Changing demographics and an array of trends are quickly positioning infill development as the “new normal” in real estate. But what is less commonly discussed is that small-scale development is the future of infill. In dense but sprawling cities like Los Angeles, opportunities for development are structurally limited by the existing built environment: our roads and transit systems, and a number of external ingredients such as rent control and Proposition 13, a 1970s era law that limited property taxes, and thus, city revenue. What is more, our many village-like, niche neighborhoods simply cannot handle the infrastructure demands of large infill projects. The result is that the ongoing pressures of urbanization and densification will require more targeted development of a smaller scope and scale. There are exceptions, of course, in Hollywood and Downtown, but the growth of Los Angeles is dependent on our ability to facilitate neighborhood development in places like Echo Park, Eagle Rock, Palms, and so on.
Such small-scale development faces a unique set of challenges that must be addressed to solidify the platform for urban revitalization. The problem isn’t that the development process is different for projects of different sizes (although it can be), it’s that the demands of the process place disproportionate strain on smaller projects. The most challenging demands stem from the opacity of the entitlements process, the cost of doing business, and the response times of city agencies. Take, for instance, the fact that it is nearly impossible to speak with a live person from any of the eight city agencies involved in an entitlement, or that you often get conflicting information from departments that have no centralized communication platform. The engineering department may require you to widen a street, but the building department may claim the street is too steep to widen. Smaller developers have fewer internal resources to digest these complexities, and can’t afford to engage expensive land use consultants and expeditors for advice. They face a much greater risk of starting a project under-informed or with the possibility that conflicting information between city departments may add costs or building restrictions that could derail them entirely.
The cost of doing business comes primarily in the form of fees as well as conditions placed on development to fix infrastructure that the city cannot afford to fix itself. These conditions include street improvements (widening, sidewalks, and drainage), street lighting, and utility capacity upgrades, among others. Neither fees nor conditions scale perfectly with the size of a development, and the impact on a small project can be monumental. Whereas it might cost $40,000 to permit and construct a streetlight on a two-home subdivision, a 300-unit apartment building might require a much lower cost per unit, because the plan-check fees are fixed. Or a 10-home subdivision may require the installation of two fire hydrants, which could trigger an upgrade of 2,000 feet of water main that actually services an entire neighborhood. There are countless examples, but many potential small projects are infeasible due to the high costs imposed by the city through fees and, particularly, conditions.
The California Environmental Quality Act (CEQA) is the root of further procedural vagaries and frivolous costs to development. While it has attempted to address this issue, small projects are still largely subject to the same environmental review requirements as large projects. This is because even small, categorically exempt projects are still vulnerable to legal contest. The whim of a single individual can disrupt any project, be it a football stadium or local grocery store. The current environmental review process imposes virtually no costs to contest the findings of CEQA analysis and permits any challenger to remain anonymous in the public realm. This has resulted in attorneys and neighborhood groups across the city engaging in a practice known as “greenmail,” where they extort developers by holding up development for years in litigation or causing expensive settlements. Larger projects and developers with deeper pockets can more easily absorb this “tax” and uncertainty than small projects.
While Los Angeles will see more small-scale development out of necessity, we should also embrace it as a prospect for better development, generally. Smaller developers tend to be much more attuned to the wants of communities in which they work, which leads to projects that are designed more appropriately to fit within the existing fabric of neighborhoods. Smaller developers are also more apt to experiment with design, architecture, and construction methodologies, generating more diversity of product and building innovation. Prefab, adaptive reuse, and micro-housing are all innovations advanced in the laboratory of small scale development. These projects also offer an added economic uplift to the community, as small developers are more likely to engage local architects, designers, and builders. These stakeholders better understand the nuances of their local environment and contribute to the ongoing success of neighborhoods by reinvesting in them themselves.
There is no shortage of opportunities to improve the prospects for small-scale development without subsidy or prioritization. Foremost, CEQA must be modified to make it more difficult to obstruct small projects by limiting the tools available to NIMBY obstructionists. There should be a real cost to contest a project that otherwise stands up to the statewide environmental standards—after all, infill development is by its nature environmentally sound. Planning and permitting fees could easily be modified to scale better with project size, so that they are treated more fairly in context and so fixed costs do not overwhelm so many valid projects. The city should also re-evaluate its requirements that infrastructure improvements be imposed whenever possible. So often this is wasted on out of context streetlights, street widening, and other so-called improvements that benefit no one. Such infrastructure requirements should either be waived, or the funds should be redirected to locations that would see a more immediate benefit. The mayor’s office is currently working on a consolidation of City Planning and LADBS, an idea with merit that could help overcome some of the complexity and inconsistency that befuddles so many small developers. But, in light of the potential for small scale development to reshape LA for the better, the public sector must work harder to alleviate the bureaucracy and costs that stifle so many promising projects.