The Big Score

Has capitalism failed, or have you?


Last week, Los Angeles Times reporter Mary MacNamara wrote a damply sympathetic, ain't-it-awful column entitled, "An Urban Pioneer's New Claim," about a guy who'd been priced out of Echo Park and forced to rent new digs in Lincoln Heights. For those not familiar with the dizzying altitude L.A. real estate has reached these days, even in locales where polite society often fears to tread, Echo Park is a funky bohemian barrio slightly northwest of downtown, while Lincoln Heights (slightly northeast) is still basically just a barrio—albeit one that realtors and "urban pioneers" hope will soon be funky and bohemian.

The Times piece wasn't a complete downer; both MacNamra and her subject managed a certain plucky, smiling-through-tears optimism, despite Lincoln Heights' rather gritty ambience: few trees, but plenty of window bars and pit bulls. The urban pioneer in question—a freelance printer's rep named Jim Priest—said his new neighbors were "really nice" and brought him "baked things"—unlike the snobby folks in Echo Park, who as prices rose became "hipper than thou." ( Priest admitted that his erstwhile neighbors may have been put off by his "anti-capitalist attitudes.")

Those attitudes, not incidentally, buzz around Priest's bonnet like a hive of bees. He never wanted to be what he calls a "careerist," but now he tells his two children to "learn how to earn" so they can afford to be homeowners when they grow up. "I hate it, man," Priest laments. What has the world come to that a dad needs to give his kids advice like that?

Prices had risen so steeply in Echo Park, MacNamara writes, that Priest couldn't "even muster criticism of his landlord for selling." The implication here is that of course a person really has no right to sell his own property if someone else wants to continue living in it, but we must realize that greed is an understandable human failing.

"It is difficult for a renter in Los Angeles to maintain true anti-capitalist attitudes these days," she observes, adding that "many of those who help establish an area as desirable inevitably get the boot somewhere between the opening of the Brazilian caf? and that of the high-end cheese shop."

Well, actually, as it turns out, not "inevitably." Buried in paragraph 17 comes the revelation that Priest could have bought "a run-down little place in Highland Park a few years ago"—newly hot Highland Park is not yet as incandescently groovy as Echo Park but much nicer than nearby Lincoln Heights—but didn't because "I thought I could do better."

Aha! So evil capitalism could have worked for Priest. If he'd bought that Highland Park house he'd probably be sitting on at least $100,000 of increased equity by now, by my extremely conservative reckoning. But he chose not to take the chance.

Now as it happens, funky East Side real estate with astonishingly increased value is something I know about. In 1988 I and my then-husband bought a rundown little Echo Park duplex for $165,000. Even at that price the only way we could afford it was because of the second unit's rental income, but I knew that with our finances we couldn't do better.

Here are some of the sniffy comments I heard at the time:

"I'd rather wait until I can afford a normal place, with a hall and two bathrooms." Well it was true that the two bedrooms in our tiny house connected right into the kitchen, and the one bathroom's toilet sat up on a weird foot-high ledge, like a throne. But since you could see the entire house while making dinner, I never needed a playpen for the baby.

"I don't like to visit because, face it, you live in East L.A.!" Actually, we lived several yards west of the L.A. river, thank you very much, but it was hard to keep the soundtrack of Cheech Marin's "Born in East L.A." out of my head when I went to the grocery store, where local abuelitas constantly asked me to reach things from high shelves for them because, as they pointed out, I'm so tall. (Well, I am almost 5'5.")

"Do white people send their kids to public school in your area?" one of my husband's friends asked. "I don't know," I said. "I don't think there are any white people in our area."

"I could never handle being a landlord." But that was the only way I could handle the mortgage.

There were some bad moments, like the time the roofers forgot to close the skylight to the tenant's place and I had to clean up all the debris myself. By the end of the job I was so coated with shingle dust I felt like I'd spent two hours licking the roof. I have good tenants, though, and I've never lost a month's rent in 15 years.

In 1991 I got divorced and the house was valued at just over $200,000, so I paid my ex-husband off for his share of the increased equity. In 1994 the L.A. real estate market sunk so low that I could afford to buy the much nicer house in Silver Lake where I live now, because like the first place it had a second unit I could use for rental income. Also everyone else who saw it apparently felt they could do better. "Smells like probate," the agent said when we walked in, although technically it wasn't.

Potential buyers were depressed by the Grandma-died-here ambience: wall-to-wall shag carpeting, ugly heavy drapes, a little ceramic rabbit with a broken ear on the kitchen counter. But I thought, well, we've all got to go sometime. And the Doing the Samba with Cugat! books in the closet were cheery; apparently Grandma had enjoyed a good life in that house. Anyway, I knew I couldn't do better, so I bought the house for $240,000 and made the sellers give me $4,000 back for repairs.

But I couldn't sell the Echo Park duplex without losing money after all the repairs and improvements I'd put in—"you might be able to get $180,000," a Realtor said doubtfully—so I kept it as a rental and bought the new house with something like 3 percent down—about the same amount other people I knew were spending as down payments on new cars.

I am sometimes appalled at the prices of L.A. real estate, even though I've benefited. I know you're not supposed to talk about these things, but what the hell: The Echo Park duplex, which I still own and rent out, is now worth around $400,000; my Silver Lake home is valued at over $600,000. Unlike the house's price, though, my income hasn't almost tripled. And here's what makes me think we may be in a bubble: Even if I did make three times as much money as I used to, I still couldn't hope to buy it now.

Many people missed out on taking advantage of the L.A. real estate recession through no fault of their own. But others, like Jim Priest in the Times's sad Tale of the Downwardly Mobile Renter, just failed to seize the day. I knew others like him. At around the same time I bought my new house, a friend and his wife went into escrow on a Koreatown duplex, but backed out after encountering "nightmare contractors." The nightmare in question turned out to be a contractor who showed up a little late to give an estimate for repairs.

They're still renters. Like Jim Priest, they thought they could do better. Obviously Mary MacNamara and her woeful subject think that when it comes to capitalism, we all can and should do better.

Well, maybe. It's just too bad they never let us know how.