by Kevin Cody
Pier Avenue, from Monterey Boulevard to Valley Drive, will be lined with market rate and moderate to low income homes and apartments if a program approved by the Hermosa Beach City Council at its Tuesday, December 12 meeting is successful.
The program, known as Land Value Recapture, involves rezoning upper Pier Avenue, as well as sections of Pacific Coast Highway and Aviation Boulevard, from commercial to mixed use zoning. Mixed use allows for both commercial and residential development on the same property. Allowing residential development is expected to significantly increase the affected properties’ values.
The council voted 3 to 2 to set LVR fees in the newly designated mixed use zones at $76 per square foot on residential developments of four or fewer units, and $104 per square foot on residential developments of five or more units.
LVR fees are meant to “recapture” for the city a portion of the property value increase attributable to the mixed use designation.
Mixed use property owners who agree to sell or lease their mixed use residential units at county-defined “moderate to very low income” prices will be exempt from the fees.
An analysis of the LVR fees by Kosmont Companies, of Manhattan Beach, found residential development is $200/sq.ft. to $400/sq.ft more valuable than commercial development. Minus a $100/sq.ft. LVR fee, a property owner would still realize a $100 to $300/square foot benefit from the mixed use rezoning.
A two-bedroom, 950 square foot unit built above a commercial business, and sold at the market rate of $855,000 would pay $95,000 (11 percent of the profit) in LVR fees, leaving a $190,000 (22 percent) profit for the developer, the Kosmont report states.
Councilman Raymond Jackson made the motion to approve the fees. Mayor Justin Massey seconded the motion, which was also supported by Councilmember Rob Saemann.
Coucilmembers Dean Francois and Mike Detoy opposed the fee schedule.
“We are creating a barrier to new housing with high fees,” Francois said. He expressed concern that the LVR fees will discourage new development in the mixed use zones.
“I have zero issues with fees on five or more units. But I won’t support fees for small businesses,” Detoy said.
“The primary intent of the LVR program is to incentivize development of affordable housing to meet the City’s RHNA (Regional Housing Needs Allocation) mandate. The second intent is to generate a local funding source to assist in new affordable units, and to benefit a regional Housing Trust,” Community Development Director Carrie Tai explained in a report to the council.
LVR funds do not go into the city’s general fund, she noted.
Hermosa’s RHNA assignment is 558 new housing units by 2029. Of these, 465 must be affordable to very low, low, or moderate income households. The council recently approved residential development in commercial zones because there is insufficient space in the residential zones for the RHNA mandated housing.
Several downtown business owners told the council they support the Land Value Recapture goal of creating affordable housing, but not at the expense of small businesses.
“I am opposed to any measures that would make it more difficult for local, small landowners to add second story living or work spaces,” wrote Dave Davis, Chamber of Commerce Chairperson, and owner of Hermosa Brewing on Hermosa Avenue.
Laura Pena, owner of BioNew Labs on upper Pier Avenue, proposed a pilot program to determine appropriate LVR fees.
“We need evidence-based programs…. If you want to show how a Land Value Recapture can work, create a pilot program…to test the effectiveness of the fee structure and incentives,” Pena wrote.
Affordable housing built in mixed use zones will be subject to a deed restriction requiring the rent to remain affordable for moderate to very low income households for 55 years.
Additionally, affordable housing in the mixed use zones may only be resold at affordable home prices. Appreciation will be split evenly between the property owner and the city, Community Development Director Carrie Tai said. ER
