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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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Property Owners and Developers--What's with all the Demonizing

Uploaded: Mar 30, 2017
Shortly before my 75th birthday I became a commercial property owner for the first time. When my mom died I inherited 1/8 of a commercial property in Los Angeles along with my sisters. Rge property has been in the family for 50 years and my dad and now I have maintained a friendly relationship with the tenant who has also been there for most of the time,

I see a lot of negative comments about developers on Town Square and in council meetings and it seems off point to me.

In nearly all cases before there was a developer, there was a property owner who decided to sell their property. The children of the current owners of our Los Angeles property may make that decision in the future as have many families here as generations or financial circumstances change.

What happens if the property becomes less valuable to develop--because it takes a long time to get approvals, because there are lots of fees, because the city places other restrictions, etc.

A developer does not lose if they have not yet bought the property. The only losers are the property owners who will get less for the sale of their property. A developer can just move to the next property or city. Imagine if it became more difficult to sell your house. The buyer does not lose, the seller loses.

It is ironic (to me at least) that most people who complain about developers live and or work in buildings built by developers. All of my homes in Palo Alto were built by developers.

Development is a business in which the developers take the risk of development in return for a prospect of profits, just like any large or small business owner.

While recent property values have increased along with rents, this is not always the case and there have been large losses for developers as there have been for stock market picks that went bad, In our old office the rent went up $3 per square foot in the dot com boom and back down in the bust.

Commercial development cycles are the norm and money is made and lost depending on when in the cycle property was purchased.

Finally, developers like any business, survive or not depending on how well they serve customers. No one builds a home or commercial building that they expect no demand for. They build for customers. Customers not developers create the demand for space just like customers create the demand for cars, restaurants and goods and services generally.

One can debate the rules under which development takes place without demonizing the people who do the development.

Comments

 +   44 people like this
Posted by Douglas Moran, a resident of Barron Park,
on Mar 30, 2017 at 5:53 pm

Douglas Moran is a registered user.

"One can debate the rules under which development takes place without demonizing the people who do the development."

Steve, you well know that the "demonization" of developers is the result of a long history of them abusing and perverting the system, of using political influence to "Privatize profit, socialize costs/risks". They get projects approved that are major exceptions to the rules. They violate the terms of what was approved, knowing that enforcement is unlikely. They present false information about impacts of the projects.
Portion deleted


 +   35 people like this
Posted by Well,said, Steve., a resident of Charleston Meadows,
on Mar 30, 2017 at 6:02 pm

Well written article, Steve. Why I am not surprised that Doug Moran agrees with the demonization of developers.
But, do remember, that much of negative comments came from a very small number of disgruntled residents that continuously vent their anger on the town square forum. And remember that the weekly itself plays a role in these negative comments-- they write one-sided stories and editorials that stir their anti- development base for their own personal profit.


 +   22 people like this
Posted by Robert, a resident of another community,
on Mar 30, 2017 at 6:52 pm

It's for the same reason that people complain about traffic, even when they're just as responsible for it as anyone else; there's a gut reaction to blame the "other" that, while understandable, should have no place in public policy.


 +   16 people like this
Posted by Resident, a resident of Another Palo Alto neighborhood,
on Mar 30, 2017 at 8:00 pm

Developers have an economic interest in densifying Palo Alto, and political influence is part of their business model. Those things put them at cross purposes with many residents. But it's not demonization to say that, just as it's not fair to resent them for what they do. If you think your elected officials are inappropriately influenced by developers, that's an elected officials issue. Developers are businesspeople, not charities, and they don't pretend to be anything else.

There are individuals and groups who caucus with developers who do pretend to be something they're not. For those people “demonization" isn't the right term.


 +   9 people like this
Posted by Opinion., a resident of Menlo Park: Downtown,
on Mar 31, 2017 at 12:31 pm

Fine, developers primarily care about profit, regardless of the impact on the community. It's up to our elected officials and proper regulation to ensure that choices about development BALANCE the need for different kinds of development, adhere to regulations and more. For the past 20 years, it truly appears that developers have been permitted to do almost whatever they want to the detriment of the community. We have luxury housing, but not affordable. We have far more office space than housing. Individuals struggle to buy because developers can offer more, and build or renovate much cheaper than an individual (this has happened to me). The list goes on. These examples point more towards various cities on the peninsula "allowing" developers to do what they want. That's not the developers fault. That's the elected officials not doing what the citizens want, and/or the citizens not voting for people that will do what they want for the long-term health of the community. Start there.

