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I spent a most enjoyable hour recording this podcast with Liz Falletta, who is deeply immersed in the nuances of the Los Angeles building codes and their impact on housing production.
Liz just published a book, By-Right l By-Design, an interdisciplinary housing reference text. It studies significant Los Angeles housing design precedents and their related development types. A side-by-side comparison of these projects – real estate development models built in large numbers as of right, versus singular examples of innovative architecture built by variance – reveals new insights for future housing production in Los Angeles and elsewhere. Projects are examined through the lenses of real estate development, urban planning and design, expanding the context in which these works can be understood, evaluated, and, ultimately, built upon.
Liz teaches architectural and urban design at USC’s Price School of Public Policy where she’s taught for over 15 years. Her courses focus on design as an interdisciplinary activity and explore how the intersecting values of architecture, planning and development can inform the design process and improve design outcomes.
In addition to teaching full time, Liz is principal of Falletta Development, which developed one of the first small lot subdivisions in Los Angeles, located on Huntington Drive in El Sereno. She has consulted on many small lot subdivisions throughout Los Angeles and worked as an entitlements consultant on various single and multi-family housing projects. Liz is a licensed architect and a licensed real estate broker in the state of California.
In recognition of the breadth of her expertise, Liz was recently appointed to the City of Los Angeles’ Zoning Advisory Committee (ZAC). This 21-member group is the first line of critique for the city’s recode LA project, a $5 million dollar, five year plan to overhaul the zoning code. Liz is leading the Housing Working Group, a subcommittee of the ZAC working to prioritize issues of housing production, affordability and sustainability throughout the recode project. Ms. Falletta is also a member of the California Planning Roundtable.
Insights and Inspirations
- Through research for her book “By-right, By-design” Liz learned that more design is not always better.
- She found that some of the best housing solutions might not be the most innovative designs.
- Over the years her students have evolved from not caring one iota about design, to caring very much today. And that bodes well for the future of cities.
- To Liz impactful real estate projects are those that balance design, planning and real estate development well.
Information and Links
- You can buy Liz’s book, By-Right l By-Design here.
- Liz loves the Penland School of Craft in NC. She’s been several times for a creative recharge and plans to go more often in the future. (I want to go too.)
- Something important to Liz is her participation in the Ross Minority Program in Real Estate (Home | Lusk Center for Real Estate) fostering minority participation in real estate development in emerging communities.
Read the podcast transcript here
Eve Picker: Hey, everyone, this is Eve Picker, and if you listen to this podcast series, you’re going to learn how to make some change.
Eve Picker: Hi there. Thanks so much for joining me today for the latest episode of Impact Real Estate Investing. My guest today is Liz Falletta. Liz teaches architectural and urban design at USC’s Price School of Public Policy, where she’s taught for over 15 years. But that’s not all Liz does by a long stretch. Liz is also a small-scale developer, having developed, painfully, one of LA’s first small-lot subdivision projects. She sits on LA’s Zoning Advisory Committee, which is tasked with critiquing the city’s Recode LA Project, a $5 million five-year plan to overhaul the zoning code. Last, but not least, Liz has just published a book, “By-Right, By-Design,” where she researched housing solutions. Be sure to go to EvePicker.com to find out more about Liz on the show notes page for this episode and be sure to sign up for my newsletter so you can access information about impact real estate investing and get the latest news about the exciting projects on my crowdfunding platform, Small Change.
Eve Picker: Hi, Liz. Thank you very much for joining me all the way from California. It’s earlier for you than me, right?
Liz Falletta: Yes.
Eve Picker: I know you teach architecture and urban design at the University of Southern California’s Price School of Public Policy. I think you also have your own development firm, wrote a book, and you were one of the first developers to develop a small-lot subdivision in LA. You’re a very busy woman.
Liz Falletta: Yes. I do teach design across disciplines at the Price School at USC. I’m an architect and, for a long time, I taught in our architecture school, but now I’m exclusively in our policy-planning environment. Thinking about design from multiple perspectives is something that I do a lot. I guess it’s been a long time now since I did that small-lot subdivision project, and I think I’ve blocked a lot of it out.
