York in 1990 there were 24,165 people per square mile. In Chicago in 1990 there were 11,905 per square mile. In other words, New York is over twice as dense in terms of population as Chicago. Even though the two cities are roughly comparable in terms of housing units per capita, the cost of real estate in New York is way higher, which means the cost of housing is going to be way higher. So while the median income for the two cities is in the same ballpark, you’re going to get less apartment for your buck in New York. Because of this, even if New York didn’t have rent control, you’d expect to see a difference in the kind of housing that New Yorkers could afford compared to the rest of the country.

There are other problems with Glaeser and Luttmer’s paper. On the first page, in talking about mechanisms for rationing goods, they say, “If the allocation mechanisms are not perfectly efficient, then the analysis illustrated by Figure 1, which implicitly assumes that the rationing under rent control ensures that apartments go to the consumers who value them most, is wrong.” The authors seem to be saying that rent control is failure because it’s not “perfectly efficient”. This is an interesting way to define failure when it comes to the housing market. Is the free market “perfectly efficient” when it comes to allocating housing resources? Of course not. When it comes to housing, perfect efficiency is nothing more than an abstract concept. Glaeser and Luttmer base their argument on their own false assumption. They make a claim for rent control that its supporters never have. I’ve never heard anyone claim that rent control is perfectly efficient. Let me repeat, the point of rent control is to provide stable housing and to prevent displacement.

But let’s get to the crux of Glaeser and Luttmer’s argument. For these two academics, the efficient allocation of assets is their Holy Grail. How do they define that in the housing market? “The baseline apartment characteristic used to estimate misallocation is the number of rooms in the apartment.” Huh. Interesting. So they look at the data for New York, Chicago and Hartford, and what do they find? “Our methodology suggests that 21 percent of New York apartment renters live in apartments with more or fewer rooms than they would if they were living in a free-market city.”

Really? That’s the criterion they use? Whether New Yorkers are living in “apartments with more or fewer rooms than they would if they were living in a free-market city.” Honestly, this seems pretty arbitrary. If the outcome was that a lot of New Yorkers were living in apartments with too few rooms, that would fit in with the standard argument that rent control decreases supply. But in their minds, having too many rooms is just as bad as having too few rooms. They say that, according to their calculations, “…the overall percentage of New York renters that are living in apartments that are the wrong size is 25.8%….” And what’s the right size? It’s a ratio they came up with by crunching data for a selection of U.S. cities, most of which are completely different from New York when it comes to employment, income, housing stock, and demographics.

Glaeser and Luttmer seem to believe there’s some kind of ideal that will result from the “perfect allocation” of housing resources, and that the free market will achieve that ideal. But even though all of us want to live in a place where there’s enough room to be comfortable, the key issue for renters is affordability. While Glaeser and Luttmer worry about the right number of rooms, you can see increasing numbers of tenants worried about just making rent in cities like Miami, Portland, and Austin, none of which have rent control. And the free market doesn’t seem to have helped tenants in Clark County, Nevada, where official data says that there were 30,000 evictions in 2016 alone. Interestingly, most housing experts in the area agree that the actual number is much higher, since many tenants who fall behind on rent just leave to avoid having an eviction on their record.

Ultimately, I have to say that Glaeser and Luttmer’s work isn’t very convincing. I give them credit for crunching a lot of numbers, but their conclusions seem pretty arbitrary. Like many economists who tackle rent control, they’re more focussed on the numbers than they are on reality. Rather than looking at the pressures the economy brings to bear on renters, rather than examining the impacts of speculative real estate investment, rather than measuring the social impacts of displacement, they spend their time counting the number of rooms a household has. And because in New York they find that those numbers don’t add up according to an an ideal ratio they’ve decided on, their verdict is that rent control is a failure.

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Downtown LA now offers “boutique apartment lofts”.

The most recent study I looked at was the 2017 paper from Diamond, McQuade and Qian, a trio of academics at Stanford. Their work was just as disappointing as the others. Like Gyourko and Linneman, these folks have decided they can analyze the impacts of rent control by looking at a single city. They feel perfectly comfortable making sweeping statements about the negative effects of rent control without considering what tenants are dealing with in other cities governed by the free market.

The folks from Stanford study decades of data from San Francisco and find that rent-controlled units are more likely to be removed from the market through legal conversions than units not covered by rent control. They argue that because of these conversions the supply of rental units shrinks and therefore rental prices rise. “We conclude that this led to a city-wide rent increase of 7% and caused $5 billion of welfare losses to all renters.” Well, that may sound logical on the face of it, but without comparing their data with rent increases in free market cities, it’s pretty meaningless. To claim any certainty about the actual rate of rent increases due to conversions you’d need to do more than study a single city. You’d have to compare your results to other cities without rent control to see if rents rose even without such conversions. Like, maybe Orlando, where Apartment List reports that rents rose 5.3% from August 2017 to August 2018. Or how about Denver, where a June 2018 report from Zumper says that in a single year the rent for a one-bedroom rose 16%.

This isn’t the only questionable conclusion that the folks from Stanford come to. Check this out….

