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The Real Deal Los Angeles

Will new California law cut red tape for developers?

Some say it will merely fray it

Governor Jerry Brown signed a bill last week that lawmakers hope will encourage a surge in housing development in Southern California and throughout the state. But some real estate experts and developers say it does not go far enough, since it maintains restrictions based on outdated zoning laws.

When Senate Bill 35 goes into effect on Jan. 1, it will require California cities that lack adequate housing to streamline their permitting processes. Those cities must approve all apartment and condo developments — provided that they comply with zoning laws and 10 percent of the units are affordable, among other requirements. This will allow developers of projects that meet the guidelines to skip the expensive and often years-long review process that involves environmental impact reports, city council votes and court challenges.

Under SB-35, height or unit count cannot be altered in the design review process, which will be expedited and focused on architectural design. Also, all minimum parking requirements will be waived.

SB-35 had the support of the California Apartment Association, the Los Angeles Chamber of Commerce, Governor Brown, and Mayor Eric Garcetti. The real estate industry largely believes it is a step in the right direction, but some are concerned the bill still includes too many restrictions. Here are some of them: Accessory dwelling units can qualify for SB-35’s streamlining, but single-family home developments will not; proposals will not qualify if they include demolition of existing rent-controlled housing; developers of qualifying projects must pay construction workers prevailing wages; qualifying projects must follow zoning laws and must not exceed 200 feet in height.

“The legislation gives with one hands and takes with the other,” said David Waite, a land use attorney and partner at Cox Castle & Nicholson in Los Angeles. “As much as the goal [of SB-35] is a good one, the practical reality of what projects can qualify is an open question.”

SB-35 may not lead to as much housing as lawmakers hope because developers will “constrained” by L.A.’s outdated zoning standards, which only allow small projects to be built in many areas, Waite said. To build a residential project of any scale, developers need to request zone changes to increase the floor area ratio allowed on a site, he said. But such a request disqualifies a project from SB-35 streamlining.

“The height restriction is going to be the big issue,” said Edward Casey, a Los Angeles-based partner at Alston & Bird’s Environmental, Land Use & Natural Resources Practice Group, who said the bill probably won’t be a “game-changer” since the zoning standards are the biggest hinderance to approvals in the first place.

The city is working to update its community plans – which dictate what type of development is allowed in certain areas – and Los Angeles is currently modernizing its zoning code with its re:code L.A. program. But that process is years from completion and many of the city’s community plans have not been updated in decades and still focus on suburban development.

Waite said L.A. needs to focus on removing barriers for market-rate housing as well.

“We need to limit regulatory obstacles to develop both types of housing to really tackle the housing crisis,” he said. “All boats rise with a rising tide.”

Developers, meanwhile, say they are discouraged by SB-35’s requirement that at least 10 percent of units are affordable and that construction workers be paid union wages. These restrictions increase the cost of development — and could push owners to raise prices on market-rate units to compensate, said Nick Buchanan, president of Cape Point Development.

Casey also pointed to the “objective planning standards” included in SB-35, which are defined as local housing overlay zones, specifics plans, inclusionary zoning ordinances and other local ordinances. Under the bill, projects that conflict with these plans can be delayed by local officials.

“That may be an area we could be hung up on,” Casey said. If the approvals process is not expedited for all housing projects, “it’s just wasting time, and time is money,” he said.