Mansionization in L.A. and NEWTON

If you think Newton is expensive, welcome to the Hotel California!

California shows the nation its future.  From hippies to high tech, from the Gold Rush to America’s waves of inequality and immigration, and from ocean surfing to desperately surfing the “net” for affordable housing, the Golden State has been and may always be the nation’s trendsetter, showcasing national trends in highly exaggerated form.

Though I left my “native” state decades ago, I still sometimes see things through “California eyes.”  And although my concerns with Newton’s housing and development problems are relatively new, forced by aggressive development projects in Newtonville, my reasons for settling here were strongly related to what I disliked about California.  So is much of my opposition to local development projects, as well as tear-downs and mansions.

California was a great place to grow up in its “Golden Years.” The weather was unbeatable, people were friendly, and free highways, beaches, and mountains were within easy reach with a car and “freeway smarts.”  The most striking negative was that nothing seemed to last.  People moved frequently, and the population was growing by leaps and bounds, tripling between the mid-50s and today.  Likewise, divorce and drugs were widespread, and natural and agricultural lands were continually being bulldozed and plowed under to make room for more people.

Priced Out

After my father transitioned out of the aerospace industry to take a job with the Navy in DC, my parents would have preferred to move back to California where we had old friends and relatives.  But they decided to retire in Florida instead in the 1980s, because even then, the cost of housing in places they once loved had escaped their reach.

Homes which my parents purchased in Manhattan Beach (1957) and Los Gatos (1960) for $25,000 and $30,000 respectively, now sell for millions of dollars.  While that is not surprising for Los Gatos, in Silicon Valley, and next to the SF Metro Area, where 57% of homes are now valued at more than $1 million, I was amazed to see that the Manhattan Beach house is now valued at $3.1 million (by Zillow)!  This is twice as much as just a few years ago.  But, as a fascinating article in the Huffington Post pointed out, I should have expected this, since after the Bay Area and New York, LA’s home prices are booming faster than almost anywhere else in the country.  The article tells an amazing story with a series of time-lapse maps demonstrating the rapid increase over the past four years in Bay Area, LA, and NYC homes valued at a million dollars or more.  See: http://www.huffingtonpost.com/entry/cities-million-dollar-homes_us_573d7480e4b0646cbeec2bc6

As you can see, Manhattan Beach (not indicated, but to the immediate left of Alondra  Park on the map) has been one of the fastest growing places in the LA area for $1 million+ plus homes.  And no wonder, as it’s full of beautiful beach area homes rife with the spirit of expressive individualism, hedonism, narcissism, and materialism for which LA is reputed.  This is great for not just keeping up with the Joneses, but also for getting ahead of them.  Indeed, in addition to population pressures and the near-perfect climate, the spread of mansionization seems to be a major factor contributing to the high price of housing there.

Take my old house for example.  Below is a picture of it taken by my brother about 10 years ago.  But Google Earth, and pictures from realtors show that the house looks almost the same today.  In fact, aside from the faded paint, and the grass turned brown by drought and watering restrictions, it looks almost like it did in 1960 when we sold it.

108 North Dianthus

steve's shot

While it looks the same, however, it has been surrounded by new mansions.  And although our old house is today valued at approximately $3 million, as noted, the neighboring property, at 100 N. Dianthus, is valued at $6.6 million (Zillow), and has 6 bedrooms and 7 baths.  It looks much like others in the neighborhood, including another house adjacent to my former house at 116 North Dianthus, which is similar in size and value to the property at 100.

100 North Dianthus Street

dianthus

116 North Dianthus Street

116 N. Dianthus

Were 1950s era ranch houses still surrounding this old house, its value almost certainly would have inflated much less rapidly.  While it’s shocking to see the glaring contrasts in style, cost, and size between my old house and its neighbors, they also call to mind similar contrasts between new and old houses in Oak Hill Park and elsewhere in Newton.

Today, my parents live in Florida, in a nice house (with a pool!) about the same size (1350 square feet), and with three bedrooms, and 1.5 baths like the CA house.  It’s valued at just $300,000, even though it’s just as nice as the California house, and is similarly about a half-mile walk to the beach.   My parents can afford the property taxes there, whereas all of their income would go to such taxes if they still lived in the Manhattan Beach house, which would likely be assessed at ten or more times as much, in proportion to its value.

