Exurbs in trouble

From the blog Calculated Risk:

Last week I mentioned that 15% of the homes in Temecula, CA were REO or in foreclosure. Temecula is a fairly isolated town (see map), and the city is very dependent on construction and/or long commutes. The combination of the housing bust, plus high oil prices, is hitting exurban towns like Temecula very hard.

From Bloomberg: Wealth Evaporates as Gas Prices Clobber McMansions, SUV Makers

``At $4 per gallon gas, $125 per barrel oil and $10 per million Btu natural gas, a lot of activity becomes uneconomical,'' says Mark Zandi, chief economist at Moody's Economy.com ...

The lifestyle of the exurban commuter may be one casualty.

Emerging suburbs and exurbs -- commuter towns that lie beyond cities and their traditional suburbs -- grew about 15 percent from 2000 to 2006, nearly three times as fast as the U.S. population, as Americans moved further out in search of more affordable houses or the bigger ones that are sometimes derided as McMansions.

``It was drive until you qualify'' for a mortgage, says Robert Lang, director of the Metropolitan Institute at Virginia Tech in Alexandria, Virginia. ``You can't do that anymore. Your cost of transportation will spike too much.''

Assuming the price of gas stays around $4 a gallon or spikes higher, places like the Antelope Valley and Inland Empire may be looking at a permanent contraction. Meanwhile, Downtown's gentrification is likely to continue or accelerate, despite the downturn (though I don't see condo sales recovering anytime soon). Of course, Downtown isn't for everyone, but communities with good access to public transportation and that are close to employers are positioned to do better in the long term. Density is a dirty word for a lot of Angelenos, but for better or worse, it looks like suburban sprawl simply isn't economically sustainable for the average family.

I've used maybe half a tank of gas in the past month and that plus the decrease in rent means I'm feeling pretty happy about moving down here.

Alexandria landlord slapped by judge

From the LA Times:

A federal judge has found that the city of Los Angeles allowed more than 100 poor and disabled people to be improperly evicted from a downtown residential hotel slated for redevelopment.

Judge Margaret M. Morrow issued a preliminary injunction last week ordering the city's Community Redevelopment Agency to locate dozens of the now potentially homeless people and pay them relocation funds.

She also ordered the owner of the Alexandria to make the building habitable for the remaining 100-plus tenants, many of whom are elderly and disabled.

The ruling is the latest turn in a long-running battle over redevelopment downtown. It marks a victory for the homeless and their advocates, whose claims that hotel owners were treating them badly fell on deaf ears in city government for months.

...

The Alexandria, a stately building at 5th and Spring streets, was built 102 years ago as a luxury hotel. Its architect, John Parkinson, also designed such notable buildings as Los Angeles City Hall, Union Station and the Los Angeles Memorial Coliseum.

For a time, the hotel, with its Tiffany skylight, was the most glamorous in all Los Angeles. But by the 1980s, as downtown fell on hard times, the beaux-arts revival landmark had become a weekly rate residential hotel, serving as housing of last resort for hundreds of disabled people.

In 2006, as gentrification was sweeping through downtown and lofts began to transform old buildings, developer Ruben Islas and partners purchased the building and began renovating it.

Islas, who specializes in low-income and senior housing, pledged to keep the building as affordable housing and received funds from the CRA and the federal government to help pay for the rehab.

Soon, however, many long-time tenants of the building, organized by homeless advocacy groups such as the Community Action Network, began accusing developers of waging an illegal campaign to get them out and replace them with wealthier clientele.

They claimed that the water and elevators were shut off for days at a time, destroying their quality of life and leaving the disabled among them stranded upstairs without potable water or flushing toilets.

The Los Angeles City Council and the CRA board declined to step in, despite the parade of residents in wheelchairs urging them to do something.

Islas denied the charges and accused his critics of sabotaging work at the Alexandria by turning off the water and disrupting service on an elevator.

Last fall, residents filed a lawsuit charging that Islas and his partners "systematically and intentionally worked to remove the long-term tenants of the Alexandria and replace them with non-elderly, non-disabled and non-African American tenants."

The lawsuit, which seeks damages, is set for trial next year.

If you look at the Alexandria's website, it definitely seems as if they are trying to get lofties into the building (check out this photo, which, trust me, does not resemble anyone who currently lives in the hotel).