Eve Picker: Well, I wanted to hear a little bit about your development work. What prompted you to test out the small-lot subdivision? It might be worth telling our listeners a little bit about that zoning-code overlay, which I kind of find fascinating.
Liz Falletta: Sure. The small-lot subdivision came out of an effort by the LA Planning Department, in 2004/2005, to really address housing and our mounting housing crisis, which is now even more of a crisis. They actually invited an interdisciplinary group of designers, developers, planners, other stakeholders in housing to brainstorm what are some ideas, from a policy-planning perspective, that could engender housing production.
Liz Falletta: The small-lot, or, aka, zero-lot-line housing was one of hundreds, I think, and was really the one that got pursued. I think the idea was if you were able to scale down homeownership and also allow development outside a condominium model … Because, really, what the small-lot allows is feasible homeownership on a smaller scale. Contractors and builders don’t have to get onerous builders risk insurance like they do when they build condominiums.
Eve Picker: Interesting.
Liz Falletta: Yeah, no, it’s … I think planners really thought that the smaller scale would create for more affordable housing.
Eve Picker: I’ve seen some of that, and it’s not affordable, is it?
Liz Falletta: No, no. That is the thing that struck me the most is that, if you build a small-lot in Venice on the west side, it’s going to be $2 million a unit, because it’s the west side. Build one in Silver Lake, it’ll be a $1.5 million. Smaller-scale solutions, I think, are a good option. I think ultimately, after having done one, and having seen how the small-lot has evolved since I did the one that I worked on, I think it’s one tool amongst many [cross talk]
Eve Picker: I think what it does do is it sort of maximizes the use of infrastructure that’s already in place. I know that there are cities all over the world kind of densifying areas through zoning so that they can maximize their transit [cross talk] and utility lines. One little house in the middle of a very large lot in a highly desirable neighborhood doesn’t really … It just makes the sprawl go further, right?
Liz Falletta: Exactly. I think one of the things that was actually brilliant about the way the ordinance was written is that it didn’t have anything to do with the zone change at all. It had nothing to do with zoning. It just allowed you to use lower-density, multifamily-zoned sites in a different way. They might have been built as apartments or condominiums before, but this allowed … We have a restricted-density zone, for example, probably 20 dwelling units an acre, density-wise; it allowed those sites to be developed with for-sale housing, which, at the time, was … The small-lot subdivision came out pre-crash.
Eve Picker: If you were to rewrite that today, what would you change about that small-lot subdivision overlay?
Liz Falletta: That’s such a good question. I do think … Because it’s actually not an overlay, but I think using it as an overlay, and being more targeted and specific about where it could be used and how, I think, would be helpful [cross talk]
Eve Picker: So, it’s LA-wide. It’s just a change for the zoning-
Liz Falletta: It’s LA-wide, yeah [cross talk] It’s an ordinance that allows you to develop with a different model. It was sort of marketed as small houses on small lots, and it really has turned into giant houses on small lots.
Eve Picker: Yeah.
Liz Falletta: So, I think [cross talk]
Eve Picker: It’s an interesting- it’s like an interesting lesson in how much you’d have to think about the details of a code like that.
Liz Falletta: Oh, yeah. Also, you have to … I feel terrible saying this – you have to think about the bad actors.
Eve Picker: Yeah. I think that’s right.
Liz Falletta: Who’s going to abuse this, and how, and-
Eve Picker: So, this is not a democracy. It’s [cross talk]
Liz Falletta: Yeah. How do we head off the bad acting? I think we saw a lot of really bulky design that communities pushed back against. You saw a lot of projects … There were a lot of single-family homes that were built on multifamily-zoned sites, so you saw a lot of turnover of those kinds of sites, and communities … You know, communities, in the main, don’t really understand zoning.
Eve Picker: Yes, that’s right.
Liz Falletta: And were very upset to see houses being demolished to build these giant things. Then a lot of rent-controlled small-scale housing from the ’20s, ’30s, and ’40s has been demolished to build them, also.
Eve Picker: Maybe even just saying that if you have the privilege of adding more units to a lot like that, there’s a maximum size to each of them would have kind of stopped that. It’s interesting. What other development are you doing?