“Taken together, we see rent controlled [sic?] increased property investment, demolition and reconstruction of new buildings, conversion to owner occupied housing and a decline of the number of renters per building. All of these responses lead to a housing stock which caters to higher income individuals. Rent control has actually fueled the gentrification of San Francisco, the exact opposite of the policy’s intended goal.”

This is fascinating. Because the authors see an increase in high-cost housing, they come to the conclusion that rent control accelerates gentrification. But this is based on the assumption that San Francisco housing prices only increased due to conversions, which is ridiculous. The fact is, real estate investors looking for the highest rate of return will do whatever’s required to squeeze more money out of a building. Sure, in San Francisco they resort to conversions to free themselves from rent control. But in markets without rent control they’d just jack up the rent as high as they pleased, and the end result would would still be the displacement of low-income residents by high-income residents. Free market cities like Portland, Austin and Denver have gentrified rapidly over the past 15 years.

Seriously, the authors are totally clueless on this point. They’re so busy fondling their data that they completely ignore the reality of what’s been happening in San Francisco. As the Bay Area has become a tech hub, wave after wave of high-paid employees have flocked to the city. Seeing this, real estate investors have bought up all the units they can in order to capture some of that cash. Even if San Francisco had never enacted any kind of rent control, prices would still be rising like crazy. Low- and middle-income tenants would still be getting hit with exorbitant rent increases as housing speculators swarmed over the city to cash in on the tech boom. These conversions aren’t the cause of higher prices, they’re just a tool. Given the rise of the tech sector in San Francisco and the flow of global real estate investment into the city, prices would be shooting up with or without rent control, and the end result would still be massive displacement of low-income residents.

Mr. Krugman, you seem pretty cool, so I hate to make sweeping generalizations about economists. But after looking at these three papers, and others on rent control, I have to say their authors all have one thing in common. They’re so focussed on crunching numbers they seem completely out of touch with reality. These academics have certainly spent a lot of time compiling data and working out complex equations, but did they even spend five minutes talking to renters in the cities they were studying? They analyze rental markets in terms of dollar amounts and the number of rooms, but did they spend any time looking at how renters are struggling in the current housing market? Did they even consider looking at displacement in free market cities like Miami, Portland and Austin? Did they ever consider that speculative investment could cause rapid distortions in the housing market that would leave renters out in the cold?

No. They look at isolated datasets and after adding up the numbers they come to the conclusion that rent control is incontestably bad. But their work is narrow and shallow. Of the three studies cited here, only one of them actually compares rent controlled cities to free market cities. And in that case the authors state that rent control should be perfectly efficient, without ever asking if the free market is perfectly efficient when it comes to housing. They claim that rent control distorts the housing market without considering whether other factors could distort the market as well.

But I want to be clear. I’m not saying you should come out in favor of rent control. I’m saying that, based on the research I’ve looked at, no economist should come out against it. It’s entirely possible that there are other, better papers I missed, and if that’s the case, you can dismiss me as an ignorant fool. But the studies by Gyourko, Linneman and Glaeser, Luttmer have been widely cited, which seems to indicate that economists give them credence. Honestly, I can’t understand why. While I’m sure these academics worked hard to produce their papers, the results are a meaningless exercise in crunching numbers. These people need to spend less time on their laptops and more time in the real world.

I admit I’m biased. I live in a rent-controlled apartment, and if it wasn’t for LA’s Rent Stabilization Ordinance I would have had to move out a long time ago. But I still say that the economists who argue against rent control haven’t done the research necessary to support their arguments. If you’re still with me at this point, you might be saying, Okay, so what kind of research should we be doing?

I’m glad you asked.

First, a credible study on the impacts of rent control shouldn’t be focussed just on rent control. It should look at housing accessibility in both controlled and free markets. It should cover a range of major US cities. It should include data covering at least a 20 year period, and 30 or 40 years would be even better.

Second, it should look at various measures of accessibility. I think the level of rent burden is the best indicator for tenants, but it would probably also be good to look at homeowners and gather data on their level of mortgage debt. A thorough study would also examine data on evictions and foreclosures, but the first category could be tricky. In LA we have data on evictions under the Ellis Act, but Ellis is only invoked for rent-controlled units. If tenants leave because the rent rises sharply, or because the landlord offered them $3,000 to get out, or because the owner threatened to call ICE on a family of undocumented immigrants, there won’t be any record of their departure. And while most cities would have records of cases where tenants are evicted through a legal process, I bet those cases rarely reflect the real rate of displacement.

And third, how about actually going out into the world and talking to the people who are struggling to keep a roof over their head? How about making this an interdisciplinary study that ties housing accessibility to income, education, location, race and culture? How about looking at housing in the context of the real world, instead of looking at it as a set of numbers on a spreadsheet. The thing that makes me angriest about the papers these economists have produced is that they seem completely cut off from the world around them. When I read that the Bureau of Labor Statistics says the median annual wage for economists was $102,490 in May 2017, can you blame me if the words “ivory tower” come to mind?

