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By SHELLY GARCIA

Staff Reporter

News stories suggest that the Southern California apartment market is booming, with median rents rising and vacancy rates shrinking. But if that’s the case, why are there so many “Now Renting” banners hanging outside apartment buildings in places like Van Nuys and North Hollywood?

The answer might point to a coming crisis in portions of the San Fernando Valley.

Vacancy rates in Van Nuys, North Hollywood and some parts of the Northeast Valley are holding steady at about 9 percent nearly twice the rate of some other Valley communities along the hot Ventura Boulevard corridor.

The buildings in these slow-renting communities, initially intended to accommodate the swarm of newcomers who descended on the Valley in the 1950s and ’60s, have now grown old, and they no longer meet the needs of today’s apartment dwellers.

“It’s not the young, new Valley anymore,” said David Diaz, an environmental planner and lecturer in urban studies at Cal State Northridge. “The Valley is definitely reaching middle age structurally.”

In Van Nuys and North Hollywood combined, 2,550 buildings of five units and more or 70 percent of the apartment properties were constructed prior to 1970. And unlike areas like Sherman Oaks, which received funds for renovation following the Northridge earthquake in 1994, buildings in Van Nuys and North Hollywood have gone without significant rehabilitation.

Not only do these buildings often lack amenities like laundry rooms and parking garages, the vast majority contain mainly studio and one-bedroom units, which makes them impractical for families with children.

“There’s a mismatch” between available apartments and demand for housing, said Don Spivack, deputy administrator for the Community Redevelopment Agency of the city of Los Angeles. “There’s very little vacancy in three- and four-bedroom apartments.”

The Valley’s earlier residents tended to be upwardly mobile singles and couples en route to becoming families and homeowners. Today, those groups have been replaced with low-income families for whom apartments are long-term housing solutions.

The high vacancy rates in Van Nuys and North Hollywood have driven apartment values down, despite rebounds in other communities, according to a report by Marcus & Millichap, a real estate company specializing in investment properties.

The average price per unit in multi-family dwellings in Van Nuys and North Hollywood fell about 8 percent between 1996 and 1997, to $32,404, the survey found. That compares with an overall increase in per-unit apartment prices of about 1 percent, to $42,168, for the entire San Fernando Valley.

In neighborhoods like the Ventura Boulevard corridor, which stretches from Studio City to Tarzana, the difference is more dramatic. The average per-unit price of an apartment building in that market jumped 16 percent, to $78,205.

And in Glendale, Pasadena and Burbank, average apartment prices rose 23 percent, to $62,900.

“Investments are valued based on income,” said John P. McDermott, regional manager of Marcus & Millichap in Encino. “In Van Nuys and North Hollywood, because of the condition of the buildings, you won’t have huge increases in rents.”

Overall, apartment vacancy rates in the San Fernando Valley dipped to about 6.5 percent in the first quarter of 1998 from nearly 8 percent in first-quarter 1997, and rents increased 1.3 percent during the quarter over the previous year to an average of $760 a month. Areas like Burbank, Glendale and Pasadena combined saw apartment vacancy rates tighten to just over 4 percent, from about 5.2 percent last year, and rents climbed about 2 percent to about $700.

But in Van Nuys and North Hollywood, where vacancy rates remained unchanged at 9 percent during first-quarter 1998 compared to the same period last year, rents have remained flat at about $600.

As buildings in Van Nuys and North Hollywood reach the critical 30-year mark in age, they become more expensive to maintain. With costs going up and income stagnant, these buildings are more likely to attract the kind of buyers who would rather milk the property in the short term rather than invest in the future.

“Diminishing returns won’t attract quality investors,” McDermott said.

According to Marcus & Millichap, 119 buildings in Van Nuys and North Hollywood changed hands in 1997, one more than the number of transactions that occurred at the height of the market in 1990.

Most of the buyers were speculators attracted by a supply of foreclosed properties selling at well below market value, betting that when the market begins to improve, so will the values on the properties, said Don Schultz, president of the Van Nuys Homeowners Association.

“The landlord who bought property as a foreclosure is only interested in turning a quick buck,” said Schultz.

Not everyone agrees with Marcus and Millichap’s numbers.

According to Grubb & Ellis Co., the average price per unit of apartment buildings in North Hollywood and Van Nuys rose nearly 7 percent in 1997 over 1996, to $39,606.

Grubb & Ellis’ statistics include smaller, newer buildings not taken into account by Marcus & Millichap. But others say that it is the larger buildings that will have the greatest impact on the landscape of the community.

“Van Nuys, Panorama City and North Hills are already overbuilt,” said Tom Henry, planning deputy to City Councilman Joel Wachs, who shares jurisdiction over Van Nuys with City Councilwoman Cindy Miscikowski. “And some of the places are very run down, almost to where we’re concerned there might be a slum situation.”

The city has several programs underway to counteract the trend.

The Community Redevelopment Agency of Los Angeles offers low-interest loans to property owners who wish to improve their buildings, provided they agree to limit their rents to prescribed levels.

Since the program’s inception in 1979, CRA funding has been used to rehabilitate 882 units in North Hollywood a fraction of the 59,008 units in Van Nuys and North Hollywood, according to Marcus & Millichap.

Another problem is that the CRA funding is for cosmetic repairs, such as painting, and not the major renovations often required, such as converting studio and one-bedroom apartments into larger units.

“If (property owners) don’t see a market, a lot of them are not willing to take rehab funds,” said Spivack.

Programs like the Neighborhood Recovery Program and the Mayor’s Targeted Neighborhood Initiative Program also include loans, along with components that focus on community improvement efforts. A third city program, slated to start up next month, will move responsibility for housing code enforcement to a new office, which will oversee inspections and help property owners obtain low-interest loans.

But these programs tend to focus on buildings that already have deteriorated well beyond accepted standards. The larger dynamics are often more subtle.

“You don’t always have to look at the worst neighborhood,” said CSUN’s Diaz. “Neighborhoods showing signs of aging don’t necessarily have to be the socioeconomic basket cases.”

Indeed, slowly aging apartment buildings often do not attract the attention of city officials. Most of the emphasis in Wachs’ district is on “new, single-family housing and businesses,” said Henry.

Renee Weitzer, chief field and planning deputy to City Councilman John Ferraro, whose district includes a portion of North Hollywood, said that in her district, people never come to her with complaints about substandard housing.

The Los Angeles Housing Department has had its hands full shoring up the problems caused by the Northridge earthquake. “Now we’re finally at a point where that’s done, and the department is focusing on this code-enforcement program,” said John Wickham, housing and economic planning analyst for the agency.

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