Liz Falletta: I have done development in the past. I did two or three small-lots, also, that, in the end, didn’t get built. Then, the market crash happened, and then I started teaching full-time, and then, I started writing this book, which, it turns out, takes a long time to write a book. So [cross talk]
Eve Picker: Yes. So that’s taken over. Okay- [cross talk]
Liz Falletta: -yeah, but I am actually, I should say, looking to do another development. I feel like I learned a lot by doing all the research for the book. I would like to get back into small-scale development in LA.
Eve Picker: What’s interesting about small-scale development?
Liz Falletta: Personally, it’s just the financial scale [cross talk]
Eve Picker: -in LA, small-scale is still really big, and expensive, right?
Liz Falletta: -yeah, still pretty expensive. But also, I think that’s where we can build successful communities. Not that we can’t have large-scale communities that are successful, but I think neighborhood change in giant steps is not palatable to communities. I think smaller-scale changes can be really impactful [cross talk]
Eve Picker: Right. It’s a way to innovate change slowly and gently, right?
Liz Falletta: Yeah, and in ways that people can embrace and see immediate benefit from, as opposed to this 200-unit housing project that assembled 10 lots, and suddenly, the neighborhood is totally different.
Eve Picker: Yeah, I think that’s right. Your work focuses a lot on LA. What conditions have you found that are unique to LA versus just across the country [cross talk] in the research that you’ve done?
Liz Falletta: One of the reasons why this research was well-suited to LA is we really do have a strong history of design innovation, but also a really interesting history of multifamily housing and different multifamily housing types. They’re different types than we see maybe in Chicago or New York. Then we also see these types have persisted. Our city is younger than many on the East Coast, so these types are still extant in a way that maybe they aren’t in some other communities. I think, also, LA has the reputation – and it’s somewhat true – super pro-growth; really driven by development and developers. There’s long been a close association with the city with the development- development as a profession.
Eve Picker: Be sure to go to EvePicker.com and sign up for my free educational newsletter about impact real estate investing. You’ll be among the first to hear about new projects you can invest in. That’s EvePicker.com. Thanks so much.
Eve Picker: Your book is called “By-Right, By-Design.” I’d love to know how you came to that name.
Liz Falletta: So, by-right, as I’m sure you know, just means by-right projects can be built with ministerial approval – approvals where nobody can say … If you meet all the criteria, and the criteria are laid out, nobody can deny approval for your project. Developers really like by-right projects, or permissionless projects, because they’re a lot more certain, and they’re less risky, and they usually take less time. Developers would prefer to build by-right if they can. That’s become increasingly impossible in Los Angeles. There’s been a lot of discussion about by-right housing- elevating the threshold of by-right and actually making more projects able to be built by-right.
Liz Falletta: For my purposes, I needed a second category that was a corollary to by-right, and that’s where by-design came from, because the book really looks at a set of six case studies that look at really famous Los Angeles housing precedents by famous architects, aka by-design, with their by-right counterparts. By-design could also mean by-discretion, or by-variance. All of the by-design projects actually required some sort of discretionary approval to be built.
Eve Picker: Interesting. And do you think they’re better?
Liz Falletta: Not always, actually.
Eve Picker: That’s interesting.
Liz Falletta: No, I was … Because one of the questions I had when I started out on this is like I wonder if all these projects that are really famous, you know, that I studied in architecture school, I wonder if they broke the rules; if they could only do these innovative things by not following the rules. It was true. They all required variances of different kinds. I don’t think being by-design means they’re necessarily better, or better designed, or that if they’re in the by-right category, they’re poorly designed.
Liz Falletta: One of the things that really started this research is some annoyance at the fact that architects always … A. they always believe that unless it was designed by them, it’s not really well-designed, and B. that – I should also say that I’m a licensed architect – but that they really thought more design was always better in every situation, and it’s not necessarily true. I was frustrated-
Eve Picker: That’s a pretty damning thing for an architect to say.
Liz Falletta: I know. I’m sorry [cross talk] bad. I guess typically what I say is I think design really, really, really matters. It just doesn’t matter in the way that many architects think it does.
