LOS ANGELES DESPERATELY NEEDS MORE AFFORDABLE HOUSING AS WELL AS MORE PARK AND RECREATIONAL AREAS: A NEW ORDINANCE SEEKS TO ADDRESS THESE TWO POTENTIALLY COMPETING NEEDS BY RAISING DEVELOPMENT FEES

The City of Los Angeles has for many years been faced with a planning dilemma, lagging far behind all other major U.S. cities in green space and affordable housing.  The local development boom has not substantially alleviated the problem and may have even added to it.  In response, the City has recently passed legislation, Ordinance No. 184505 (the “Parks Dedication and Fee Ordinance”), which tries to strike a new balance between housing and open space considerations.  It sets out a revised version of the City’s park or “Quimby” fee requirements.  Its provisions extend to apartment projects as well as condominium developments.  The amount and scope of those fees will be increased on the premise that those funds will help pay for steps to mitigate the impacts which ongoing residential development will have on parks and other recreational areas, even as the City continues to encourage additional multi-family construction.

A colleague of Joe Cobert, Craig Lawson, a highly regarded and knowledgeable land use consultant in Los Angeles (and a reader of The Joe Cobert Report), has written a terrific summary of the terms of the new ordinance, both its coverage and its exemptions.  With his permission, we have sent a copy to the readers of The Joe Cobert Reort.

Note that the ordinance is not scheduled to be fully operative until February of 2017, 120 days after the currently prescribed “effective date” of October 20, 2016.  The October date is very important right now because the exemption is tied to the effective date.  The exemption reads as follows:

“Any project that would otherwise be subject to a park fee but has acquired vested rights under Section 12.26 A.3 of this Code prior to the effective date of this Ordinance, and/or has an approved vesting tentative tract map per Section 17.15, the application for which has been deemed complete prior to the effective date of this Ordinance, shall not be subject to a park fee.”

Clearly, absent modification of the Ordinance in the next few weeks, anyone who has a project “in the pipeline” in the City of Los Angeles needs to do everything possible to move the project to an exempt status in the next 30 days (by October 19).

The Joe Cobert Report will keep you informed about the Ordinance and the various issues raised thereby.

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WILL “INCLUSIONARY ZONING” BE RETURNING TO CALIFORNIA?

“Inclusionary zoning” is a term which has been utilized to describe governmental requirements to set aside part of development projects for low-income tenants at below-market pricing, whether the units are to be sold or rented.  It used to be a method employed in California to assure some degree of “affordable housing.”  Developers disliked it because it reduced the sale prices and rents they could obtain on the units set aside.  Purchasers and tenants of the rest of the units usually disfavored the concept too, because it effectively created two “classes” of occupants in each such project.

 Prior to 2009, inclusionary zoning was adopted by law or ordinance in Los Angeles and more than 150 other cities and counties across the State of California.  A couple of years earlier, Geoff Palmer, a long-time real estate developer locally, had brought suit to challenge the legality of inclusionary zoning as a “back-door” way to reinject a form of rent control where it was not permitted under 1995 legislation known as the Costa-Hawkins Act.  (In 1995, Joe Cobert, author of this newsletter, was president of one of the several apartment owners’ associations statewide which lobbied for the passage of that legislation.)

 Palmer had plans to build a mixed use project (retail and some 350 apartments) at Bixel and Sixth Streets, just west of downtown Los Angeles.  Under Los Angeles’ then operative inclusionary zoning policy, Palmer was faced with two alternatives which would have made the project economically infeasible:

1. set aside 20% of the units (70 of the 350) for low-income tenants at below-market rents; or
2. pay an “in-lieu” fee of almost $6 million to help subsidize other affordable housing projects in the City.

 Palmer’s case went to the Los Angeles Superior Court and then to the Court of Appeal here in the Second District (the Los Angeles-Ventura area).  The ruling of the appellate tribunal, which came down in 2009, was in Palmer’s favor.  The California Supreme Court did not take the case.  Accordingly, the concept of inclusionary zoning was abolished in the Second District, and the ban has apparently taken effect statewide.

 Fast forward to the summer of 2013.  Since 2009, the real estate environment in the Golden State has changed dramatically.  We all know that, even with historically low interest rates for home loans, many potential house purchasers were forced into the rental market.  Although new apartment projects have proliferated in the last couple of years, the housing stock is still limited for people with low incomes as rents have risen significantly on multifamily residential properties.  Add to the foregoing the elimination of redevelopment agencies last year, which had provided funding for many developers in the affordable housing sector.

 Now there is a bill before the State Legislature, AB1229 (introduced by Assemblywoman Toni Atkins out of San Diego), which would supposedly reinstate inclusionary zoning for cities and counties electing to adopt the policy anew.  Shortly before the abolition of redevelopment agencies, a previous bill seeking to revive inclusionary zoning was defeated on the floor of the State Senate.  Ms. Atkins and her supporters cite the end of redevelopment agencies as a reason for the Legislature to reconsider the concept and bring back some form of inclusionary zoning.

 Does AB1229 have a chance of passage by both houses of the State Legislature?  If so, would Governor Brown sign it?  Which groups are lining up to back the bill and which are opposing the measure?

 The Joe Cobert Report will furnish updates as AB1229, as well as any similar proposed law, proceed through the lawmaking process.