Kiss the ring: City pols weigh heavy on development in these major markets

How much control local officials have over real estate projects in Los Angeles, New York, Chicago and Miami

National /
Nov.November 09, 2020 07:00 AM

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Developers have a huge say in how skylines are shaped. But so do a select number of local officials in some of the country’s biggest real estate markets.

In Los Angeles and Chicago, developers must often win approval to build from the local city politician who reigns over the project site — a major point of contention for some industry players and local residents. In New York City, major zoning and other land use decisions usually come down to one City Council member (though getting there involves a litany of steps), while in Miami, one of the more developer-friendly cities, land owners have more autonomy.

It’s a question that many are asking with a new presidential term just around the corner and social movements gaining momentum: How much control do local officials have over development?

The Real Deal dug into city land use protocol in four major markets, talking to lawmakers and legal experts to make sense of it.


Municipal monarchs

Los Angeles City Council members call the shots over projects in their districts, a double-edged sword for developers

By Matthew Blake

Los Angeles has four million people in city limits, but a real estate developer with plans for a big project needs the approval of just one: the local City Council member.

“They’re like the little kings of their district,” said Ryan Leaderman, an attorney for Holland & Knight.

Ellia Thompson, a lawyer at Ervin Cohen Jessup, echoed the sentiment. “No other question has meaning besides ‘Does the Council member approve this?’” she said. “There is very little legal authority” vesting such power in each of the city’s 15 Council members, but instead a longstanding practice that has hardened over decades, Thompson noted.

“They’re like the little kings of their district.”

Ryan Leaderman, Holland & Knight

Embattled downtown Council member Jose Huizar — who was arrested by the FBI and indicted on 34 counts related to bribery and corruption this summer — reportedly told developers involved in his alleged criminal enterprise to “call me boss.” Projects linked to the scandal include Shenzhen New World Group’s plan to convert a downtown hotel into a 77-story mixed-use tower as well as a 35-story tower that developer Carmel Partners won the Council member’s approval for.

Nearly all of the city’s Council members, clean or corrupt, enjoy such power over development projects, said Casey Maddren, president of United Neighborhoods of Los Angeles, a group that advocates for more affordable housing development. If a project in L.A. doesn’t need a zoning variance, “the approval is ministerial, and the developer just needs permits from the Los Angeles Department of Buildings,” Maddren said.

If the developer does request a rezoning, the project first goes to the Planning Commission, a board of mayoral appointees. While some say the Planning Commission is entirely toothless, the commission can be strong-willed in imposing affordable housing requirements on projects, Leaderman argued.

But Thompson said that even affordable housing set-asides go out the window if the Council member throws their weight around, as evidenced by Carmel’s projects in Huizar’s district.

Once the Planning Commission greenlights a development, the project ambles its way to the City Council’s Planning Land Use and Management Committee. There, well over 90 percent of the time, the project is unanimously approved and sent to the 15-person City Council, where another unanimous approval is in order.

If a project is controversial — such as a homeless shelter in a wealthy enclave or an office or residential high-rise in an area full of single-family housing — the Council member or Planning Commission will hold hearings.

Again, though, whose argument carries the day depends on the Council member.

“We’ve created a system where everybody’s opinion at the hearing is equally weighted,” Thompson said. “A Stanford grad with 20 years of experience in traffic engineering can put up 16 charts showing why traffic won’t increase on the block. But that person’s expertise is equal to the cranky man on the block who says traffic will increase.”

And while a Council member’s power is absolute, “the vast majority of projects are initiated by the developer,” Maddren said. Sometimes, though, a Council member “does try to court investors to interest them in projects,” he noted.

Affordable housing-focused developments, for example, are often initiated by elected officials, according to observers.


A majority of one

In New York, a single politician decides rezonings — but it’s not that simple

By Erik Engquist

Developers in New York City need no special permission to build something that meets zoning and construction codes. Most of the city was created this way — “as of right,” to use the industry term. For anything else, though, builders must endure an approval process with an appropriately brutal acronym: ULURP.

Navigating the Uniform Land Use Review Procedure demands technical expertise, political savvy, clever communication and familiarity with the community. Not to mention a hell of a lot of money.

