COURT CASTS DOUBT OVER FUTURE HOLLYWOOD DEVELOPMENT

By Dale J. Goldsmith and Damon P. Mamalakis
Armbruster Goldsmith & Delvac LLP 

On December 10, 2013, Los Angeles Superior Court Judge Allan J. Goodman issued a 41-page tentative decision in the actions challenging the City of Los Angeles Hollywood Community Plan ("Community Plan") update.  The Community Plan update involved a series of zone changes and amendments that increased the development potential of a number of properties in Hollywood.

It is likely the court will adopt its tentative ruling as final.  Despite acknowledging that the Community Plan update expressed "the finest thoughts of dedicated city planners," the judge held that the "otherwise well-conceived plan is also fundamentally flawed, and fatally so in its present iteration," along with the accompanying EIR.  The core flaw identified by the court was that the population base used by the City was erroneous - the City should have used updated 2010 Census data, which became available 60 days after the publication of the Draft EIR, instead of the Southern California Association of Government's 2005 projections.  This flaw infected virtually all of the impact analyses contained in the EIR.  The judge ordered the City to rescind the adoption of the Community Plan update and related approvals and enjoined it from granting any entitlements that "derive" from the Community Plan update.  The City may appeal the ruling, which would stay its effect, and/or begin preparation of a revised EIR and Community Plan update.  The last update took several years to adopt.  

The ruling will cast a very long shadow over development in Hollywood for the foreseeable future, and will require a rethinking of the entitlement approach for many projects.  Additionally, it is unclear as to the effect of the ruling on already approved entitlements under the Community Plan update.

  The cases represent the ever expanding use of litigation to impact reasonable development not only in Hollywood, but also throughout the region.  In the last few years, we have obtained approvals for a number of high profile projects in Hollywood, as well as successfully defended and resolved legal challenges to our clients' projects.   We have closely watched the Community Plan update process, as well as the litigation, and are actively engaged in strategizing paths forward for development in the aftermath of the ruling.

Please contact Dale Goldsmith or Damon Mamalakis for an evaluation of the effect of the court's ruling on specific projects or properties.   

Eisenberg: Regulation and its Unintended Consequences

Guest Post by Eliot Eisenberg, Ph.D 

Looking around the United States there are cities like Boston, Los Angeles and Washington, DC that have very high house prices.  Yet there are equally successful cities like Austin, Dallas, Louisville and Oklahoma City that have much more affordable home prices.  Why the difference?  Of course the surf is better in L.A. than in Dallas, but it has always been better, and 40 years ago L.A. was not an expensive city. The reason for this disparity is regulation.

Simply put, each piece of legislation that becomes law, and each regulation promulgated by the bureaucracy, regardless of how well-meaning, increases home prices.  Sure, having a 30-foot setback looks nicer than a 20-foot setback, but it makes lots more expensive.  And while requiring a brick façade may add gravitas to a house, it too raises its price, and the list goes on. Worse, as housing prices are artificially pushed up, distortions are introduced that have negative unintended economic consequences.   

Imagine yourself new to town and looking to buy a house.  Happily, you quickly find your dream house, but it costs $205,000 and all you can afford is $200,000.  Turns out the house you love was built in 2009, the first year houses were required to have cement driveways and picket fences, which raised the price of those houses and all subsequent ones by, you guessed it, $5,000.  The solution, look for a house built before 2009.  But just like you, everyone else in your situation is doing the same thing.  As that happens, the price of homes built prior to 2009 rises.  After all, demand for them is suddenly up, way up.  And presto, the house that used to sell for $200,000 now costs $203,000.                  

An alternative is to look for a house in a neighboring town where asphalt is still allowed and picket fences are optional.  And as luck would have it, you find a beautiful $200,000 house and move in. The only problem; your commute to work is now twice as long as it would have been if you had been able to buy that original house.  And that increases CO2 emissions, causes needless wear and tear to roads and infrastructure, requires you to buy a new car more often, and hire a sitter for your kids, as you are all too often caught in traffic driving home.     

But wait, it gets worse; suppose your uncle owns a huge parcel of land and planned to build entry-level houses on it for $200,000. He can’t now because of the cement driveway and picket fence rules which force the price up to $205,000.  The problem is folks like you can’t afford those houses, so he goes upscale and builds $225,000 houses, and in that way does well, but contributes to the affordability problem.

