What real estate experts have to say about Arcadia home size restrictions and property values
ARCADIA >> As “mansionization” continues to take center stage in Arcadia, a group opposed to new home building restrictions has been attacking the proposal by claiming they would have a negative impact on local property values.
But those figures being shared by the group have been questioned by city officials and real estate experts.
A residents’ property rights group, tied to City Councilman Sho Tay, has been promoting private meetings around town and collecting signatures opposing a recommendation to establish a floor area ratio (FAR), which sets limits on square footage. A push for tighter standards stems from an ongoing battle in the city over “mansionization,” a real estate development trend that involves demolishing older, smaller homes and building much larger ones in place.
The resident group, which operates on Chinese social media site WeChat, has been circulating a flier that claims “most realtors estimate that the property value will drop up to 30%” if a FAR is adopted.”
It also states that people’s land value will be low in the future as a result.
Brad Thompson, vice president of the Appraisal Institute’s Southern California chapter, said those statements are highly exaggerated. Home size is only one of many elements to consider when valuing a property, he added.
“It’s complex,” he said, “even to some people in the industry who don’t understand the real economics of valuation.”
Appraisers also look at location, neighborhood, school district, lot size, amenities and condition of the home, he said.
Arcadia Association of Realtors CEO Andrew Cooper said that on paper it would appear that a reduction in square footage could equate to a reduction in value, but there are so many factors involved in pricing a home that it’s impossible to apply that rationale across the board.
He said the organization surveyed its 2,300 members about a FAR five months ago, which generated mixed responses.
“The survey clearly indicated it’s not one-sided,” he said. “But the numbers on that flyer are certainly not from us. We don’t have an official stance on this.”
Tay, who is opposed to more stringent development standards, said he has no idea where the residents’ rights group got those figures.
“I hate when people jump to conclusions and say I said something I didn’t,” Tay said of the information in the flier.
He said he didn’t create it, but only offered to help translate the city’s zoning recommendations into Chinese for some residents.
HOW HAS A FAR IMPACTED OTHER CITIES?
Thompson said a FAR is a common building regulation, both in commercial and residential development.
“The FAR is the industry standard in trying to dictate a building envelope on a property,” Thompson said. “There are very few cities that don’t have it.”
Arcadia is one of three cities in the San Gabriel Valley that does not have one, along with Baldwin Park and Duarte.
Arcadia Development Director Jason Kruckeberg said the city estimates far lower impacts than 30 percent. He said the Zoning Review Committee looked closely at what is being built now and selected four different FARs based on varying topography and lot sizes in the city.
They were created so as not to lead to a “shock” in the system financially.
“Each of the FARs do represent a slight, minor reduction in size,” he said. “But what the committee wanted to do was keep a level of continuity in those areas by recommending FARs that were comparable to what is being built.”
Thompson, who is also a city planning commissioner, said compared with surrounding cities, the proposed Arcadia FAR is the least restrictive.
Over the past two years, neighboring cities of Pasadena, San Marino and Temple City have seen modest increases in median home values, while Arcadia has seen a downward trend, part of which is due to a decline in foreign capital.
DEVELOPERS COULD TIP THE MARKET
Data from RealtyTrac, show the median price per square foot for residential properties in Arcadia has decreased by $51, or 10 percent since 2014, whereas Pasadena and Temple City saw increases of 5 percent and 10 percent, respectively, over the same time period.
Paul Choi, a senior residential real estate appraiser who works throughout the San Gabriel Valley, said you have to consider who the clients are in Arcadia. While some are homebuyers, many are developers looking to turn a profit.
“If there is a significant effect (on the market), it will be based on the cooling of developers,” Choi said. “But even if it does fluctuate initially, home builders will begin to conform and you will get to a level of stabilization.”
What Arcadia is proposing is too marginal for there to be significant dormancy in activity, he said.
Choi said that, generally, developers prefer a FAR because it tells them what they can build, rather than wasting time submitting multiple projects for the same property.
Thompson said there is a misconception out there that a reduction in home size will immediately result in a reduction in property value.
“A size reduction, if adding conformity, could actually enhance the value in a neighborhood,” Thompson said. “Conformity tends to create value in the marketplace because market participants like a neighborhood that is homogeneous to some respect.”
Another point to consider, Mayor Gary Kovacic said, is that projects are still subject to design review, which means that although the square footage on a proposed home may fit within the current standards, projects are still denied because they are out of sync with the surrounding neighborhood.
But the zoning recommendations are still in the process of being refined, and residents can still offer their input.
The city will hold a community workshop next at 9 a.m. March 24 at City Hall. At the meeting, elected officials, city planning staff and residents will work together to reach a consensus on the recommendations, in hopes of holding a public hearing on the zoning update.