Eve Picker: How so?
Liz Falletta: I think architects are trained to be innovative all the time, to be focused on image, to be focused on creating things that are new, that are this, that are that. I think that allows them to not see, or to discount other aspects of design that are maybe tried and true, or repetitive, or something that actually really matter to quality of life; because I think the design of housing, for example, really matters, but I think what really matters about it is a lot about density, about spatial organization, about circulation, about how common space and open spaces organize. I should say, also, I think there are a lot of amazing architects doing really great projects who don’t maybe share these attitudes, but I think the profession focuses less on these things; doesn’t feel like these things are as important.
Eve Picker: Yeah. As you know, I’m also a trained architect, and I went to the dark side, too, and became a developer.
Liz Falletta: Yay!
Eve Picker: Yeah, but, you know, I have a sort of similar frustrations with the architecture profession, which I adore. I think that architects are trained in a unique and priceless way, but I think they are not necessarily … Especially young architects don’t really understand how much they’ve learned and how they can put that to use in other ways and follow a traditional path in sort of that branded architecture studio that may not always make the world better.
Liz Falletta: Yeah.
Eve Picker: I wish they’d learn a little more about real estate development, as well, because the pragmatic side of architecture is sometimes overlooked, right? I remember having conversations with an architect about the fact that five units would be so much nicer than six. I’m thinking, “Well, five units won’t be built and six will be …” It’s that sort of basic thinking, yeah …
Liz Falletta: Yeah, because that sixth unit is your profit; that’s your cash flow [cross talk].
Eve Picker: -or I’ll break even. It may not even be profit, you know?
Liz Falletta: Exactly. One of the reasons I wanted to write this book is because I wanted to help architects, and planners, and real estate developers better understand each other’s goals and values so that that architect could use his understanding of the profit motive in real estate to get his or her own goals addressed, or met, or something. Because, if architects just sit there and say real estate developers are terrible because they don’t understand that the five-unit design is going to be better than the six-unit design, that’s completely unhelpful. It’s not going to get us anywhere.
Liz Falletta: I think what architects don’t understand is they have an interest, a vested interest, in the planning and real estate development strategies of the projects they design, right? A good example from the book is Gregory Ain’s Mar Vista Tract, which had a very enlightened developer who had done some development in the ’20s, or early 20’s; hadn’t done anything in the ’30s, during the Depression, and really wanted to build a community, which is fantastic. Ain was also very interested in that. They got a lot of pushback from lenders, and they got a lot of pushback from the city planning department, in terms of how it was laid out, and the style the houses; did it have flat roofs or not? Ultimately, they could only build half of the tract, and that half was a financial failure. So, if people wonder why we don’t have modernist communities, that is one reason.
Eve Picker: Yeah.
Liz Falletta: They had to sell off the rest of their land. and it got developed in the traditional kind of manner.
Eve Picker: Talking about by-right, I know you’re a fan of the recent offering we had on Small Change, Bungalow Gardens, which is in your neck of the woods. It’s a little homeless housing project. I believe that’s a by-right project [cross talk] and I’m wondering why you like that project.
Liz Falletta: I personally would love to build a bungalow court for myself. My goal – I think a lot of people have this goal – it’s going to be hard to do here in Los Angeles. Everybody wants to build a compound, where you can live with your friends and have communal dinners. Actually, also, I should say that the first place I lived when I moved to Los Angeles was a very small bungalow court, and that-
Eve Picker: Oh, cool!
Liz Falletta: It was interesting. I moved out here from D.C. to go to SCI-Arc, actually, for grad school. Finding housing was really interesting, because I had lived in a rowhouse, I think, in D.C., in a basement apartment. I’d never encountered a bungalow court, but I was driving around, and they’re just … Everybody loves them. They are the best places to live.
Eve Picker: That’s really sweet.
Liz Falletta: You know your neighbors immediately [cross talk].
Eve Picker: How big are they, typically?
Liz Falletta: Oh, gosh. They can be relatively large. The one I lived in was probably six units, eight units-
Eve Picker: For our listeners, the bungalow court typology, I think, start being built in the ’50s, right?
