When I walk around the Venice Beach area, I see plenty of two story buildings and homes that could be knocked down and rebuilt with 6 story and taller buildings. The WSJ poses a great puzzle today on why more housing isn't being built in this paradise. My friends Issi Romem and Jed Kolko are both quoted.
My simple economic explanation for why supply isn't keeping up with demand is the fact that Venice Beach is a progressive community with much of its land located within the Coastal Commission's jurisdiction. Both of these factors create more regulation and zoning which leads to an inelastic supply of housing and thus higher demand leads to higher prices and prices out young people seeking to rise on the housing ladder.
For evidence on progressives and California housing construction, read my 2011 paper.
For evidence on the effects of the California Coastal Commission, read my 2010 paper.
For those who know some formal economics, read Devin Bunten's important paper.
For those of you who don't know Jim Morrison (the door's) old stomping grounds. Take a look at these pictures.