Tag Archives: Mid-Rise

A Short High-Rise Editorial

First, many thanks are owed to this week’s guest author, Tom Steidl, for producing such a great, detailed post about the impact of building codes on high-rise development in Los Angeles. A few follow up thoughts:

Long-time readers will know that this blog has strongly advocated for low-rise and mid-rise density as the key to affordability in LA, since these types of construction can take advantage of lower costs of construction and will pencil out all over the city. However, there clearly is demand for high-rise living in some neighborhoods in LA, and we ought to allow and encourage it in those areas. The more efficient we can make these developments, the more units will pencil out, and the more demand can be accommodated by these projects. That’s a good thing all around: it gives more people the opportunity to live in a high-rise, and it reduces rent pressures on existing low-rise and mid-rise apartments.

The post also serves as a great example of the complexity of land use regulations and of the decisions that private sector actors make. Too often, the popular narrative about development holds that developers build the projects they build because they are excessively greedy, or excessively stupid. This is poor analysis and it leads to poor policy. Solutions that seek to mandate certain actions by developers, without understanding why developers do what they do today, run a large risk of having unexpected effects and exacerbating existing problems. As the post says, developers build chunkier towers in LA due to specific regulatory causes that encourage them to do so. Additional regulation that says “thou shalt build Vancouver-style towers,” without understanding what motivates developers to build the types of projects they do today, might result in no towers being built, rather than Vancouver-style towers.

To give an analogy, mandating that developers build certain types of projects, without addressing the zoning and building code regulatory regime, is like putting up a 25 mph speed limit sign on a road designed for 50 mph, without changing the design of the road. If you design a road for 50 mph and sign it for 25 mph, the drivers who go 50 mph are not foolish, you are. If you want a road where drivers go 25 mph, you need to understand what motivates their decisions and design accordingly.

Likewise, land use planning needs to look beyond the concept of simply mandating what development should be built. We need to look at all the elements of the process, and design the process so that all elements are contributing to making the desired results be the ones that make the most sense to develop.

People Move to Suburbs Because They’re Cheap, Volume 1

As part of trying to keep track of larger trends, I’m following the suburban development homes being offered by the major builders. Partly, this is because others (like Curbed) are already keeping good tabs on development in LA County. But also, urban redevelopment projects tend to be more unique, depending on the specific developer goals, location, land costs, difficulty of permitting, and so on. In the suburbs, we can look at projects in different communities by the same developer, which makes it easier to compare costs across communities, or we can look at projects in the same community by different developers, which makes it easier to compare developers.

In this post, I’m going to take a quick look at some different developments by D.R. Horton, which as of late February has 33 developments in some stage of progress in LA, Orange, San Bernardino, Riverside, and Imperial Counties. Of these, 19 were in Riverside County, highlighting the uneven nature of the recovery. Note, D.R. Horton doesn’t put prices for all models on their website, so I’m making some reasonable assumptions indicated by with a ~, e.g. assuming that “high 200s” is about $290,000.

Now, you can get different customizations and finishes, but the big home builders are basically working off a few common plans they’ve developed. Peruse D.R. Horton and you’ll see a 2,798 SF option pop up regularly, priced as follows:

  • Indio (Mountain Estates): ~$315,000
  • Murrieta (Iris): ~$385,000
  • Temecula (Morgan Heights): ~$500,000
  • Eastvale (Noble): $550,400

Those are all in Riverside County.

Nothing too surprising here. Temecula is closer to San Diego County than Murrieta. Eastvale is one of the closest Riverside County cities to Orange County. Indio is the suburban fringe of the Coachella Valley. In other words, location matters, just like you’d expect.

There’s a common thread of urbanist thought that goes something like “operating a car costs about $8,000/yr, so you can afford to pay more for housing if you live in a place where you don’t need a car”. This has been extended to suggest that banks should consider household transportation costs when deciding if they should make loans, i.e. if household needs one less car, they can afford a larger loan. And indeed, the difference between Murrieta and Temecula at current 30-year fixed rates (4.35%) is about $6,950 per year – about the same as the cost of operating a car.

So let’s say that living in Temecula instead of Murrieta would let one person in the family bike to work instead of drive, allowing the family to get rid of a car. Why wouldn’t a bank give the family a larger mortgage to buy the same house in that case?

