In this week’s edition, we dive deep into the complexities of entitling sites for multi-family projects in Los Angeles, spotlighting a significant challenge we’re currently facing with a 39-unit ED1 (100% affordable) project. This case highlights the importance of vigilance, adaptability, and proactive communication in navigating the ever-evolving landscape of real estate development regulations.
Current Status of Our 39-Unit ED1 Project:
- Initial Submission: Two months ago, we submitted our case for a 39-unit ED1 project.
- Hold Letter Received: The city issued a hold letter requesting changes and corrections.
- Addressing Corrections: We collaborated with our architect to address every item noted in the hold letter and resubmitted the case.
- Case Deemed Complete: The city deemed our case complete, which typically indicates that it meets all preliminary requirements.
- Awaiting Determination: The city confirmed they were preparing the letter of determination.
- Non-Compliance Notification: Unexpectedly, we received a letter of non-compliance, a major setback given the earlier assurances.
Unpacking the Issue:
Upon receiving the non-compliance letter, we scheduled an immediate call with the city planner. During this call, we learned that the city’s interpretation of the state density bonus law had shifted. Specifically, they are now limiting projects to no more than five incentives and one waiver.
This new stance is a stark departure from the previous understanding and must have been adopted very recently, as it wasn’t communicated in any earlier discussions or official correspondences.
Implications for Developers:
- Increased Uncertainty: The unpredictability of regulatory interpretations can disrupt project timelines and increase costs. When the rules change midstream, developers must pivot quickly to comply, often leading to redesigns and additional consultations.
- Need for Legal Expertise: Engaging legal experts who specialize in land use and zoning laws becomes crucial. They can provide insights into possible interpretations and help navigate appeals or seek clarifications from city officials.
- Extended Timelines: Each adjustment or clarification request adds to the project timeline, potentially delaying groundbreaking and occupancy dates, impacting the overall project viability and financial planning.
- Financial Implications: Changes in incentives and waivers can affect the project’s financial feasibility. Fewer incentives might mean higher costs or reduced profitability, necessitating a reevaluation of the project’s financial model.
Lessons Learned and Best Practices:
- Proactive Communication: Regularly engage with city planners throughout the entitlement process. Frequent check-ins can help identify any shifts in interpretation before they become roadblocks.
- Documentation and Record Keeping: Keep meticulous records of all communications and submissions. Documenting each step can be invaluable if discrepancies arise or if an appeal becomes necessary.
- Stay Informed: Monitor local government meetings, announcements, and policy changes. Being aware of potential shifts in regulations can help you anticipate and prepare for changes.
- Legal and Consulting Support: Retain experienced legal counsel and land use consultants. Their expertise can help navigate complex regulatory landscapes and advocate on your behalf.
- Flexibility in Planning: Build flexibility into your project plans. Anticipate potential changes and have contingency plans to address them without significant delays or cost overruns.
Moving Forward:
While encountering unexpected changes in regulatory interpretations can be frustrating, it’s a reminder of the dynamic nature of real estate development. By staying informed, maintaining open communication with city officials, and leveraging the expertise of consultants and legal advisors, developers can navigate these challenges effectively.
For those working on similar projects, I recommend reaching out to your city planner to discuss the best options moving forward. Understanding their current stance and planning accordingly can save time and resources down the line.
Conclusion:
The path to entitling multi-family projects is fraught with challenges, but with the right approach and resources, it’s possible to navigate these complexities successfully. Stay proactive, informed, and flexible to overcome regulatory hurdles and achieve your project goals.
