A specialty? Luxury apartment complexes in Los Angeles neighborhoods such as Palms and Silver Lake filled with mostly market rate units, but with a handful of income-restricted affordable ones as well.
It can be a good business, but lately less so.
“We have pulled back,” said Kahan, the president of California Landmark Group. “The metrics don’t work.”
Across California and the nation, developers moved to start fewer homes in 2023, a decline some experts say could eventually send home prices and rents even higher as supply shortages worsen.
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Developers cite several reasons for delaying new projects. There’s high labor and material costs, as well as new local regulations that together make it harder to turn a profit.
Perhaps the biggest factor — and one hitting across the country — is the high cost of borrowing. Rising interest rates not only make it more expensive for Americans to buy a home, but they add additional costs for developers who must shell out more money to build and manage their projects.
As a result, fewer projects make financial sense to build and fewer homes are built.
“More than anything it is debt costs,” said Ryan Patap, an analyst for real estate research firm CoStar.
In all, preliminary data from the US. Census Bureau show building permits for new homes nationwide fell 12% in 2023 from the prior year and 7% in California. Drops were recorded in both single-family homes — most of which tend to be for sale — as well as multifamily homes — which are chiefly rentals.
Dan Dunmoyer, president of the California Building Industry Assn., said one major reason for the decline is that many for-sale home builders foresaw “a massive downturn” and stopped buying lots to develop when mortgage rates soared in 2022.
Then a funny thing happened. Demand for their product didn’t crater as much as expected, in large part because existing homeowners didn’t want to sell and rid themselves of ultra-low mortgage rates.
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“Builders kind of woke up and realized ‘Oh, it’s just us [selling homes],‘” Dunmoyer said. “But we don’t turn on a dime.”
As for-sale builders restart their engines to take advantage of a shortage of listings, there are signs of improvement. During the first two months of this year, builders in California pulled 35% more permits for single-family homes than during the same period a year earlier, according to census data.
Permits for multifamily continued to decline — dropping 33%.
The diverging paths are probably due to several factors, said Rick Palacios Jr., director of research for John Burns Research and Consulting.
On a whole, single-family home builders have access to a wider source of debt that isn’t as vulnerable to rising interest rates. In the single-family market, the supply shortage has also worsened and home prices are climbing.
Meanwhile, rents in many places — including Los Angeles — have dropped slightly as vacancies have risen, in part because apartment construction has been relatively robust in recent years.
“Single-family solid, multifamily weak is a pretty consistent theme across most of the country,” Palacios said. “You’re hard pressed to find a market where developers and investors are gung ho on apartments.”
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In the city of Los Angeles, developers must contend with another factor — Measure ULA.
The citywide property transfer tax took effect last year to fund affordable housing and has drawn the ire of the real estate industry.
Though it’s known as the “mansion tax,” except for rare exceptions it applies to all properties sold for more than $5 million, no matter if they are gas stations, strip malls, apartment buildings or actual mansions. Under the measure, a seller is charged 4% of the sales price for properties sold above $5 million and below $10 million.
At $10 million and above, the tax is 5.5%.
Apartment developers and real estate brokers said additional costs from ULA make it even harder to earn a reasonable profit in what can be a risky business.
That’s because when building apartments, developers often sell their finished product, which would probably trigger the ULA tax for any building over 15 units, according to Greg Harris, a real estate broker with Marcus and Millichap. Even developers who hold onto their properties typically need to take out a mortgage on the finished building — and Harris said lenders are willing to give less because they too would need to pay the tax if they foreclose and sell the property.
“ULA is like the last nail in the coffin,” said Robert Green, a Los Angeles developer. “It couldn’t have come at a worse time.”
Many apartment projects got their start under different economic circumstances and have opened in recent years or will soon. That supply should help keep rents down for a while, but not forever, said Richard Green, executive director of the USC Lusk Center for Real Estate.
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In two or three years, as fewer apartments are finished “we will see rent start to go up again,” he said.
That would be a hit for Californians struggling to find housing in an expensive state where thousands sleep on the streets.
Economic cycles, of course, ebb and flow and construction may rebound.
The Federal Reserve plans to cut interest rates later this year, which may help more projects make sense financially, as could rising rents.
Land sellers could also drop their asking prices to adjust for rising developer costs, including ULA in Los Angeles.
Normally, real estate analyst Patap said he’d expect apartment construction to rebound as land costs adjust downward. But he noted developers say they are also cautious about building in L.A. because of a broader political shift in the city that’s more supportive of restrictions on landlords and more supportive of protections for tenants.
In the city of Los Angeles, multifamily permits dropped 24% in 2023 compared with 19% in Los Angeles County, census data show. (Data from the Construction Industry Research Board show even larger drops: 49% in the city and 39% in the county.)
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Laurie Lustig-Bower, a commercial real estate broker with CBRE, said some L.A. landowners have reduced their prices to sell, but “if they don’t have a gun to their head” they are waiting until developers can pay more.
In recent years, state lawmakers have taken action to make it easier to build housing, in part by eroding local control over land use decisions.
Los Angeles Mayor Karen Bass has also fast-tracked 100% affordable buildings under her Executive Directive 1, while the city recently exempted smaller projects from some storm water capture requirements.
Mott Smith, chairman of the Council of Infill Builders, said more must be done to increase the number of new homes in Los Angeles and cited the storm water decision as the kind of steps government should take.
“The city has no influence over interest rates … [but] what it controls is the process to get a project approved,” Smith said. “There are so many opportunities.”
For now, developers say it’s tough to find opportunities.
Kahan said his company runs the numbers on potential land purchases constantly and at least once a week finds it doesn’t make sense to buy and build.
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He expects to purchase some land in Southern California by year’s end, though mostly outside of the city of Los Angeles where Kahan said he’s increasingly looking because of costs from ULA, which unlike current interest rates aren’t expected to change.
So far, Kahan said he’s yet to find a deal that will work — within or outside city borders.
Southern California’s real estate market is as cold as the snow currently adorning the peaks of its mountains. Interest rates are up. Inventory is down. And deals are few and far between.
In slow markets, the agents at the top — those with experience, connections and plenty of clients — typically maintain a modest but steady stream of business. It’s the agents at the bottom — those just getting into the industry who’ve only managed to close a handful of sales — who starve.
As those agents have grown more desperate for leads, they’re trying alternative ways of finding them. Some are outsourcing the work overseas, and others are turning to AI or automation in a last-ditch attempt to find a seller.
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During the record-breaking pandemic market, there were so many transactions that most determined real estate agents were able to make a living. More than 43,000 single-family homes traded hands in L.A. County in 2021, and more than 42,000 were sold in 2022, according to the Multiple Listing Service.
During that time, tens of thousands joined the National Assn. of Realtors, or NAR, with membership swelling to a record 1.6 million in 2022, up 200,000 since 2020. Real estate wasn’t just a solid job; it was a way to leap into a higher tax bracket.