On the other side, I bet this forum can come up with dozens of examples of things developers shouldn't have done, and were not penalized for it. Any takers?


 +   2 people like this
Posted by IVG, a resident of Rex Manor,
on Apr 2, 2017 at 7:46 am

"They get projects approved that are major exceptions to the rules."
I take that as an implicit acknowledgement by City Council that the rules are inadequate to the current economic situation. Council just can't say that outright and change the general plan, because then they'd be mobbed by activist homeowners.


 +   16 people like this
Posted by Renter, a resident of Menlo Park: Downtown,
on Apr 2, 2017 at 7:16 pm

As a renter, it might surprise you to know what I think about developers. Renters, unfortunately, rely on large corporations (their employers) and developers to fight for their interests.

I frequently hear opinions such as:

"For the past 20 years, it truly appears that developers have been permitted to do almost whatever they want to the detriment of the community. We have luxury housing, but not affordable. We have far more office space than housing. Individuals struggle to buy because developers can offer more, and build or renovate much cheaper than an individual (this has happened to me). The list goes on. These examples point more towards various cities on the peninsula "allowing" developers to do what they want."

The way I see it, developers' hands have been tied, and they have not been able to accomplish much at all. Why do I say this? Well here's what I would want to do if I were a developer:

1) Upzone the multifamily corridor near Caltrain: Alma, Laurel, Live Oak, Fremont, etc. Sorry, but duplexes, fourplexes, even two story garden developers are a waste of space with such a shortage of housing. I would require a minimum of 3 stories, maximum 1 parking spot per unit, and offer incentives for no cars at all.

2) I would buy the houses next to Menlo Tower and build Menlo Tower 2. I've never heard anyone complain about the noise and traffic generated from this ~10 story condo tower.

3) Rinse and repeat.

New supply is the only way that we can bring back semi-sane prices. The situation we have now is neither luxury nor affordable. Renters pay a lion's share of income for an antiquated class D apartment. Buyers pay $2M for a closet in original condition.

There is very little in MP under $1.5M. Consider that a DINK couple with tech jobs, each making $10k/mo, could barely qualify for a loan on a $1.5M home. Is this really the MP we want? This is why we badly need new condo towers. I bet Menlo Tower 2 would presell in a few days.

Finally, let's not forget that the luxury apartments of today are the crappy apartments of 30 years from now. If we want "affordable housing" in our future, then we need to build new construction today.

Upzoning would increase the demand for services and the population who wants to buy a SFR. Therefore it would increase the value of your land, homeowners. And with more people living near Santa Cruz Ave, maybe we could actually turn it into something respectable.


 +   5 people like this
Posted by Me 2, a resident of Old Palo Alto,
on Apr 3, 2017 at 12:29 pm

"We have luxury housing, but not affordable"

Look in the mirror. By obstructing development through misuse of appeals and increased regulation, the only projects that pencil out are luxury housing.

Know where the costs of mandating affordable housing go to? The people who buy the non-subsidized housing. The cost of constructing housing does not magically decline because something is forced to be "affordable." The cost gets over allocated to regular housing in those projects - hence the market pricing needs to be above a certain level for the other units in order for a project to work.

Go on - feel free to scapegoat developers for our problems, but in the end, residents (and "residentialists") have done it to themselves.

Portion deleted


 +   8 people like this
Posted by Echo Chamber, a resident of College Terrace,
on Apr 3, 2017 at 1:05 pm

deleted

I explain the deletions in a post below.


 +   5 people like this
Posted by Longview, a resident of another community,
on Apr 3, 2017 at 5:39 pm

Longview is a registered user.

I agree with the pro-housing comments by renter. Also, city councils need to get the zoning right. If city councils changed zoning so that most sites could only develop or redevelop as housing (not office), then developers would be choosing between build housing or build nothing, a choice I am comfortable with. Correct zoning points developers in the needed direction, and de-demonizes developers.


 +  Like this comment
Posted by the_punnisher, a resident of North Whisman,
on Apr 3, 2017 at 8:14 pm

the_punnisher is a registered user.

Read my post in the other issue along similar lines in the MV paper. It explains our families take on this issue. I called the future of Moutain View perfectly 40 years ago. Fool me once, Shame on you. Fool me twice, Shame on me...


 +   1 person likes this
Posted by Steve Levy, a Palo Alto Online blogger,
on Apr 3, 2017 at 8:28 pm

Steve Levy is a registered user.

Many posts have been deleted on this thread, interestingly all from Palo Alto posters though there are twice as many residents in MP and MV where this blog also appears.