Because it’s a 30-year loan, and few people work in the same place for 30 years. If the person working in Temecula in the family living in Temecula loses his/her job and finds a new one in Menifee, now the family needs another car. Or, if the person loses his/her job and can’t find a new one, there’s no way for the family to quickly reduce its fixed expenses. If the person working in Temecula in the family living Murrieta loses his/her job and can’t find a new one, the family could reduce fixed expenses pretty quickly by selling a car. Simply put, it would be crazy for a bank to make a 30-year loan that depends on transportation costs being stable.

To finally reach my point, the real tradeoff that you make when you decide to live closer to the city is housing size: you accept a smaller dwelling in order to be closer. For example, you could get a 2,414 SF house in Fontana for around $390,000, or you could get an 1,851 SF townhouse in Rancho Cucamonga for about the same price. Of course, this pattern is distorted by zoning and other things like Prop 13, which encourages communities to try to drive up housing prices.

If you look at things on a per SF basis, prices increase as you move towards the more desirable areas, and there will be thresholds at which more expensive types of construction become feasible. While prowling around Save Marinwood and Quiet and Safe San Rafael, I found a presentation by John Burns that gives relative costs of construction: about $60/SF for SFR, about $90/SF for garden apartments, and about $200/SF for podium construction.

D.R. Horton’s most affordable properties, in Adelanto and Imperial, are selling for about $100/SF, around 165% of construction costs. Assuming that zoning allows for it, and market conditions and regulation don’t favor buying over renting, that means garden apartments become economic when prices hit about $150/SF, and podiums when prices hit about $330/SF.

The threshold for garden apartments is pretty low; based on D.R. Horton’s SFR pricing, they already make sense in places like Fontana and Murrieta. Podium construction has a higher threshold; Santa Clarita is getting close, but only LA and Orange County pencil out. Note that this is a gross simplification. Small (1-2 person) households often don’t want dwellings as large as SFRs. In a place like Adelanto, a lot of single people could be accommodated in things like garage apartments, let rooms, and so on, if permitted. At small dwelling unit sizes, prices don’t scale linearly because of fixed costs like bathrooms and kitchens, which are more expensive per SF than bedrooms or living rooms.

However crude it is, this analysis is consistent with the expectation that there is a logical progression of densities as you approach more desirable areas: SFRs to garden apartments to podiums.

I should point out that by this logic, high-rise construction doesn’t make sense until prices go above about $500-$600/SF – a level that only some places in LA have reached. Not to beat a dead horse, but I feel compelled to again emphasize that the debate is not about the aesthetics of mid-rise versus high-rise construction. It is affordability versus unaffordability. If your vision is high-rises instead of mid-rises, your vision is an unaffordable Los Angeles. There’s no two ways about it.

A Modest Zoning Proposal

There’s a rezoning effort underway in Los Angeles, branded as recode:LA, that’s going to rewrite the city’s entire zoning regulation. This is a huge opportunity to make it easier to build in LA, restoring affordability and capitalizing on infrastructure investments. I’m planning to get involved and start attending meetings, and I encourage everyone interested in seeing LA flourish to do the same.

Where Are We Today?

First, a quick summary of where we are. Typically in LA, the arterials on the grid are zoned for commercial uses, and the area between the arterials is zoned for residential. For example, here’s the general zoning for Palms and Cheviot Hills.

Palms-CH-RP legend

To simplify things, there are 10 major residential zoning groups in LA, designated A through R5. Note that the default zoning in many New England suburbs equates to the lowest density zones available in LA, which explains why LA isn’t sprawl and is denser than everyone thinks. Here’s a summary of the major residential zoning requirements:

LAzoning

There’s also RAS3 and RAS4, which are basically R3 and R4 with ground-level retail permitted, and slightly less restrictive setbacks.

Where Do We Want to Go?

Now, before we start rezoning, we have to ask ourselves what we’re trying to do here. What goals are we trying to achieve? What do we hope LA will become?