“The rezoning process is not for the faint-hearted or the undercapitalized.”

Ken Fisher, Cozen O’Connor

“The rezoning process is not for the faint-hearted or the undercapitalized,” said Ken Fisher, a land-use attorney at Cozen O’Connor and a former City Council member who knows it as well as anyone.

Between lawyers, architects, engineers, lobbyists, public relations specialists and others, even a basic application will cost at least $250,000. For larger, more complicated projects it can be as much as $5 million.

Approval requires a majority vote of the 51-member City Council. Getting to that point is often an odyssey, which helps to explain the cost.

An application must first be scrutinized by the Department of City Planning staff and declared complete by the agency’s director, which Fisher warns clients “can take anywhere from a year to forever.”

That kicks off a seven-month review involving four public hearings, advisory opinions from the local community board and borough president, and votes by the City Planning Commission, the City Council land use committee and then the entire Council. (The mayor can veto the deal, but never does.)

Negotiations to win approval typically go down to the wire, but the set timeline at least guarantees the developer a verdict.

It does not, however, guarantee success. That’s because the outcome is essentially determined by one person: the Council member in whose district the project is.

In the early days of this system, created in 1989, Council consent was easier to get because elected officials saw growth as an objective. Their mission following the city’s brush with bankruptcy in the 1970s and crime-ridden ’80s was to persuade developers to build anything that might keep New Yorkers from fleeing.

But as crime fell and the economy boomed, developers began to find communities skeptical and often hostile to their projects. Who needed more jobs? The city was adding nearly 100,000 per year. And high earners were bidding up housing. Gentrification, not white flight, became the concern.

Term limits provided a tailwind to that shift, Fisher explained, by triggering Council speaker races in which candidates courted colleagues by promising them more autonomy, emboldening them to act in their district’s interests rather than the city’s at large. The loudest of their constituents — inevitably critics of rezoning — began to carry the day.

The pandemic, despite emptying the city of roughly half a million people, has yet to swing the pendulum back. This summer Brooklyn Council member Carlos Menchaca derailed a rezoning that would have brought thousands of jobs to Sunset Park. His colleague Jimmy Van Bramer is opposing a $2 billion development in Astoria.

“I don’t think the Council has internalized just how bad the city’s financial condition is right now,” Fisher said.


Absolute aldermen?

Chicago’s mayor, socialists and developers are jockeying for control of the city’s land use
By Georgia Kromrei

Chicago’s newly-elected progressive aldermen are fighting Mayor Lori Lightfoot, long-standing political protocols and dozens of real estate developers to wrest control over development in their communities.

And the battle is getting ugly.

Local City Council members have the ultimate say over many projects in their ward — especially if they need a zoning change — because of an off-the-books practice called “aldermanic privilege,” where other aldermen defer to the local leader on issues in their ward.

But that can also lead to corruption, as in the case of Chicago alderman Ed Burke, who was charged with repeatedly using his power over projects before the city to funnel work to his private law firm.

“Chicago laws are still not written by legislators, but by developers and corporations.”

Byron Sigcho-Lopez, Chicago City Council

Lightfoot’s efforts to repeal the practice, which she campaigned on, haven’t gone very far. Progressive members of the 50-seat City Council say trading aldermanic prerogative for mayoral control still doesn’t give communities more say. And while Lightfoot has hedged on taking definitive steps to rid Chicago of such local power, working-class and immigrant communities are taking the fight directly to developers.

Those tensions have sharpened in the past year. Residents were enraged this April when the city, without notice, gave Hilco Redevelopment Partners the green light to demolish an old coal factory to make way for a 1 million-square-foot warehouse in Little Village, where the asthma rate was already high, sending a plume of asbestos into the air.

Several months later in Pilsen, community backlash over a proposal to redevelop a Catholic church into a co-living complex killed the $4 million development deal. Byron Sigcho-Lopez, the neighborhood’s alderman and a member of the socialist progressive caucus, backed a community-led development plan for the dilapidated church which has been seeking a buyer since 2016. Sigcho-Lopez, a former housing activist, has also opposed the redevelopment of a seven-acre vacant lot proposed by New York-based Property Markets Group, demanding 30 percent, rather than 25 percent, affordable units.