Why the difference in the values of these seemingly similar houses?  Well, I’m not a real estate expert or an economist, but I would attribute this to several factors.  First is that California’s coastal population, is denser than that of coastal Florida, and that of Manhattan Beach is more than three times denser than the part of the Space Coast in Florida in which my parents live.  Median incomes are also twice as high in the California locale.  But another crucial difference, perhaps the biggest one, is that the houses in my parents’ current neighborhood are all, like our old Dianthus house, 1940s and 1950s vintage ranch houses with no mansions or even McMansions nearby.  And like 1950’s Manhattan Beach, when it was full of beatniks, artists, surfers, and ex-GIs, and adjudged “blighted” by the local Chamber of Commerce, much of my parents’ town is regarded as “blighted” by local elites.  For my parents, though, it’s a wonderful place for them to live independently and affordably as they approach the century mark.  They only hope, to quote my mother, that it just doesn’t become “too posh!”

Ominous Trends

Ominous trends are afoot in many of America’s favorite places to live.  As the Huffington Post article points out, already, a family needs at least $180,000/year to qualify for a mortgage in the typical San Jose (Silicon Valley) home.  This excludes 95% of American families, including the teachers, firemen, police and other civil servants that the “5%” need to provide their education, government, and other essential services.  But the “95%” is being squeezed out of single family housing.

Of course, there are always apartments.  But, as the Wall Street Journal’s Laura Kusisto has written, 82% of all multi-family units are being built only for the top 20% of the market.[i]  So that’s some relief, but still excludes the vast majority of the population.   And current policies for creating affordable housing by allowing developers to build three or four units of very expensive housing for each affordable unit, as we see in Newton, Boston, and NYC, are only reinforcing the problem.

The Local Scene

For instance, here in Newtonville, the Court Street 40B, Washington Place (Washington and Walnut), and Austin Street Project are currently set to build, within blocks of each other, 36, 171, and 68 total units of housing, of which 8, 26, and 23 (respectively) are set to be affordable.  In the process, 11 affordable units were demolished at Court Street, and 21 are slated for demolition to make way for Washington Square.   So a net gain of 25 affordable units is counterbalanced by 218 very expensive units  ̶  a ratio of 1 to 9.  Moreover, 40Bs and similar large apartment buildings combining a mix of affordable and upscale units, tend to drive up property values, taxes, and rents in their neighborhoods, gentrifying and making less affordable nearby housing that had once been affordable.  So what we have is not a housing shortage (Trulia had 550 units for rent in Newton today), but a crisis of affordable housing, and a middle class at risk of being forced out town by escalating housing costs.

What Can Be Done?

New York and LA are rapidly following Bay Area trends in housing inequality, and Boston and Newton are not far behind.  In much of Western Europe and Canada, private housing markets are viewed as incapable of providing sufficient housing.[ii]  Instead building by cooperatives, governments, and religious institutions  is regarded as essential to meet housing demand, especially affordable housing demand.  Will our current housing crisis force the U.S. to the same realization?

And here in Newton, the densification, commercialization, and price inflation toward which our policies and practices seem geared may actually do more harm than good, as they raise land values, property taxes, and rents like the high-priced cities above, and scare away many from the “creative class” that our political and business leaders want to attract.  For instance, start-up businesses are flourishing more in out-of-the-way places where land prices are cheaper than in NYC, LA, SF, or even Silicon Valley.[iii]  Likewise though writers and artists in the 1950s lived for next-to-nothing in major cities, today’s bohemians increasingly can’t pay the rent, and may decide to leave in droves as housing prices increase, especially since the Internet facilitates being culturally connected in out-of-the-way places.

Do Newton and other “smart-growth” oriented cites really want to drive away the “creative class”?  And do we want to allow increasing property values (and taxes) to push out Newton seniors seeking to downsize, or who have retired and are living on fixed incomes  ̶  longtime residents who have always worked hard, but are not wealthy.  Likewise, high property prices also keep their children from returning to live here, in a way that’s quite similar to dynamics of housing exclusivity in California.   To reverse these trends, we need to change our policies that allow rampant mansionization and large, mostly upscale, Upstairs/Downstairs apartment housing that hurts the middle class.

 

 

 

[i] Laura Kusisto, “New Luxury Rental Projects Add to Rent Squeeze.”  Wall Street Journal, 5/20/2015.

