City paying high price in dispute over rentals

Despite my best effort to get Geoff Palmer’s attention, the Brentwood-based developer still hasn’t responded to my request for an interview. So I guess I’m going to have to try again.

Palmer, who keeps fighting a city requirement that 15% of his units be set aside for low-income renters, is the man behind the downtown Los Angeles apartment house monstrosities with Italian names -- the Visconti, the Medici, the Orsini. Can the Biscotti be too far off?

I noted last week that he’s got a $21-million manse in Beverly Hills and a $17-million house in Malibu, but I didn’t know at the time that he also has a spread in St. Tropez and a Boeing 727 to take him there. Several readers passed on the information, and Palmer’s attorney told me it’s true.

Are you reading, Mr. Palmer? I can meet with you in Malibu or Beverly Hills. If you’re on the way to St. Tropez, I’d be happy to tag along.

Palmer was a no-show at City Hall on Tuesday, but that was a foregone conclusion. So was the City Council’s unanimous rejection of his request to be let out of the 15% requirement on the Lorenzo, his latest project. So now it’s a safe bet that Palmer will sue the city, and I’m about to explain how that could be a good thing. Palmer has actually raised a debatable point, however Scrooge-like, and it could and should lead to a welcome discussion on what to do about one of the greatest needs in Los Angeles and beyond.

Why should he, a private developer, be expected to solve the public’s affordable housing crisis? After all, we don’t require a grocer to offer lower prices for 15% of his neediest customers. (My answer would be that we don’t have a food shortage, nor do people lack options for lower prices on food. But still, it’s a conversation worth having.)

Palmer’s attorney, Ben Reznik, believes the 15% rental set-aside is illegal, and he plans to cite the Costa-Hawkins Rental Control Act in his lawsuit. The state law, passed in 1995, said that new housing must be exempt from local rent controls. The city attorney’s office tells me it would argue that inclusionary zoning, like the 15% set-aside, isn’t rent control and therefore not covered by Costa-Hawkins.

Reznik also argues there’s no evidence that the Lorenzo would adversely affect the supply of low-income housing, and so the 15% requirement is unconstitutional. But in my column last week, I focused on a renter who has seen first-hand the rising rents in areas where Palmer and others are developing tony housing downtown.

How it plays out in court is anyone’s guess, but Reznik made another argument worth discussion. He said set-asides are bad for market-rate renters because their rent is increased to cover the cost of low-income tenants. And he said set-asides make some developers turn and run, which means fewer rentals and higher rents.

Despite this highly debatable free-market argument, Reznik calls himself a progressive. In his Century City office, he’s got photos of himself with Bill Clinton, John Kerry and Zev Yaroslavsky, and he’s got an original painting by Dianne Feinstein. He also represents John Huskey, a developer I quoted last week who thinks Palmer’s dead wrong and considers inclusionary zoning an important way of creating mixed-income communities near job sites, which benefits everyone by reducing traffic and smog.

So what gives with Reznik? Money is the same color whether it comes from Palmer or from Huskey, and Reznik is a land-use attorney, not a political consultant. But he believes the city has failed to create enough incentives for developers to help solve the housing shortage. He also believes the city housing bond that narrowly failed last month -- less than four points short of two-thirds approval -- would be the best way to subsidize low- and moderate-income housing.

OK, fine. And here’s what I believe: Palmer wasn’t forced to build in an area where the 15% set-aside was already established, and his years-long challenge of existing law is not just arrogant, it’s costing taxpayers a bundle. He already sued on another project, and now he’d be dragging out the same old arguments for Round 2. That case was settled before it went to trial.

The set-aside zone gave developers certain advantages, such as the right to build with higher density, which improved the chances for a healthy profit. And some argue that developers of land in the set-aside zone have been able to negotiate discounts by contending their cash flow would be lower because of the 15% requirement. So I’m having trouble generating much sympathy for Palmer’s claim that the set-aside “will result in practical difficulties and hardships,” as argued in Reznik’s letter to the city Planning Department.

Is Palmer’s wealth irrelevant, as Reznik argues?

Not as I see it. The federal government has stripped funding for affordable housing while awarding gargantuan tax breaks to the wealthiest Americans. Is it unfair to expect a staggeringly wealthy developer to abide by a local law designed to address such growing inequities?

But Reznik is right about one thing: city officials ought to be discussing all manner of solutions to the housing crisis.

On my way to Tuesday’s City Council meeting I bumped into Mayor Antonio Villaraigosa, who told me he’s in favor of taking the 15% set-aside citywide. Then why isn’t he talking about it, I asked?

He doesn’t write the legislation, Villaraigosa said. If the council approves a bill, he’ll run with it. Beautiful. The mayor points to the council, as if he has no authority to light a fire. The council points to the mayor, with some members accusing him of having gone missing in action during the narrowly defeated housing bond campaign.

While they dicker, rents and mortgages are sky high, middle-income wages are harder to come by, and far too many people are crammed into sub-standard rentals or commuting for hours to low-paying jobs in which they make life comfortable for the likes of Geoff Palmer.

In reality, a citywide set-aside may be a longshot because most lawmakers are terrified at the prospect of incurring the wrath of wealthy and politically connected developers and business leaders. Council President Eric Garcetti told me he’d be happy to lead the discussion, but he wants to have another go at a housing bond, and he’d like to lead the charge on kicking more money from business taxes into an existing trust fund that will pay for affordable housing.

Fine, let’s get the conversation going. And if my boss will spring for the ticket to St. Tropez, I’ll let you know what Palmer has to contribute.

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Reach the columnist at steve.lopez@latimes.com and read previous columns at www.latimes.com/lopez.