Builder’s remedy projects cluster in wealthy cities, data shows

The vast majority of development projects proposed via the builder’s remedy provision are in “exclusive, high-income and coastal enclaves,” according to recent data compiled by nonprofit advocacy organization YIMBY Law and shared with TRD.

According to the research, “81 percent of the still viable projects and 88 percent of the still viable units” are proposed in high-income cities such as Santa Monica, Redondo Beach, Menlo Park and Palo Alto. These are cities whose median incomes surpass California’s median income, which means a household income of $91,905 or more.

A number of California developers have tested builder’s remedy in courts in recent years as a last-resort option to navigate bureaucratic processes and get housing projects approved. Under builder’s remedy, if a city or county doesn’t have a housing plan approved by the state, a housing project can bypass zoning and other approvals provided 20 percent of the units are affordable. 

Advocates of the provision, including YIMBY Law, say projects in upscale markets could help with integration in addition to ameliorating the state’s housing crisis. This latest data suggests that may in fact be the case.

“The builder’s remedy projects in our database are overwhelmingly in rich places: They are higher-density, multi-family projects that otherwise would be banned by the existing low-density zoning,” Sonja Trauss, executive director at YIMBY Law, said. “Since the projects are higher density — either apartments or townhouses, or even single-family detached homes with smaller lot sizes than is allowed with the zoning — it means the proposed housing is going to be cheaper than the existing housing and therefore more accessible to people who make less money than the existing residents.”

From a developer’s perspective, higher-end markets make sense because a project must have 20 percent of its units affordable to qualify for builder’s remedy. To pencil out, the other units must command high rents.

“If it costs, let’s say x to build a unit, the low-income units are likely going to break even on just the operating expenses — they’re not even going to cover the property taxes,” Leo Pustilnikov, one of the developers engaged in court battles over proposed builder’s remedy projects in Beverly Hills and Redondo Beach, said in January. “So you need the rest of the project to carry the property taxes and the maintenance and the construction, given all the other fixed costs that you have.”