LA’s old mandate that developers build affordable housing is back

Los Angeles is suddenly resurrecting old zoning rules meant to spur construction of new affordable housing, and it has caught at least one developer off guard.

The change is due to a state law that went into effect last month—it gives cities the power to mandate that developers include affordable housing in new apartment projects. Los Angeles used to do that in Westlake, before a court ruling invalidated the policy.

Earlier this week, however, Jade Enterprises discovered that the city’s planning department had begun enforcing the old policy again—starting with its Sapphire apartments complex.

Planned for the northwest corner of Sixth and Bixel, the apartment complex would be made up of two seven-story buildings with a combined 369 units.

Jade has been planning the mixed use development for more than two years. It hadn’t planned to include any affordable units, but now the city planning department says 15 percent of the apartments will have to be set aside for low-income residents. (It can also opt to pay an “in-lieu” fee to the city’s affordable housing trust fund.)

“This is a massive hit to the project that probably makes it completely unviable,” says Ryan Leaderman, the developer’s attorney.

The “inclusionary zoning” rule dates to 1991. The city included it in a plan for Central City West (the portion of Westlake that borders Downtown), requiring developers to set aside a percentage of newly constructed apartments for low-income residents. That policy was in place until 2009, when the city lost a court battle with developer Geoff Palmer, who sued to avoid putting affordable units in his Piero II apartment complex.

Palmer’s legal team argued that requiring developers to include affordable units in their projects violated the 1995 Costa Hawkins Rental Housing Act, which prevents cities from imposing rent control requirements on newly constructed properties. A state appeals court agreed, and the city has been unable to enforce the inclusionary zoning requirements over the past eight years.

But those regulations were never taken off the books, and a state bill signed into law in September tailored the language of Costa Hawkins to allow cities to once more require developers to set aside a portion of new apartments for lower income residents.

Leaderman suggested that, since the old inclusionary zoning requirements had been struck down in court, the City Council needed to officially reinstate the policy before it could be applied to new projects.

But the Central Area Planning Commission approved plans for the Sapphire apartments Monday with the affordable housing mandate intact.

City planner Shana Bonstin told the commission that other projects in the area could also be affected by the requirements, and that planning staff would be working with developers to clarify what the rules would require.

Since 2009, the city has established a number of other other policies to encourage affordable housing development. Most notably, voters approved Ballot Measure JJJ in 2016, which requires developers to include affordable units in projects that are taller or more dense than local zoning rules allow.

The area covered in the Central City West Specific Plan has also become a hotbed of development in the years since Palmer’s lawsuit.

Right across the street from the Sapphire project, Holland Residential’s Sofia apartments recently opened, bringing more than 600 new units to the area. Within a couple blocks, two other projects with nearly 800 combined apartments and a 126-room hotel are also in the works.

“We support private investment and new capital,” Gerald Gubatan, senior planning deputy for City Councilmember Gil Cedillo, told the commission. He said that projects like the Sapphire apartments are “upgrading and revitalizing the neighborhood.”

He suggested that the commission could simply approve the Sapphire project without affordable units, given the unexpected imposition of these requirements.

“While I sympathize with the very last-minute notice, I do think this is an issue we need to get clarified,” said commissioner Lys Mendez. “If we have the opportunity to have a conversation about affordable housing in the city of Los Angeles, which is in the midst of a housing crisis, I think it’s important for us to have that conversation.”

The developer can still appeal the commission’s decision to the City Council before deciding whether to construct the project.