Most deletions were personal attacks on various people. Some were off point. I deleted all my follow up posts as well.

Posts do not get deleted for simply disagreeing as readers can tell by looking at the posts that remain.

The demonizing of developers or any group is particularly troublesome at this time when Muslims and Latinos are often treated as a homogeneous group in a negative way.

It is easy to confuse feelings about developers with feelings about development or developments but they are different.

Developers are just people like bankers, teachers, used car sales folk and elcted officials. They all serve useful functions and come in all varieties of competence and behavior.


 +   3 people like this
Posted by Allen Akin, a resident of Professorville,
on Apr 3, 2017 at 8:56 pm

Steve, you wrote: "The demonizing of developers or any group is particularly troublesome..." and for that reason you deleted many comments regarding developers.

Yet you left this untouched: "...the boomers who want to maintain the facade of developers causing problems are sitting on their own gold mine of 20-50x appreciation. In the end, it's about protecting the valuation of their own property."

This appears to be exactly what you denounced. Why didn't you delete it?


 +   1 person likes this
Posted by Steve Levy, a Palo Alto Online blogger,
on Apr 3, 2017 at 9:03 pm

Steve Levy is a registered user.

Good point Allen. Taken care of.


 +   2 people like this
Posted by Curmudgeon, a resident of Downtown North,
on Apr 3, 2017 at 9:07 pm

" Many posts have been deleted on this thread.."

We know. But do you realize that, if you had kept those posts opposing your view instead of deleting them, your total poster count would be at least three times what it is, far above any competing blogger?


 +   5 people like this
Posted by Steve Levy, a Palo Alto Online blogger,
on Apr 3, 2017 at 9:10 pm

Steve Levy is a registered user.

Ha ha. Guess it shows my priorities are not in winning the most posts trophy.


 +   3 people like this
Posted by Douglas Moran, a resident of Barron Park,
on Apr 3, 2017 at 9:46 pm

Douglas Moran is a registered user.

Deleted.

Doug and I disagree on policy but that does not give Doug the right to misrepresent statements or read minds, something he rightly objects to on his blog.

One poster said he/she was not surprised by Doug's post, which by the way disagreed with me and Doug took "not surprised"as a personal attack.

Doug provided a list of projcts that he thought developers broke promises on but that is exactly my point--that you do not characterize a group by the actions of some. That is exactly the point I am making about Muslims.

There have been hundreds of thousands of developments just on the peninsula in the past 100 years and a few that Doug or anyone else does not like is not cause for blanket statements about developers.

This is not a blog about what people think about sp specific officer developments in Palo Alto in the past gen years.

Let's leave the space open for other people to post and stop the back and forth with Doug and Curmudgeon.


 +   16 people like this
Posted by Sanctimonious City, a resident of Another Palo Alto neighborhood,
on Apr 3, 2017 at 10:01 pm

Modified for a NIMBY perspective to provide equal treatment for the blog that will never get written:

Shortly before my 40th birthday, I became a single family home owner. I see a lot of negative comments at city council meetings and Towne Square about residentialists and it seems off point to me.

In nearly all the cases before the city took a pro-development bias, there was a quiet neighborhood with a sense of community and high quality of life. What happens if the schools get overcrowded, the traffic and pollution get worse and the city raises taxes while simultaneously creating deficits?

It is ironic that those who push so hard for densification do not own homes in the neighborhoods that will be affected. While recent property values have increased, no amount of new housing has reduced market prices but it has changed the nature and feel of the Palo Alto. Progress is the norm but that doesn't mean things should get worse over time rather than better.

Finally, city governments survive or not depending on how well they serve the needs of their current citizens. No one buys a home to raise a family in a neighborhood that they expect to turn into an urban jungle or a city that re-writes zoning rules based on the priorities of outside interests and ideologues with social agendas.

Residents create the heart of the community, not developers or commuters or politicians. One can debate the vision of the future for Palo Alto without demonizing the current residents who love the city and want to keep it that way.


 +   10 people like this
Posted by @Renter, a resident of Menlo Park: The Willows,
on Apr 3, 2017 at 11:21 pm

"New supply is the only way that we can bring back semi-sane prices."
Wrong. Cap total commercial space and/or tax headcount, and do so Bay Area wide. We need to stop the demand part of the cycle, not indefinitely increase housing supply. I'm a strong proponent of zero population growth at all levels within our state.