Liz Falletta: Really much earlier than that. Probably the latest ones are in the ’30s.
Eve Picker: In the ’30s. This little one that Jason and John built – a building, Bungalow Gardens – is the first one in almost 100 years.
Liz Falletta: You can’t build them now, mainly because of the parking requirements, but also just underlying density is reflected in land values, so you can’t … Basically, if I wanted to build a bungalow court, I would overpay for land and then under-develop it. Part of what makes the bungalow court work, really, is the scale and the individuality of units.
Liz Falletta: Many of the units actually- these were often built for tourists, because people would come to LA for their health, but would also … It took a long time to get here, then, so you stayed for months. They had all this built-in furniture and fun things that allowed you to live in the unit, easily, for a few months, as opposed to having to bring all your belongings and actually move here for real.
Liz Falletta: They’re very efficient; they’re laid out, really, very functional. They’ve got a lot … They’re high, in terms of individuality, so you have a lot of identity with your unit and your space, but then there’s that communal scale. That actual courtyard usually then connects to the block and the street [cross talk]
Eve Picker: It’s very nice [cross talk]
Liz Falletta: -if we could all live in bungalow courts, we would [cross talk]
Eve Picker: -maybe the issue is not … Maybe the issue is not just by-right, and by-design, but also by-cost, because the cost of land clearly drives development, as well, right?
Liz Falletta: You have done your deal when you bought the land, right?
Eve Picker: Yes.
Liz Falletta: If you overpay for land, you’re done. You have determined sort of what kind of project you’re going to do and whether that project’s going to be a success or not.
Eve Picker: How does all of that fit in with affordable housing?
Liz Falletta: One of the other benefits of building small-scale housing and even this- the whole explosion of ADUs is many of those are going to hopefully provide inherently affordable housing, as opposed to subsidized affordable housing. Getting subsidized affordable housing, we just haven’t been able to build a huge number of units. There’s a lot of competition for those funds. We now have transit-oriented communities. It does incentivize the development of affordable units in mixed-use projects. You get some extra density and some parking reductions, if you’re near transit, and they have a pretty liberal definition of transit. I do think that is generating way more affordable units than maybe some of our other mechanisms have in the past [cross talk]
Eve Picker: Interesting. Zoning becomes a serious mechanism for affordable housing. Actually, that brings me to the other thing I’d like to talk to you about. I think you were appointed to LA’s Zoning Advisory Committee? The Recode Project-
Liz Falletta: Yeah. Mm-hmm.
Eve Picker: You’re one of not many people who are critiquing that and leading a subcommittee on housing, right?
Liz Falletta: Yes. I was just talking about this with my students yesterday and realizing that I needed to check in with people at the City, because we haven’t had a meeting in a while. LA’s zoning code that we are still using today was officially created in 1946, even though we had a code prior to that. We had residential districts as early as 1908.
Liz Falletta: Our code has been frustrating to use for … It makes it really difficult for people to do good projects; the kind of projects that the city wants to see. Mixed-use has always been a problem with our code, because it’s very single-use oriented, so it’s confusing to use. There was also a substantial sort of phantom code, or ghost code that, if you were in the know, you knew [cross talk]
Eve Picker: Oh, really?
Liz Falletta: -you didn’t? Yeah, that wasn’t very transparent. It meant that certain people got certain favors. The planning department wanted to do several things. One, make the code more user-friendly; I think, two, make it more modular. Basically, it’s a form-based light code. It disassociates use and form. The idea is that the modularity will make the code more flexible, but then, also, as people want to do different kinds of projects, the tools are already there, in terms of making a zone combination that will facilitate that kind of project. I think the third thing they wanted to do is elevate by-right processes. So-.
Eve Picker: Interesting.
Liz Falletta: -allow more projects to be built by-right, because virtually no projects are built by-right.
Eve Picker: Yeah, and the entitlement process takes a really long time in LA [cross talk]
Liz Falletta: Oh, yeah. No, the first small-lot project I did was the real education because I was like, “This makes no sense …”
Eve Picker: How long did it take?
Liz Falletta: Oh, my God. At least two years, yeah. It was like banging your head against a wall.
