Tucked away in the Santa Monica Mountains region of Los Angeles County, the exclusive city and gated community of Hidden Hills is home to fewer than 2,000 people, including some prominent celebrities.
But the San Fernando Valley community could soon find itself getting a lot more attention for a different reason.
That’s because Hidden Hills now has the distinction of being one of 43 jurisdictions in the county making the July 12 California Department of Housing and Community Development list of communities that are out of compliance with state housing element laws, opening the door for possible unwanted development via a tool known as the Builder’s Remedy.
A provision of the state Housing Accountability Act, the Builder’s Remedy allows developers that meet certain affordable-housing requirements or other criteria to bypass a city’s existing zoning laws when a community’s housing element does not meet state requirements.
“In upscale communities like Hidden Hills, where the population is low and there is not that much development, it’s not surprising to learn that the city is out of compliance,” said Fred Gaines, chair of the Valley Economic Alliance and managing partner of the land-use, zoning and environmental law firm Gaines & Stacey. “I don’t think there’s any multifamily housing in the city at all, and the idea of allowing more building probably does not sit well with them.”
An expanding provision
While Hidden Hills did not respond to a request for comment on the list or the Builder’s Remedy, the city of Santa Monica recently settled litigation with WSC Communities, which filed 14 preliminary applications last year seeking to construct high-density projects during the time that the city’s housing element was out of compliance.
As Lewis Brisbois Bisgaard & Smith partner Cameron Kalunian explains, while Santa Monica’s Housing Element was approved last October, it couldn’t simply dismiss the applications.
“HCD recently clarified that a developer who submits a preliminary application under the Builder’s Remedy maintains a vested right to develop that property even if a city or county becomes in compliance prior to the project’s approval,” said Kalunian, vice chair of the firm’s national construction practice group.
The Santa Monica agreement, which was approved by the city council on May 9, calls for WSC Communities to suspend 13 of its Builder’s Remedy applications and refile 10 with height and floor ratios that comply with the city’s new zoning code.
City planners have promised to review the applications and have the option of granting additional local incentives, including a 15% inclusionary requirement for off-site affordable-housing units, providing owners more flexibility “to pool affordable housing units into one 100% affordable housing project to satisfy off-site inclusionary requirements for multiple market-rate projects.”
Beverly Hills is the latest city with a housing element that is listed as out of compliance to see an influx of applications.
When asked when the issue began, the HCD’s communications office stated, “HCD has conducted multiple reviews on the City of Beverly Hills’ housing element, beginning in the summer of 2021, and has not yet found the City’s housing element in compliance with State Housing Element Law.”
According to Lauren Santillana, Beverly Hills’ public information manager, five applications have been filed, including four preliminary and one formal entitlement, for which the applicant has requested review under the Builder’s Remedy.
That application was filed by Leo Pustilnikov for 125-129 S. Linden Dr. and includes 165 units and a 73-room hotel. The other four are seeking to build more than 350 units collectively.
Citing ongoing litigation, Santillana declined to comment.
This year, The Ratkovich Co. refiled an application under the Builder’s Remedy to construct 790 residential units on unused land at the site of The Alhambra after a series of setbacks dating back to October 2021.
The original application for the project, known as The Villages at The Alhambra, was submitted in May 2017 for 1,061 residential units and included a promise to voluntarily make 84 units available to low-income individuals.
After nearly four years and more than 20 public hearings, the city council adopted a resolution on Oct. 25, 2021, denying the project, which had been reduced to 790 units by that time.
The following year, the company filed a lawsuit in Los Angeles Superior Court, arguing the project was denied based on a hodgepodge of classic anti-development “justifications,” adding the city misrepresented what its own staff and consultants found regarding the project’s consistency with the city’s general plan and misrepresented its compliance with city parking requirements.
The case summary said the council determined the development “would not be in the public interest because the project included insufficient affordable housing; construction laborers would not be paid a living wage; and petitioners did not provide an adequate community benefit payment.”
Ratkovich fired back.
“The Villages is a textbook example of exactly the type of urban in-fill living that people want and need. Instead, the City of Alhambra has chosen to outright deny the project over petty objections such as carports,” Brian Saenger, the company’s president and chief executive, said at the time.
Ratkovich turned to the Builder’s Remedy, and has agreed to set aside 158 units for low-income individuals.
The application is still under review by Alhambra officials.