I realize a study like the one I’m talking about would cost a lot of money and take years to produce. But it’s time for economists to get out of libraries and conference rooms and spend some time in the world the rest of us live in. The rising cost of keeping a roof over your head is dragging millions of people down across the country. We’re in the middle of a nationwide housing crisis. While the majority of economists feel comfortable slagging LA and New York for having rent control, they don’t seem to want to ask why the free market is failing renters in cities across the nation. If the free market is supposed to naturally produce affordable housing, then why are tenants in cities like Portland and Chicago pushing for legislation to limit rent increases?

Mr. Krugman, if you’ve read this far, I want to thank you for hearing me out. The reason I decided to direct this letter to you is that, of the economists I’m aware of, you seem to realize that economics isn’t just about graphs and algorithms. It’s about people. It’s about whether people can find a job, whether they can put food on the table, and whether they can keep a roof over their head. As you know, in spite of the fact that unemployment is nearing historic lows, there are millions of tenants across the US who are struggling to make rent. Over the last fifteen years, real estate investment has become a global force, with investors targeting cities around the planet looking for the highest possible rate of return. This has caused housing costs to soar in cities as diverse as Los Angeles, Chicago, Toronto, London, and Hong Kong. The argument that we can build our way out of this crisis doesn’t seem credible, since the vast majority of new units built in these cities are far too expensive for the average citizen.

It’s time for economists to stop asking whether or not rent control works. They need to start asking whether the housing market, regulated or not, is working for the millions of Americans who are living a paycheck away from the street. They need to step outside the university campuses and the think tanks and take a good hard look at how difficult it is for average citizens to keep a roof over their head these days. Economists need to look beyond individual cities. They need to start asking bigger questions. They need to make an effort to see human beings as something more than numbers on a spreadsheet.

Until these economists open their eyes wide enough to look at the big picture, their research won’t be worth the paper it’s printed on.

RC 20 VC

Help Save the Regal Place Bungalow Court

RP 01 Stairs

LA’s bungalow courts are becoming extinct. In recent years we’ve seen a number of them demolished by developers. Even the Norton Court, which was eligible for the National Register of Historic Places, was torn down by real estate investors who valued cash over culture.

Now another bungalow court complex is threatened, but you can act to save it. The apartments at 3649-3657 Regal Place are slated for demolition, but community members believe the City should designate these units as a Historic Cultural Monument (HCM). Just above Cahuenga Blvd. near the foot of the Hollywood Hills, the first of these apartments were built in 1928. They stand directly across from Universal Studios, and according to film historian Joseph McBride, Steven Spielberg was living in one of these units when he became the youngest director ever to sign a multi-picture deal with a major studio.  McBride also says that Bobby Darin was a former resident.  Records from the County Assessor’s Office show that actress Yvette Mimieux owned the property in 1970.  The Cahuenga Pass Property Owners Association (CPPOA) strongly supports the HCM nomination. In their letter to the Cultural Heritage Commission, the CPPOA states that they believe the complex is the last bungalow court remaining in the Cahuenga Pass.

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One of the units at Regal Place.

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Stairs leading to the top of the complex.

RP 32 Top Unit

The complex is filled with trees and shrubs.

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Looking down from the highest point in the complex.

Visiting these apartments, it’s easy to understand why bungalow courts were so popular in Hollywood’s heyday. This cluster of small units gathered around a central green space, shaded by tall trees, creates an intimate, peaceful space for tenants. You’d never guess that the Hollywood Freeway was just a few hundred feet away. It’s worth mentioning that the developer also plans to cut down five of the seven protected oaks on the property. While replacement trees will be planted, it would take decades before they could reproduce the shady canopy that currently shelters these units.

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One of the apartments at Regal Place.

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Interior of one of the units.

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A shady back porch to relax on.

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View of the neighborhood from one of the units.

Please ask Councilmember David Ryu to nominate this lovely bungalow court for HCM status.

Councilmember David Ryu:
david.ryu@lacity.org

Please copy Randi Aarons at:
lilrandi@yahoo.com

Be sure to include the address, 3649-3657 Regal Place, in your subject line.

RP 90 Window

Predatory Development: Crossroads Hollywood

CH Sunset Project Site EDIT

New development is necessary. In order for a city to grow, in order for its economy to stay healthy, it’s important to have new construction to bring investment to communities and adapt to the city’s changing needs. But new development isn’t always a good thing. New projects bring new impacts, and the larger the project the more important it is to consider carefully how it will affect the surrounding community. Most large projects are a mixed bag. Pro-business groups will inevitably argue that they bring tax revenue and jobs, and both of these are important. But large projects can also have serious negative impacts, and we need to weigh those, too. Often it’s a matter of trying to figure out if the good will outweigh the bad, and in many cases it’s hard to say for sure.

On the other hand, in some cases it’s pretty easy to make the call. Crossroads Hollywood is a clear example of predatory development. While the backers of the project tout its benefits in terms of tax revenue, jobs and economic activity, they completely ignore the downside. And the downside is considerable.

First, let’s take a look at what this whole thing entails.

