February 27, 2004 - From the February, 2004 issue

Alan Casden: The Absence of Public Leadership Unreasonably Limits Region's Housing Supply

Already one of the most successful multi-family housing developers in the country, Alan Casden last year opened up another significant development in the Palazzo across from The Grove. TPR is pleased to present this interview with Alan Casden, CEO of Casden Properties, in which he discusses the successful development of The Palazzo and the challenges of multi-family housing development in Los Angeles today.

Alan Casden

Alan, a number of the TPR interviews in this month's issue address the challenges of both housing affordability and availability in the L.A. metropolitan area. How would you gauge the degree of difficulty any developer faces when attempting to provide market rate housing in the metro L.A. area?

There is a big contradiction between what people want and where people want to live and what the city, through the planning process, is allowing to be developed. Couple this with the fragmentation of the council districts and the power of the more affluent homeowners groups, and you have a real ambivalence towards housing development here in the city.

But housing is being built. So, looking at it from a business point of view, what then are the characteristics of a profitable development opportunity?

Opportunities abound because of the enormous demand for both for-sale and rental housing. The characteristics we look for in a good rental opportunity are an urban site close to transportation, employment centers, retail and entertainment amenities. However, opportunity often confronts opposition from empowered homeowners groups. Downtown is an area in which housing can be developed right now because there's not a constituency to oppose it. There's no empowered homeowners group. After enough people are living downtown, I suppose you'll be building a constituency that will then oppose the next project being proposed.

Your firm is now completed development of The Palazzo across from the Grove. Describe that project, the niche it fills, and how replicable it is.

The Palazzo fills a great niche because it's right across the street from The Grove, which is a very "in" place in Los Angeles right now.

As housing developers, we brought to Fairfax new residential housing, which was severely lacking. There hadn't been new housing in that area since Park La Brea was built. The Palazzo is a new form of housing right next to shopping and services; it by design provides all of the attributes and amenities to make it a very desirable place to live. The Palazzo has been received with an overwhelmingly positive reception, and is 80% leased.

Who is the target audience for these housing units?

We targeted upscale, affluent families, older couples and single professionals who prefer rental homes. They have more discretionary funds to spend on housing, and are seeking better places to live-different types of units that are more convenient and more tailor-made for their lifestyles. So, we designed those projects to meet that target market. These are people who rent by choice. They could afford to purchase a home in other areas, but because they want to live in this area and this rental housing is still an affordable alternative to buying a house in this area, they choose to live at the Palazzo.

Typically when interest rates are low, as they are now, rentals suffer in favor of home ownership. Is that what is happening today in L.A.?

It happens to some extent. But, the median sales price of a single-family house is now over $382,000 in the city of Los Angeles. And you can't find a house at $382,000 on the Westside very easily. So, our style of luxury rental housing is an affordable housing alternative. The price of home ownership is still higher than it is to rent. That's not true in other parts of the country, but here in the city of Los Angeles, the cost of homeownership is much higher.

How replicable is The Palazzo in the city and the region?

Well it depends where it is. There's a height limit of fifty-five feet. So, if it meets the height limit, it could be replicated. But we don't replicate projects from one site to another. We design and create projects that are tailor-made for each particular site with which we're involved. It isn't as if we're building way out in the suburbs where we can just acquire a piece of flat land and build the same project from site to site. We've never been able to do that, and you especially can't do that in infill housing situations. You have to fit the project to its community and context.

Is it replicable in Westwood?

Westwood is a different project all together. It's designed for a different rental home occupant and it has different amenities. Some attributes are the same, but Westwood is designed as a mixed-use project. The Palazzo and the Palazzo East, across from the Grove, are not mixed-use because the retail is across the street. In Westwood, projects are mixed-use, and that's what the city likes to see. Also, the Westwood environment is even more conducive to not getting in your car. You can walk to the grocery store, the drug store, and there are restaurants and theatres all around you. So The Palazzo has some similarities to this because you can walk across the street to the Grove, but our project in Westwood focuses more on pedestrian orientation for the occupant.