To review, forcing anyone to do something they otherwise would not have done makes whatever it is more expensive.  In this case, it raises the price of new entry-level houses.  In addition, it raises the price of houses built prior to the law, which in turn pushes home construction into neighboring areas which adds to sprawl and boosts CO2 emissions.  

The moral of this sad tale, think twice before reflexively solving problems through regulation and legislation.  The consequences can be quite far-reaching and unintended.          

Elliot Eisenberg, Ph.D. is President of GraphsandLaughs, LLC and can be reached at Elliot@graphsandlaughs.net.  His daily 70 word economics and policy blog can be seen at www.econ70.com.

Eisenberg: Economic Forecast for 2nd Half 2013

 Economic Forecast for 2nd Half 2013 : Sunny with Cloudy Periods

By Eliot Eisenberg, Ph.D.

Looking ahead at the second half of 2013, the economic news is pretty solid.  The US economy is on the mend, the labor market is slowly healing and house prices are up about 10% from year-ago levels. In addition, Europe (while in recession) appears to be holding together, DC budget brinksmanship is fading, car and light-truck sales along with consumer sentiment are rising, and new home construction continues its steady ascent.  The only serious domestic fly in the ointment is the significant fiscal drag from Washington as the result of sequestration and year-end tax increases.  The biggest foreign drag is Europe’s recession is hurting US exports.

With all this in mind, I expect Q3 GDP to be about 1.75% and Q4 GDP to come in slightly higher at 2.1%.  As for housing starts, in Q3 they should, for the first time in years, exceed a million units (seasonally adjusted and annualized) with single family starts coming in at 675,000 and multifamily starts reaching a pace of about 340,000.  In Q4 single family starts should hit to 700,000 with multifamily starts unchanged. 

Inflation will remain benign.  The combination of weak global growth, flat to declining energy and commodity prices, and flat to mildly rising food prices will keep CPI growth well below 2%.  Moreover, the combination of tiny rises in import prices, producer prices, consumer prices and anemic wage growth means that personal consumption expenditure inflation, the Feds preferred inflation measure, will barely exceed 1%, giving the Federal Reserve ample room to continue its program of quantitative easing.              

As for jobs, despite an improving labor market, the unemployment rate at the end of the year will remain above 7%.  And combined with an annual inflation rate of well below 2%, it makes me think Bernanke and the rest of the voting members of the interest rate-setting Federal Open Market Committee will continue purchasing $85 billion/month in Treasuries and mortgage-backed securities at least through October 2013.  Any tapering of QE3 will commence in late 2013 and more likely in early 2014.    

Another reason why QE3 will be maintained in that due to weak wage growth, consumer spending is rising quite slowly and is being fueled, at least in part, by a decline in the personal savings rate which now stands at a scant 2.5%.  Of course rising stock prices, improving home values and easing credit market conditions are also aiding the rise in consumer spending. But a sudden rise in interest rates could derail these positive developments and weaken manufacturing, which is currently neither expanding nor contracting.  As such, the risk is simply not worth the return, at least for now.   

What would change my thinking about QE3 would be consistent monthly non-farm payroll job growth of greater than 187,000.  If we manage to achieve that, the Fed would likely reduce the amount of its monthly bonds purchases and interest rates would rise.  However, given a growing economy, the rate rises would not be growth-sapping and I put the chances of a new recession at no more than 10%.  In the meantime, I look forward to continued, slow and steady improvement the rest of the year.  

Eliot Eisenberg is a guest contributor to the BIA Blog.

What Do Home Buyers Want in Their Next Home?

As the housing market strengthens, it is a great time to think about what you want in your next new home. We’ve all seen a stunning hillside mansion and dreamed what it would be like to raise our families there. Or envied the amazing renovation makeovers depicted on television shows that give the home owners a sense of pride and accomplishment. But how does your dream home compare to what home buyers across the country are looking for in their new home?

 A recent study from the National Association of Homes Builders, What Home Buyers Really Want, shared the results of a survey of the preferences of thousands of home buyers. On average, home buyers are looking for a home that is 17 percent larger than their current home, a median of 2,226 square feet. But, likely as a result of the ongoing challenges of the economic downturn, that size is 13 percent smaller than the average size of homes started in 2012.

 The layout of the home is more important than the location to most buyers. Living space and number of rooms was ranked the most influential characteristic by 65 percent of buyers, while only 33 percent ranked proximity to locations they need to go as tops. A sense of open space continues to be popular, with about three-quarters of home buyers wanting a kitchen that is open to the family room, and nearly two-thirds looking for ceilings on the first floor that are 9 feet or more tall.

