What real estate investors can learn from development battles in two famous beach towns
Santa Monica and Miami Beach are each cities of around 90,000 residents. The world thinks they’re paradise and flocks to their sun and sand.
But behind their glamorous facades, the success of these cities has bred new urban woes and acrimonious debates among residents about the pace of “development."
It doesn’t matter that they're on opposite coasts: one a famously liberal town in a deep blue state, and the other a bit of a purple island in a sea of deepening red. In both cities, two very different visions for the future are in competition.
To simplify, at one pole are the slow-growthers. They’re saying, “Whoa, hold up! Life’s spinning out of control. Traffic’s crazy. Housing prices and rents are through the roof. Money-grubbing developers don’t care about residents. Crime is rearing its head. This isn’t the bohemian beach scene we remember. Stop building so much, respect our cool history, and preserve what we have.”
At the other end are the modernizers. They’re saying, “Dudes, it’s time to step up our game! We need bigger and better structures to house our people, deal with rising seas, encourage work/live density so people shed their cars, and class things up to encourage tourism, business, spending, and jobs. And we need those development taxes for new infrastructure, public safety, and green space.”
Consider the recent experience of legendary architect Frank Gehry, who has managed to walk into the crossfire in both cities.
A real estate reversal in Miami Beach
In Miami Beach on July 20, 2022, Gehry and renowned developer Steve Ross, both of whom expressed love for the place because of long family histories there, teamed up to propose two glitzy new towers. The towers would replace a four-acre debris heap where the famed but dilapidated Deauville Beach Resort from the 1950s sat until courts ordered it to be imploded.
Ross was willing to spend an astonishing $500 million to purchase the lot from the private owner. He asked no money from the city, and instead projected that his work would provide $6 million to $7 million a year for the next three decades in new tax revenue to improve this neglected part of town, as well as a similar amount for the whole city. As America’s largest affordable housing owner, he also threw in a pledge to devote himself to that critical need in the area, and to give $12 million in cash for "public benefits” of the city’s choosing.
At age 93, Gehry personally came to the public hearing. After an hour’s debate, the city commission supported Gehry and Ross, 5-1. Mayor Dan Gelber pronounced the offer a miracle that had landed at their doorstep. A required citywide referendum three months later seemed perfunctory.
But then came a blizzard of flyers and emails circulated by the lone commission dissenter and historic preservationists, blasting “billionaires” and “land grabs.” They attacked the design as being out of sync with the neighborhood and bound to cause auto Armageddon—even though several nearby buildings are taller or bigger, and the proposed 175 hotel rooms and 125 condos for largely part-time residents would likely produce less traffic than the bygone 540-room hotel.
Some said the old hotel was “iconic” and expressed outrage it wasn’t rebuilt. Defenders of the new project countered that the Deauville was designed by a middling architect of the 1950s, and its replacement would be by one of the most revered architects of the last 100 years, who promised to pay “homage” to the old hotel in his design. They argued that it would be an improvement for ordinary residents because Gehry’s new vertical towers would allow a 200-foot green space between them, which would afford sightlines and access from the street to the beach that had never existed before.
In short, the case for the development seemed overwhelming.
But in the referendum on November 8, 2022, 53% of voters turned Ross and Gehry down.
Many thought the result a fluke, the result of poor campaign tactics, or shrill voices drowning out measured ones in Trump-era style. And 53% was hardly a landslide. But the message of opponents undeniably resonated.
Now the emboldened slow-growthers are calling for even stricter historic preservation in the city (3,000 structures already have historic designation, which makes it harder to replace or rehab them). And, in the name of preventing congestion, they oppose reducing the minimum size of apartments that can be built. Modernizers counter that such restrictions will instead prevent the building of desperately needed affordable housing, which in turn will worsen traffic if local workers can’t live nearby.
A Santa Monica love fest
In contrast to his Miami Beach experience, Gehry took part in a love fest in Santa Monica, 2,700 miles away. On July 14, 2022, he appeared before the city council to be crowned with approval for a high profile mixed-use project on Ocean Avenue. The measure engendered nary a negative word either at the hearing or from the broader public. Instead, members of the council crowded around Gehry for pictures, predicting exciting rejuvenation for a tired stretch of downtown and an iconic new landmark for the city.
So what was Santa Monica’s secret sauce that produced kumbaya?
To some extent, it was just exhaustion. Gehry and the developer, Jeff Worthe, had made their proposal 10 years before. In the ensuing time, slow-growthers and modernizers jousted over approval, not unlike the standoff in Miami Beach. The original request for a 250-foot, 22-story tower was sliced down to 130 feet and 12 floors. Yet in the end Gehry and Worthe still got 120 hotel rooms, and a second tower of 100 residential units.
To achieve this, proponents learned to talk early and often with local stakeholders and offer generous and specific “community benefits,” including many more affordable housing units, a city cultural museum incorporating two historic Santa Monica bungalows, public pathways, solar energy, and the like, as well as new tax dollars. And they recognized that objectives of the other side should be treated not just as an afterthought but as a core part of the proposal.
Former Santa Monica mayor Sue Himmelrich says, “Show me a project that’s turned down, and I’ll show you a package of community benefits that's too small.” City councilman and slow-growth leader Phil Brock, 69, in rotation to be mayor next year, says, “Unlike some of my old friends who only listen to music from our college days, I listen to all the new stuff too. Slow growth doesn’t mean no growth. I’m willing to compromise.”
It would be easy to hope Santa Monica has found the magic formula. But the process is often slow and grudging. And now the city is facing tug-of-wars over other projects like converting parking lots into residential buildings, and the future of 227 acres when the local airport closes. Some see answered prayers for sorely needed housing, others see congestion and vanishing amenities. Most see protracted clashes.
Future battles loom
In Miami Beach, frustrated modernizers are amping up. Businessman and former mayor Phil Levine says strong leadership and real-world pragmatism are needed to fight “phony populism,” because “we can’t become a city of no. Capital is fluid and will move elsewhere." He warns that Gov. DeSantis could seek a state law guaranteeing commercial owners the right to modify their private property as they see fit in the face of sea level rise and a housing crisis. Levine says NIMBYs should realize they can probably find other fine but stubborn preservation boards "at the bottom of the ocean with the continent of Atlantis.”
Ironically, the struggle in both cities comes at a time when they have an historic opportunity to re-establish their glittering brands with new generations, for the renewal communities need.
Downtown Los Angeles is beset by a homelessness crisis and post-COVID distaste for office towers, and companies are looking to relocate. What youthful cohort wouldn’t be attracted to new living and working spaces in a cool beachside town?
And South Florida, with its balmy winter weather, finds itself a rediscovered promised land for not only cold Northeasterners but entrepreneurial young people and companies from all over. Miami Beach, only one of many possible destinations in the region, could be more attractive if it treated these hordes not as outside invaders, but as energizing fresh blood, spirit, and, yes, money.
The good news is, proponents of both slow growth and modernization are activated by love of their communities. But if they are to avoid becoming a microcosm of the impasse seen on our national political stage, they need to recognize each other’s good intentions and get to compromise much more cheerfully and quickly.
If not, residents may never enjoy their cities the way the tourists do.
Mark Bisnow, a former publisher, lives in both Miami Beach and Santa Monica.
The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.
This story was originally featured on Fortune.com
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