Crossroads Hollywood includes about 1,381,000 square feet of floor area, consisting of 950 residential units (of which 105 are for Very Low Income Households), 308 hotel rooms, and approximately 190,000 square feet of commercial space. The project does include the preservation and rehabilitation of the historic Crossroads of the World mall and the Hollywood Reporter building. All other buildings on the project site would be demolished, including 84 Rent Stabilized apartments. The developers are also asking for a Master Conditional Use Permit to allow the sale of a full line of alcoholic beverages at a total of 22 establishments, and another Master CUP to allow eight uses with public dancing and live entertainment.

I’ve gotta say, it’s pretty ambitious. The investors behind Crossroads, Harridge Development Group, are thinking big. They’re also thinking only of themselves and the massive profits they’ll reap from this project. They don’t really give a damn about the community. If approved, Crossroads Hollywood will be devastating for the environment, devastating for housing, and devastating to the health and well-being of the Hollywood community.

Let’s take a look at the project’s environmental impacts….

These days any developer is going to tell you their project is good for the planet. They learned long ago they need to play that angle to sell it to the public. But Harridge’s claims about Crossroads being environmentally friendly are mostly just hype.

The State of California has designated Crossroads Hollywood an Environmental Leadership Development Project. (ELDP). In order to qualify, the developer has to show that it won’t result in any net additional emissions of greenhouse gases (GHGs). But a project on the scale of Crossroads represents a huge increase in square footage, so it’s to be expected that there will be a huge increase in energy use. The report by the California Air Resources Board (ARB) estimates the Crossroads project will produce 9,440 MTCO2e (Metric Tons of Carbon Dioxide Equivalent) during demolition and construction, and then 14,294 MTCO2e during the first year of operation, though they say that number will decline each year over the life of the project. This is a huge increase in emissions. So how can the State say it achieves a net reduction?

Simple. The developer buys carbon credits. Like many other states, California has an exchange where businesses that aren’t producing their maximum allowed CO2 emissions can sell what they don’t produce as “credits”. Other businesses that want to offset their own emissions can buy the credits to satisfy regulators. So while Crossroads Hollywood will be putting tens of thousands of tons of additional GHGs into the atmosphere, the State says that buying credits actually makes the project carbon neutral. There are people who have reservations about the carbon credit system, but it’s become widely accepted as a tool for reducing global warming, so let’s go along with the idea that this does represent a net reduction in CO2 emissions.

The problem is that this project isn’t just producing massive amounts of CO2. It’s also spewing out tons of ozone, nitrogen dioxide, and particulate matter. This is bad news for the people who live in the area. The South Coast Air Quality Management District (SCAQMD) has evaluated cancer risk from air pollution in its Multiple Air Toxics Exposure Study IV (MATES IV). You can see by the map below that Hollywood is near the top of the scale.

Crossroads Air Quality MATES IV from EIR

But it gets worse. After going through pages of boiler plate language about localized significance thresholds and standard methodologies, the Crossroads Environmental Impact Report (EIR) gets around to analyzing impacts during the construction phase of the project. After listing nearby sensitive uses, including Selma Elementary School/Larchmont Charter School (same campus), Hollywood High, and Blessed Sacrament School, and acknowledging that young people are at higher risk of chronic lung disease from air pollution, the EIR claims, “…, localized construction emissions resulting from the Project would result in a less-than-significant air quality impact.”

Give me a break. Four years of construction, including demolition and excavation, thousands of diesel truck trips and extensive use of heavy machinery will have “less-than-significant” impacts on the kids at these schools? And it’s also important to point out there have been projects under construction on Selma for years now, many of them within three blocks of Selma Elementary. These kids have been inhaling construction dust and diesel fumes since 2015, and the folks behind Crossroads want to keep that going til 2021. But don’t worry. It won’t harm the students a bit.

So let’s talk about transportation. I will give the authors of the EIR credit. Usually traffic assessments for projects like these are ridiculously dishonest. In this case, the EIR acknowledges that traffic is already bad in the area, and that the project will make it worse. Here are a few shots of what it looks like at rush hour.

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Northbound traffic on Highland, the western boundary of the project.

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Traffic heading west on Selma toward Highland.

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Traffic heading north on Las Palmas toward Selma.

The EIR does analyze existing weekday rush hour conditions as required by the California Environmental Quality Act (CEQA). The problem here is, Hollywood is a special case. In addition to really awful congestion at rush hour, you can also have heavy traffic at night and on weekends because of the constant parade of concerts, movie premieres, food fairs and other miscellaneous events. There are multiple happenings in Hollywood every month, many of them involving street closures. And don’t even ask what it’s like during the Hollywood Bowl season.

I wouldn’t expect the authors of the EIR to include all this, because they’re not required to. But they should at least talk about additional traffic generated by the eight live entertainment venues that are included in the project. Crossroads Hollywood isn’t just meant to be a place where people live and work. It’s intended to be a destination. While I’m sure some of the spaces offering entertainment will be fairly small, it seems likely that at least one of them will be a dance club offering live DJs. And I wouldn’t be surprised if popular singers and bands start showing up on a regular basis. Which means that a community already overwhelmed with events that draw tons of cars and disrupt transit will have to bear an even heavier load once Crossroads is up and running.

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Apartment building to be demolished if the project is approved.

