L.A.’s Occidental Petroleum Corp. suffered a loss last week when the overreaching government of Ecuador seized its property there.
Likewise, some L.A. apartment and hotel owners suffered a loss recently when the L.A. City Council, which appears to be doing a fair imitation of an overreaching government, told them they couldn’t redevelop their properties for a time.
Did I miss the announcement? Is it open season on property rights?
Occidental’s case is particularly egregious. Occidental two years ago claimed it was owed $75 million in tax refunds by the country. The Westside company won that dispute in arbitration and had it upheld by an international court. Ecuador responded last Monday not by refunding the money but by kicking Occidental out of the country and taking over its oil properties. Now, Ecuador gets the 100,000 barrels a day of oil that Occidental invested $1 billion to develop.
Occidental has filed an arbitration claim with an international body, but it’s hard to imagine Ecuador would do the right thing if it lost. After all, it’s a country with a storied history of little dictators nullifying constitutions and elections that they don’t like.
You’d expect a different tack from the L.A. City Council.
Alas, you’d be disappointed. The council recently imposed a moratorium to prevent low-cost residential hotels from being converted or rebuilt into condos and apartments for the more affluent. It’s aimed partly at slowing the gentrification downtown for awhile. The moratorium lasts for one year but could be extended.
To be fair, L.A. did not seize anyone’s property. Nonetheless, L.A.’s act robbed property owners of an important right the right to do with their properties as they see fit.
This is not an academic point. The right of owners to push their properties to their highest and best use is what revitalizes downtowns, creates shopping and entertainment districts and gives consumers choices in homes.
There’s a practical consideration, too. Property owners who want to develop or redevelop their properties, like poker players, must move at the right time. They need to weigh market conditions as well as the lending environment and make other considerations before deciding whether to proceed. After the moratorium expires a year or two from now, the world will have changed. Interest rates may be up or the demand for units may have softened and the chance to redevelop a property may be lost for years.
The city isn’t stopping there. It is going to hold hearings on whether to impose a moratorium that would prevent apartment owners from converting their properties to condos in hopes of slowing the loss of affordable apartment units. (The article is on Page 1.)
The putative reason for these initiatives is to retain affordable housing for low-income and lower-middle residents. The concern is legitimate and the goal is laudable. But if the city wants to accomplish that goal, the way to do it is for the city to build or buy affordable housing units and sell or rent them to those folks. The way not to do it is to push the problem off on landlords and trample on their property rights.
The principle is simple: Either we have property rights or we don’t.
We can be a city that understands and respects those rights, or we can be Ecuador.
Charles Crumpley is editor of the Business Journal. He can be reached at
[email protected]
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