Eve Picker: Now, I know, with the Bungalow Court listing, I talked to them probably for two years before we listed it. All along the way, there was entitlement, entitlement, entitlement, right up until the end.
Liz Falletta: Yeah. What I learned is that part of that is inherent in development. Every week, something happens that’s going to kill your project. It’s just how it is, here. I would get upset and there would be crying. Finally, after a few months of this, I was like, “Oh, this is what development is. This is how it works. Okay. I need not get so upset about this, because it’ll kill me, A, and B. that’s the work site traffic control inspector. Sure, he’s going to deny your work site traffic control plan …” That I even had to have a work site traffic control plan was ridiculous, but-
Eve Picker: How many units are we talking about?
Liz Falletta: Four!
Eve Picker: That’s crazy. That’s crazy.
Liz Falletta: It’s crazy, and they already existed. I was using the ordinance. The ordinance was silent on whether it had to be new construction or if it could be existing construction. Basically, I bought two duplexes on a big lot, and cut the duplexes apart, and cut the big lot into four.
Eve Picker: And it took two years to get it approved.
Liz Falletta: Yeah.
Eve Picker: That’s nuts.
Liz Falletta: It was insane. Then they wanted me to build a public sewer.
Eve Picker: Oh …
Liz Falletta: Yeah! It was … I think my experience was maybe more extreme than some.
Eve Picker: I had the public sewer experience in Pittsburgh once.
Liz Falletta: Did you?
Eve Picker: Yes. The sewer was out on the main street, and they’d been wanting to move it into the alley for a long time, behind the building. Our building was at least 600 feet from the crossroad. They wanted us to lay an entire line to the [cross talk] So, every other building on the both sides of the alley could feed into it. It was really awful.
Liz Falletta: Yeah. No, they wanted me to build an eight-inch line with a manhole on my property for four one-bedroom/one-bath units.
Eve Picker: Now you’re in the middle of the Recode Project. How long has that been going on?
Liz Falletta: You know, it was supposed to be a five-year project, so it’s gone on six and maybe seven years, now.
Eve Picker: For a five-year project?
Liz Falletta: Yeah, five years; $5 million dollars. It’s going to be interesting to see how it plays out.
Eve Picker: Do you think that it’s going to be successful? Are there pitfalls that you’re seeing already?
Liz Falletta: There are several. There are many pitfalls, I think. One is mixed messaging about the project and what it would do. I think they promoted it differently to different constituencies. That’s fine, but they have not been very clear about that. I think, two, they have- this is a critique of urban planning. I think there’s a whole sector of urban planning that feels like if they did 800 community outreach meetings, they’ve done their job, and I don’t think that’s the measure of whether this is successful or not [cross talk] I kept getting emails; “We’ve had 800 meetings …” and I’m like, “Great …”
Eve Picker: Wow, that’s a lot meetings.
Liz Falletta: It was a lot of meetings. It definitely was. Then, thirdly, these zones are basically being applied in a community planning process … I unfortunately know very little about planning on the other cities or the East Coast but, in California, every city has a general plan, which is sort of the constitution for growth and development; has different elements. One of them is about land use and planning for land use. In the city of LA, we have 35 different community plans that basically apply zoning and apply various planning tools to specific parcels and talk about how neighborhoods are going to grow and change.
Eve Picker: Right.
Liz Falletta: We update … We don’t update those very often. Five or six years ago, we’d updated four or five in the past 20 years. We didn’t update them very often. What that meant for the zoning code was that most communities wouldn’t see the benefit of this new code for decades. We’d have a dual kind of code system. The mayor, then, vowed to update all the community plans within six years. I don’t know the status of that, right now [cross talk]
Eve Picker: It sounds like a monster project.
Liz Falletta: Yeah, no, it’s just … I fear that it was oversold, and people aren’t really going to see the benefit of it.
Eve Picker: That’s a shame. What do you think is the best possible outcome for this code overhaul for LA?
Liz Falletta: What all of us really focused on was identifying and reducing the barriers, which are legion. But then there was a lot of … I think there are a lot of people out there … I’m one of these people who want- I want to do interesting small projects, and I can’t, for a variety of reasons. You have to cobble together … It’s so interesting to me that the Bungalow Gardens project really could only exist because it’s in a TOC designation, because they don’t have to have parking.
