Los Angeles Studio Apartments: Worth More than a Parking Lot?

Suppose you wanted to buy an apartment in downtown Los Angeles. If you’re on a tight budget, you could focus on small studios, such as this 460 square-foot unit at 7th and Broadway, listed for $360,000.

But why not think big? According to the LA County Assessor’s office, a 17,000 square-foot parking lot just two blocks away on Main and Winston is also worth $360,000. Why not buy the whole thing, and convert it to an apartment building for yourself, your family, all your friends, and a few dozen of your fellow Angelenos?

“Wait,” you’re saying. “This can’t be true.” Alas, the combination of badly outdated property tax laws and local government’s cult-like worship of parking in the region means the low value of parking lots is not just true — it’s costing LA County over $100 million per year in unrealized property taxes.

[CLICK HERE to read our full report on Los Angeles parking lots]

A Broken Tax Code Leaves Millions on the Table

There are about 12,000 parking lots and garages across Los Angeles County. Each one tells a story about how California’s broken tax code and preferential treatment of car infrastructure leaves billions of dollars of potential value buried underneath the sea of asphalt that covers huge swaths of our state. Because of California’s Proposition 13,  a 1978 initiative that capped property taxes, many of our parking lots are time capsules of a bygone age. Like the mosquitos trapped in amber from the Jurassic Park movies, the DNA of these parking lots contains relics of ancient history: Their assessed valuations can only grow 2 percent per year, even while the market values of residential and commercial land have skyrocketed. 

Thanks to Prop 13, that parking lot on the corner of Main and Winston is officially worth about $360,000 for tax purposes, according to the LA County Assessor’s office. That means that if you were to buy the 460 square foot studio, you’d be paying about the same amount in property tax as the owner of a 127-spot parking lot who can collect at least $38,000 each month in parking fees (according to parking rates posted on parkopedia.com). 

The grossly inequitable under-valuation of this parking lot, and thousands of others like it, means that Los Angeles County loses huge amounts of potential property tax revenue every year. If we compare the assessed price-per-square foot for LA County’s over 12,000 parking lots to other nearby commercial properties that sold in the past five years, parking lots are under-valued by nearly $8.6 billion

While commercial property values have risen 500% in Los Angeles, Prop 13 keeps their taxable values very low.

 

The upshot: Los Angeles County lost out on about $101 million in property taxes from  parking lots in 2019 alone. 

As the state plods through the COVID-19 recession, having access to this foregone revenue would help plug gaping holes in essential social services, as well as potential relief to Angelenos whose businesses, jobs, and lives have been upended by the pandemic. 

But beyond this, aligning our tax structure to reflect actual, present-day land values would go far to ensure that precious urban land isn’t being wasted on unproductive uses. The owner of a parking lot whose tax bill levelizes to present-day valuations may be more inclined to sell that land for use as housing, mixed-use retail/residential, or other high-value uses of downtown land. 

Proposition 13 gives some of the wealthiest Californians an opportunity to live in the past forever. But it freezes California in Jurassic amber by incentivizing the wrong types of land use for the California of the 21st century. If our cities are going to reflect the reality of 2020 and start building for the future, then our tax code can’t be stuck forever in 1978.

[CLICK HERE to read our full report on Los Angeles parking lots]