Dan McCaffery, CEO of the development firm McCaffery Interests, said that while he has “never felt Chicago is unfriendly to development,” there are headwinds for those whose projects are out of step with the local community. Increased public interest and input on larger developments, particularly residential projects, make the approval process more “sticky” but not impossible, he noted.

“You have to have patience, but it’s not like everybody is calling you a dirty name,” McCaffery said. “People are concerned about what’s happening around their neighborhood — their houses, their schools, traffic congestion — you have to have thick skin. But more than that, you have to have some big ears, to listen every once in a while.”

Developers might not always like what the public has to say about their projects, especially in any of the six wards where aldermen backed by the Democratic Socialists of America have made housing affordability a key issue.

But Sigcho-Lopez said the Windy City is still a “safe-haven for developers.”

“Chicago laws,” he argued, “are still not written by legislators, but by developers and corporations.” Changing that is not the job of just one legislator, the alderman for the city’s 25th ward said, though he hopes the progressive caucus will grow to command a majority on the City Council — giving them broader control over development.

“I’m hopeful, because I saw what happened in the last election,” Sigcho-Lopez noted.


Miami viceroys

South Florida’s many commissioners have the final say over large developments, though few projects get overruled

By Katherine Kallergis

In North Miami Beach — one of more than 100 municipalities that make up South Florida — seven commissioners in two recent meetings listened to hours of public comments railing against the proposed redevelopment of a major mall.

Neighbors who opposed the plans were critical of the traffic it would bring, whether it would be successful and its impact on the surrounding neighborhood. The proposal even inspired a local resident to run against Mayor Anthony DeFillipo in the November election.

Nonetheless, zoning changes for Dezer Development’s nearly 30-acre project were approved by the majority of the commissioners, with the mayor casting a swing vote in favor of the project on the first and second reading. A third vote is planned for November.

“We have the Everglades on the left, the ocean on the right. It makes our overall land use process a bit more intense.”

Joe Hernandez, Weiss Serota Helfman Cole & Bierman

The dozens of planning boards, commissions and mayors in Miami-Dade, Broward and Palm Beach counties often determine the fate of developers’ plans if they’re seeking zoning changes. One elected official could pump the brakes on a specific project. But since developers are able to return to elected and appointed boards, many projects ultimately get approved.

Miami attorney Joe Hernandez, who chairs the real estate practice at Weiss Serota Helfman Cole & Bierman, said it’s not always so easy for developers and much of the work happens before a sponsor buys a site. And each municipality has its own building and zoning codes.

Hernandez added that it’s “hard to overstate how critical” the land use process is, considering South Florida’s unique landscape where some developments require layers of approvals. “We have the Everglades on the left, the ocean on the right,” the attorney noted. “Infill development has been the name of the game. It makes our overall land use process a bit more intense.”

At the same time, Florida’s pro-business environment — with its favorable zoning, cheaper land and labor, a slew of business incentives and lack of state income tax — has long attracted big-time developers, even if they are forced to compromise in some cases.

Last year, before brash developer Michael Shvo closed on the acquisitions of two adjacent hotels in Miami Beach, he pushed for the passage of an ordinance that allows developers with more than 115,000 square feet of land to propose ground level additions up to 200 feet tall within that specific historic district, which he secured.

Still, Shvo had another layer of approvals to get through. Fast forward a year, and the Miami Beach Historic Preservation Board approved the New York developer’s plans to add a residential tower behind the anchor Raleigh hotel building, but the board shaved the height to 175 feet.

Even some of Miami’s most seasoned developers can face hiccups. In late October, for example, the Miami Urban Development Review Board rejected the Melo Group’s plans for a 58-story residential tower in downtown Miami. One board member called the design “excessive and monolithic” while another said he didn’t see the benefit to the city or the adjacent community. Melo has developed thousands of apartments in Miami.

And if major projects require voter approval — such as David Beckham’s plans to build a sprawling mixed-use soccer complex on a city-owned golf course property in Miami — expect an expensive campaign to be waged both for and against. Beckham and his partners secured voter approval to be able to negotiate an agreement with the city.

But that agreement has not been finalized since the referendum passed in November 2018.


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