Eve Picker: Oh, and probably because the developers are non-profit [cross talk] they spent two years on that project, and I don’t know what for-profit developer could do that.
Liz Falletta: Right. No. A for-profit developer would slide right past that project, or at least definitely not do it in the same way-
Eve Picker: Yet they got an award for innovation on that project. So, there’s something really broken, right?
Liz Falletta: Yes, that is- that’s exactly right. Part of the reason, also, that I wrote the book is I think … We’re having to have a citywide conversation about housing and how to produce it. Our ability to have that conversation is just as broken as all the tools that we use to try to generate housing – affordable housing that costs $500,000 to $700,000 a unit to build. I’m even beginning to think that these sort of silos that we exist in are a problem, when we think about gentrification, also. It stops the conversation. We just don’t get anywhere.
Eve Picker: Yeah, I think that’s right. It’s kind of depressing.
Liz Falletta: Yes. I’m sorry. No, I mean-
Eve Picker: You know, John Perfitt said something, actually, in the podcast I did with him and Jason about the work they do as a nonprofit housing developer that I think was really sad. That was engagement of community is very difficult for them and very expensive, if they’re going to … It’s kind of had the reverse impact on involving community because if they’re going to spend a long time on a housing project, they simply can’t afford to have it shut down by someone at the end of a two-year process. They don’t have the money for it. That means that they almost have to avoid some community engagement, which is kind of the reverse that you want, right?
Liz Falletta: I think that’s one of the big reasons, also, that you’ve seen more housing initiatives in California at the state level. People interested in taking local control over housing away, because communities have shut down projects, basically because they’re only looking at them from a singular perspective, which is their own. We can’t move forward, as a city, with that.
Liz Falletta: For a long time, Christopher Hawthorne, who is now the city designer; I forget exactly what his title is, but he was the architecture critic for the LA Times for a long time. Then, Mayor Garcetti hired him recently. Basically, his analysis of the city really was for a long time we had so much- enough space to be 10 different cities. We could be the industrial engine. We could be the idyllic single-family home and the garden. We could be the diverse multifamily community. But now, we’ve run out of space, so all of those images and versions of the city are competing with one another and conflicting. We have to have a higher-level conversation. There needs to be a lot better education of the public about housing and how housing works [cross talk]
Eve Picker: -just on a broader level, impact investing … How do you think it’s aligned with real estate and the importance of it in your mind?
Liz Falletta: Well, like I said, I was super-excited to be able to invest in John and Jason’s project. I actually have been teaching design to real estate development students for about 15 years, 16 years; increasingly horrifying amount of time. It’s interesting, the evolution of the students that I’ve encountered, because when I first started doing it, none of them thought design was important. None of them wanted to be there. I got ones on my evaluations. Everybody hated me. It was demoralizing and terrible.
Liz Falletta: Now, the students are not only aware of issues of gentrification; really aware of the perception communities have of developers and development; aware of social issues, like homelessness. Also, they’re really interested in building communities, and innovative communities. I think the interest in impact investing is going to track that. I think my generation screwed it up or it was part of the problem. I think the students- I think kids in their 20s and 30s are going to really change things.
Eve Picker: They really care about the world, I think, in a way-
Liz Falletta: They do. Climate change … I think they really understand development as a responsibility, as opposed to a way to make money. Don’t get me wrong; they want to make money, totally, but it’s interesting; a lot of them have fathers or mothers who are developers, and their parents’ development practices really bother them. They’re like, “You know, my dad doesn’t spend any money on this part; this thing that I think is really important.”
Eve Picker: Interesting, yeah-
Liz Falletta: Things are changing.
Eve Picker: I think that’s right. I think my parents didn’t think that way either. It’s a definite shift, which is great.
Liz Falletta: Yeah, and I’m wondering how it happened. I’m not sure I know. I don’t know if you have children, because I don’t. I just see the students and see how they how they shift and change.