 Some of the most wanted features in a home involve saving energy. Energy Star-rated appliances were rated as essential or desirable by 94 percent of respondents, and 91 percent wanted an Energy Star rating for the whole home. In fact, nine out of ten buyers would rather buy a home with energy-efficient features and permanently lower utility bills than one without those features that costs 2 percent to 3 percent less.

 Convenient organization and storage is another home buyer favorite. More than 80 percent of the respondents said they wanted walk-in pantries and pull-out shelves in the kitchen, a laundry room and storage in the garage.

 Today’s home buyers want the latest technology. While only 15 percent of home owners currently have a wireless home security system, 50 percent want one. Similar gaps in “have” versus “want” occur with security cameras, lighting control and wireless audio systems, and multi-zone HVACs.

 The most unwanted home features include elevators, a location in a golf course, high density or gated community, and having only a shower stall and no tub in the master bath.

 So whether you’re planning or dreaming about what your next new home will look like, or you’re making renovations to your current home so that it will appeal to its next owner, keep these home buyer preferences in mind! 

BIALAV Launches Be Smart Buy New Campaign

The Building Industry Association of South California’s Los Angeles/Ventura Chapter (BIASC/LAV) announced that for 17 days in March, homebuilders will be offering substantial savings and special opportunities on the most desirable new homes in Los Angeles and Ventura counties. The chapter’s Be Smart Buy New promotion will feature more than 30 new home communities throughout the region.

From Friday, March 1 through Sunday, March 17, participating homebuilders will be passing along big savings to homebuyers to help them buy the homes of their dreams for less. From design options to livability, to energy efficiency, construction techniques and more, there are countless reasons to choose new when searching for a home. To view a listing of all of the participating new home communities, visit BeSmartBuyNew.com.

“Homebuilding is back in Southern California and this is the event we have all been waiting for,” said Holly Schroeder, CEO of the Los Angeles/Ventura County Chapter of the BIASC. “It’s truly an unprecedented sales event with dozens of new-home communities participating all over Los Angeles and Ventura counties. Combined with historically low interest rates and the steady increase in home prices, now is the time to buy a new home.”

Be Smart Buy New will feature a diverse collection of 14 homebuilders with offerings at more than 30 new home communities.  Homebuilders include:

• Brookfield Homes
• California Home Builders 
• DR Horton
• KB Home
• LA Urban Homes
• Lennar
• The New Home Company
• Newhall Land
• TRI Pointe Homes
• Pardee Homes
• Toll Brothers
• Watt Communities
• William Lyon Homes
• Williams Homes

A new home offers seemingly endless benefits when compared to a re-sale house. Here are the top five reasons to purchase a new home:

1. Build it your way

New homes offer homebuyers choices that used homes can not offer. Buyers can select cabinets, countertops, flooring and more that complement their tastes and design styles.

1. Select your perfect floorplan

New homes offer buyers choice. Select the perfect floorplan that fits your lifestyle and meets your needs.

1. Energy efficiency

Today’s new homes are constructed with modern products and include features that help conserve valuable energy. They are far more energy efficient than homes constructed just 10 years ago. New homes will save you money every month.

1. Warranties

New homes offer the latest technology in building materials that are typically under a limited warranty from the homebuilder. Used homes likely have products and materials that may need to be replaced.

1. Safety and Indoor Air Quality

Today’s new homes are constructed with products that use the latest in technologies to increase indoor air quality. The homes meet strict standards and codes that were not in place years ago, keeping you safe.

Join the interest list now for a chance to win a $100 Amazon gift card. One winner will be chosen each day during the Be Smart Buy New promotion March 1 through March 17. Registrants will be among the first to receive important information and updates from BIASC/LAV and from homebuilders regarding the campaign. Visit besmartbuynew.com to register.

Visitors to the model homes in the more than 30 new home communities participating in the Be Smart Buy New promotion could be one photo away from winning one of three $1,000 Pottery Barn shopping sprees. Guests are encouraged to take a photo of their favorite room, backyard or even of themselves and upload it onto the Be Smart Buy New Facebook page, tweet it with hashtag #besmartbuynew or share it on Instagram with hashtag #besmartbuynew in the comments to be eligible. A drawing for the gift cards will be held on March 22.