Why now?
Given that the Builder’s Remedy is a 1990 provision, why has it taken so long for developers to make use of it?
Gaines said recent changes to the laws make it easier for the state to not certify a jurisdiction’s housing element.
“Developers are aware of this, and they now see a large number of opportunities,” he said.
There’s also a significant demand for housing, especially affordable units, because of the homeless crisis. But recent changes to the laws have added major hurdles, time and costs for developers seeking project approval.
For example, Measure JJJ, which was passed by voters in November 2016, requires developers building 10 or more residential units seeking general plan amendments or certain zoning changes to include affordable housing or pay into the city’s Affordable Housing Trust Fund.
Projects must also use licensed contractors, hire from local and disadvantaged areas and state- or federally-approved apprenticeship programs and pay prevailing wages.
De’Andre Valencia, senior vice president of the Building Industry Association of Southern California’s Los Angeles/Ventura Chapter, said adhering to the contractor rules isn’t always that simple.
“We are happy to hire local people, but the problem is, there are not enough qualified contractors in the area to do the building,” said Valencia.
The multifaceted requirements often lead to a years-long approval process with high costs, or applications that are discarded because they are no longer financially viable.
“Currently, the only type of housing that seems to be penciling out is above moderate-income housing, and projects that rely on subsidies from the state or federal government can also go up, but housing that serves moderate-income individuals, also known as workforce housing, is not getting done,” said Valencia.
There’s also a scarcity of temporary housing, which further contributes to the homelessness problem in the state, Valencia added.
A developer’s panacea?
The lengthy approval processes and other issues that go along with construction make the Builder’s Remedy look pretty attractive.
“If you are a developer who is willing to comply with the affordable requirements laid out in the Builder’s Remedy, you can sidestep zoning rules that might only allow for a five-story development and build a larger skyscraper,” said Gaines. “It’s a huge incentive, but it’s not without its legal hurdles, because jurisdictions are fighting back.”
And Lewis Brisbois’ Kalunian cautions that while the Builder’s Remedy does remove a major obstacle, it’s not carte blanche for development.
“There are five reasons that a jurisdiction can deny an application, ranging from a failure to meet state or federal law to the preservation of agriculture or natural resources,” said Kalunian.
The Builder’s Remedy prohibits a jurisdiction from denying a project using the fifth reason, inconsistencies with zoning and land use based on a municipality’s failure to comply with the housing element.
To fall under the Builder’s Remedy, a project must be entirely residential or a mixed-use development with at least two-thirds of the square footage set aside for rental or owner residency.
In addition, either 100% of the units sold or rented must be moderate-income housing, or 20% must be designated as low-income units.
Projects that meet the definition of transitional or supportive housing are also covered.
While it can help speed up the approval process, Valencia said the Builder’s Remedy is not a first choice for developers.
“We don’t want to use the Builder’s Remedy,” said Valencia. “Ideally, every jurisdiction would have an approved housing element and we would work with city planners to get our projects approved.”
“But that’s not what is happening,” Valencia said. “Unfortunately, there are too many NIMBYs, where either the city council or neighbors make it extremely hard for projects to be approved.”
“Places like Huntington Park, which is out of compliance, have come out and said they don’t care, so we are left with the Builder’s Remedy,” said Valencia.
Part of the housing equation?
Although the Builder’s Remedy may lead to some additional housing in the long run, Stuart Waldman, president of the Valley Industry Commerce Association, said it alone will not solve the homelessness crisis.
“Developers are looking outside the state because of the onerous legislation that tacks on years and additional costs to a project,” said Waldman. “We need real reform. Municipal governments are denying good projects while the city continues to have a deficit of about 500,000 units.”
“Until the landscape changes, I think we will continue to see more applications filed under the Builder’s Remedy,” said Waldman.
Daniel Yukelson, executive director of the Apartment Association of Greater Los Angeles and a former Beverly Hills planning commissioner, said what many jurisdictions fail to realize is that building housing, including market rate, will not only address the scarcity problem, it will also help offset the rising costs of rents in the city.
“Costs automatically go down when the supply is plentiful,” said Yukelson. “Right now, regulations are making it too difficult to build. There are multiple hurdles for developers and numerous ways to stop a project. In this environment, developers are encouraged to turn to things such as the Builder’s Remedy to cut through the massive red tape.”