Land-Use Rules, Courts Boost Housing Costs
Here in the San Fernando Valley we celebrate neighborhood blight. If you don’t believe me, reflect on that “triumph” of neighborhood activism that for eight years transformed an entire block of Ventura Boulevard in Sherman Oaks (the former site of the “Scene of the Crime” bookshop) into a row of derelict, boarded-up buildings, defaced by graffiti and favored by rats and vagrants as their abode--all sanctioned by law and cheered on by local homeowners. Welcome to California, home of bizarre land-use laws that are the laughingstock of the nation’s experts.
In 1988, Jacky Gamliel, naively acting under the impression that laws mean what they say, bought a long-term leasehold interest in the Scene of the Crime block, intending to demolish the old stores to make room for a three-story office building for which the land was zoned. Ah, but this is California, man--the place where what passes for land-use law is in the eye of the local city councilman who, in turn, takes his marching orders from the local suburbanites.
When Gamliel applied for a building permit, his plans were duly checked by the city, but when he applied for a permit to raze the old stores, all hell broke loose. Then-Councilman Michael Woo proudly announced that, law or no law, he would find “some legal means to stop” Gamliel. In other places that would be evidence of discriminatory treatment, but here? Like I said, this is California, man. Next thing you knew, the city decided that Gamliel would first have to complete a full environmental impact report.
Gamliel sued, but the Superior Court denied him legal relief. Why? It’s hard to tell. At about the same time, the court granted relief to Ira Smedra, another Valley developer fighting the same legal battle at the corner of Ventura and Laurel Canyon boulevards. There, local NIMBYs wanted an old carwash declared a “cultural monument,” and there, too, the city demanded an illegal EIR. So why did the court grant relief to Smedra but not to Gamliel? Maybe ‘cause this is California, man. Here judges don’t have to have a reason to rule against landowners.
As far as redevelopment of the Scene of the Crime property went, eventually none of it mattered. While Gamliel was temporarily stymied by the EIR demand, the city changed the Ventura Boulevard Specific Plan, so his project was suddenly rendered out of compliance with law.
Gamliel tried again, this time under the new plan. Same answer from the city: No. Another lawsuit. Another judicial refusal to grant relief. By then it was 1993, and hundreds of thousands of dollars had been spent on attorney fees alone. Enter Zev Yaroslavsky as the new councilman. Negotiations ensued, with self-appointed neighborhood “activists” predictably saying “No!” to everything.
Eventually Yaroslavsky ascended the throne as county supervisor and was replaced by Mike Feuer. A compromise was struck, or so it seemed. The City Council would permit a mixed-use project, but not the one Gamliel wanted. This one, proposed by developer Ovadia Oved, would allow only 86 tiny senior apartments and only 3,000 square feet of commercial space. Even that would require a waiver of the height limit to the extent of five feet (fiercely opposed by neighbors), and a city-sponsored low-interest loan of $2.5 million. The rest of the $8 million would have to come from private resources. It didn’t. No wonder. Would you lend more than $5 million on a Mickey Mouse deal like that?
That did it. Tired of dutifully carrying the cost of this bizarre caper for seven years, the developers finally gave up. The land was returned to its owners, the Guthman family. The old stores are being renovated and leased to local merchants, just as demanded by local suburbanites.
And so, what we have is a classic California land-use saga of lawlessness that wasted millions of dollars to no purpose. A constructive and legal land use was illegally frustrated, and use of valuable land denied for years, for no better reason than whims of local homeowners whose prime function has become to keep “their” turf exclusive and to stop all progress in their “village.”
California is suffering a decline because the cost and risk of land development and of doing business here have grown so unreasonably high that the end product, including housing, is most expensive. Dartmouth professor and land economist William A. Fischel has recently demonstrated that none of the factors usually implicated in rising housing costs--land or water scarcity, labor and material costs, or population pressures--caused the explosive increase in the cost of California housing. It was the impact of unreasonable land regulations that constricted housing supplies in the face of ongoing demand, and the California courts’ abject failure to limit them, even when they were plainly unreasonable.
In the end, we all pay a steep price for such folly, and in spite of the recession-induced decline in home prices, we are continuing to pay for it. For all the journalistic cheerleading, California’s recovery is tenuous, home foreclosures are at record highs and our future prospects are not going to improve much until the outlandish cost of building and doing business here is brought under control, and until there is assurance that our laws can be relied on.
