If you watched the Golden Globes, or any award show for that matter, you know that celebrities spend obscene amounts of money on the glam-tastic dresses that they wear to those events. One reason why they spend so much on these garments is because they are usually rare, one of kind gowns. Scarcity justifies the price tag, but so does the name on the tag. Versace, Gucci, Valentino. All of these names are dropped when red carpet reporters ask, “Who are you wearing?”
Los Angeles, on the other hand, does not have a scarcity problem in terms of housing. So why is it still so pricey to live in L.A.? As a young’n looking to get in the real estate market in the next couple of years, I can’t help asking myself that question every time I open the Real Estate section of the L.A. Times. I’ve consulted business magazines, websites, and newspapers for answers. All of them provided some insight, but left me feeling slightly more confused than before.
I have a theory, though. It doesn’t sound as astute as the articles I’ve read but I’ll share it anyway: Los Angeles is the Versace of California. Or whichever designer you prefer. Los Angeles doesn’t have a scarcity problem. Look at all the new houses and condos being built! Los Angeles doesn’t even have a land problem. Manhattan has a land problem! And they charge for it!
What Los Angeles does have is an image, and it conveys it. It conveys image the way Versace conveys status, glamour, and a few Academy Awards on the mantle. Real estate buyers are essentially paying a premium for a Los Angeles zip code, the same way someone pays a premium for a Lacoste polo shirt. You know you can get the exact same shirt for a fraction of a price, but you pay $72 for it anyway because of what the little green crocodile logo conveys.
Los Angeles may not have a housing shortage or a land deficiency. But it does have an image, the way Manhattan, Paris, and Versace do. And sometimes those are things that are worth paying a little more for.