But then the market started to freeze in 2023 as mortgage rates shot up. Only 11,539 single-family homes sold that year, and sales are at a similar pace so far this year.
Some agents are simply calling it quits. In California alone, NAR lost 9,723 members from December 2023 to January 2024 — a 4.75% decline . But even after the drop, California still holds the second-most active Realtors in the nation at 194,964, and they’re all fighting for an extremely small pool of sellers.
At the peak of the pandemic market, Tyler Andrews, 29, tried his hand at real estate in the Inland Empire, thinking he would use his outgoing personality to sell homes as L.A. residents flocked to the area during the pandemic. He got his license and helped a few friends with their house hunts, but ultimately didn’t earn any commission and stopped in 2023.
He’s one of many agents who rushed into real estate hoping for a taste of California’s latest gold rush.
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From the outside, listing a house in a hot market seems like the easiest of get-rich-quick schemes. Homes sell in days, and a 3% agent’s commission on a $1-million sale comes out to $30,000. If you represent both sides of the deal, it turns into $60,000.
But the real estate industry isn’t an easy one to break into. You typically get paid only if you close a sale, and in any market, most homeowners still prefer to go with an agent with experience.
In a hot market, sellers find an agent. In a cold market, agents have to find a seller. The situation is coming to a boil in many areas, such as Leimert Park, where residents have been barraged by agents asking whether they’re interested in putting their homes up for sale.
Cold calling is time consuming — and stressful, considering the ire it draws from those on the receiving end. So some agents are handing that thankless task to machines.
A handful of companies such as Slybroadcast and Salesmsg offer “ringless voicemail,” a robocall-adjacent tool enabling agents to send pre-recorded messages straight to your voicemail box without your phone ever ringing. The messages are often meant to trick you into thinking you missed a call, saying things like, “Sorry I missed you! Give me a call back whenever you get a chance.”
In 2022, the Federal Communications Commission declared the trend a form of robocalling and said it’s illegal if the caller doesn’t have the recipient’s prior consent. But that hasn’t stopped agents from sending out such voicemails to potential clients.
“I don’t have time to cold call all day,” said one real estate agent who asked to remain anonymous due to the potential taboo of using the technology. “I have to find clients somehow, and in a market like this, you have to get creative.”
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The thinking is this: An agent could spend eight hours a day calling every home in a neighborhood to ask whether they want to sell their home. Or they could send out 500 ringless voicemails simultaneously, and those who bother to call back have a better chance of needing the services of a real estate agent.
Andrews said he had heard of other agents trying such technology as the market got colder in 2023, but he never bothered doing it himself because it didn’t seem authentic. It also would’ve been an extra expense — one he didn’t have a budget for.
Mary Thompson has owned her home in Beverly Crest for more than a decade. Over the last year, she’s received multiple ringless voicemails asking whether she wants to list or buy a house.
“I was fooled by the first one. I called back and ended up on the phone with an agent for 15 minutes asking about my plans as a homeowner,” she said. “I don’t bother calling back anymore.”
U.S. consumers received more than 55 billion robocalls in 2023, 5 billion more than the previous year, according to the YouMail Robocall Index. Roughly 15 billion were telemarketing calls, and 8 billion were scams. California consistently ranks as the state with the second-most robocalls, behind only Texas.
As a response to thousands of unwanted call complaints, the FCC has established a Robocall Response Team to combat the influx of robocalls, many of which are targeted toward homeowners.
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Last year, the commission shut down a robocalling campaign from MV Realty, a real estate brokerage that was sending out robocalls with misleading claims about mortgages. A whistleblower from the company told a Seattle news outlet that employees were directed how to use software called PhoneBurner and required to make at least 450 calls per day.
Other companies such as VoiceSpin give agents access to auto-dialing software, which, like it sounds, automatically dials numbers from a list. VoiceSpin claims to use AI and machine learning and enables agents to drop voicemails straight into inboxes, record calls or even use local area codes so you’re more likely to pick up.
In that case, you’d be talking to an agent, but sometimes you might find yourself unwittingly conversing with a robot.
The tech company Ylopo recently uploaded a video showcasing an AI assistant conversing with a potential home buyer planning a move to the North or South Carolina coast. The company said it’s “one of thousands of AI calls being made daily already for Ylopo clients.”
Cinc, a real estate lead generation platform, offers agents an AI-powered digital assistant that purposefully misspells words and uses emojis to make interactions with potential leads appear more human.
The NAR itself offers an AI scriptwriter powered by ChatGPT that analyzes housing trends so that agents can appear more knowledgeable about the market. Agents can even choose the tone: professional, engaging or conversational.
Earlier this month, the FCC continued its fight against robocalling by outlawing robocalls that use AI-generated voices. Since the ruling is so fresh, it’s unclear how companies utilizing the technology will be affected.
In a market as slow as this one, even finding numbers to call becomes a challenge; tech becomes useless if it’s being wasted on the wrong potential clients. So many agents are looking for leads.
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On Fiverr, an online marketplace for freelance services, a glut of listings has popped up offering agents potential leads on prospective buyers or sellers. One of the most prolific is Abhishek Rai, who has racked up more than 3,000 five-star reviews offering leads on motivated sellers, vacant properties or absentee owners since joining the platform in April 2020.
Rai, who’s based in India and uses the handle @virtualguy2020, typically charges $10 for 100 leads, $50 for 650 and $100 for 1,500.
“Real estate agents have demanding schedules, and outsourcing lead generation tasks allows them to focus on other aspects of their business, such as client meetings, property showings, and negotiations,” he said.
Rai has clients across the U.S., including many in Southern California. He added that generating leads is a specialized skill and not every agent has the expertise to find them on their own.
For his leads, he combs through public records, online databases and real estate sources such as property records, tax records and foreclosure listings.
To be clear, the vast majority of agents in Southern California still conduct business the old-fashioned way. But the ones trying new things are often doing so in order to make a living.
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In 2022, Realtors with 16 or more years of experience made a median gross income of $80,700, according to the NAR. But those with two years or less experience made just $9,600.
According to a report from business networking platform Alignable, 31% of real estate firms struggled to pay rent for their office in January.
AI’s subtle invasion of the real estate industry doesn’t necessarily come as a surprise because the technology has pervaded nearly every profession over the last few years. But for an industry that has long relied on human connection — handshakes, open houses, fresh flowers and other personal touches — AI’s cold, sterile seep into housing has become unnerving for some.
“When I do need a real estate agent, I need one that I can connect with,” Thompson said. “I don’t want anything to do with their AI assistant.”
With property tax bills as high as they are in Southern California, you’d think that homeowners would sign up for every break they could get.
You would be wrong.