[ii] Arnold J. Heidenheimer, Hugh Heclo, and Caroline Teich Adams.  Comparative Public Policy: The Politics of Public Policy in America, Europe, and Japan.  St. Martin’s, NY, 1990, p. 98.  And, Peter Dreier, “Affordable Housing Lessons from Canada.”  American Prospect, December 4, 2000.

[iii] James Fallows, “How is America Putting Itself Back Together?” Atlantic.   March 2016.

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11 Comments on "Mansionization in L.A. and NEWTON"

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Marti Bowen
Hi Peter, Thanks for an in depth comparison of home prices over time. I have a similar story. My father built our last home in 1958 for $32,000. It’s now priced at several million. Luckily it’s in an area where the rising prices are not caused by an influx of new wealthy homeowners so many houses remain relatively affordable. It’s experiencing a boom of a different kind – an increase in outdoor adventures and artistic talent. A few days ago, I saw a change of the same type going on in Pittsfield – empty storefronts and low housing prices bringing artists, etc. My first thought was I hope it stays that way for a while but realize it will be gentrified eventually. It’s happening now in Southie – where there is a marketing campaign to call it SOBO. It’s an ongoing crisis. As for the Mansionization of Newton, it is more similar to what happened in Silicon Valley. New high paying jobs brought in new high income earners – even though some didn’t last. In the recently released Pew analysis of the shrinking middle class, they list in Appendix B the changes in income in metro areas. The Boston/Cambridge/Newton metro area falls in the category of changing income between 2000 and 2014 by losing middle income and gaining upper income by a similar percentage while lower income basically stayed the same. In 2000, the percentage of the population in the lower income group was 21.4, in middle income was 55.9… Read more »
Julia Malakie

Really interesting post, Peter. I’ve been too busy working on my tree stuff to do list, to comment.

I don’t believe Newton or any city can build its way to affordable (small A) housing by increasing supply, except to the extent it may make a place ‘so crowded no one goes there anymore.’ Housing prices are based on what people are willing to play to live in a place. In the case of Newton, a place with good access to highways and transit, 12 miles from Boston, with a reputation for good schools. Increasing supply may nave a short term effect on prices, but eventually more people who would otherwise have chosen somewhere else to live, will decide to move to Newton, and we’d be back to the same equilibrium price structure, but more crowded. It’s a lot like traffic. You add a lane to a highway to improve traffic flow, and people who used to take another route — or public transit — to avoid the congestion, will go back to their preferred route.

Marti Bowen
Peter, I think your observations are valid. i agree that these very expensive speculative ventures, whether they be single family homes, million dollar duplexes or apartments, are approaching the top of a bubble but I don’t think it’s going to burst anytime soon. As long as the high paying jobs continue to increase and the graduates of our great universities stay (this has turned around in recent years), I think there will be wealthier people moving to Newton and surrounding towns. I do agree that housing prices have increased so fast that the basic principles of supply and demand are being influenced more by a “hot” market than usual. I think that developers speculating the market will remain “hot” and wanting to build 100’s of apartments deserve more scrunity. As for ASP, they maintained, until the last minute when they saw that their project was in danger of not being approved and added 6 more affordable units, that they would make no money if they added more affordable units unless they could build a larger building. This same claim is being made by most other developers. In addition, these developers are asking for much more than they expect to be approved, making many believe the city negotiated concessions. This example just played out with St Philip Neri. As for the Orr Block, Korf knew he would never get 6 stories making it appear to some that he listened to the public when he refused it to 5. I am hearing… Read more »
Bob Jampol

Great article, Peter. I must object to one point of yours, however. Our real estate taxes in Newton seem fair to me, perhaps even a bit low. Consider that when I purchased my home in Waban thirty-five years ago, I paid about $5000 a year in real estate taxes. I pay slightly less than double that sum these days although the value has increased eight-fold. In terms of current value, I probably pay lower real estate taxes these days than in the Eighties. I don’t believe that Newton’s increasingly prosperous citizens are unduly burdened aside from those on fixed income. Those folks, to be sure, merit some sort of abatement. The young millionaires in those MacMansions, on the other hand, are doing just fine.

Doug Cornelius

I’m confused about your comparison of prices. In part, that’s because $25,000 was a big pile of money of 1957. It’s always hard to compare past prices to today.

If you had put that $25,000 into stocks (the S&P 500) in 1957, you would have almost $7 million in that account today. So the house investment was not that great or that housing market trails a standard measurement of financial performance.

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