And what about the impacts that eight places featuring live entertainment will have on the LAPD’s workload? Not to mention the 22 establishments selling alcohol. Incredibly, the EIR doesn’t even discuss these things in the section dealing with police protection. They conclude again that project impacts will be “less-than-significant”. Obviously the authors of the EIR haven’t seen the research indicating that high alcohol outlet density has been linked to higher rates of violent crime.  Back in 2014, LAPD Chief Charlie Beck wrote to the Department of City Planning (DCP) pointing out that the “oversaturation” of alcohol outlets in Hollywood was contributing to increased crime, including robbery, shootings, rape, and assault. The DCP obviously paid no attention, because they’ve gone on granting liquor permits, and violent crime in Hollywood has risen every year since then. LAPD stats for Hollywood as of April 21 show violent crime has gone up 28.9% over the same period last year. The LAPD is understaffed, and doing their best to cope with a difficult situation. Too bad the DCP has no interest in helping them out. Apparently the folks at City Planning have no concern for the safety of Hollywood residents, or for the people who visit the area. And it looks like Harridge shares their total indifference.

This same indifference extends to the project’s noise impacts. Remember, the developer is asking permits for live entertainment in 8 venues. It seems like at least some of these will be outdoors. Check out this table from the EIR that lists the spaces where they plan to have amplified sound.

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It’s hard to say how much overlap there will be, since they don’t distinguish between those spaces intended for live performances and and those that will just have recorded sounds. But it’s pretty clear that there’s going to be a lot of music, and a lot of it will be outdoors. The EIR acknowledges that there could be significant impacts from noise, but don’t worry, they have a plan to take care of that. What’s their plan? They’re going to build a 12-foot wall on the project’s eastern boundary, between Crossroads of the World and Blessed Sacrament Church. And according to the EIR, that fixes everything.

This is so ludicrous it’s hard to believe they expect people to buy it. A single 12-foot wall is going to addres any concerns about noise. Live outdoor performances have been a problem for years in Hollywood. Area residents can tolerate a lot, and nobody gets bent out of shape if someone puts on a show during the day. But in recent years more and more club owners have been pushing the limits at night. There have been a lot of complaints about DJs ripping it up on rooftop bars in the small hours. The EIR’s claim that amplified music will only be heard in the immediate vicinity is bull. People who live in the hills have told me they can hear late night noise from down on the boulevard, and they’re not happy about it.

But Crossroads Hollywood wasn’t meant to benefit the community. It was meant to benefit the investors who are hoping to reap huge profits. This project will put more cars on the road and more poison in the air. It will create more crime than the LAPD can handle and more headaches for residents trying to get a good night’s sleep. And what do we get in return? Yeah, there’s the tax revenue, but the City is already seeing record revenues and still can’t balance its budget. More housing? Yeah, the vast majority of it priced way beyond the reach of most people who live in Hollywood. When we put the 105 Very Low Income units gained against the 84 Rent Stabilized units lost, we see a net increase of 21 units that will be accessible to the low income families that really need housing. The gain of 21 units will quickly be erased by the project’s gentrifying impact. If Crossroads is built, you can expect to see a lot of other investors buying up apartments and kicking people out. And will the project create jobs? Sure, mostly low-paying jobs in bars, restaurants, and hotels. Most of the people who will work there could never afford to live there.

This is predatory development. A project designed by investors for investors. The reason the EIR doesn’t see any serious problems for the community is because the needs of the community were never considered in any meaningful way.

It’s just about money.

Next week the City will be holding a hearing on Crossroads Hollywood. If you want to show up and speak your mind, here’s the info.

Tuesday, May 15, 2018, 9:00 am

Los Angeles City Hall
200 North Spring St., Room 350

ENTER ON MAIN STREET.

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Crossroads of the World

 

Where Is this Bridge Going?

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The old Sixth Street Bridge is gone. It was torn down early in 2016. The demolition was necessary because the concrete in the original structure was decaying. Work has begun on constructing a new Sixth Street Bridge, and right now it looks like it will be finished in 2020. (For the record, the formal project title is the Sixth Street Viaduct Replacement Project.)

Bridges are about making connections. The original structure was built in 1932, and was one of a series of bridges that spans the LA River. This ambitious infrastructure project started in the 20s and continued through the 30s, eventually allowing numerous crossings between Downtown and East LA. Here are a few photos of the old Sixth Street Bridge.

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A shot from the base of the bridge.

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A truck coming down the west side.

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A view of the bridge facing west.

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Downtown in the distance.

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A view of the San Gabriel Mountains from the old bridge.

The renderings of the new bridge are striking. It was designed by architect Michael Maltzan, but the project is a team effort, and the goal is to produce something much more than a bridge. Here’s a quote from Maltzan’s web site.

The design team including Michael Maltzan Architecture (Design Architect), HNTB (Engineer and Executive Architect), Hargreaves Associates (Landscape Architect), and AC Martin (Urban Planning) began with the fundamental understanding that the Viaduct is more than a simple replacement thoroughfare crossing the Los Angeles River. The project instead foresees a multimodal future for the City, one that accommodates cars, incorporates significant new bicycle connections. It also increases connectivity for pedestrians to access the Viaduct, not only at its endpoints, but along the entirety of the span, linking the bridge, the Los Angeles River, and future urban landscapes in a more meaningful relationship.