Since 1974, the state of California has offered to reduce the assessed value of any owner-occupied home by $7,000. That, in turn, reduces the home’s annual tax bill. You just have to apply once, and the “homeowners exemption” will be applied automatically to your assessment until you move out or sell.
According to Los Angeles County Assessor Jeff Prang, however, nearly one-third of county homeowners do not sign up for the exemption. That translates to $30 million in extra tax payments by roughly 435,000 households.
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Granted, that’s not a huge amount of money per household; with property tax rates generally set at 1% of assessed value, the $7,000 exemption saves $70 per year. But after a few years, that would be enough for a bigger TV set in your living room.
And signing up for the exemption is especially important for homeowners hoping to take advantage of 2020’s Proposition 19, Prang’s office said in a press release Wednesday. The ballot measure allows people to transfer their homes to one or more of their children without it being reassessed for property tax purposes, potentially shielding their offspring from an enormous increase in taxes. But to qualify for this benefit, the recipient of the house must apply for a homeowner’s exemption or disabled veteran’s exemption within one year of the transfer.
If you lived in your current abode as of Jan. 1 but haven’t claimed a homeowners exemption, you have until Feb. 15 to apply to receive the full $7,000 reduction. After that, the reduction will be prorated, Prang’s office said.
To claim the exemption, download a form from https://assessor.lacounty.gov/homeowners/homeowner-exemption. Then fill it out with information about yourself, any co-owner and your property, and return it to the assessor’s office.
Forms are available in English and Spanish. For more information, visit the assessor’s website or call (213) 974-3211.
The verdict is in! Katy Perry’s legal battle over that $15-million Montecito mansion has concluded.
The “Teenage Dream” hitmaker purchased the mansion for herself and fiancé Orlando Bloom in July 2020 from the founder of 1-800-Flowers. But the entrepreneur tried to call off the sale, alleging he was mentally incapacitated at the time of the agreement due to pain pills.
On Wednesday, a Los Angeles County Superior Court judge tentatively ruled that Carl Westcott, 84, had not met his burden of proving he was mentally unfit.
“Wescott presented no persuasive evidence that he lacked capacity to enter into a real estate contract between June 10, 2020, and June 18, 2020, the days during which he negotiated and signed the contract,” the judgment read.
The judge said evidence presented by Wescott’s team was not credible or persuasive. The court actually found significant evidence that demonstrated Wescott was well enough to knowingly sign on the dotted line. The evidence included the testimony of a witness who interacted with Westcott while he negotiated and finalized the contract as well as Westcott’s written communications during the same time frame that the court said showed the entrepreneur to be “coherent, engaged, lucid, and rational.”
Westcott’s medical reports showed that none of his doctors found he lacked capacity to engage in any action before the sales contract or for more than a year afterward. According to the court documents, the contract that Westcott negotiated and signed yielded him a $3.75-million profit. He also had entered into other contracts shortly before and shortly after the real estate agreement with Perry and had not attempted to rescind any of those due to lack of capacity.
“Today’s proposed decision is clear — the judge found that Mr. Westcott could not prove anything other than he was of perfectly sound mind when he engaged in complex negotiations over several weeks with multiple parties to transact a lucrative sale of the property that netted him a substantial profit,” Perry’s attorney, Eric Rowen, said in a statement to People.
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“The evidence shows that Mr. Westcott breached the contract for no other reason than he had changed his mind,” said Rowen. “We look forward to wrapping this matter up at the scheduled damage trial phase set for February 13 and 14, if not before.”
Westcott filed a lawsuit against the couple’s business manager, Bernie Gudvi, in August 2020, alleging he was heavily medicated and not of sound mind when he contracted with Perry for the $15-million sale. Shortly after the contract was signed, Westcott and his lawyers alleged that he was unable to properly review the contract because he had been on “several intoxicating pain-killing opiates” at the time.
Westcott said in his lawsuit that he had a six-hour back surgery several days before being presented with the proposed real estate contract and had been prescribed powerful medications that left him “intoxicated” at signing time.
The trial began in late September, and the judge has since bifurcated the case. The “Roar” singer is expected to testify in front of the judge in the countersuit regarding damages.
Westcott’s son, Chart Westcott, told People, “While we do not agree with [the judge’s] ruling and wish he had spelled our father’s name correctly in his ruling, we accept it.” “Katy Perry will now have to testify, in person, on damages and the contradictory claims she has made over lost income for the rental of my father’s home. While this has been a long road, the fight for my father is not over and we will continue to represent him and his legacy of incredible achievements.”
Landlords across the country have been empowered to act as a kind of police force in the name of crime prevention for decades. How? Through local “nuisance property” laws and “crime-free housing” programs that require them to evict tenants for vaguely defined “criminal activities.”
As of Monday, California became the first state in the nation to ban so-called crime-free housing programs. More states should follow suit.
Such laws target low-income and minority renters for eviction and violate their civil rights. That’s bad enough. But they also fail to reduce crime.
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Cities across the country have been implementing these policies for about 30 years, building on the Anti-Drug Abuse Act of 1988, which stepped up evictions in federally subsidized housing. By 2019, about 2,000 American cities had a crime-free housing program, and 37 of the 40 largest U.S. cities had a nuisance property ordinance.
Even as these policies spread, their efficacy was in doubt. I led a recent analysis of California’s crime-free housing policies that found they had no effect on crime. Other researchers have found that by driving people into desperation and homelessness, nuisance property ordinances may actually increase property crime.
Crime-free housing policies backfire partly because they treat 911 calls as an indicator of criminal activity. This creates a perverse incentive: For fear of being evicted, tenants don’t call authorities when they need them.
This particularly harms victims of domestic violence, who may hesitate to seek help from police lest they lose their housing. These policies can also dissuade tenants from seeking medical aid during drug overdoses or mental health crises. Evictions also hamper crime prevention by disrupting community social networks, making it harder for residents to monitor what’s going on in their neighborhoods — a critical element of crime prevention.
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My study of California found that city blocks with apartments certified as crime-free saw 21% more evictions than blocks without such housing. Other researchers have found that nuisance property ordinances increase eviction filing rates by 16%. In the six months after the U.S. Department of Housing and Urban Development instituted a “One Strike and You’re Out” policy on criminal activity in 1996, reported evictions from public housing surged 40%.
Evictions are deeply harmful in many ways. People who are evicted struggle to find housing again, and tenants removed from public housing are prohibited from receiving housing assistance. That can lead to more homelessness and desperation. Evictions also cause disproportionate housing insecurity for children, more unemployment, additional use of emergency room resources, and accidental drug and alcohol deaths.
Legal experts have argued persuasively that punishing people with eviction instead of through criminal justice procedures also denies them due process. These policies don’t require an arrest or conviction or even an indication of crime anywhere near the property. They don’t even require a crime.
