Sunday, November 22, 2015

Thank You, NIMBYs

Los Angeles is a wonderful place to live.  With the climate, geography, glamour and amenities it's no wonder that people from all over the world, from rich Chinese and other investors, to pro athletes who don't play for LA teams, have been flocking here.  But there are downsides to living in paradise.  Housing costs are incredibly high, traffic congestion is ridiculous (it takes my co-worker about 2 hours each way to commute a little over 20 miles), and people are forced to live long distances from where they work.  Interestingly,  the three problems I just mentioned have all been greatly acerbated by the "activist" community.  Typically we think of activists as being progressive and standing up for the little guy.  And in the case of NIMBY (not in my back yard) activists, they think they are taking that path.  But in the way the world really works, they have created a world 180 degrees apart from what they intend.

The latest act of NIMBYism was just chronicled in the newspaper, where activists are pushing a ballot measure that would have the effect of stopping high rise residential construction in Hollywood.  The idea behind the construction boom is to build high rise apartment buildings near transit stops is to move people off the freeways and onto public transit, to ease the housing shortage which makes rents and home prices so high, and to generally revitalize the center part of the city.  But the activists want nothing of this, saying high rise residential construction will destroy the character of their neighborhoods.  Now if there were just one group in NIMBYs in town there wouldn’t be a societal problem.  But there are NIMBYs all over Los Angeles, creating what is referred to as high barriers to entry for the development of new residential housing in Los Angeles.   This NIMBY created restriction on the supply of housing means a shortage of housing, high prices, and long commutes for people who are relegated to moving into the boondocks in search of affordable housing.

Indeed, the contrast between housing supply and prices in places like Los Angeles and San Francisco, as opposed to parts of the country, like Texas, where there are no restrictions or opposition to the development of new housing stock, and developers are free to build new projects, is stark.  I remember being on vacation a few years ago and having breakfast at Denny’s.  I was talking to my waiter and learned that he was originally from Los Angeles, but left because of the high cost of housing.  His next revelation floored me.  He had just bought a three bedroom house with a pool.  On his salary from Denny’s.  Of course there is a flip side to living in a city where there is a plentiful housing supply.  The value of your house will only keep up with inflation, and generally not appreciate above that rate.  In contrast my house in Los Angeles is worth at least four times what I paid for it.  Oh wait.  Thank you, NIMBYs.  I love you.

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