So, here's what's happening in the Pacific Palisades right now:
A pro-development organization has sued Gov. Gavin Newsom over an executive order blocking duplexes in Los Angeles neighborhoods stricken by January’s wildfires.
Newsom issued his order in July in response to lobbying from property owners in the Pacific Palisades, the coastal L.A. community that was largely destroyed in the blazes. Palisades residents argued that allowing duplexes and spitting [sic] lots into two parcels would undermine the neighborhood’s character and worsen evacuation efforts in the event of future disasters. Following the governor’s order, all the jurisdictions affected — the cities of Los Angeles, Malibu and Pasadena and L.A. County — banned SB 9 rebuilds in high-risk fire areas. The suit includes each local government as a defendant as well.
This is interesting.
On the one hand, there is, of course, a logic to not allowing too much density and too many close-together houses in an area prone to wildfires and where there are only so many roads leaving the community. But on the other hand, it's not clear that this is really what it's all about.
The counterargument, from groups like the one suing, is that this is actually about perpetuating exclusivity, and perhaps even about "cleansing" the neighborhood of households who don't have the means to rebuild in a way that suits the "character" of the place. Duplexes = rental homes. And smaller lots = less expensive houses.
So, which is it?
My view is that this should be looked at from an overall population standpoint, and not from a housing type standpoint. According to 2023 census data for zip code 90272, the Pacific Palisades had a population of approximately 21,438 residents. This is a decline of just over 10% over the last 23 years. (Source: U.S. Census Bureau Decennial Census 2000 & ACS 2023)
On top of this, the number of households has also declined from ~9,319 in 2000 to 8,282 in 2023. So by all accounts, the area is shrinking and becoming less dense. There are fewer residents and fewer occupied homes. This is a directionally good thing if your primary concern is evacuation congestion and the safety of residents.
But then, what's the concern with duplexes and smaller lots? Is the concern that the area might regain its previous population and household count? Is the objective to continue shrinking and reach some more optimal set of numbers? Should there only be 15,000 residents, or maybe even 10,000?
Because if that's the case, then I think a more effective policy would be: "This neighborhood can only support X number of residents and Y number of households, because otherwise people can't evacuate quickly enough in the case of emergency. Once we reach these limits, we will stop processing building permits for all housing types."
When a policy only restricts specific housing types, as opposed to more directly addressing a stated problem, it suggests to me that the stated problem is not actually the primary concern.
Cover photo by Beau Horyza on Unsplash
The hardest thing about writing a daily blog is not the actual writing part; it’s coming up with a new topic every single day. I’m often asked, “How long does it take you to write your posts?” And the truthful answer is that it varies greatly.
Part of this variability, of course, has to do with the length and depth of each post, but another big part of the variability is that I have to first land on a topic.
The usual criteria are that I’m looking for something that is roughly aligned with the topics covered on this blog, that is interesting to me (and where I can hopefully bring a unique perspective), and that I haven’t already written about over the last 12+ years. Another challenge is remembering what I have written about!
The two techniques that I have found most helpful in optimizing for the topic problem are to 1) keep a list of topics as they hit me (I do this in the to-do app on my phone) and 2) read the internet until I land on something that excites me.
Technique one is the most efficient because it means I’m more or less ready to go once I sit down to write. But I don’t always have topics on the list. It’s not easy having a daily writing practice. It’s a huge commitment that sometimes feels worth it and sometimes doesn’t.
That said, hard things tend to be the things you want to do in life. There’s probably also something to be said about the fact that the hardest part is the thing that AI isn’t good at.
Cover photo by Klim Musalimov on Unsplash
Customarily, landlords induce tenants to lease space in a building by offering X months of free rent, as opposed to discounting the actual face rent.
For example, let's assume that the rent for a particular apartment is $3,000 per month or $36,000 per year. Assuming the inducement is equal to one month of free rent, the two logical options are: (1) offer the first month for free and then charge $3,000 for the remaining 11 months or (2) charge $2,750 per month.
Both options equal $33,000 in gross annual rent, but the second option permanently impairs the value of the real estate asset by lowering the overall rent roll on a go-forward basis. So when you capitalize the net operating income of the property, you end up with a lower value. For this reason, option one is the standard approach. You want to offer as much free rent as possible before touching your face rents.
But there can also be local nuances to consider on top of this standard practice. For example, I found this recent tweet from Paul, a multi-family landlord in Los Angeles, interesting. He notes that in rent-controlled buildings in Santa Monica, you also have to be careful not to offer free rent in the first 12 months of a lease. Instead, you need to offer it starting in month 13 or beyond.
His example:
Lease rate of $3,000
Inducement equal to 2 months of free rent ($6,000)
Tenant pays 10 months x $3,000 = $30,000 in Year 1
Apparently, the way Santa Monica looks at this is that the tenant is paying $30,000 / 12 months = $2,500 per month in rent. So, after year one this becomes the Maximum Allowable Rent (MAR) going forward under the city's rent control policies. In other words, the monthly rent becomes the $2,500 number and not the $3,000 number that you thought you had contracted for.
It's an annoying gotcha detail, but it's a meaningful and permanent one until the apartment turns over. Landlord beware. Real estate may be subject to the flows of global capital, but in many ways, it still remains a local business.