People have been evicted under crime-free housing policies over kids playing basketball or jumping on a trampoline and because of complaints about barbecues. Tenants can even face severe consequences for the behavior of their guests. One federal court case concerns an Illinois city trying to evict a family because of a burglary committed by a friend of their teenage son who had slept on their couch.
The policies tend to be selectively enforced, with low-income, multifamily properties bearing the brunt. This has led the Department of Justice to take action against cities for violations of the Fair Housing Act and other federal laws. In 2022, the San Bernardino County city of Hesperia signed a consent decree with the federal government related to selective application of its crime-free housing program. Lawsuits have been filed on similar grounds against cities in Washington, Illinois, Pennsylvania and Minnesota.
What is the point of these harmful policies if they aren’t reducing crime? Public officials have suggested their real goal is segregation.
A Hesperia official acknowledged that the purpose of the city’s crime-free housing program was to remove what he described as “those kind of people” and “improve our demographic.” The mayor of Bedford, Ohio, said the city’s nuisance property ordinance was about taking “pride in middle-class values” and curtailing “urban immigration.” The analysis I led found that cities with crime-free housing programs had larger Black populations and that the affected apartments were on lower-income blocks with larger Black and Latino populations.
HUD has issued guidance to cities on how these policies may violate the Fair Housing Act by disproportionately evicting women, victims of crime and people with disabilities. But more needs to be done.
Following California’s lead, other states should limit evictions under these policies without an arrest or conviction or based on the behavior of nonresidents. Cities should also be required to report the number of evictions resulting from crime-free housing policies and nuisance ordinances. Similar federal policies also need reconsideration, including the one-strike policy for public housing and the rules that prevent evicted tenants from obtaining future housing assistance.
These policies and the evictions they cause are at best an ineffective means of preventing crime. At worst, they’re a harmful form of discrimination that leads to more crime and homelessness. Ending them could make all our communities safer.
Max Griswold is a policy researcher at the Rand Corp.
Southern California’s luxury real estate market never sleeps. But this past year, it collectively caught its breath.
Luxury sales slowed down in 2023 — a combination of soaring interest rates, a newly introduced “mansion tax” and an inevitable drop-off from a pandemic market when megamansions flipped like hotcakes.
In 2022, there were 17 home sales above $50 million and 48 over $30 million in L.A. County, according to the Multiple Listing Service. In 2023, there were only five sales over $50 million and 23 over $30 million.
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But even in a down year, there were still plenty of headlines. Jay-Z and Beyoncé set the all-time price record in the state of California, while other celebrities sold homes and left L.A. just in time to avoid paying taxes under Measure ULA.
Here are the top sales of the year.
$200 million
Bought for $200 million, the 40,000-square-foot mansion overlooks the ocean in the affluent enclave of Paradise Cove.
(Google Earth)
History was made in May when Jay-Z and Beyoncé shattered California’s price record, paying $200 million for a concrete compound in Malibu.
The L-shaped house, which topped the previous record of $177 million, looks more like an airplane hangar or supervillain’s lair than a home. It was built by Tadao Ando, a decorated Japanese architect who also designed a home for Kanye West a few miles down the coast. Ando brought in 7,645 cubic yards of concrete to erect the 40,000-square-foot home.
It never officially hit the market, so photos are scarce. The property is perched above Malibu’s Paradise Cove and features concrete hallways and walls of glass that open to a swimming pool and lawn overlooking the ocean.
$60.85 million
Another power couple — Jennifer Lopez and Ben Affleck — claimed the second-highest home purchase of the year when they shelled out $60.85 million for a five-acre spread in Beverly Crest. High interest rates weren’t a problem; they didn’t need a 30-year-fixed. The pair paid in cash.
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The deal marked the end of a year-long house hunt for Lopez and Affleck, and the house boasts an array of amenities that few other mega-mansions can match. Across 38,000 square feet are 12 bedrooms, 24 bathrooms, 15 fireplaces, a movie theater, wine cellar, nail salon and sauna, as well as a 5,000-square-foot sports facility with a boxing ring and pickleball court.
The $60.85-million sale actually came at a discount; the home originally hit the market with a gargantuan price tag of $135 million.
$55 million
Built in 2014, the European-inspired mansion comes with 12 bedrooms, 20 bathrooms, a skate park, movie theater and grotto.
(Anthony Barcelo)
Some scratched their heads when Mark Wahlberg unloaded his Beverly Park mega-mansion for $55 million in February. The movie star spent years designing the French-inspired palace, and he originally asked $87.5 million when he first listed it in 2022.
But Wahlberg was a motivated seller. He moved to Nevada last year, and by selling the home in February, he avoided Measure ULA, a transfer tax that took effect April 1 and would’ve charged a 5.5% tax on the sale. At $55 million, Wahlberg’s tax bill would’ve been more than $3 million.
The European-inspired showplace is truly one of a kind, featuring amenities such as a five-hole golf course, driving range, grotto-style swimming pool and skate park. Wahlberg, a native of Massachusetts, also added a Boston Celtics-themed basketball court during his stay.
$52.056 million
Malibu’s second entry on this list comes via attorney Stuart Liner and his wife, Stephanie Hershey Liner, who sold their beach house on Point Dume for just over $52 million.
The Liners have made a fortune flipping houses over the years, including doubling their money on a house they bought from actor Danny DeVito. They scored a hefty profit here as well; records show they paid $21.758 million for the oceanfront home in 2020 before extensively remodeling the place.
The 6,000-square-foot house comes with a swimming pool and tennis court. It sold to Tom van Loben Sels, a partner at Bay Area tax firm Apercen Partners.
$52 million
Built in 1998, Villa Firenze combines three lots across nearly 10 acres and centers on an Italian-inspired mansion.
(Hilton & Hyland)
For years, Villa Firenze was a cautionary tale, an extravagant reminder that while fortunes can be won in Southern California’s lucrative real estate market, you have to be strategic in how you sell to truly cash in.
Hungarian billionaire Steven Udvar-Hazy was not. The airplane mogul built the Italian-inspired mansion in 1998 and listed it for $165 million in 2017, which at the time was one of the most ambitious asking prices in California history.
Clearly overpriced, the house sat on the market for years until it was auctioned off for $51 million in 2021 to biotech entrepreneur Roy Eddleman, who, for some reason, tried the same thing as Udvar-Hazy.
Eddleman quickly attempted to flip the house for a massive profit, putting it back onto the market for $120 million just a year after he bought it. Unsurprisingly, there were no takers, and he died before it sold.
His estate slashed the price on the luxurious villa, which features 40-foot palm trees, 20-foot ceilings and a two-story library complete with a secret passageway that leads to a bedroom and bar.
After a year of price cuts, it finally sold in February for $52 million, just $1 million more than Eddleman paid for it at auction two years prior.