The project also includes a park and an arts center. You can see some images here.

Sixth Street Viaduct/PARC from LA Bureau of Engineering

Here are some shots of the project site from March 2017, when work on the new bridge was just beginning.

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For the time being, this is where Sixth St. ends.

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Lots of machinery on the project site.

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Looking across the river toward East LA.

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A shot of the riverbed when construction was just starting.

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Another angle.

And here are some shots from August 2017.

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A little more progress has been made.

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A closer view.

For the team involved with the design, this project is all about bringing things together, creating connections and offering new ways for people to experience this space. One of the chief goals is to link the Arts District with Boyle Heights and the LA River. That sounds pretty cool in the abstract, but in actual fact there are a lot of reasons to worry about the downside. I’m sure Maltzan and his team see this project as a positive thing, but that’s not surprising. They’re architects and engineers engaged in creating a spectacular new piece of infrastructure. And of course the City’s website  is all about the upside.  But really, the City’s glib promo materials don’t begin to describe what’s happening here. By itself, the new bridge may sound great, but if you look at it in the larger context of the area’s culture and economy, you start to realize that this project could have serious negative impacts.

Any large scale infrastructure project, any attempt to remake the landscape, is going to affect the surrounding communities. These impacts can be good or bad, and often it’s a mix of the two. In this case, the biggest issue is one that never gets mentioned on the City’s web site. It’s the same issue that communities all over LA are dealing with. Displacement. Downtown LA has been going through a massive construction boom, with high-end housing and high-end retail largely transforming that community into an upscale enclave. Now developers are eyeing neighborhoods on the other side of the river.

The residents of Boyle Heights are already feeling the effects of gentrification, as real estate investors looking for cheap land and big profits have been buying up parcels in the area. Evictions are already happening, and many people who live in this largely Latino community are afraid they’ll be next. You may have read about the protests that have taken place in recent years. Here are some shots from an action staged by East LA residents in September 2016.  Protesters met at the intersection of Whittier and Boyle, where the old bridge touched down on the East Side.

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“Boyle Heights Is Not for Sale.”

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Families are worried about losing their homes.

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Many people on this side of the river see gentrification as violence.

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New art galleries are seen as harbingers of displacement.

The protest movement in Boyle Heights has gotten a fair amount of media attention, partly because in some cases the protesters have used aggressive tactics in trying to shut down a new coffee house and some local galleries. They see these businesses as the first outposts of coming gentrification. There are people who have questioned the protesters’ methods, complaining that they’ve gone too far. But let me ask you this. If you were in danger of losing your home and being driven out of your neighborhood, how far do you think you’d be willing to go?

It’s no accident that communities like Boyle Heights have been targeted by real estate investors. Land is cheaper there than in Downtown, and they know that the completion of the bridge and the accompanying amenities will make the area more desirable to upscale residents. We’ve already seen something similar happen in the Arts District. A largely low-income community has been rapidly transformed by a massive influx of developer dollars, and the people who had lived there for years, in fact, the people who actually built the community, have been driven out.  A similar scenario has been unfolding in Hollywood, and with the construction of the Crenshaw/LAX line you can see the same thing happening in communities like Leimert Park.

Investment in a community can be a good thing, but not when it drives out the people who have spent their lives there. And these days it’s not a gradual evolution. City Hall works with developers to target areas for rapid growth, almost all of it geared toward affluent new residents. When the City or County lays plans for new infrastructure, like light rail or parks or, in this case, a bridge, real estate investors move in quickly.  Often these investors are well connected at City Hall and already have possible projects in mind.  In other cases they’re speculators just snapping up parcels that they know will rise in value. They don’t plan to build anything, since they know they can make a profit just by sitting on the property until new infrastructure is in place.  And Mayor Garcetti gleefully promotes the aggressive transformation of these communities, apparently without giving a thought to the real suffering that displacement is causing for thousands of Angelenos. It seems he feels he was elected just to serve the affluent.

These days I hear so much talk about making LA a “world class city”, and I’m really sick of it. Garcetti’s idea of creating a “world class city” is about pouring billions into new infrastructure so that developers can cash in by building upscale enclaves for the affluent. Personally, I don’t care what class LA is in. If we can’t help hardworking people stay in their homes, if we can’t support communities that people have invested their lives in building, then this city is a failure.

You can spend all the money you want on bridges and parks and rivers and rail lines. All that stuff is meaningless if at the same time we’re dismantling our communities, the human infrastructure that really holds this city together.

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West Hollywood Is Taking Action. Why Can’t LA?

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Level Furnished Living in Downtown LA

A friend just sent me an article from Wehoville. Last year the City of West Hollywood issued a ruling that Korman Communities, operator of the AKA extended-stay hotel, was breaking the law by offering units as short-term rentals. There are actually 190 units in the complex, which was originally approved by the City as residential condominiums. When the site was purchased by Korman, they announced that the units would instead be offered for extended-stays. This is key, because this use is allowed, since guests would be residing there for more than 30 days.

