Builder’s Remedy or Density Bonus: Pick Your Poison

We have a Hobson’s Choice wrapped in a dilemma revealing a problem.

If you have been paying attention to the City’s Planning Commission in recent months (and if you haven’t, you should), you would have noticed a new phenomenon. Applications for multi-family structures of seven or eight story buildings in areas zoned for a maximum of three or four stories are consistently approved. The hearings are a sham: residents make heartfelt statements about the impact on their neighborhoods, the commissioners express sympathy and then approve the applications explaining, largely but not always entirely correctly, that their hands are tied by California State law.

Now, the City Council is considering admitting that there is little discretion to deny multi-family projects with Density Bonuses that exceed our zoning limitations and using that now admitted baseline to reduce the size of larger projects through negotiation. If you provide affordable residential units, you have a bonus that lets you build taller and more. For example, if local zoning laws limit heights to 50’, a 50% bonus might allow a building of up to 75’ or taller.

On January 28, the City Council convened a Study Session to discuss the possibility of offering developers a streamlined permit process to incentivize a scaling back of their projects. One real estate industry publication discussed this issue under the premature and overly simplistic headline: “Beverly Hills softens its stance toward Builder’s Remedy projects.” State law arguably prohibits local governments from enforcing any zoning limits during a period when their housing plans have not been certified as a Builder’s Remedy.

⸻

Picking the lesser of two poisons

It is important to understand why the Council would consider making it easier to get approvals for projects that, however scaled back, involve, for example, taller buildings than our zoning codes mandate. The short answer is that the Council is picking its poison — faced with two unattractive alternatives, it is picking the one that it considers less bad.

The overall context is California’s policy to require the construction of large numbers of multi-family residential units that will be made available at rental rates far below market rates (“affordable”) in every California county and municipality, large or small, urban or rural, densely developed or with lots of open space, affluent or not. Personally, I consider the state’s policy as misguided as it is destructive. But it is what it is.

The proposal currently under consideration relates to fourteen so-called Builder’s Remedy Projects for which Preliminary Applications were filed prior to the early May, 2024 certification of the City’s Housing Element. These applications seek entitlements to build structures that are vastly in excess of our zoning restrictions. For example, one application seeks to construct a 20-story building at 8844 Burton Way; another seeks to construct a 19-story building at 145 S. Rodeo Drive.

Of the fourteen, four were submitted after the City adopted its later certified plan in mid-March, 2024. In my opinion, the “window” for Builder’s Remedy applications closed at that time. I am hopeful that the City will reject the post-Mid March applications as untimely. Apart from those, there are ten projects from five or six different developers.

⸻

HCD and legal risk

The California Department of Housing and Community Development (“HCD”) has taken an aggressive position regarding the City’s processing of applications for both Density Bonus and Builder’s Remedy projects. HCD has sought to curtail the City’s discretion to deny those applications even though they ignore the City’s zoning laws. It appears that the City Council is concerned that if pending Builder’s Remedy applications are rejected, we will likely be facing substantial legal jeopardy if the applicants institute litigation challenging those rejections.

Further, the more that the City resists approving any of these projects, HCD may revoke its certification of our Housing Element. Such a revocation will open a new window for Builder’s Remedy applications. The enactment of this expedited path to development hopefully may curb the enthusiasm of HCD to take punitive action against the City.

It is important to understand that at HCD’s insistence, the City’s plan requires at least that the City makes substantial progress in the next 4+ years toward the construction of at least 2,000 affordable residential units. If every one of the 14 currently active Builder’s Remedy applications is actually constructed as proposed there will be two consequences:

1. Our City will have been dramatically, irrevocably altered; and

2. A total of only 327 affordable units will have been constructed.

Take a moment to think about that: the character of a 110 year old city altered for only 327 affordable units and then we will be “only” 1700 affordable units short of our quota.

⸻

The Council’s leverage

The Council hopes that if it can offer assurances of quick and certain approval, it will have “leverage” to persuade applicants to modify a Builder’s Remedy project for 19 or 20 stories to 8 stories. If this happens, of course, the number of affordable units will be reduced to 150 or so.

Specifically, the Council is considering enacting Municipal Code provisions which, in essence, authorize the City to drop all of the administrative hearing review and environmental scrutiny and provide expedited approval of a Density Bonus project if the applicant will drop its Builder’s Remedy project and comply with the limits afforded by the Density Bonus provisions.

Without express legislative authority providing that the City can offer to streamline (or eliminate) the review mandated for Density Bonus projects, it will be more complicated to negotiate the desired reductions of size of the Builder’s Remedy projects. Given that the applicants could have limited themselves to Density Bonus projects but went well beyond those limits, it is unclear whether this will be attractive.

At the January 28 study session, the Council took no action other than to refer this matter to the Planning Commission for its suggestions for implementation of this proposal. Notably, the Council did not ask the Commission whether this should be implemented; rather, only for ideas as to how it would be implemented.

⸻

My thoughts

Projects limited by the current State Density Bonus “menu” generally are preferable to our residents to the far less constrained Builder’s Remedy rules. While we may not like the seven or eight story buildings in our neighborhoods, insertion of a number of twenty-story buildings is worse.

Whether the trade-off of Density Bonus standards for far more generous Builder’s Remedy standards will be attractive to the applicants will be influenced by a number of factors including whether the applicant perceives that the larger project is financially viable and the applicant’s resources. Presumably, circumstances of the five or six developers and the viability of the projects differ materially.

At the January 28 study session, Councilmember Corman made clear that he would not favor giving the Builder’s Remedy applicants ministerial approval to do anything more than what they could do by taking advantage of the Density Bonus with more certainty and less cost. But if that is the starting point of the negotiations, it is foreseeable that further concessions will be demanded by the applicants and, perhaps, agreed to.

A better course may be to keep our powder dry and leave our options open. For now, I shall keep an open mind regarding the best course for navigating our way through a state policy which, in a word, is stupid.

⸻

A new proposal: The Eastern

Quite apart from the Density Bonus/Builder’s Remedy dilemma, another very tall project has been proposed for the City. On February 7, Millennium Partners, a developer of very high-end projects in major US cities, filed an application with the City for a 34-story residential tower called “The Eastern”. This has been proposed for 8300 Wilshire Blvd. at the eastern border of the City, currently the site of a single-story retail center.

The proposal is for 249 residential units of which 22 will be affordable apartments, the rest condos. Approval of this proposal will require a Specific Plan for the site, similar to the process for approval of the One Beverly Hills project (which also involves high-rise towers) on the western border of the City.

This is a serious project from a serious applicant. At this point, I am not advocating approval of the project but simply observing that Millennium Partners is a major, well-financed developer. Notably, its press release includes favorable comments from Chamber of Commerce Board of Directors Chair Bobbie Jo Dawson and former Mayor Willie Brien so the developer has already started gathering prominent local support.

This application is very different from the Density Bonus/Builder’s Remedy projects discussed above. The applicant has no right to the entitlements that will be requested but, rather, must persuade the City to exercise its discretion to allow it to go forward. That persuasion will, predictably, involve substantial consideration to the City in addition to the revenues that it will generate in the form of taxes and fees.

While it is good to have confirmation that our little City remains attractive to high-end developers, we must take care to protect the qualities that make our City special with all available tools.