You can sense it in the ubiquitous “Help Wanted” posters in artsy shops and restaurants, in the ranks of university students living out of their cars and in the outsize percentage of locals camping on the streets.
This seaside county known for its windswept beauty and easy living is in the midst of one of the most serious housing crises anywhere in home-starved California. Santa Cruz County, home to a beloved surf break and a bohemian University of California campus, also claims the state’s highest rate of homelessness and, by one measure based on local incomes, its least affordable housing.
Leaders in the city of Santa Cruz have responded to this hardship in a land of plenty — and to new state laws demanding construction of more affordable housing — with a plan to build up rather than out.
Many Santa Cruz business owners back the city’s plan for high-rise development, saying the city needs more affordable housing for servers and retail workers.
(Brian van der Brug / Los Angeles Times)
A downtown long centered on quaint sycamore-lined Pacific Avenue has boomed with new construction in recent years. Shining glass and metal apartment complexes sprout in multiple locations, across a streetscape once dominated by 20th century classics like the Art Deco-inspired Palomar Inn apartments.
And the City Council and planning department envision building even bigger and higher, with high-rise apartments of up to 12 stories in the southern section of downtown that comes closest to the city’s boardwalk and the landmark wooden roller coaster known as the Giant Dipper.
“It’s on everybody’s lips now, this talk about our housing challenge,” said Don Lane, a former mayor and an activist for homeless people. “The old resistance to development is breaking down, at least among a lot of people.”
In recent years, Santa Cruz has approved development of modern multistory housing complexes, part of a broader effort to add housing stock.
(Brian van der Brug / Los Angeles Times)
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Said current Mayor Fred Keeley, a former state assemblyman: “It’s not a question of ‘no growth’ anymore. It’s a question of where are you going to do this. You can spread it all over the city, or you can make the urban core more dense.”
But not everyone in famously tolerant Santa Cruz is going along. The high-rise push has spawned a backlash, exposing sharp divisions over growth and underscoring the complexities, even in a city known for its progressive politics, of trying to keep desirable communities affordable for the teachers, waiters, firefighters and store clerks who provide the bulk of services.
A group originally called Stop the Skyscrapers — now Housing for People — protests that a proposed city “housing element” needlessly clears the way for more apartments than state housing officials demand, while providing too few truly affordable units.
City officials say the plan they hope to finalize in the coming weeks, with its greater height limits, only creates a path for new construction. The intentions of individual property owners and the vicissitudes of the market will continue to make it challenging to build the 3,736 additional units the state has mandated for the city.
“We’ve talked to a lot of people, going door to door, and the feeling is it’s just too much, too fast,” said Frank Barron, a retired county planner and Housing for People co-founder. “The six- and seven-story buildings that they’re building now are already freaking people out. When they hear what [the city is] proposing now could go twice as high, they’re completely aghast.”
Frank Barron is among the activists who say the City Council’s development plans are out of character for the laid-back beach town.
(Brian van der Brug / Los Angeles Times)
Susan Monheit, a former state water official and another Housing for People co-founder, calls 12-story buildings “completely out of the human scale,” adding: “It’s out of scale with Santa Cruz’s branding.”
Housing for People has gathered enough signatures to put a measure on the March 2024 ballot that, if approved, would require a vote of the people for development anywhere in the city that would exceed the zoning restrictions codified in the current general plan, which include a cap of roughly seven or eight stories downtown.
The activists say that they are trying to restore the voices of everyday Santa Cruzans and that city leaders are giving in to out-of-town builders and “developer overreach laws.”
The nascent campaign has generated spirited debate. Opponents contend the slow-growth measure would slam on the brakes, just as the city is overcoming decades of construction inertia. They say Santa Cruz should be a proud outlier in a long string of wealthy coastal cities that have defied the state’s push to add housing and bring down exorbitant home prices and rental costs.
Diana Alfaro, who works for a Santa Cruz development company, said many of the complaints about high-rise construction sound like veiled NIMBYism.
“We always hear, ‘I support affordable housing, but just not next to me. Not here. Not there. Not really anywhere,’ ” said Alfaro, an activist with the national political group YIMBY [Yes In My Back Yard] Action. “Is that really being inclusive?”
Zav Hershfield, a renters’ rights activist, advocates rent control caps and housing developments owned by the state or cooperatives.
(Brian van der Brug / Los Angeles Times)
The dispute has divided Santa Cruz’s progressive political universe. What does it mean to be a “good liberal” on land-use issues in an era when UC Santa Cruz students commonly triple up in small rooms and Zillow reports a median rent of $3,425 that is higher than San Francisco’s?
Beginning in the 1970s, left-leaning students at the new UC campus helped power a slow-growth movement that limited construction across broad swaths of Santa Cruz County. Over the decades, the need for affordable housing was a recurring discussion. The county was a leader in requiring that builders who put up five units of housing or more set aside 15% of the units at below-market rates.
But Mayor Keeley said local officials gave only a “head nod” to the issue when it came to approving specific projects. “Well, here we are, 30 or 40 years later,” Keeley said, “and these communities are not affordable.”
Santa Cruz County, known for its windswept beauty and easy living, is in the midst of one of the most serious housing crises anywhere in California.
(Brian van der Brug / Los Angeles Times)
Today, with 265,000 residents, the county is substantially wealthy and white.
An annual survey this year found Santa Cruz County pushed past San Francisco to be the least affordable rental market in the country, given income levels in both places. And many observers say UC Santa Cruz students contend with the toughest housing market of any college town in the state.
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State legislators have crafted dozens of laws in recent years to encourage construction of more homes, particularly apartments. While California has long required local governments to draft “housing elements” to demonstrate their commitment to affordable housing, state officials only recently passed other measures to actually push cities to put the plans into practice.
Regional government associations draw up a Regional Housing Needs Assessment, designating how many housing units — including affordable ones — should be built during an eight-year cycle. The state Department of Housing and Community Development can reject plans it deems inadequate.
For years 2024 to 2031, Santa Cruz was told it should build at least 3,736 units, on top of its existing 24,036.
For decades, Santa Cruz culture has centered on quaint shops and restaurants along sycamore-lined Pacific Avenue.
(Brian van der Brug / Los Angeles Times)
Santa Cruz and other cities have been motivated, at least in part, by a heavy “stick”: In cases when cities fail to produce adequate housing plans, the state’s so-called “builder’s remedy” essentially allows developers to propose building whatever they want, provided some of the housing is set aside for low- or middle-income families. In cities like Santa Monica and La Cañada-Flintridge, builders have invoked the builder’s remedy to push ahead with large housing projects, over the objections of city leaders.
The Santa Cruz City Council resolved to avoid losing control of planning decisions. A key part of their plan envisions putting up to 1,800 units in a sleepy downtown neighborhood of auto shops, stores and low-rise apartments south of Laurel Street. Initial concepts suggested one block could go as high as 175 feet (roughly 16 stories), but council members later proposed a 12-story height limit, substantially taller than the stately eight-story Palomar, which remains the city’s tallest building.