And wrong again on your support for single parking space per unit. Drive by the two sets of condos at East Meadow Circle and East Meadow built at about the same time. One set has 2 spots per unit, side-by-side. There's mild spillover parking onto the street even beyond those two. The other set of condos has two spots/unit, but idiotically designed as double deep parking. The curbs surrounding those are packed with vehicles and you won't see a single kid playing outside. That's standard of living trending toward zero in my book.


 +   6 people like this
Posted by Renter, a resident of Menlo Park: Downtown,
on Apr 4, 2017 at 9:35 am

"Cap total commercial space and/or tax headcount, and do so Bay Area wide. We need to stop the demand part of the cycle"

This could be very effective, and it's a legitimate option to discuss as long as you acknowledge it as a poison pill. If MP could drive the companies out, people like me would not be nearly as attached, and would move. Then they could stop building and preserve the idyllic, suburban feel.

Assuming that this ship has not yet sailed, one problem I see is that Bay Area homeowners have already made a pact with the devil. It's companies and renters like me who create the vibrancy that drives people to live here and bring the massive home appreciation that comes with demand. Homeowners build real equity that they can use to generate more wealth and get to raise kids in a stimulating, diverse environment with unparalleled opportunities. The cost is traffic, construction, and fewer restaurants. Are they willing to give that up?

The $3M, 2500 sqft house in MP is worth $1.5M in Bel Air, and far less in most parts of the country. The plan you outline puts tens of billions of homeowner equity and hundreds of millions of property tax revenue at risk. Is everyone willing to take the haircut? Will towns default on your bonds for the over-built, over-improved, and overpaid after everyone leaves?

But in principal I think we agree that you can't have your cake and eat it too, forever. Either you embrace what the area has become and take the good with the bad, or you try to kick everyone out and deal with the consequences. The unstable equilibrium we have is more vulnerable than ever: Web Link


 +   12 people like this
Posted by mauricio, a resident of Embarcadero Oaks/Leland,
on Apr 4, 2017 at 3:55 pm

The blogger often admonishes readers that he will delete unfounded posts. A reminder: unfounded means having no foundation or basis in facts. In his blogs, just like in this one, we often read posters who claim that only new supply of housing, that is additional densification will bring down housing prices in palo Alto and the Bay area. To the best of my knowledge, none of those posts were ever deleted by the blogger, who is quick to delete posts that oppose his development centric views. The notion that additional development would lower prices in a desirable area has zero basis and foundation in facts. I have researched and studied this very topic for a couple of decades now, and there isn't one example anywhere in the world that indicates this notion has any basis in reality. Quite the opposite-be it San Francisco, San Jose, Redwood City, London, or any other desirable city and town, the more they built and developed, the more expensive housing became. It didn't quench the demand, made it more expensive to rent or buy in, and provided more opportunities for foreign investors to either shelter and launder their money in real estate, money sometime obtained by questionable means, or make huge profits, thereby driving housing prices ever higher.

When is the blogger going to start deleting unfounded and plain wrong posts claiming that increasing housing development would bring prices down? Post like this:"New supply is the only way that we can bring back semi-sane prices."?


 +   4 people like this
Posted by Curmudgeon, a resident of Downtown North,
on Apr 4, 2017 at 6:53 pm

Portion deleted

Did you really delete Moran's post and substitute your own text under his name as though he had written it? That's dirty bloggery. No fair.

From Steve to Curmudgeon.

Probably readers seeing a post that started " Doug and I disagree" would not think the post was written by Doug don't you thibk.

Be honest: reply to what posters post as you want, but then keep the original so your faithful audience can see and weigh both sides of the argument.

From Steve to Curmudgeon

"Usually arguments don't get deleted unless attached to put downs or personal attacks. The online editors and I do delete comments from time to time we feel are inappropriate."

In closing, I know many of the major local developers personally. There is no need to demonIZE them.

From steve to Curmudgeon

Good to hear


 +   2 people like this
Posted by Me 2, a resident of Old Palo Alto,
on Apr 4, 2017 at 7:42 pm

@Sanctimonious says "In nearly all the cases before the city took a pro-development bias"

The fact that it went up the chain to the city council for a hearing already disproves the city has a "pro-development" bias. Leaving the PC stuff out, which is a whole separate ball of wax, the fact that projects that follow the process and are approved under existing zoning and regulations still get appealed by vindictive NIMBYs abusing regulations to get a hearing in front of the city council is very much ANTI-development.


 +   1 person likes this
Posted by BP, a resident of College Terrace,
on Apr 5, 2017 at 6:48 pm

Are developers paying for the new parking garage at California Ave?


