Down with the old and up with the huge
From SUVs to fast food, Americans love to go big. And homes are no exception. Lack of inventory and a shortage of raw land in many areas have owners and developers tearing down older homes to accommodate the preference for more square footage.
Although building a larger home on the footprint of a smaller structure is not a new concept, the practice is creating a stir among Southern California residents and leaving some areas with an architectural identity crisis as quaint charmers fall beneath the shadows of larger neighbors.
From beachside villages to tonier towns, teardowns are a welcome source of increased property tax revenues. But growing concern about the “bash-and-build” trend in Hancock Park and Windsor Square, for instance, prompted the Los Angeles City Council in April to approve an interim control ordinance, a yearlong ban that regulates demolition permits that would change more than 51% of the existing structure of homes in the two neighborhoods.
Jim Wolf, president of the Hancock Park Homeowners Assn., said a rise in the number of leveled homes there, which increased from three in 1998 to eight last year, coupled with the “mansionization” of various teardowns in recent years, raised eyebrows among some residents. But two things happened to mobilize homeowners: A “demolition derby” in 1998 and ’99 razed three properties designed by famed architect Paul R. Williams, and many in the neighborhood united to protest plans to demolish a house and rebuild it as a synagogue.
“We are finally coming to the conclusion that we have something to preserve,” said Hancock Park resident Marguerite Byrne, who has lived in the area for 36 years.
During the ordinance’s interim,Wolf said, Hancock Park, which lies close to the heart of Los Angeles, is being evaluated for eligibility as a historic preservation overlay zone, a designation that creates a review board and allows stricter zoning regulations on the external facade of a building or property in a historic district. Windsor Square also is being considered for eligibility.
“Having the zone doesn’t prevent modifications,” Wolf said, “but it acts as a check on what is going to happen in the home.”
Preservationists hope to save vintage properties built in the 1920s and ‘30s, which account for about 80% of the area’s 1,207 homes. Liberal zoning regulations have enabled builders to tear down stately 4,000-square-foot homes, Wolf said, and replace them with monster-mansions twice that size. The homes appear “to virtually fill the lot, “ he added, and dwarf neighboring properties.
Loss of sunlight, privacy and mature trees are common complaints among residents in areas with high teardown activity, according to Jim Lindberg, who co-wrote “Taming the Teardown,” a report by the National Trust for Historic Preservation.
Loss of value also could be an issue for adjacent owners, Lindberg said. “If that teardown overshadows its neighbor, then you have really reduced the value of that existing home,” he said. “So then its only value becomes its land.”
However, Lou Bourgeois, owner of Manhattan Beach-based Bourgeois Development LLC, said many older homes aren’t worth as much as the land under them.
Rather than destroying the character of a property, the former insurance industry fire claims adjuster believes that most developers improve property values by recycling community eyesores.
“Rarely do we tear down a home that has a nice character,” Bourgeois said. “Most developers are going after homes that people wouldn’t want to live in anyway.”
Bourgeois said his most recent investment was so dilapidated that the city wanted to condemn the property. He purchased the 75,000-square-foot north Redondo Beach lot, which contained a pair of two-bedroom, one-bath homes built in the 1950s, for $460,000 in March and plans to build two 2,400-square-foot, four-bedroom, 3.5-bath homes and sell them for $700,000 each next year.
To determine if buying a teardown will be profitable, Lindberg said developers and real estate agents use “a rule of three.” The newly built home should sell for three times the original purchase price. A developer who buys a house for $270,000, pays $30,000 to demolish the property, spends $400,000 to build and sells the home for three times the purchase price could earn about $100,000 profit, Lindberg said.
Julianne Worrell, co-owner of Worrell Realty in Pasadena, said owners and developers who rebuild in an architectural style consistent with the neighborhood stand the best chance of profiting.
“But if you build a giant-jumbo house that is inconsistent with the architecture of the area, you would probably lose money, because typically most buyers are looking for that charm,” she said. “If a house misses the mark on charm, forget about it.”
Like most speculative investors, Bourgeois knows the financial risks. In 1991, he bought a 900-square-foot two-bedroom, one-bath house in what is known as the Tree Section of Manhattan Beach for $175,000. He added a bathroom, a bedroom and 500 square feet and sold the new property for less than the $250,000 he had invested in the project. “I was happy to get that at the time because the market had turned,” Bourgeois said.