City planners say focusing growth in the downtown neighborhood makes sense, because bus lines converge there at a transit center and residents can walk to shops and services.
“The demand for housing is not going away,” said Lee Butler, the city’s director of planning and community development, “and this means we will have less development pressure in other areas of the city and county, where it is less sustainable to grow.”
Santa Cruz planning director Lee Butler advocates concentrating new development downtown, rather than building in areas where growth is less sustainable.
(Brian van der Brug / Los Angeles Times)
A public survey found support for a variety of other proposed improvements to make the downtown more attractive to walkers, bikers and tourists. Among other features, the plan would concentrate new restaurants and shops around the San Lorenzo River Walk; replace the fabric-topped 2,400-seat Kaiser Permanente Arena, which hosts the Santa Cruz Warriors (the G-league affiliate of the NBA’s Golden State Warriors), with a bigger entertainment and sports venue; and better connect downtown with the beach and boardwalk.
Business owners say they favor the housing plan for a couple of reasons: They hope new residents will bring new commerce, and they want some of the affordable apartments to go to their workers, who frequently commute well over an hour from places such as Gilroy and Salinas.
Restaurateur Zach Davis called the high cost of housing “the No. 1 factor” that led to the 2018 closure of Assembly, a popular farm-to-table restaurant he co-owned.
“How do we keep our community intact, if the people who make it all happen, the workers who make Santa Cruz what it is, can’t afford to live here anymore?” Davis asked.
One opponent calls the plan to add high-rises to the city’s picturesque downtown “out of scale with Santa Cruz’s branding.”
(Brian van der Brug / Los Angeles Times)
The city’s plan indicates that 859 of the units built over the next eight years will be for “very low income” families. But the term is relative, tied to a community’s median income, which in Santa Cruz is $132,800 for a family of four. Families bringing home between $58,000 and $82,000 would qualify as very low income. Tenants in that bracket would pay $1,800 a month for a three-bedroom apartment in one recently completed complex, built under the city’s requirement that 20% of units be rented for below-market rents.
The people pushing for high-rise development say expanding the housing supply will stem ever-rising rents. Opponents counter that the continued growth of UC Santa Cruz, which hopes to add 8,500 students by 2040, and a new surge of highly paid Silicon Valley “tech bros” looking to put down roots in beachy Santa Cruz would quickly gobble up whatever number of new units are built.
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“They say that if you just build more housing, the prices will come down. Which is, of course, not true,” said Gary Patton, a former county supervisor and an original leader in the slow-growth movement. “So we’ll have lots more housing, with lots more traffic, less parking, more neighborhood impacts and more rich people moving into Santa Cruz.”
Leaders on Santa Cruz’s political left say new construction only touches one aspect of the housing crisis. Some of the leaders of Tenant Sanctuary, a renters’ rights group, would like to see Santa Cruz tamp down rents by creating complexes owned by the state or cooperatives and enacting a rent control law capping annual increases.
“No matter what they build, we need housing where the price is not tied to market swings and how much money can be squeezed out of a given area of land,” said Zav Hershfield, a board member for the group.
The up-zoning of downtown parcels has won the support of much of the city’s establishment, including the county Chamber of Commerce, whose chief executive said exorbitant housing prices are excluding blue-collar workers and even some well-paid professionals. “The question is, do you want a lively, vital, economically thriving community?” said Casey Beyer, CEO of the business group. “Or do you want to be a sleepy retirement community?”
The town clock is one of several landmarks in the beach town.
(Brian van der Brug / Los Angeles Times)
Just days after the anti-high-rise measure qualified for the March ballot, the two sides began bickering over what impact it would have.
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Lane, the former mayor, and two affordable housing developers wrote an op-ed for the Lookout Santa Cruz news site that said the ballot measure is crafted so broadly it would apply to all “development projects.” They contend that could trigger the need for citywide votes for projects as modest as raising a fence from 6 feet to 7 feet, adding an ADU to a residential property or building a shelter for the homeless, if the projects exceed current practices in a given neighborhood.
The authors accused ballot measure proponents of faux environmentalism. “If we don’t go up,” they wrote, “we have less housing near jobs — and more people driving longer distances to get to work.”
The ballot measure proponents countered that their critics were misrepresenting facts. They said the measure would not necessitate voter approval for mundane improvements and would come into play in relatively few circumstances, for projects that require amendments to the city’s General Plan.
While not staking out a formal position on the ballot measure, the city’s planning staff has concluded the measure could force citizen votes for relatively modest construction projects.
The two sides also can’t agree on the impact of a second provision of the ballot measure. It would increase from 20% to 25% the percentage of “inclusionary” (below-market-rate) units that developers would have to include in complexes of 30 units or more.
The ballot measure writers say such an increase signals their intent to assure that as much new housing as possible goes to the less affluent. But their opponents say that when cities try to force developers to include too many sub-market apartments, the builders end up walking away.
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Santa Cruz’s housing inventory shows that the city has the potential to add as many as 8,364 units in the next eight years, when factoring in proposals such as the downtown high-rises and UC Santa Cruz’s plan to add about 1,200 units of student housing. That’s more than double the number required by the state. But the Department of Housing and Community Development requires this sort of “buffer,” because the reality is that many properties zoned for denser housing won’t get developed during the eight-year cycle.
As with many aspects of the downtown up-zoning, the two sides are at odds over whether incorporating the potential for extra development amounts to judicious planning or developer-friendly overkill.
Joyful, left, and Valerie Christy, right, jam for fun and a few dollars in downtown Santa Cruz.
(Brian van der Brug / Los Angeles Times)
The city’s voters have rejected housing-related measures three times in recent years. In 2018, they decisively turned down a rent control proposal. Last year, they said no to taxing owners who leave homes in the community sitting empty. But they also rejected a measure that would have blocked a plan to relocate the city’s central library while also building 124 below-market-rate apartment units.
The last time locals got this worked up about their downtown may have been at the start of the new millennium, when the City Council considered cracking down on street performers. That prompted the owner of Bookshop Santa Cruz, another local landmark, to print T-shirts and bumper stickers entreating fellow residents to “Keep Santa Cruz Weird.”
Santa Cruzans once again are being asked to consider the look and feel of their downtown and whether its future should be left to the City Council, or voters themselves. The measure provokes myriad questions, including these: Can funky, earnest, compassionate Santa Cruz remain that way, even with high-rise apartments? And, with so little housing for students and working folks, has it already lost its charm?
An L.A. County judge dismissed a lawsuit challenging L.A.’s “mansion tax” on Tuesday, marking the end of a months-long legal challenge from the luxury real estate community that looked to declare the measure unconstitutional.
