Congestion and "Affordable" Housing in Los Angeles

Should an investment of $1.5 million get you a nice house? In St. Louis it might, but on the westside of Los Angeles, it will get you a 3 bedroom house with a 6,000 square foot lot. The westside is close to the ocean, has low smog and easy access to many restaurants and amenities in Santa Monica and other "consumer cities". But, I wonder how much of the price premium is due to traffic congestion.

Everyone knows that it takes time to drive in LA especially at peak times. I drive very little but I put around at around 15 MPH on most of these urban roads. I mention this because last night I was at a party at a very nice house located 19 miles from UCLA in Woodland Hills. So take the 405 north 8 miles, take the 101 North (to the west for 8 miles) and you are there. If you could drive 60 MPH on these roads, this should be a 20 min one way commute. In such a world of higher Los Angeles speeds, what would happen to home prices on the near westside such as in Santa Monica and Westwood, would they decline in a speedy world?

Now one school of thought would be that there is free entry into Los Angeles, you can move here from Seattle or Detroit. If word got out that LA had "solved" its congestion problem would this just lead to more population growth bidding up home prices in the suburban areas such as Woodland Hills. In equilibrium, the irony is that population growth (triggered by improvements in quality of life due to perceived reductions in congestion) would lead to more congestion!

Conversely, in a closed economy or at least one with high cross-city migration costs; improvements in congestion would increase the demand for living in suburbs (Woodland Hills is warmer than Santa Monica and is not a perfect substitute) but the resulting sprawl of the population would yield a lower average home price and greater affordability in the greater LA area.

So , do the incumbent homeowners close to the city support congestion as a way of creating higher rents for their asset? They want low crime, low smog and congestion! That's my claim!