This situation truly sucks because there are so many buildings in this area that can be developed without displacing people (the building I live in, and most of the buildings in the area, were vacant before they were developed into lofts). One of the things I love about downtown (despite my over-reaction to the Hayward shooting) is that it is economically diverse in a way that you see a lot in New York but don't see much in LA. The SRO residents were here first, and if they lose their housing, they have no place to go but the street. Plus there are plenty of empty buildings/lots that can be developed, so why push out people who really need their homes?

Silverlake sucks

A post in Curbed LA asks why the Rowena Reservoir isn't open to the public. Some replies in the comments section:

rowena reservoir is encased. the water in the picture is "non-structural" - by which i mean purely for aesthetics. the space used to be open to the public, after it was first built. this being silverlake, i'm sure it was closed at the request of the neighbors.

The heartbreakingly beautiful Rowena Reservoir actually covers a subterranean water storage tank and even though the precious H2O is now protected and secure below such landscaped wonderfulness, my bet is the grounds will remain off limits long into the future. I'm gonna hazard a guess that it was fenced off due in part to the efforts and outcrying of area residents who feared it would draw the vast unwashed transient masses. That's what the Silver Lake Meadow is for.

Ugh. I'm so glad we moved.

Rents in the Historic Core

A post on Curbed LA breaks down the rents at some of the loft buildings in my neighborhood.

Union Lofts: $1800 for 630sf. Dark, no tubs in bathrooms.

Chapman Flats: $1800 to $2200 for 800sf

Pacific Electric Lofts: One month rent free with 13 month lease (but no info on rents)

The article doesn't say if in-building parking is included. That would definitely add to the appeal, but these buildings still seem way overpriced. These rents are going to come down--believe it.

More thoughts on downtown development

I saw a post on Curbed LA that mentioned LA Live. Since I had only a very vague idea of what LA Live is, I did a little googling and quickly found out that LA Live is basically Marina del Rey combined with Universal City Walk, located right next to the Staples Center.

Wow. Talk about missing the point of being downtown.

I know that South Park is supposed to be the most successful neighborhood in Downtown--but by what criteria? Do we really want to recreate Marina del Rey Downtown? I mean, if you want a Marina del Rey living experience, wouldn't you rather just live in Marina del Rey and be able to walk to the beach?

If you're going to develop Downtown, you should exploit what's good about being in a dense city: walkability, readily available mass transit, older buildings with details you don't find in newer construction. That's the hook. Not, "Ooh, it's just like Third Street Promenade! And almost as expensive! Only it's not next to the beach and the freeways form a cluster fuck around it!"

The Bank District/Gallery Row/Historic Core (pick the name you like best) makes a lot more sense. You're restoring the beautiful Beaux Arts and Art Deco buildings that are already there. There are more and more restaurants, bars and galleries springing up. It's a quick trip to the freeway but you're not living right next to it. You have easy access to most of the major bus and rail lines in the city. And you have a lot of economic and ethnic diversity, which is not the case in most of LA.

It'll be interesting to see what happens in South Park as the condo crash continues. I think the more central areas of Downtown may wind up doing better in the long run. The artists and creative types who are drawn to the Historic Core may be more likely to stick around simply because their expectations are more reasonable. And the changes to the neighborhood are driven by residents, rather than by developers.

Downtown developer up shit's creek (which is good news for folks like me)

From Bloomberg via Curbed LA:

May 11 (Bloomberg) -- A package of Los Angeles real estate on sale for 35 cents on the dollar is attracting investors to the depressed shares of Meruelo Maddux Properties Inc., the biggest private landowner in the city's four-square-mile downtown.

The stock has plummeted 85 percent since an initial public offering 15 months ago as the global credit crisis threatens to disrupt refinancing of $200 million in mortgage debt coming due in the next 12 months, as well as completion of the city's tallest downtown residential tower.

Meruelo Maddux owns or controls 80 acres including the Little Tokyo Shopping Center, home of the country's largest Japanese supermarket, as well as warehouses and buildings used in Tom Cruise's action film ``Mission Impossible III.''

...

Meruelo Maddux's market capitalization of $142 million is about a third of the book value of its properties minus debts. Loan payments and maintenance consume $500,000 a month more than the company takes in, eroding the developer's $13.5 million in cash.

...

Meruelo Maddux's biggest bet is that people will want to live downtown, where 500,000 work but only 35,000 dwell....Meruelo Maddux is building a 34-story rental tower, known as 717 Ninth, that will be Los Angeles's tallest downtown residential structure. Twenty floors have been erected so far. The building is across the street from a 50,000-square-foot Ralphs Grocery Co. outlet, the first supermarket-chain store to open downtown in more than 50 years.