The transfer tax known as Measure ULA was passed in November and took effect April 1, bringing a 4% charge on all residential and commercial real estate sales in the city above $5 million and a 5.5% charge on sales above $10 million, pumping millions into housing and homelessness-prevention efforts.
Los Angeles County Superior Court Judge Barbara Scheper issued a tentative ruling dismissing the challenge on Monday after hearing arguments from both sides, and she officially dismissed the lawsuit on Tuesday, according to court documents.
The ruling is a big win for housing activists, who say that L.A. desperately needs the money raised by the tax.
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“This is a great day for Los Angeles,” said Joe Donlin, who serves as director of the United to House LA coalition, which brought the measure onto the ballot in November. “The judge’s ruling confirms what we knew all along: ULA is the law of the land and it’s the will of the people. And it reminds us of the power of the people to shape our city’s future for the good.”
Donlin said he was surprised the ruling came out so soon.
“Before the hearing, we thought it might take weeks or months, but this was a positive sign that the judge didn’t feel compelled by the plaintiff’s arguments,” he said.
Advocates for Measure ULA gather outside Stanley Mosk Courthouse in downtown L.A. on Monday. A judge on Tuesday dismissed a lawsuit challenging the measure.
(United to House LA)
Greg Bonett, senior staff attorney for the Public Counsel who worked to defend the measure, applauded the decision, calling it “a resounding victory for the power of the people to initiate transformative solutions to address our city’s housing and homelessness crises.”
The judge’s ruling is a blow for many in the luxury real estate community, who claim that the transfer tax has frozen the market and stifled development.
Keith Fromm, an attorney for Newcastle Courtyards, one of two groups challenging the measure, said he plans to appeal the decision.
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“The order contains numerous errors of law which the appellate courts will hopefully recognize and correct,” Fromm said. “The ruling is simply one step in a very long journey to justice.”
The legal battle — which was headed by two main groups: Newcastle and Howard Jarvis Taxpayers Assn. — became a national conversation, as other cities looked to L.A. to see how it would implement such a tax.
Other cities such as San Francisco, New York City and Culver City have implemented transfer taxes, but L.A.’s is unique in scope and scale, not just taxing home sales but all property sales above $5 million.
Voters approved the measure with a 57% majority in November, and the tax became a hot-button issue immediately after.
Advocates argue that the tax is a way for luxury property owners to contribute to solving L.A.’s housing crisis, while opponents say it discourages development and pushes owners out of L.A. and into cities that don’t have the tax, such as Beverly Hills, West Hollywood or Santa Monica.
“With Measure ULA, we are now going to lose billions of dollars every year in economic development and property tax revenue in order to raise less than $500 million through the tax,” said Jason Oppenheim, a real estate agent with the Oppenheim Group and star of Netflix’s “Selling Sunset.”
The luxury real estate market froze in the months after the measure took effect, as many luxury homeowners looked to find loopholes to avoid paying the tax. Many hired accountants to find workarounds, such as dividing their homes into three parcels and selling them separately to stay under the $5-million threshold at which the tax kicks in.
Many homeowners held off on selling their homes, hoping the lawsuit would overturn the tax. As a result, funds raised by the tax have fallen dramatically short of original projections since sales have slowed.
In November, proponents of the tax estimated it would raise roughly $900 million a year. In March, a report from the city administrative officer lowered that number to $672 million. Then in April, Mayor Karen Bass’s first budget proposal, a $13.1-billion plan, included only $150 million in projected revenue from Measure ULA.
The number was chosen out of caution, as the city wanted to funnel as much money as possible toward housing and homelessness issues but not so much that it wouldn’t be able to pay it back if the measure were ruled unconstitutional.
But with the court’s latest ruling, spending will likely increase.
On Wednesday, the L.A. City Council’s budget, finance and innovation Committee will meet to discuss the implementation process, and the ULA coalition will propose that $12 million be reallocated to short-term emergency assistance for renters.
In August, the City Council passed a $150-million spending plan for funds raised by Measure ULA. It was the first time funds were specifically allocated since the tax was passed in November, and the plan sent money to six programs: short-term emergency rental assistance, eviction defense, tenant outreach and education, direct cash assistance for low-income seniors and people with disabilities, tenant protections and affordable housing production.
Walk past the street-facing 1990s duplex and beyond a 1920s Sears Roebuck kit bungalow, and an accessory dwelling unit, or ADU, rises before you at the end of the property. It’s a slim, two-story rental clad in inexpensive white vertical corrugated metal.
Only then do you realize this single Venice lot has four rental units.
With Southern California in desperate need of housing and state and federal laws constantly evolving to make permitting ADUs easier, the detached home by architects Todd Lynch and Mohamed Sharif of Sharif, Lynch: Architecture feels like a harbinger of what’s to come.
“When the city encouraged us to increase housing, I thought of the Venice property,” said owner Ricki Alon, who had previously worked with the architects and builder Moshon Elgrably on another project. “Given the unique site constraints, I didn’t believe they could do it. I was worried it would be too crowded and negatively affect the small guest house.”
The two-bedroom ADU was built five feet from an existing duplex and four feet from the property line.
(Jason Armond / Los Angeles Times)
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Alon was hesitant at first, but after a persuasive Zoom call with the architects, they all agreed that a fourth unit would add value to the bustling community.
“We viewed it as a challenge and a way to transcend ADUs in an SB9 world,” Sharif said, referring to Senate Bill 9, the 2022 state law that allows homeowners to convert their homes into duplexes on a single-family parcel or divide the lot in half to build another duplex for no more than four units.
Alon loved their initial sketches despite her skepticism, and the project moved ahead.
“It’s taught me how to think differently about how things are arranged and how I store things,” Henry Schober III said of his 13-foot-wide rental.
(Jason Armond / Los Angeles Times)
The large windows in the living room overlook the courtyard and give the ADU an open and airy feel.
(Jason Armond / Los Angeles Times)
“We decided to go as high as possible,” Sharif said of the eventual design, a slim, two-story ADU built on what was previously a driveway. Slipped into the lot, the 1,200-square-foot ADU, or IDU as the architects like to refer to the infill dwelling unit, was built an inch from the 1920s bungalow, five feet from the duplex and four feet from the property line.
Resting a few feet from a dingbat apartment to the south, the ADU is lifted off the ground to preserve two parking spots in the alley and a swimming pool in front. “Its entire width is dictated by that two-car side-by-side dimension,” said Sharif, who teaches in the undergraduate and graduate design studios at UCLA. Lifting the volume to preserve the pool also created shade and an open space that all residents could share.
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“They refused to get rid of it,” Alon said of the water feature. “They insisted on building around it.” Today she admits it was the right decision. “Now, when you walk in, you experience a wonderful, absolutely lovely environment. I’m glad they did not listen to me,” she added with a laugh.
