“It’s going to put a lot of people out of business — mortgage brokers, agents, developers and blue collar workers.”
L.A.’s high-end real estate crowd has been agitated for months.
Along with rising interest rates and global economic uncertainty, this year the city’s luxe agents and owners have been reckoning with Measure ULA, a hefty new transfer tax on most property deals above $5 million. In April, the first month the tax came into effect, the city saw just two single family home sales above the price threshold. A year earlier there were 50.
Now, even as the full impact of that tax is still unfolding, another major real estate policy is on the horizon, in the form of a new law that aims to benefit hillside wildlife by restricting residential development in some of the city’s most expensive neighborhoods. And L.A. real estate players are heating up all over again.
“It’s another example of the City of Los Angeles shooting itself in the foot,” said Jason Oppenheim, of The Oppenheim Group. “It’s as dumb as the mansion tax.”
The proposed city law, called the Los Angeles Wildlife Ordinance, would require developers to scale back residential footprints in the Santa Monica Mountains between the 101 and 405 freeways, creating a 36-square-mile corridor that includes parts of Bel Air, the Hollywood Hills and Studio City — a swath of the city that’s prime territory for both animals and hillside mansions.
The law would leave existing properties alone but impose regulations on major renovations and new development. It would mandate animal-friendly fencing and window requirements, limit maximum height to 45 feet, or about four stories, and subject larger projects to a site plan review.It also stipulates that projects cannot occupy more than 50 percent of a lot’s total square footage. A loophole on the size of basements in current law also would be closed. And new rules discuss the specific angle of hillside one can build. Critics argue that the proposed law would leave little space for new development.
The idea is to protect critical hillside habitat and allow free movement for species that include coyotes, gray foxes, bobcats and mountain lions. The measure’s supporters — a group that includes more than two dozen environmental groups — are also promoting the ordinance as a kind of legacy for P-22, a mountain lion who became a local icon after years ago crossing the 405 and 101 and getting stuck in Griffith Park. Authorities euthanized the 12-year-old cat in December after he began behaving erratically and attacking dogs.
“This area is a scientific treasure,” Paul Edelman, a deputy director at the Santa Monica Mountains Conservancy, recently said in a public meeting, “and in order to keep the commons alive, and to keep it functioning, all the landowners have to chip in a little bit.” He added that after years of development the local ecosystem is “on life support.”
But industry players, including those who spoke with The Real Deal, argue what’s really endangered is L.A.’s residential market, because the restrictions will effectively squeeze out new development and tank property values.
After winning a unanimous sign off from the city’s Planning and Land Use Committee, the measure will head to the full City Council, where a vote is expected before the end of 2023. As it advances, property owners, agents and developers are coalescing against it to create an opposition campaign that could be even larger than the fight the industry waged last year against Measure ULA.
“This ordinance is being disguised as being solely about wildlife,” said Jon Grauman, a broker with The Agency, “when in fact it has an ulterior agenda. This is about continuing the anti-mansionization efforts that the city has been working on for years.”
Grauman is a veteran agent who has had numerous high-profile listings in the area, including a share of the $139 million listing for La Fin, a Joseph Englanoff-built Bel Air mansion that includes its own nightclub and climbing wall and stretches nearly 40,000 square feet. The massive home is on a lot that’s over two acres, or around 91,000 square feet, so its overall footprint, at least, would still have been allowed under the ordinance.
Enforcement of the law would drastically cut back the size of homes, according to Grauman. Nothing larger than a 6,000-square-foot residence would get a green light. New construction, and some renovations, on smaller lots in the hills would face more trouble, and Grauman sees the legislation as a grave enough threat to the market that he was moved, for the first time in his life, to get involved in local politics. He blasted the measure at the city’s recent PLUM committee meeting; he’s also posted a series of videos in which he urgently pleads his case, arguing the measure would knock off billions of dollars of local property values.
“Hi everyone, please take a quick minute to listen to this very important announcement,” he begins in one. “I want to make you aware of a city ordinance … which, if passed, will have the most devastating, destructive impact on the L.A. housing market that we have ever seen, far worse than the recent ULA mansion tax.”
Current homeowners in the area will suffer first, opponents argue, because the new building restrictions would instantly slash their homes’ resale potential. But critics also believe the ordinance would inflict much wider economic damage, as it leads to dried up deals and far fewer construction projects even as the city’s high-end market is already reeling from ULA.
“It’s going to put a lot of people out of business — mortgage brokers, agents, developers and blue collar workers,” said Anthony Marguleas, the founder of Amalfi Estates. “Every single project employs hundreds of people.”
One prominent L.A. developer pointed out there is a way to adapt. Faced with new building restrictions, some developers are likely to recalculate their margins, pay less for the property and build a smaller home that still pencils out.
But some are already signaling a pullback. If the wildlife measure passes, ANR, a firm that’s been building mansions in the Hills for years, is likely to avoid new projects in the affected corridor altogether, according to the firm’s cofounder George Jordan. Along with the 50 percent threshold, the ordinance would also restrict building in particularly steep areas, and the additional layers of bureaucracy could bring more headaches.
“Developers do not like risk,” added Jordan, “and the entire Wildlife Ordinance provides uncertainty.”
Critics also say some of the ordinance’s specifics, including the inclusion of basements in the square footage count — which the measure’s backers argue are responsible for removing critical dirt — amount to silly technicalities that undercut the city’s prior mansion laws. They also argue the new law would end up hurting more modest property owners the most, because the ultrarich, who buy the biggest lots, will still have more room to find a workaround.
“The impact is going to be more destructive with small lots,” said Adrian Rudomin, a developer who’s built spec homes in the area. “If you have a 10,000-square-foot lot, you might be able to build only 2,000 square feet.”
There are also anxieties about more restrictions to come. “This is likely just the city’s first step,” Grauman predicted. “If this ordinance goes through, there is no reason why they wouldn’t look to adopt a similar ordinance west of the 405.”
This may be true. Some of the ordinance’s backers have also hinted at eventually expanding the boundaries of the protected corridor, which they argue amounts to a necessary pullback on construction that’s grown supersized.
“This is not NIMBYism,” said Leo Daube, a representative for Councilmember Katy Yaroslavsky, who is championing the ordinance. “We’re not saying you can’t build on your property. We are saying there has to be a limit on the size and scope of new construction … Living in the hills comes with the responsibility of protecting the environment around you.”