Let's turn your attention to the City of L.A.'s consideration of an inclusionary zoning ordinance. What's your reaction or take on that policy effort?

Well, I think that it's a grand idea. Whether it comes to pass or not, I don't know. There are certain parts of the city that just don't want affordable housing in their neighborhoods. There's an ordinance now saying that you can't build more than five units of low income housing without approval in any one project. Inclusionary zoning seems good from a policy standpoint, but in practice is that going to further alienate those homeowner groups and constituencies who now are not in favor of dense residential housing?

In other words, is the city proposing an ordinance that is not in line with what its citizens want? We are a big proponent of affordable housing components to residential housing, and have provided more affordable housing in the city of Los Angeles than any other residential developer. We pioneered the use of 80-20 projects throughout the city in the early ‘80s, and built tremendous amounts of affordable housing in the city of Los Angeles. But, is that something that everybody wants to see?

And, is the city of L.A. going to give you the financial advantages for creating affordable housing development? Where are you going to do it? And, are you further going to increase the ire of the people who think rental homes are not attractive next to their houses?

Jan Van Tillburg, in earlier interviews with TPR, has suggested that good design will overcome most neighborhood objections to growth. Is this true, from your experience?

It's true: Design can overcome those objections if the neighborhood will focus on it. You know, by the time a project gets chopped up in the entitlement process, developers often put up what they can get up. By the time you actually get to the construction phase, who is interested besides the architect and the developer in the quality of the design?

USC Law Professor George Lefcoe, who has chaired both the city and county planning commissions, has noted that there's very little planning going on any longer in L.A. Negotiation and arbitration perhaps, but very little planning. Would you agree with Lefcoe's observation?

I think a lot of it is true. We're supposed to start with good planning, and where does it end? Homeowners groups are not interested in good planning, they're interested in minimizing the impact on their own particular neighborhood. But what they see is perceived impact.

You no longer have an interest in the Dodgers; that deal is closed. And, you no longer have an interest in the Ambassador, that deal is closed. Give us your views on what's likely to happen with both.

The Ambassador Hotel was a site we thought we could share with the LAUSD. We envisioned a design that would put high-rise multifamily housing in the front, which would not impact the schools. The design also would have accommodated 5,000 students in a K-12 facility. But, the LAUSD did not want modify its design to accommodate what a school in a very urban area could be. Who knows what the design is going to be? We thought that housing would work well next to a school, but obviously the LAUSD didn't feel that way. We could have had a great mixed-use project along Wilshire Boulevard with the schools in the back. But that isn't the plan the district wanted to pursue.

As for the Dodgers, I'm a great fan of baseball and I love the Dodgers. I have season tickets and my family and I go to a lot of baseball games, so I hope that they do well. And, if the stadium stays where it is, it stays where it is.

I had no plans to develop the site. If I had been the successful buyer for the team, I was interested in enhancing the experience for the Los Angeles Dodgers baseball fans. I think a new stadium somewhere else would have been well received by fans, but that's obviously not going to come about right now. It's a long way off.

Lastly, SCAG's State of the Region report indicates that the region is now at about 17.4 million people and is likely to grow by another three million in the next 10 years. Obviously there will be housing demand. Can the region accommodate it? Will we accommodate it?

I think we will. But, people are going to have to accept more density, because that's the only way to do it. And until you gain consensus for more density, how can you create the housing solutions that you need to have a place for people to live? Are we going to tell people not to move to Southern California or Los Angeles County and halt all growth here? We need growth to be an economically viable area. It's right now one of the most attractive areas in the United States to live, to work, and to recreate, and there are more people who want to come here. Somehow the city and the city planners and the people who live here will have to come to realize that they have to accommodate the needs of our growing population, and it is better to do so within a thoughtful and organized planning process.


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