For me, as I have said before, my main goals are affordability and opportunity. I want LA to be a place where low-income people can afford a roof over their heads, and where all people have the opportunity to pursue their goals in education, starting a business, etc. In my mind, that should be LA’s raison d’etre. Better infrastructure, including transit, is not a goal unto itself, but a means of achieving those two cardinal goals. Achieving these two goals would help address many other social concerns. Other benefits that might flow out of that, such as reduced per capita energy use, would be nice, but they’re not my main concern.

Part of my project here is to try to convince you that affordability and opportunity are the two best goals for improving LA. But obviously, not everyone is going to share my goals, and that’s ok. I don’t expect people in Rolling Hills or Calabasas to give a rat’s ass about affordability in their cities, because that’s not the reason those cities exist. The important thing is to recognize and be honest about your goals. If you say you’re in favor of affordability but also want to protect SFRs, you’re lying about one of them.

Of course, there’s a huge social justice and equity component to affordability and opportunity that I haven’t addressed on this blog yet, mainly because I know planning/engineering much better, and planning/engineering challenges are much easier to solve.

Back to the zoning.

How Do We Get There?

If I had my way, we’d just let people build however many apartments they want wherever they want. The collective knowledge of the market is almost certain to be better than anything planners could devise, not because planners are no good but because of the inherent complexity of the system. It would be like trying to do an analysis to figure out how many trees there should be in the forest and where they should grow.

It’s easy to sit around, say “upzone everything”, and then hit the bar and start pounding beers, but that’s ultimately an academic exercise. Any proposal to just upzone everything is probably dead in the water. It’s much harder to come up with a plausible plan that has a chance of being implemented. So here’s my attempt at a plan that I hope could win some public support. As with everything here, consider this a starting point; comments and suggestions for improvement are encouraged.

So, here’s the basic idea. The following rules would apply to areas currently zoned R1 through R5:

Pace of Redevelopment

  • In any neighborhood, 4% of lots will be permitted for redevelopment each year.
  • If a developer consolidates lots, the project requires a number of permits equal to the original number of lots. Future redevelopment of the consolidated lot would need only one permit. This encourages small-scale development.
  • The neighborhood council can decide to permit more than 4% at its discretion.
  • Permits are auctioned off to the highest bidder. This will encourage the best projects to be built first. It also gives opponents of development the opportunity to put their money where their mouths are – if they don’t want new development, they can buy all the permits.
  • Revenue from permit auctions to be invested in neighborhood improvements by the neighborhood council.
  • Permits expire 18 months after sale if no construction initiated – i.e. no permit hording, and opponents can’t foreclose on redevelopment forever by buying up permits for a few years.

Permitted Development

  • Any structure of up to 3 stories and up to 6 units per 5,000 SF lot is automatically permitted.
  • Any structure of equal in height to the 85th percentile height, plus one story, is automatically permitted.
  • Where automatically permitted, 4-story structures may have 10 units, 5-story structures may have 16 units, and 6-story structures may have 25 units, per 5,000 SF lot.
  • Mixed use development up to 6 stories and 200 SF lot area per unit automatically permitted on arterials (e.g. Venice, Western, Pico). Mixed use includes light industry that does not produce noise or odors. Commercial uses not restricted to ground floor.
  • Setbacks per current R4 standards, except arterials, to be per RAS4.
  • Nothing in these rules shall be interpreted as making existing zoning more restrictive.
  • Rules become effective 15 years after initial subdivision is recorded. This would allow owners in new subdivisions some certainty that property won’t immediately be redeveloped in newly established neighborhoods. This provision would have little effect in LA, where most neighborhoods are long established.

When it comes to the large lot zones – A, RA, RE – I would propose allowing them to be subdivided per current R1 zoning standards. After 15 years, the subdivided lots could be developed according to the above standards. But really, A/RA/RE are a small component of the plan. The major benefit is the above rules applied to zones R1 through R5.

In neighborhoods where these rules would result in buildings up to 75’ – the maximum for Type 3 construction – being automatically permitted, the neighborhood council and city could begin to consider allowing high-rises. I’m mostly ignoring high-rises in this proposal, because we don’t need a single high-rise in LA to make the city more affordable and welcome many more future Angelenos to our city.

Parking would be handled like Donald Shoup says it should.

How Does This Work?

