SHELLY GARCIA Staff Reporter The numerous “Now Renting” banners hanging outside apartment buildings may also be the troubling sign of a coming crisis in some neighborhoods of the San Fernando Valley. Despite the fact that a shortage of apartments has tightened vacancy rates throughout the Valley, some communities are being left in the cold. Apartment vacancy rates in places like Van Nuys, North Hollywood and some parts of the Northeast Valley are holding steady at about 9 percent nearly twice the rate of some other Valley communities along the hot Ventura Boulevard corridor. The buildings in these slow-renting communities, initially intended to accommodate the swarm of newcomers who descended on the Valley in the 1950s and ’60s, have now grown old, and they no longer meet the needs of today’s apartment dwellers. “It’s not the young, new Valley anymore,” said David Diaz, an environmental planner and lecturer in Urban Studies at Cal State Northridge. “The Valley is definitely reaching middle age structurally.” In fact, North Hollywood and Van Nuys are now facing the same conditions that have plunged other communities into blight, Diaz said. “What you’re looking at is a future like (what’s happened in) the Northeast Valley if we’re not able to restore the housing stock,” he said. In Van Nuys and North Hollywood combined, nearly 2,550 buildings of five units and more or 70 percent of the apartment properties were constructed prior to 1970. And unlike areas such as Sherman Oaks, which received funds for renovation following the Northridge earthquake in 1994, buildings in Van Nuys and North Hollywood have largely gone without any significant rehabilitation. Not only do these buildings lack amenities such as laundry rooms and parking spaces, the vast majority are studio and one-bedroom units, which makes them unable to accommodate families with children. “There’s a mismatch” between available apartments and demand for housing, said Don Spivack, deputy administrator for the Community Redevelopment Agency of the city of Los Angeles. “There’s very little vacancy in three- and four-bedroom apartments.” The Valley’s earlier residents tended to be upwardly mobile singles and couples en route to becoming families and homeowners. Today, however, these same parts of the Valley have become home to low-income families for whom apartments are long-term housing solutions. The high vacancy rates in Van Nuys and North Hollywood have driven apartment values down, despite rebounds in other communities, according to a report by Marcus & Millichap, a real estate company specializing in investment properties. The average price per unit in multi-family dwellings in Van Nuys and North Hollywood dropped about 8 percent between 1996 and 1997 to $32,404, the survey found. That compares with an overall increase in per-unit apartment prices of about 1 percent to $42,168 in the entire San Fernando Valley. In neighborhoods like the Ventura Boulevard corridor, which stretches from Studio City to Tarzana, the difference is even more dramatic. The average per-unit price of an apartment building in that market jumped 16 percent to $78,205 in 1997. And in Glendale, Pasadena and Burbank, average apartment prices rose 23 percent to $62,900, according to Marcus & Millichap. “Investments are valued based on income,” said John P. McDermott, regional manager of Marcus & Millichap in Encino. “In Van Nuys and North Hollywood, because of the condition of the buildings, you won’t have huge increases in rents.” Overall, apartment vacancy rates in the San Fernando Valley dipped to about 6.5 percent in the first quarter of 1998 from nearly 8 percent in first-quarter 1997, and rents increased 1.3 percent during the quarter over the previous year to an average of $760 a month. Areas like Burbank, Glendale and Pasadena combined saw apartment vacancy rates tighten to just over 4 percent, from about 5.2 percent last year, and rents climbed about 2 percent to close to $700. But in Van Nuys and North Hollywood, where vacancy rates remained unchanged at 9 percent during first-quarter 1998 compared to the same period last year, rents have remained flat at about $600. At the same time buildings in Van Nuys and North Hollywood reach the critical 30-year mark in age, they are becoming more expensive to maintain. With costs going up and income remaining stagnant, these buildings are more likely to attract the kind of buyers who would rather milk the property in the short term than invest in the future of the community. “Diminishing returns won’t attract quality investors,” McDermott said. According to Marcus & Millichap, 119 buildings in Van Nuys and North Hollywood changed hands in 1997, one more than the number of transactions that occurred at the height of the market in 1990. Most of the buyers were speculators attracted by a supply of foreclosed properties selling at well below market value, betting that when the market begins to improve, so will the values on the properties, even if they put no further investment into them, said Don Schultz, president of the Van Nuys Homeowners Association. “The landlord who bought property as a foreclosure is only interested in turning a quick buck,” said Schultz. Not everyone agrees with Marcus and Millichap’s numbers. According to Grubb & Ellis Co., the average price per unit of apartment buildings in North Hollywood and Van Nuys rose nearly 7 percent in 1997 over 1996, to $39,606. Grubb & Ellis’ statistics include a wider range of buildings, including a large number of smaller, newer buildings not taken into account by the Marcus & Millichap survey. But others say that it is the larger buildings that will have the greatest impact on the landscape of the community, because they’re more visible and their numbers are greater. “Van Nuys, Panorama City and North Hills are already overbuilt,” said Tom Henry, planning deputy to City Councilman Joel Wachs, who shares jurisdiction over Van Nuys with City Councilwoman Cindy Miscikowski. “And some of the places are very run down, almost to where we’re concerned there might be a slum situation.” The city has several programs underway to try to counteract the trend. The Community Redevelopment Agency of Los Angeles, for example, offers low-interest loans, at about half the going rate of commercial loans, to property owners in North Hollywood who wish to improve their buildings, provided they agree to limit their rents to prescribed levels based on the income of the tenant family. Since the program’s inception in 1979, CRA funding has been used to rehabilitate 882 units in North Hollywood a fraction of the 59,008 units in Van Nuys and North Hollywood, according to Marcus & Millichap. Another problems is that the CRA funding is for cosmetic repairs, such as painting or adding amenities, and not the major renovations these buildings require, such as converting studio and one-bedroom apartments into larger units. “If they (property owners) don’t see a market, a lot of them are not willing to take rehab funds,” said Spivack at the CRA. Programs such as the Neighborhood Recovery Program and the Mayor’s Targeted Neighborhood Initiative Program also include loans, along with components that focus on community improvement efforts. A third city program, slated to start up next month, will move responsibility for housing code enforcement to a new office, which will oversee inspections and help property owners who want to upgrade to code obtain low-interest loans. But these programs tend to focus on buildings and areas that already have deteriorated well beyond accepted standards. The larger dynamics are more subtle, say onlookers. “You don’t always have to look at the worst neighborhood,” said CSUN’s Diaz. “Neighborhoods showing signs of aging don’t necessarily have to be the socioeconomic basket cases.” Indeed, slowly aging apartment buildings often do not attract the attention of city officials. For example, most of the emphasis in Wachs’ district is on “new, single-family housing and businesses,” said Henry. Renee Weitzer, chief field and planning deputy to City Councilman John Ferraro, whose district includes a portion of North Hollywood, said that in her district, people never come to her with complaints about substandard housing. And at Councilwoman Miscikowski’s office, the problems with these buildings are seen as isolated instances. “My impression is, those kinds of complaints are building-specific and tend to relate to issues such as how responsive and committed the owner is and how well capitalized,” said Glenn Barr, press deputy to Miscikowski. The Los Angeles Housing Department has, for the past four years, had its hands full shoring up the problems caused by the Northridge earthquake. “Now we’re finally at a point where that’s done, and the department is focusing on this code-enforcement program,” said John Wickham, housing and economic planning analyst for the agency. But however effective, these programs are not substitutes for the natural marketplace, which dictates that prices will go up when vacancies goes down and demand increases, Wickham added. “We can’t take the place of the market, so the market is going to have to find an approach of its own too,” he said.