 +   1 person likes this
Posted by stephen levy, a resident of University South,
on Apr 5, 2017 at 11:27 pm

stephen levy is a registered user.

The Cal Ave zt4v1Vgarages are paid from three sources I believe.

One is monies set aside for infrastructure from the general fund and come from residents, property owners, visitors and businesses.

Two is $32 million from Stanford as a result of the medical expansion agreement.

Three is money from the hotel tax increase.




 +   2 people like this
Posted by @Renter, a resident of Menlo Park: The Willows,
on Apr 5, 2017 at 11:41 pm

Thanks for the web link. Happy to share the wealth with the rest of the nation.

"Is everyone willing to take the haircut? "
Sign me up. The ~$2m in unrealized capital gains in my property are paper funny money and untouchable, serving only to ratchet up my property taxes every year. I'm stuck where I am, unable to move without being forced out of the area or out of the state. I couldn't move down the block if I wanted as I could never afford the property tax (and yes, you Prop 13 haters, it's not just seniors you're advocating against - you are also advocating that your stock option-free neighbors should be forced out of their homes to make room for richer folks). Meanwhile traffic on Willow continues to swell, backing up all the way from Dumbarton, blocking the box down Middlefield and across University, and spilling speeding frustrated drivers onto neighborhood streets, putting our kids' safety at risk. This is not equilibrium. It's uncontrolled and unnecessary exponential growth. When I returned to the Bay Area about 10 years ago, you could reasonably commute from South San Jose, Los Gatos, etc. People had options. It's an hour+ slog now each way if you're lucky regardless of work schedule or method of transportation. That's straight up lost family time and lost productivity. I feel for people stuck in that grind and I know how lucky I am. I welcome the jobs engine spreading to Texas, Colorado, and elsewhere rather than trying to cram it all into the Bay Area.


 +   2 people like this
Posted by @ CrescentParkAnon., a resident of Another Palo Alto neighborhood,
on Apr 6, 2017 at 1:56 pm

Deleted

Coukd be fastest hat trick in posting--3 sraight posts not responding to the topic.

You are still far behind the poster who writes a Cialis post on my blog every day.

Rules are simple. Write on the topic, no put downs


 +  Like this comment
Posted by Mr. Peabody, a resident of Menlo Park: The Willows,
on Apr 7, 2017 at 2:57 pm

@StevenLevy "What happens if the property becomes less valuable to develop--because it takes a long time to get approvals, because there are lots of fees, because the city places other restrictions, etc."

The simplistic answer to your rhetorical question is that the owner loses "value". There's no hard cash loss unless the owner actually sells. So what? Additionally, its hard to imagine finally getting an approval whose construction doesn't increase the value of the property in excess of the short term devaluation. Can you even cite one? I can cite an instance where an approval sans construction sent an instant price signal to nearby properties that were offered so much money for their land that the initial owner felt ripped off by the land-price originally offered to him by the developer whose approval generated the signal. I claim that this is a representative example of an entire class of lengthy approvals called "up-zonings", government legislative acts that always raises the value of the property enormously. Economists" never seems to complain or cite up-zoning as examples of government regulatory behaviour.

There are basically three kinds of project approvals: ministerial, quasi-judicial, and legislative. The blog gives no indication of what types of approvals its talking about, how many are in each class, and how long each actually takes, and the impacts on land values. It conflates them into one grand generalization.

By State law, Fees can do no more than eliminate a proven socialized cost, they cannot be a hidden tax. In fact, they are nearly always under-priced. Fees may be imperfect prices , but perfecting them isn't your point. If you think City Policy should socialize development costs you should say so plainly. Please don't tell us you advocate lower fees, tell us you advocate re-imbursing taxpayers at rates less than the actual cost to the taxpayer.

Regarding regulatory restriction on land prices. Real economists like Glaeser have found the opposite; namely that land prices and housing prices in the Bay Area are HIGH and STICKY, because of regulatory restriction, and, not low or volatile, despite fees. Global demand to use Bay Area land constantly outstrips regulatory supply allowed by the zoning code, and therefore prices stay high. If you don't believe PA is a global housing market go read a Ken Deleon brochure. Pay attention to the appendix where he talks about opening up the "China Market" and, soon, the "India market. Setting up internet tools to allow foreign buyers to park cash in PA property, sight unseen.

We are all property owners, we all get this. Anyone who has owned Peninsula property for some length of time knows that our property is not getting less valuable.

Is this blog using fake economics or cherry-picking counter-examples to misrepresent the impact of regulatory policy on property values?


Sorry, but further commenting on this topic has been closed.

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