The Greater Los Angeles
region, we've all been told, is not
a City, at least not in the European
or East Coast sense of the word. LA is
a collection of suburbs in search of a
City, the detractors say.
Without
delving into the arguments about what
the region may lack as an urban
metropolis (culture, transit, weather,
pro football), the fact remains that,
when you look at the region
objectively, it is urban. In a number
of areas, Los Angeles has household
density rivaling New York and San
Francisco. The region has an
integrated, multi-sector economy. It
has major cultural institutions,
internationally recognized
universities, and unparalleled
diversity.
LA also
has cars - more than any other place
on earth. Here in southern California,
the automobile is emblematic of the
lifestyle. The region also has a
history of developing outward at a
breakneck speed into the valleys and
deserts. The ability to traverse the
region's multitude of freeways, the
constant search for better
neighborhoods and schools (just over
the next hillside, and cheaper, too),
and, not to be overlooked, the desire
to own a home, has made LA the
world's foremost sprawling
megalopolis. With all of these ideals,
it is no accident that LA is known as
the horizontal city.
All the
while, residents, observers, and
planners have bemoaned this pattern of
development. In the long term, they
say, the costs of outward expansion
outweigh the ideals. These costs
include ever increasing freeway
congestion, longer commutes, less time
with family and less connection to the
community. Many families have begun to
value a more traditional, urban
lifestyle, where one's job, school,
shopping and entertainment are located
within an easy walk, bus, or rail
ride. The problem with simply making
this choice, however, is often cost.
Our older, established urban
neighborhoods simply do not deliver a
comparable affordable, homeownership
opportunity to the newer, outlying
suburbs.
That is
where the Location Efficient Mortgage
(LEM) comes in. The LEM is based on
research performed by John
Holtzclaw that shows
that, taking the variables into
account, living in a more compact,
more urban neighborhood is actually
more affordable, on the whole, than
living in a faraway suburb. The amount
of money people spend on owning,
operating, and maintaining a car, or
in, a lot of cases, owning 2 or 3
cars, depends greatly on what type of
neighborhood those people live in. In
Southern California, families living
in parts of Central Los Angeles, for
example, save, on average, more than
$200 a month in vehicle costs compared
to the average suburban family.
The
problem simply is that, traditionally,
the mortgage lenders view the house
for sale in the suburbs exactly the
same as the house in the city. The LEM
allows the lender to recognize that if
those two houses are selling for the
exact same price, the house in the
city is, in fact, more affordable.
This simple recognition can reverse in
a powerful, market-based way, the
incentive that has always existed for
families to relocate to the urban
fringe.
Taken a
step further, the LEM can have a
powerful effect on the city itself.
The LEM broadens the pool of eligible
buyers for housing in cities. That
sends a message to developers who can
add to the supply of housing, and city
officials and planners who can enhance
the urban livability of their
communities by adding parks and other
amenities, augmenting transit
investments, and allowing for a mix of
land uses. Of course there still will
be cars, and there will still be
suburbs, but the LEM aims to provide
an urban lifestyle as a viable choice
to families.
The LEM
is currently available in Los Angeles
and Orange Counties as a pilot program
through Countrywide. The national
partnership establishing the LEM
includes the National Resources
Defense Council, the Surface
Transportation Policy Project, and the
Center for Neighborhood Technology.
SCAG is a southern California regional
partner. Fannie Mae, who also
purchases LEM mortgages from its
participating local lenders, developed
the LEM underwriting approach.
You can
learn more about the LEM, and about
transit oriented development from the
following links.
Center
for Neighborhood
Technology
Natural
Resources Defense
Council
Location
Efficient Mortgage
"Nation Wide
Program"