But after doing some research, Interim Director of Planning John Keho concluded that the 110 units in the west tower were actually being offered as hotel rooms. He found evidence on-line that AKA was promoting the building as a hotel and decided the City had to put a stop to it. Korman is appealing the decision, and there will be a hearing this week.

The reason I’m bringing this is up is that there’s a similar situation at Level Furnished Living (LFL) in Downtown LA, and City Hall has done absolutely nothing about it. The project was approved back in 2013 as 303 residential condominiums and 7 commercial condominiums. But when it actually opened, the units were being offered not as condos but for extended stays. Again, this is legal, because the guests are staying for longer than 30 days. But last year the LA Weekly reported that the units were being offered for short-term stays. In other words, they’d become hotel rooms. This is not legal.

And what has the City of LA done about it? Absolutely nothing. The owners of the building claimed they were working with the Department of City Planning (DCP) to get a transient occupancy permit. This may be true, but the DCP hasn’t approved anything yet, and the building is still operating as a hotel. In other words, while the folks at City Hall are telling us we have a housing crisis every chance they get, they’re allowing the owners of LFL to turn over 300 residential units into hotel rooms.

So what does the City have to say for itself? I was at a meeting last month where a guy from the City Attorney’s office spoke. He first told us that they just didn’t have the staff to go after illegal short-term rentals (STRs). He went on to say these cases were really difficult because the City had to send inspectors out to the site to actually see that there were guests who were staying there illegally. This was tricky, because inspectors worked during the day, and tourists were usually only in their rooms at night. So, according to him, the City’s hands were tied.

What rubbish.

How hard is it to find evidence that LFL is offering units as hotel rooms? I just went to Hotels.com and did a search. It came up right away. I punched in some dates and found I could stay there for as little as one day.

LFL from Hotels Book One Night 180313 CROPPED

But is that really evidence? Even if they’re posting on Hotels.com, maybe no one has ever actually booked a room as a short-term guest. So I went to Yelp! next, and found these reviews….

“My family decided to travel back to LA over Thanksgiving. Since we are a family of four with two little kids we didn’t want to inconvenience anyone by staying in their home. That being said, since we had kids we needed to also have a kitchen and ample living space for our brief stay, enter Level Furnished Living.”

“I ended up staying at Level after a nearby hotel messed up my reservations multiple times and could not host me. The staff at Level were so accommodating and wonderful! We were given an early check in time and they answered all questions we had.”

“Last weekend I traveled to LA for a fun filled weekend of football. On Saturday I watched a great game between the Texas Longhorns and USC. The next day I saw one of thenew LA teams the Chargers play my home team the Miami Dolphins. Now even though those experiences were great, I had to give kudos to the place were I stayed. Which wasLevel Furnished Living!”

People do really seem to love the place. And I should point out that some guests who posted reviews had stayed for months. But it’s clear from these postings that LFL is offering units as hotel rooms.

So why hasn’t the City taken action? Back in 2016, when short-term rentals were becoming big news, City Attorney Mike Feuer held a press conference and announced that he was going after four apartment owners who had illegally turned units into STRs. But we’re coming up on two years since that press conference, and last time I checked none of those cases had been resolved. Feuer is good at putting on a show for the media. Not so good when it comes to cracking down on wealthy developers.

And would Feuer even have to file a suit against LFL? No. The City could start by simply sending a letter to the owners saying that the City had evidence that the building is operating as a hotel, and telling them to either shape up or face the consequences. If they failed to comply, then the City could open an investigation. I don’t care how short staffed they are. This isn’t a duplex where the landlord is making some extra cash on the sly. This is a tower with over 300 units in the heart of Downtown. It was approved as residential housing. The DCP keeps approving new luxury towers in Downtown, insisting that the area needs more housing. Why isn’t it cracking down on people who are illegally taking housing off the market?

Actually, the answer is simple. City Attorney Mike Feuer, Councilmember Jose Huizar and Mayor Eric Garcetti really have no interest in providing housing for the people of LA. They also have no interest in prosecuting wealthy deveopers, no matter how many laws the developers break. They’ll give you a lot of excuses, but in reality they just don’t give a damn.

Bottom line, the City of West Hollywood is taking action. The City of Los Angeles is not.

If you want to read about city officials who actually feel it’s their responsibility to serve the public, here’s the story from Wehoville.

AKA Appeals City Decision that Its Short-Term Luxury Rentals Are Illegal

I Remember When Artists Used to Live There

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800 Traction

Back in November I posted about a protest by Downtown artists facing eviction. I’d been wanting to follow-up, so earlier this month I went to a gathering at 800 Traction to check in with the folks there. Unfortunately, there’s not a lot to report. The artists who’ve been living and working in this building for years, in some cases for decades, still don’t know what the future holds for them. They’ve hired a lawyer, and negotiations with the developer are currently underway. No one had any current news about The Artists’ Loft Museum Los Angeles (ALMLA), which is a short walk away, at 454 Seaton. This is another group of creative people who have called the area home for years. They were served with eviction papers in 2017, and have been wrangling with lawyers since then.