Eve Picker: Yeah. I think climate change is probably- is there, and people are thinking about it at a much earlier age. That surely has to impact the way they think about the world. Then, there’s so much access to information easily-
Liz Falletta: That’s true.
Eve Picker: -that a generation or two ago, we just didn’t have [cross talk] there’s more knowledge to- or more access to knowledge, whether it’s fake or not. I mean, you have to sift through it all, but there’s just more access. I don’t know. I think all of those things together change things.
Liz Falletta: I think, too, their expectations have changed, in terms of how they’re going to live. They don’t all assume they’re going to buy single-family homes; either because that’s out of reach or because it’s just not something they’re going to value-.
Eve Picker: Or because it’s illegal in some cities, now.
Liz Falletta: Right, exactly.
Eve Picker: So, I’m going to I’m going to sign off now. We’ve been talking for a while, but I wanted to ask you three questions that I ask everyone. That is what’s the key factor that makes a real estate project impactful to you? What really matters to you?
Liz Falletta: I talk about triple-win projects in the book, and these are projects that perform well from the perspective of design, planning, and development. For me, that’s the real hard hallmark of a good quality project. Because the interesting thing to me was the projects that balanced those perspectives from their inception really were the more resilient projects, over time, in terms of being valuable projects from all three perspectives. The Village Green, which is a really famous Garden City garden-apartment projects in LA is a really good example. It was definitely innovative, when it was built, but also very financially successful, when it was built, and really created a community. It’s performed well in all those measures, throughout its history.
Eve Picker: That’s really interesting. Other than by raising money, do you think that crowdfunding could benefit small-scale or impact real estate developers like you?
Liz Falletta: Yeah, I hadn’t really thought about using it as a tool, but I do think, as John and Jason talked about, it is an interesting way to do community outreach and involve neighbors in projects. I think that is pretty brilliant, giving people the opportunity to invest in something next door. I think it’s probably also a really great networking tool. I could imagine that, for John and Jason, the people who invested in this project are probably going to invest in other projects [cross talk]
Eve Picker: -we can only hope, right?
Liz Falletta: Yeah, no, I’m up for it-
Eve Picker: We hope that they build more. Then, if there was one thing that you would change to improve real estate development in the United States, what would that be?
Liz Falletta: Oh, gosh, what would that be? That’s such a good question. I think it really comes down to bad acting. I think a lot of our policy is retroactive and is responding to bad acting instead of promoting high-quality, community-oriented projects created by people with good intention.
Eve Picker: Oh, yeah.
Liz Falletta: So, I guess that’s really about changing the culture of the profession, which I do think is changing. Maybe it could change quicker.
Eve Picker: Well, thank you very much. I really enjoyed talking to you and good luck with everything.
Liz Falletta: Yeah, thank you. You, as well.
Eve Picker: Actually, I have another question for you, Liz, I think I’m going to add in. What’s next for you, now you’ve written the book?
Liz Falletta: Oh, gosh, I have to say that-
Eve Picker: A break?
Liz Falletta: -yes, it is … I’m doing some book promotion, and I am looking for a real estate project right now, in between teaching, and also sort of … I’ve been teaching now for nearly 25 years, and I’m wondering if it might be time for a larger-scale change; maybe doing something more entrepreneurial with real estate.
Eve Picker: Oh, wow.
Liz Falletta: Yeah.
Eve Picker: Keep me posted!
Liz Falletta: I will.
Eve Picker: Okay. Thanks, Liz.
Liz Falletta: Okay, thanks so much. Take care.
Eve Picker: That was Liz Falletta. What an amazing woman. Here are some of the takeaways from what Liz shared with us today. First, through research from her book, “By-Right, By-Design,” Liz learned that more design is not always better. She also learned that some of the best housing solutions might not be the most innovative designs. Over the years, her students have evolved from not caring one iota about design to caring very much today, and that bodes well for the future of cities.
Eve Picker: You can find out more about impact real estate investing and access the show notes for today’s episode at my website, EvePicker.com. While you’re there, sign up for my newsletter to find out more about how to make money in real estate while building better cities. Thank you so much for spending your time with me today, and thank you, Liz, for sharing your thoughts with me. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.
Images courtesy of Liz Falletta.