Perhaps the best way to explain this concept would be by example. Take an existing R1-zoned neighborhood. In the first year, up to 4% of properties could get permits to be redeveloped into 3-story 6-unit apartment buildings – assuming, of course, that 4% of owners want to redevelop their property, and they don’t get outbid for the permits by opponents. Replacing 1 out of every 25 SFRs with a 3-story duplex where every floor is an apartment isn’t going to change the character of the neighborhood much. Under this plan, it would take at least 25 years for all structures to be replaced – a low rate of change.

In the second, third, and fourth years, the same thing would happen. Assuming 4% of lots are redeveloped every year for the first four years, by year five, 16% of the lots in the neighborhood would have 3-story buildings. Therefore, the 85th percentile height would be 3 stories, and 4-story buildings would become automatically permitted. Again assuming 4% of lots are redeveloped every year after that, in year nine, 5-story buildings would become automatically permitted, and so on.

Starting Points

Again, this proposal is just a starting point. I’d expect a healthy debate about the percentage of lots that can be redeveloped every year, the number of units allowed, and the percentile trigger that permits another story. We could also define a few different zones with different rates and triggers, some more permissive and some less permissive.

I will also note again that this is not necessarily my preferred solution; I’d rather leave more up to market forces. But this is a proposal that can hopefully accommodate a significant amount of new development to improve affordability, spread out the development so that no one area is overwhelmed, and still provide property owners with the certainty they desire.

So, what do you think? Is this a viable proposal? And what would make it better?

If Jose Huizar Wants More Skyscrapers Downtown, He Should Make It Easier to Build Mid-Rises

One of the more frustrating things about land use and transportation in LA is that we don’t even realize what we’ve done right. Because of that, lately we’ve started to get dangerously close to getting things wrong, as some people are promoting adoption of the worst policies from other cities. See, for example, the current fixation on getting rail into LAX. I’ll have more to say about that soon, but today’s issue is City Councilor Jose Huizar worrying yet again about the supposedly insufficient number of high-rises being constructed downtown.

I’ve written about this issue before, and everything I said then is still true. But today, we have a motion proposed by Huizar to look at in detail. The motion calls everything up to 75’ tall “low-rise”, but by any rational definition 7 stories is mid-rise – especially in LA. “Type III construction” refers to wood-frame construction, the only type of construction economically feasible for mid-rises given the seismic loads that structures in LA must endure. As has been written elsewhere, developers say that due to the cost premium of concrete/steel construction, buildings between 8 and 15 stories tall don’t make sense in LA – once you go to concrete/steel, you need to go to at least 15 stories to be profitable.

I’m in favor of everything on the first page of the motion: getting rid of parking minimums, making permitting much easier, eliminating restrictions on density, and removing limitations on reusing existing buildings as hotels. But on the second page, Huizar proposes prohibiting mid-rise construction in “Zone 1” (roughly everything from the 110 to Flower, from 7th to the 10) and curtailing mid-rise construction in “Zone 2” (roughly everything from Flower to Olive, from 7th to the 10, or within 1000’ of Pershing Square station). I’ve sketched these zones in Google Earth – Zone 1 in red, Zone 2 in yellow – excluding the Pershing Square area.

Huizar

Now the first thing you might notice in that graphic is that there is a ton of surface parking in the area. If I have time, I’ll update the post with a more accurate calculation, but I feel comfortable saying at least 30% of the parcels in the area are surface parking lots. On top of that, there’s a lot of older, truly low-rise construction, 1-2 stories tall. There’s no reason at all to worry about running out of space for redevelopment, even if you restrict tall building to this area, which you shouldn’t.

Prohibiting mid-rise construction will slow down development in one of the few areas in LA that’s growing as fast as it should. That will drive up housing prices in the area and reduce employment in construction.

But even worse, the motion will fail at its own purpose – prohibiting mid-rise construction will make high-rise construction less likely. Why? Well, if you’re going to build high-rises, you need to attract the kind of people who can afford high-rises. And the kind of people who can afford high-rises expect a lot of amenities in the neighborhood like shopping and restaurants. The easiest and fastest way to increase the amenities of the neighborhood is to make it easy for developers to construct the kind of buildings they want – in this case, a lot of mid-rises.