The current market, however, shows little sign of turning. Once rare, teardowns in the last five years have affected neighborhoods in every major city across the United States, according to Lindberg. In fact, the National Trust for Historic Preservation added historic neighborhoods experiencing teardowns to its annual list of America’s 11 Most Endangered Historic Places in 2002.
“As people move in and tear down smaller houses and replace them with houses that are so out of scale, you start to detract from the very qualities that attracted people to the area in the first place,” Lindberg said. “Some of the places where we are seeing new growth are places that are the most historic and have the most character.”
Santa Monica and Pasadena, favored for their proximity to thriving business hubs and cultural and environmental amenities, are among 100 communities in 20 states experiencing significant increases in the numbers of teardowns. But industry experts say the trend also is happening in Arcadia, Beverly Hills, Carson, Lawndale, Pomona, San Gabriel, Temple City and Venice.
In 2001, the Los Angeles Department of Building and Safety issued 754 demolition permits for one- and two-family dwellings in the city. That figure rose to 1,028 in 2002 and totaled 529 through June.
“In areas where there is consensus that the neighborhood should change significantly, teardowns are more accepted,” Lindberg said. “But that is a rare circumstance. More often, however, teardowns are occurring in attractive, previously stable neighborhoods that don’t want to change so dramatically.”
Still, while some communities embrace preservation, others welcome change, according to Steve Goddard, a broker-manager at Re/Max Beach Cities Realty in Manhattan Beach.
A shortage of undeveloped land, rising property values and a preference for larger homes in desirable neighborhoods, Goddard said, has increased the number of teardowns in Hermosa Beach, Manhattan Beach, El Segundo, Palos Verdes and Santa Monica.
To accommodate growth in Manhattan Beach, Goddard said, most of the 500- to 1,000-square-foot cottages and single-family homes built in the 1920s and ‘30s for weekend getaways are gone.
“About 20 years ago, they would tear down the smaller beach homes and rebuild,” Goddard said. “But as time has gone on and land has become more valuable, they tear down almost everything up to about $650,000 to $700,000 in most areas of Manhattan Beach.”
A 15-year-resident of the area, which has about 14,474 residences, Goddard estimated that for the last five years, about 200 Manhattan Beach homes have been bulldozed and rebuilt each year.
How much does it cost to go big? Depending on the quality, Bourgeois estimated average new construction costs in L.A. County range from $140 to $200 per square foot. The median selling price for an older home on a 75,000-square-foot lot in Manhattan Beach is about $800,000.
Tim Golden, a building project manager for Manhattan Beach-based Odle & Son Construction, which rebuilt 20 teardowns last year, put the cost to build a home of about 4,000 square feet in Manhattan Beach, with five bedrooms and 5 1/2 bathrooms, at $600,000 to $700,000, including materials, labor, permit fees and plans.
Many owners believe the location makes tearing down worthwhile. In 1998, Craig and Gayle Crowder purchased a 2,400-square-foot home in the Hill Section of Manhattan Beach, west of Sepulveda Boulevard and overlooking the ocean, for $965,000.
But in March 2000, the couple leveled it and built a 4,200-square-foot, five-bedroom home to accommodate their growing family. Gayle Crowder estimated the home is worth close to $3 million.
Communities with teardowns benefit from a phenomenal increase in tax revenues, said Cindy Shearin, an agent with South Bay-based Real Estate West.
In 1978, Proposition 13 limited property taxes to 1% of a home’s assessed value. So while a home valued at $700,000 produces $7,000 a year in property taxes, a rebuilt structure valued at $1.7 million generates $17,000.
In the case of Manhattan Beach, assessed property tax values rose from $4.4 billion to $6.3 billion from 1998 to 2002, and the city received more than $9 million in property tax revenues last year, up from $6.1 million in 1998. That fiscal boon is reflected in top-notch schools, low crime rates, clean beaches and a strong local retail economy.
Michelle Hofmann is a Los Angeles freelance writer. She can be reached at michelle hofmann@earthlink.net.
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