Bank Balks

While a ``large bank'' pulled out of a $97 million construction loan for the tower in January, the project will be completed on time next year, Meruelo told analysts on a March 31 conference call, without identifying the lender. The company is negotiating a new loan, he said.

People do want to live downtown. What they don't want to do is pay $700K to do it. Wonder what the sales prices will be when the tower is finished next year?

Why We Moved Downtown (and why everyone else may follow)

The main reason was space. My husband (hereafter known as My Boy, or MB) is a computer consultant who works from home. He also has a lot of hobbies and loves to fix watches, collect and use old cameras, rehab motorcycles--basically, take things that aren't working and get them up and running agin. So he needs room for a workbench and tools. Plus just over a year ago we added a charming redheaded baby to our family and Kidlo needs his own room.

We'd been living in Silverlake and needed to move in a hurry (landlord poisoned our air conditioner--don't feel like getting into the details), but all of the places in our price range were tiny--700 sf or less for a two bedroom. We looked at houses but a) they were expensive and b) we were worried that we'd rent a house and then get kicked out a few months later when the owner defaulted on the mortgage (more on that later). We thought of buying but we didn't have enough of a down payment saved up (the days of no-money-down mortgages are over).

So basically we were screwed. Until MB saw an ad on craigslist for downtown lofts.

I work on the west side of downtown and we'd been going to Art Walk for a few years, plus we love going to Little Tokyo for conveyer belt sushi. So we knew the area and liked it a lot, plus MB and I grew up in New York (me in the Bronx, him on the Upper West Side), so we're city kids at heart. We decided to take a look at new lofts on Spring Street and holy shit, they wuz cheap. Crazy cheap. Like $1600/mo for almost 1,000 sf cheap. We were paying almost $2100 for our shithole in Silverlake, so when we saw those prices we did the Tex Avery eyes-bulging-tie-spinning routine. We would have to pay for parking, but even with that we were looking at saving almost $300 a month.

So we went for it. And here we are.

There have been a few things to adjust to. Having the car a block away is a pain in the ass when you have the baby and groceries and other shit to haul around. And the neighborhood is definitely still on the gritty side (though a helluva lot better than it used to be). Seeing drug dealers on 5th did not make me a happy mama.

The good part is that our loft is unbelievable. Brand new kitchen, two bathrooms with deep tubs and marble floors, dark wood (well, Pergo) floors and huge windows. We even have a patio! We're having a wall put in to section off the baby's room and still have enough left over to fit in MB's work area and a writing desk for me.

Plus the creative vibe in the neighborhood is amazing. Our next door neighbor is a DJ, the Japanese guy across the hall is a dealer in vintage vinyl, a woman on the 5th floor runs a dressmaking business. And it's a real city, so I walk down the street and overhear people's conversations (Today's example: "Women, money and drugs they didn't pay for!"). And Broadway reminds me so much of the Bronx. I love how whole families turn out to shop, Abuela, Mami y Papi, Tia and all the kids. I love how you can see some big tough cholo with baggy jeans and tats cradling his baby cousin in his arms.

Financially, living here is an incredible bargain. It's not just the cheap rent--not driving every day is going to save us a huge amount of money. And here's where I get to the "why everyone else will follow" part...

Because the condo market has collapsed and condo buildings are being converted to rentals, the rents have dropped and are going to keep dropping. It's just flat out cheaper to live here than in Los Feliz, Silverlake and even Echo Park (which is ridiculously overpriced). Cheaper rents = what I'm seeing in my building, which is an influx of young artist types who are no longer priced out of the neighborhood. The more creative people who flood in, the more retail we'll see, the streets will get safer and that in turn will attract even more people.

Also, the price of gas is going to keep going up--China and India want gas too, which means the days of cheap gas are over. Mass transit ridership is booming. Downtown is where all the transit lines for the region converge, so you can live downtown and take the Rapid to Santa Monica...or the red line to the Valley...or the gold line to Pasadena...you get the picture. Or if you're like me and work downtown, you get to walk, get some exercise and completely eliminate your commuting cost.

(As an aside, places like the Inland Empire and Antelope Valley which have long, expensive commutes, high rates of foreclosure and no local employment are fucked).

Of course, there have been artists moving into downtown for more than ten years, but what you're seeing now is the second wave--people weren't willing to deal with hard core skid row or couldn't afford to buy a luxury condo, but are now getting pulled in by the Art Walk vibe and the cost of living.

Downtown has gone over the tipping point, so now it's just a matter of watching the people flood in.