The high-rises? They’ll come naturally when the neighborhood becomes more desirable. We’re already seeing that in the more established parts of downtown. So if Huizar wants more skyscrapers downtown, he should make it easier to build mid-rises.

When Does More Expensive Construction Make Sense?

One of the most common criticisms of things like Portland’s Urban Growth Boundary is that they increase housing costs. This is undeniably true, at least on a per SF basis, because denser construction costs more. While prowling around Save Marinwood and Quiet and Safe San Rafael, I found a presentation by John Burns that gives relative costs of construction: about $60/SF for SFR, about $90/SF for garden apartments, and about $200/SF for podium construction. While you might be able to save on transportation costs by living closer to your job, in general the tradeoff you make is accepting a smaller dwelling in exchange for living in a more desirable area.

Still, even with no urban growth boundary to speak of, at some point, agglomeration effects cause prices to rise to the point where more expensive types of construction make sense. See, for example, Los Angeles. When does that happen?

As part of trying to keep track of larger trends, I’ve started following the suburban development homes being offered by the major builders. Partly, this is because others (like Curbed) are already keeping good tabs on development in LA and Orange County. But also, urban redevelopment projects tend to be more unique, depending on the specific developer goals, location, land costs, difficulty of permitting, and so on. In the suburbs, we can look at projects in different communities by the same developer, which makes it easier to compare costs across communities, or we can look at projects in the same community by different developers, which makes it easier to compare developers.

D.R. Horton is a major builder in the region, as of early November it had 25 developments in progress in LA, Orange, San Bernardino, Riverside, and Imperial Counties. Of these, 14 were in Riverside County, highlighting the uneven nature of the recovery. D.R. Horton’s most affordable properties, in Adelanto and Imperial, are selling for about $100/SF, around 165% of construction costs.

Therefore, assuming that zoning allows for it, and market conditions and regulation don’t favor buying over renting, that means garden apartments become economic when prices hit about $150/SF, and podiums when prices hit about $330/SF.

The threshold for garden apartments is pretty low; based on D.R. Horton’s SFR pricing, they already make sense in places like Fontana and Murrieta. Podium construction has a higher threshold; Santa Clarita is getting close, and LA and Orange County pencil out. Note that this is a gross simplification. Small (1-2 person) households often don’t want dwellings as large as SFRs. In a place like Adelanto, a lot of single people could be accommodated in things like garage apartments, let rooms, and so on, if permitted. At small sizes, prices don’t scale linearly because of fixed costs like bathrooms and kitchens, which are more expensive per SF than bedrooms or living rooms.

However crude it is, this analysis is consistent with the expectation that there is a logical progression of densities as you approach more desirable areas: SFRs to garden apartments to podiums.

I should point out that by this logic, high-rise construction doesn’t make sense until prices go above about $700/SF – a level that almost nowhere in Los Angeles has reached. Not to beat a dead horse, but I feel compelled to again emphasize that the debate is not about the aesthetics of mid-rise versus high-rise construction. It is affordability versus unaffordability. If your vision is high-rises instead of mid-rises, your vision is an unaffordable Los Angeles. There’s no two ways about it.

Palms Power

As I’ve said before, the affordability of Los Angeles for people and businesses is one of the greatest challenges facing the city. If we don’t want LA to become a boutique town like San Francisco or Boston, we need to make it easy to produce cheap apartments and workspaces. By definition, affordable development does not include any space that is produced by giving developers subsidies or forcing developers to sell or rent at below market rates. Those strategies are not scalable in a meaningful way.

To that end, I’ve defended and promoted the LA pattern of low-rise and mid-rise development, contrasting it with some architects’ and planners’ preference for high-rise towers near transit hubs, surrounded by single-family neighborhoods with restrictive zoning. In previous posts, I’ve called this “Vancouverism”, since this is the strategy pursued by Vancouver. This strategy is often more politically palatable because it aligns the preferences of architects and planners with the belief of NIMBYs in single-family neighborhoods that the city should protect them from change.

However, Vancouverism can never produce affordable development at the same scale that the LA pattern can, because the construction costs are so much higher. As the LA Downtown News reported, high-rise construction costs 1.5 times to 2.5 times as much per square foot as low-rise and mid-rise construction – about $200/SF for low-rise and mid-rise buildings, and $400/SF for high-rise buildings.

