by Kevin Cody
Land Value Recapture (LVR) was endorsed by the Hermosa Beach City Council at its Tuesday, October 10 meeting, as a means to encourage commercial property owners to build affordable housing.
As explained in a report to the council by Community Development Director Carrie Tai, Hermosa’s LVR will involve rezoning approximately 74 non residential properties to mixed use.
New housing on the mixed use properties priced at market rates will be subject to a yet to be determined LVR fee, based on square footage.
The LVR fees, Tai explained, will enable the city to “recapture” some of the added value housing adds to commercially zoned properties. Property zoned for housing is generally more valuable than commercially zoned property.
LVR fees will go to “funding, or subsidizing affordable housing and public services supporting the added population from additional housing,” Tai’s staff report to the council states.
New affordable housing built in mixed use zones would be exempt from LVR fees, as would be commercial development, Tai said.
As a result, the LVR program is expected to stimulate affordable housing development by raising fees to fund it, and waiving fees for building it.
Hermosa needs affordable housing, Tai explained, to meet its Regional Housing Needs Assessment (RHNA) mandated by the State.
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. Hermosa submitted a plan to the State showing where it will allow the 558 new residences, but must rezone most of those relocations for residential development before the state will approve the city’s General Plan Housing Element.
Over 500 of the proposed new residences are slated for land now zoned commercial because residentially zoned property is largely built out, Tai said.
Presently, Hermosa has no affordable housing, Tai told the council
Until the Housing Element is approved, Hermosa is vulnerable to losing jurisdiction over new housing developments under the California Housing Accountability Act’s “builder’s remedy” law.
Last year, in Manhattan Beach, before Manhattan got its Housing Element approved, the developer of the HighRose apartments at Highland and Rosecrans utilized the “builder’s remedy” to get 79 units approved on a site zoned for 51 units, and to get approval for a height that exceeded the city height limit.
Tai told the council she will present the proposed LVR policy to the council for approval at its October 24 meeting.
An LVR report prepared for the city by real estate consultant Kosmont Companies found “affordable units within a residential development were generally found to have a negative impact on overall rental revenue.”
The report states that a moderate income household can afford rent of $2,392 per month for a 3-bedroom, 1,150 square foot apartment. But Hermosa Beach’s market rate for that size apartment is $4,313.
The Kosmont report proposes a LVR fee of $66 per square foot to $95 per square foot. The fee range is meant to approximately match the rental revenue difference between affordable and market rate rentals.
LVR fees for cities with demographics comparable to Hermosa’s vary widely, a city chart showed. Huntington Beach charges $3 to $36 per square foot; Newport $33.80 to $36.60; and Rancho Palos Verdes a flat $308,716 per unit.
Though low income housing in the mixed use zones will be exempt from the LVR fees, affordable housing rentals will be subject to a deed restriction requiring the housing lease to remain affordable for moderate to very low income households for 55 years.
Affordable housing in mixed use zones may only be resold at affordable home prices. Appreciation will be split evenly between the owner and the city, Tai said.
Tai’s report to the City Council recommended a starting LVR fee of $50 per square foot.
Councilmember Mike Detoy supported the $50 per square foot fee to “spur reinvestment.”
He and Councilmember Dean Francois expressed concern that high LVR fees would discourage new development.
Councilman Raymond Jackson favored higher range fees to encourage developers to build affordable rather than market rate housing.
“Why give property owners a windfall by allowing them to build market rate housing with no public benefit. We don’t have a housing shortage. We have a low income housing shortage. I don’t want a [developer’s] check. I want affordable housing,” he said.
Councilmember Justin Massey agreed with Jackson.
“If the fee is too low, there’s no incentive to build affordable housing, and help us to satisfy the RHNA requirement. The opportunity for affordable housing is gone for a generation or two,” Massey said.
As a compromise, Massey proposed a $76 per square foot fee for projects of one to two units, and a $104 per square foot fee for projects of three or more units.
The council unanimously agreed to direct staff to incorporate Massey’s recommendations in the Housing Element proposal. ER
