Western Real Estate Business

MAY 2018

Western Real Estate Business magazine covers the multifamily, retail, office, healthcare, industrial and hospitality sectors in the Western United States.

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52 • May 2018 • Western Real Estate Business www.REBusinessOnline.com CALIFORNIA FOCUSES ON ITS TOUGHEST TOPICS The Golden State looks to strengthen its environmental and sustainability initiatives; find new solutions to its ever-increasing affordable housing problem; and address density issues before they get out of control, as California's top legalese can tell you. The past year saw multiple efforts by lawmakers at the state and local levels to address the dire need for new and affordable housing throughout California. Two of those efforts present interesting opportunities for infill develop- ers in Los Angeles. These include the City of Los Angeles' Transit Oriented Communities (TOC) Affordable Hous- ing Incentives Program, which stemmed from the voters' passage of Measure JJJ in November 2016, and the state- wide Senate Bill (SB) 35, designed to increase the amount of available affordable housing by creating a streamlined, ministerial process for planning approval of urban infill multifamily projects in jurisdictions that have not met their state-mandated Regional Housing Needs Allocation (RHNA). The TOC Program The TOC Program creates a new incentives system for residential projects located within a half-mile radius of a major transit stop — a rail station or the intersection of at least two bus routes with frequent service during peak commute times — which also meet certain afford- able housing requirements. Housing developments are required to provide a set percentage of Extremely Low Income, Very Low Income and Lower Income units based on their proximity to particular types of transit. The program tiers incentives based on the size of a proj- ect's affordable component and its proximity to four spe- cific kinds of transit stops, allowing for up to an 80 percent increase in density or up to a 55 percent increase in floor area ratio (FAR) depending on the individual project's lo- cation and specifications. It also allows for a significant parking reduction for both market rate and affordable units. A project's specific tier is determined based on the shortest distance between its lot and a qualified transit stop, as well as the type of transit stop the lot is proxi- mate to. In addition to base density, FAR and parking incentives, which any eligible project may receive in ac- cordance with its designated tier, projects may be granted up to three additional incentives. These incentives may include reductions in yard/setback requirements, reduc- tions in lot width, increases in lot coverage and increases in project height, in return for meeting specific affordabil- ity requirements. As an illustration of the potential benefits of the TOC Program, consider the two scenarios in Tier 4 (for projects proximate to a metro station that is also served by a rapid bus line). See chart below. While there are clear benefits to participating in the TOC Program, it is not a silver bullet for developers look- ing to completely bypass the complicat- ed issues that can arise through the dis- cretionary approvals process. Though application of base incentives remains ministerial, additional incentives are subject to discretionary review. The TOC Program does not eliminate site plan re- view or other discretionary approvals processes (such as a zone change to al- low residential land uses, if necessary). SB 35 By contrast, SB 35 does not offer proj- ect incentives, but does allow for min- isterial planning review under certain circumstances. In Los Angeles — which has failed to approve enough housing projects to meet its RHNA for below- moderate income housing — 50 percent of a project's residential component must be dedicated for affordable hous- ing. Prevailing wage and labor stan- dards must be met to take advantage of SB 35's streamlining provisions. A project must also be consistent with "objective zon- ing and design review standards" set by the local land-use authority, meaning that projects requiring a zone change are not eligible for SB 35 streamlining. Projects taking ad- vantage of the TOC Program's ministerial base incentives and only needing discretionary approval from the city for site plan review (e.g. not requiring a zone change or other discretionary approval) could utilize SB 35 to bypass dis- cretionary review by meeting the affordable and prevail- ing wage requirements of SB 35. Opportunities Abound? The ability to take advantage of these programs will depend, in large part, on the location of the project site and the type of project under consideration. Sites close to transit that are already zoned for residential use are ideally suited to avail themselves of the TOC Program. However, projects requiring a zone change will become subject to prevailing wage and labor requirements estab- lished by a different section of Measure JJJ, and would not be able to take advantage of SB 35 streamlining. For projects that require discretionary approvals beyond site plan review, the TOC Program may provide attractive incentives, but some discretionary approvals will likely remain. Stein Waite Farkas Original Project (sf = square foot) Using TOC Program Incentives Residential Only 75 base units 135 units (80 percent density bonus) 3:1 FAR on a 30,000 sf lot with 25,000 sf 4.25:1 FAR, translating to 106,250 sf floor area buildable area, translating to 90,000 sf floor area No parking required Mixed-Use in 150 base units 270 units (80 percent density bonus) Commercial 1.5:1 FAR on a 60,000 sf lot, 4:25:1 FAR, translating to 255,000 sf of floor area Zone translating to 90,000 sf of floor area No parking required for residential component; 40 percent reduction in non-residential parking POTENTIAL BENEFITS OF THE TOC PROGRAM TACKLING OIL WELLS IN, UNDER YOUR DEVELOPMENT By Steven D. Farkas, Principal in the Energy, Land Use and Environmental Law Practice Groups, Meyers Nave in Los Angeles Oil production in the United States began more than 150 years ago. Since that time, more than 4 million wells have been drilled, and more are added ev- ery day. While many are still active, mil- lions of others are idled, orphaned (wells with no legally responsible and/or financially able party), and/ or abandoned and plugged with un- certain techniques. Dealing with older, abandoned and plugged oil wells (particularly those considered orphaned) burdens some states and localities more than oth- ers. California's long history of oil production, especially in areas that are now densely populated, puts the state at the forefront of trying to figure out how to address risks. For the state and for developers, there is concern over the safety of older wells that are now orphaned but were plugged and abandoned before adequate regula- tions and oversight existed to ensure that gas or fluid did not leak onto the land or into the groundwater and air. Plugging techniques once considered adequate are not acceptable today. The Division of Oil and Gas and Geothermal Resources (DOGGR) of the Department of Conservation is vested with the responsibility of tracking active, idle and abandoned orphan oil wells in California. This division is also tasked with ensuring that well operators comply with state requirements for each classification. DOGGR also oversees the plugging or re-plugging abandoned orphan wells if the condition of the well creates en- vironmental or safety concerns. The Los Angeles basin produced almost 25 percent of the world's oil during the early 20th century. At that time, there were no regulatory re- quirements that addressed methods of plugging or otherwise abandoning a well. This led to well owners and operators using whatever techniques they thought were appropriate. Most abandoned wells were plugged and buried and, over time, commercial buildings, housing developments and even schools were built above them. Most structures in Los Angeles situ- ated above these wells have not re- NEW INITIATIVES TARGET AFFORDABLE HOUSING, DENSITY AND PERMIT STREAMLINING By David P. Waite, Partner, and Julia E. Stein, Senior Counsel, Cox, Castle & Nicholson in Los Angeles

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