Example: at a 10% rate of return and a 30 year term, you need to collect about $1,250/month in rent to cover the cost of building a 700 SF low-rise apartment. High-rise, you need to collect at least $2,500/month. This doesn’t include the cost of maintenance and management, but $1,250/month is down into the realm of affordability. And anyway, the point of new construction is often not to build new cheap apartments, but new upscale apartments for people with more money.

The key thing to realize here is that the cost of new construction sets a reference price for existing apartments that have already had their capital costs paid off and just need to cover maintenance. If new apartments are going for $2,500/month, then you can charge up to $2,499/month for an old apartment. But if new apartments are only $1,250/month, you can never charge more than $1,249/month for an old apartment. So, the less costly the new construction, the larger the market segment that can be targeted with new construction, and the less price pressure on existing apartments.

In other words, if we really care about affordability, we need the traditional LA pattern of development. And since I live in Palms, I’m going to frequently use Palms as a good case study. I’m planning to do some more detailed research, but for now let’s trust Wikipedia and assume Palms was upzoned in the 1960s. At a glance, Palms might look like it’s all apartment buildings of the same size and vintage, but that’s not the case – there’s a variety of building types, sizes, and ages. This includes a considerable number of remaining single-family houses. In a few upcoming posts, I’m going to take a closer look at selected streets in Palms, including the types and ages of buildings, with an eye on the fact that none of the single-family houses have been ruined by the nasties that are supposed to come with apartment buildings.

Skyscraper Sueños

Here we go again with the skyscrapers. This time, it’s an editorial in the LA Downtown News worrying about the lost opportunity of the current spate of mid-rise construction. The basic thought process behind these pieces is “I really like skyscrapers” and from there, proceeding to come up with reasons for their construction. Kind of like the streetcar fad.

I’ve said before that I have no opposition to skyscrapers. I think they’re cool. I’m pretty excited to see the new Wilshire Grand go up. If developers want to build skyscrapers, more power to them!

However, the editorial is wrong on just about every count. Here’s a rundown:

  • This is a once-in a generation opportunity to go tall. It doesn’t matter. In 1983, how many people thought Downtown LA would be the way it is today? Anybody telling you that they know what downtown will or should be like in 2043 is overconfident in their ability to predict the future.
  • Once the parking lots disappear, so does the opportunity to go tall. Not really. Towers going up in places like New York are replacing mid-rise construction. If the market for skyscrapers exists and they are not precluded by foolish zoning and permitting laws, they will be constructed.
  • We’ll run out of sites to redevelop. LA is an enormous city. The idea that we are going to run out of parking lots and low-rise buildings that could be redeveloped any time in near future just doesn’t pass the laugh test.
  • Downtown is the center of the region. LA is the prototype of polycentrism. There are job centers all over the place. It makes just as much sense to have more residential development in Burbank, in El Segundo, in Long Beach, on the Westside, in the Valley – basically, everywhere – as it does downtown.
  • Downtown has the region’s best public transportation. This is true to some extent, though it sort of equates “public transportation” with “rail transportation”. But even if you ignore the possibility for easy improvements to bus service, which we obviously shouldn’t, rail lines are going to be coming to other places with projects like Crenshaw/LAX, Sepulveda Pass, and so on.
  • Downtown can and should support more density. This is true, but it implies that other areas can’t and shouldn’t support more density, which is false. The editorial cites the battle against Millennium Towers in Hollywood, but that project is more symbolic density than anything else. We could get more density more quickly by allowing mid-rise construction in a larger part of the city than we could by encouraging skyscrapers downtown.
  • We need to go tall close to Metro stops. I have written before that TOD plans are an oversimplification of how cities work, and presume a level of knowledge no one has, so I’ll refer you to those posts.

Thankfully, the conclusion is pretty accurate: it recommends against ill-advised policies like minimum density zoning, and suggests that we need to make the permitting process easier. I’m in complete agreement there. But we shouldn’t be spending limited public resources on subsidizing developers. The idea that urban planners or city officials know what type of development is appropriate better than the market is just wrong.