The narrow living room, seen from the staircase, and the first-floor office and en-suite bathroom. (Jason Armond / Los Angeles Times)
Even though you can’t see the rental from the street, the ADU has enormous curb appeal and a touch of glamour. A Midcentury-style Sputnik pendant light hangs outside the front door, giving it an elegant feel, and the white cladding gives it a distinctive quality from the other rentals, which are clad in orange metal and gray siding.
The driveway before Sharif, Lynch: Architecture added a two-story ADU alongside a bungalow, right, and duplex, in back.
(Sharif, Lynch: Architecture)
Up a short flight of stairs, the front door opens to the ground floor and the two-story entry, which features a compact first-floor bedroom, study and en-suite bathroom.
“We wanted every room to have a bathroom to suit roommates,” Sharif said.
Tenant Henry Schober III, a 38-year-old attorney specializing in data privacy, uses the ground floor as his office and a bedroom for out-of-town guests.
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“It’s a place that I’m comfortable spending a workday in,” said Schober, who goes to the office once or twice a week. “I don’t feel like I’m trapped in my house.”
Tenant Henry Schober III takes advantage of the ADU’s rooftop deck, which offers panoramic views of Venice. (Jason Armond / Los Angeles Times)
An overhead view shows the ADU’s proximity to the modern duplex and bungalow.
(Steve King Architectural Imaging)
Up the stairs to the second floor, the main living area and kitchen measure just 13 feet wide; large windows and operable skylights add light and cross-ventilation throughout the linear floor plan.
“The windows make you feel like you’re in an amazing penthouse in SoHo,” Alon said. “It gives the room a great energy.”
The rest of the second floor houses a powder room, bathroom and bedroom. Because of limited space, there was no room for a formal dining room. However, Schober said that’s easier to maneuver than the limited storage, which has taught him to think differently about how he stores and displays things.
The pool was preserved to create a communal area for all tenants.
(Jason Armond / Los Angeles Times)
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“I eat at the long breakfast bar, and when I have people over, I use the common space or the roof deck,” he said.
The home’s two floors feel like three, Lynch said, “because of the way the stairway draws one upward through the IDU and then because of how the roof steps up again.”
The roof deck serves as another outdoor room, further expanding the living space. From the rooftop deck, Schober has panoramic views of Venice, not to mention ample room for a dining table, barbecue and sauna.
After renting an apartment temporarily a few blocks from the beach, Schober was still determining whether he wanted to rent another apartment in Venice.
The master bedroom on the second floor.
(Jason Armond / Los Angeles Times)
“It originally turned me off to Venice,” he said. “The price points were so high. It felt like people were paying for the ZIP Code. Landlords were asking five grand for an apartment next to a parking lot.”
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But when he saw the two-bedroom ADU, he changed his mind. “When I walked in, I thought, ‘I’m going to live here,’” said Schober, who is originally from Philadelphia and moved to Los Angeles from Switzerland.
“The apartment and the secluded feel changed my attitude,” Schober said. “You get the convenience of Venice and access to all the restaurants and shops, but you’re not in the thick of things. I lived in San Francisco for a decade, Europe for six years. I view the apartment as an oasis in a neighborhood that is not as transformed as others.”
Schober said the strength of the architects’ vision is that the unit is quietly tucked away in a congested neighborhood. “Since you are set back from the street, there is no foot traffic,” he added. “It doesn’t feel like I am living among a bunch of units. There is little street noise, and you would never know you live a stone’s throw from Lincoln Boulevard.”
Stairs lead up to the rooftop deck.
(Jason Armond / Los Angeles Times)
Perhaps most impressive, the ADU defies the notion that you can’t have parking, privacy and quality of living, including a swimming pool, on a tight infill lot with other properties.
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In a sense, Schober said, “It seems the solution to the housing crisis is building up.”
“There is a community feeling, and people know each other,” Sharif said. “They sit around the pool, and it’s very intimate and private.”
After a 10-month building process, the team completed the project this spring at a cost of approximately $410 per square foot.
Looking back, Alon is grateful that she moved forward with the project.
“It’s not just a unit that brings value to the property,” she said. “It enhances the entire property for everyone. Adding housing in this condensed community is important, but this team made it something beautiful that people will enjoy. You don’t have to add a huge amount of square footage to add quality of living.”
A lucky cat figurine sets the tone inside Henry Schober III’s two-bedroom ADU in Venice.
State officials have revived a popular grant program to help lower-income California homeowners build accessory dwelling units by covering some of the upfront costs. But funding is limited, so demand for aid may soon outstrip the supply of dollars.
The California Housing Finance Agency’s ADU Grant Program offers up to $40,000 to qualified homeowners to cover pre-construction costs of an ADU, including planning and permit fees for the structure. The program exhausted its initial $100 million months ago, causing the agency to stop taking applications; now, $25 million more is available for homeowners seeking help.
Obtaining a grant is not as simple as filling out a form online, however. For starters, applicants have to meet the program’s new income limits. Household income must be less than 80% of the area median income, which translates in Los Angeles County to $84,160. That’s down from 150% of the area median income in the initial round of grants.
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Applicants also need to work through a state-approved lender or “special financing participant” because the grants aren’t paid to homeowners — they’re paid to lenders. The CalHFA website lists 18 participating lenders as well as 10 governmental or nonprofit agencies, including Neighborhood Housing Services of Los Angeles County, which specializes in affordable housing.
Typically, homeowners must obtain a construction loan for an ADU from a participating lender before seeking an ADU grant. The loan will cover the costs that the grants will reimburse, including architectural designs, permits, soil tests, impact fees, property surveys, energy reports and utility hookups, the agency says. These expenses can make up a sizable portion of the cost of a new ADU, especially one built by converting a garage or other existing structure.
If you haven’t started work on an ADU yet, let alone obtained a loan, you can still get in line for a state grant. Neighborhood Housing Services, which provides construction loans for ADUs, says it will try to reserve a potential grant for anyone who emails it two pieces of information: a current mortgage statement and one month’s worth of pay stubs or other proof of income. The information, which should be sent to [email protected], should also include the person’s legal name, address and Social Security number.
A homeowner who meets the income limits but can build an ADU without a loan can still apply for a grant through NHSLA. But the agency’s construction team would have to manage the project and the grant funds, said Iris Cruz of Neighborhood Housing Services.
Grant applicants will have to sign and submit an affidavit to CalHFA attesting to several things about themselves and their plans, including that they are a U.S. citizen or legal resident; they own and have their primary residence on the property where the ADU is being built; they will use the ADU for permanent housing or long-term rentals; and the ADU will conform to local building and zoning codes. If any of those statements prove to be false, the applicant could face a prison term and a fine of up to $10,000.
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The lender, meanwhile, will have to attest that the grant applicant meets the program’s income limits.