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454 Seaton

But I wanted to write a post anyway, if only to keep this situation in peoples’ minds. As gentrification continues to spread across LA, the pace of evictions is accelerating. Evictions from apartments covered by the Rent Stabilization Ordinance (RSO) have been increasing for years, with 1,824 units taken off the market in 2017 alone. Over 23,000 RSO units have been lost since 2001. But this only tells part of the story, since there’s no mechanism in place to track the number of tenants who are forced out of non-RSO units. It’s commonplace these days for people living in a building not covered by rent control to find that the landlord has suddenly hit them with an exorbitant increase. If they can’t pay, they have to leave, and no one has been keeping track of how often that’s happened in recent years. If you’re not covered by the RSO, you have no protection. Unfortunately, that’s the case for the artists at 800 Traction.

So many people have highlighted the irony of an Arts District that’s forcing artists out, it seems redundant to bring it up again. The folks at City Hall certainly don’t care. They’ve been actively assisting real estate investors in a massive overhaul of the area. The change in the neighborhood’s vibe is both striking and depressing. Even going back just 10 years, I can remember aging warehouse spaces filled with struggling artists who didn’t have much money, but who had still managed to create a lively community. Most of those people are gone now. And where there used to be cheap dive bars and funky little stores, now the streets are being taken over by clothing shops and chain restaurants. More and more these days the neighborhood seems like a giant outdoor shopping mall.

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The people at City Hall keep talking about how they want to create vibrant communities, and insist that the onslaught of high-priced apartments and upscale retail is helping to achieve that goal Downtown. In reality, what they’re doing is creating enclaves for the affluent that automatically exclude anyone making less than $70,000 a year.

If these artists are eventually forced out of their homes, it’ll be one more win for the developers. And a huge loss for LA.

AE Live Work

 

Westlake Residents Speak Out Against “Design District”

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Attendees at a community forum on the North Westlake Design District.

It’s clear that the people at City Hall think they know better than we do how our communities should grow. The latest example of their arrogance is the proposed North Westlake Design District (NWDD). It’s another attempt to put money in developers’ pockets by pushing for gentrification and displacement in low-income communities. Check out the language from the notice announcing a hearing held by the Department of City Planning (DCP) back in 2014.

“The proposed Design District is being considered to guide new development that will complement the existing character of the neighborhood, create a pedestrian friendly environment, and provide neighborhood-serving amenities. The proposed zoning ordinance is initiated by the City of Los Angeles.”

Pay attention to that last sentence, because it’s the key to what’s happening here. This “design district” is not something that the community asked for. It’s something City Hall wants. Are any of the area’s residents in favor? Local activists organized a community forum in January. I was there for about an hour, and I only heard one speaker who thought this was a good idea. Everybody else who spoke while I was there was against it. Why? Well, there were a lot of reasons, but it boils down to the fact that a lot of them are worried they’re going to get kicked out of their own community.

Why are they afraid that’s going to happen?

Because that’s what’s been happening in communities all over LA for well over a decade. As real estate investment interests have moved into places like Echo Park, Highland Park, Boyle Heights and Hollywood, low-income residents have been forced out by rising rental prices. Even units protected by the Rent Stabilization Ordinance (RSO) aren’t safe. In 2017 landlords took 1,824 RSO units off the market using the Ellis Act. Over 23,000 RSO units have been lost since 2001. So the residents of the Westlake area, including Historic Filipinotown, have good reason to be worried.

Real estate investors are already buying up property in the area. The City Planning Commission recently approved The Lake, a huge mixed-use project that includes a hotel and a 41 story residential tower, at Wilshire and Bonnie Brae. Other projects in the works are a 54-unit building at 1246 Court and a 243-unit mixed-use complex at 1800 Beverly. As investors move in, you can bet a lot of locals will be forced out.

The impacts are already being felt in the community. One of the speakers talked about how the office building he works in was recently purchased by a new owner, and the non-profit the speaker works for has already received an eviction notice. Another speaker complained that a project containing over 200 condos at Temple and Hoover will take away what little open space the neighborhood has.

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City planning staff responds to community concerns.

There were a lot of unhappy people at the forum. Speaker after speaker came forward to talk about their concerns, and some weren’t shy about expressing their anger. Three representatives from the DCP attended, and they did their best to defend the design district. Personally I didn’t think their arguments were persuasive, but at least they showed up. The organizers of the forum invited Councilmember Mitch O’Farrell to come and hear what the community had to say, but he was a no-show. Didn’t even send a rep from his office. I guess that shows just how much he cares about the folks who live in the area.

We’ve seen this all before. The City pushes a plan that will create a “pedestrian friendly environment” and bring “neighborhood-serving amenities”. They talk about “walkable”, “vibrant” urban spaces, where people can shop, dine, drink and party. The only problem is, once the City’s done with its makeover of these areas, the people who get to enjoy them are the affluent newcomers who’ve taken the place over. Families who used to call the neighborhood home have to leave. They can’t afford to live there any more.

In response to the NWDD, a group called The Coalition to Defend Westlake has been formed. To view their Facebook page, click on the link below.

Coalition to Defend Westlake

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People wait in line to have their say about the NWDD.