May 26, 2005 - From the May, 2005 issue

Attorney Ben Reznik Recounts The Many Local Regulatory Challenges Inhibiting Infill Housing

City zoning regulations often lag behind new trends in development and pose significant challenges to those pursuing innovative strategies to provide housing. In this interview with attorney Ben Reznik, Chair of the Government, Land Use, Environment and Energey Department for the firm of Jeffer Mangels Butler & Marmaro, LLP, TPR draws on his 30 years of experience with land use issues in Los Angeles to illuminate some of the past and present challenges.

Ben Reznik

Ben, as a leading land use attorney in Los Angeles, you have handled some of the most complex land use and housing cases in the city. Draw on your expertise to describe the market here for housing. Elaborate on the projects that you have been involved with in Central City West on behalf of Geoff Palmer? What, for example, were the legal victories you won there?

The Medici project has certainly been the defining project for Central City West, and some might even argue for market based housing in downtown LA. At the time that Geoff purchased it and was entitling it for the project that you see today, everyone thought that I was crazy in believing the plans and designs that Geoff had drawn would be built. The biggest issue I had was credibility, because no one believed that this was actually going to happen. The area was crime infested, and slated for high-rise commercial development under the specific plan. Apparently, other people who considered the site could only think of it in terms of some sort of commercial use.

I think it was Geoff Palmer who envisioned a residential community for downtown. The impact can be readily seen today. The area on Bixel Street has experienced a reduced crime rate. The Medici has been successful from the day it opened. It has spawned other housing developments in the Central City West area. More importantly, I think it has made people, including planners and policy makers, think about housing in downtown in a different light.

Geoff Palmer ran into some challenges when trying to build the Medici. One of those challenges was the requirement to include affordable units on the project. How did that issue play out?

Prior to purchasing the property where the Medici is located, City Planning staff informed Palmer that there were no obligations for affordable housing when building market housing. Geoff closed the deal and then discovered later that someone had misread the Central City Plan and the city was, indeed, requiring a 15 percent, low-income set aside. The city had not seen an application for non-subsidized market based housing in downtown in 40 years, so planners were grappling with a specific plan that contemplated high-rise office buildings as a means to provide and pay for affordable housing. There was not a single lender in the state of California willing to loan a nickel on that project. He ended up having to go to a Texas lender and put up 50 percent of the money himself. He was heavily invested and basically committed to a successful project.

Some people realized the challenge at the time and I have to give credit to the planners and to Con Howe himself. I remember meetings with Con in which he acknowledged that it would be in the city's best interest to have market based housing built and spur development on the west side of the Harbor Freeway, which had been neglected for 15 to 20 years. That's the reason that the city was willing to negotiate an affordable housing set aside that was a little different than what the specific plan called for, but still consistent with the goal of creating affordable housing. So, instead of 15 percent low income units, we were allowed to provide moderate income or senior housing, or to rehab an equivalent number units in another project. The Central Area Planning Commission reviewed and approved that arrangement.

The City was actually being quite visionary at the time in realizing that if it insisted on the 15 percent low-income requirement, rather than a more flexible one, Geoff could not build the project. By allowing moderate-income units, Geoff was able to subsidize it out of his own pocket. We ended up with 60 affordable units on this project, which equates to about 9 percent. We recorded a covenant and bound the units and signed an agreement with the Housing Department, which is probably a little known fact to many people. The project has proven to be a catalyst. The legal issues were resolved out of court because the city was willing to be accommodating and practical.

I remember meetings in Con Howe's office, where Con looked at me and said "you're not wasting my time are you? Is this really going to get done?" People were really trying to work with us, but, at the same time, they thought it was a bit of a pipe dream.

After that, you worked with Geoff on the Visconti. Talk about that project and its challenges.

The Visconti, just a few blocks away from the Medici, is a project in which we had to once again confront the 15 percent low income set aside. The Visconti site had no prior housing on it. It was a commercial site. There was no issue of housing being removed and our having to replace it. Our issue was that we had to provide an affordable, inclusionary element there. We had negotiated with the city to provide the 15 percent low-income units, but we wanted to do it off site, and we wanted to do it in conjunction with a non-profit housing developer. We entered into a MOU with an entity known as New Economics for Women. We were going to partner with them to build a project that would give us credit for the 45 low-income units we needed. We thought it was going to work well and everybody would be happy. The problem that we ran into was that the City Council would not let us occupy the market rate housing until the low-income units were ready for occupancy. The problem with that was that it can take from three to four years to complete a low-income housing project, by the time you do the bond financing and other paperwork. On the other hand, the market rate housing could be ready in 18 months

Our lender would not approve the deal, and Geoff was not willing to build a project and let it sit there for years until the low-income portion was completed. We couldn't convince the city to let us guarantee the housing through the appropriate covenants, which we were willing to do. Unfortunately, logic did not prevail and Geoff ended up taking the city to court to challenge the affordable housing requirement. One of the legal arguments that we used in court most effectively was that the inclusionary requirement in the Central City West Specific Plan was inconsistent with and in direct violation of the Costa-Hawkins Act. This is the state law that says that new housing construction cannot be subject to rent control regulation. We argued that the specific plan did just that by requiring low-income housing in new housing projects. Effectively it created rent-controlled units for 30 years in a new construction project, and we argued that it was a back-door wayto avoid the limitations of the Costa-Hawkins Act.

That resulted in the city reconsidering. Actually, the city then went to Sacramento and had Gil Cedillo introduce an amendment to Costa-Hawkins to address the issue raised by our lawsuit. The amendment made it out of the Senate but I don't think it ever made it out of the Assembly. That became a whole other issue.


So the city realized it was on the losing end, and the judge was kind to the city and withheld a ruling in order to give us time to settle. We don't really know how the judge would have ruled, but she made it clear where she was headed. We ended up agreeing to build the Visconti project, and in lieu of the 15 percent set aside, we agreed that we would pay money into the Central City West housing fund, which we did. While we were at it, we also ended up settling on the Medici. We bought out the covenant for the Medici affordable housing by contributing, again, to the Central City West housing fund.

What's the future for supply of housing from the point of view of your clients? Is there opportunity in LA? Do our regulations encourage or discourage housing?

I think that there are still some barriers, but we have had significant progress in making it easier to build housing. The mixed use ordinance is a good example of removing such barriers. Another state law takes away some authority from local jurisdictions when it comes to affordable housing, but makes it easier to get some projects approved. I still have a lot of clients who are searching for opportunities to build housing in the city of LA, and they are willing to go through the headache of entitlement. In my 30 years of experience, I've never seen a hotter market, a crazier market than what I'm seeing now. Things are moving so fast. Clients are calling, saying, "I just tied this piece of property up and I want to build 100 or 200 units, I've got seven days for due diligence. I need to know in seven days if I can do this."

Planning Director Con Howe is retiring. Do you have thoughts about the role of the planning director in the City of LA and the qualifications the new planning director ought to have?

Beyond the prerequisite qualifications, what will be important for the director's success is the ability to manage and energize the department, to boost morale and be a very strong advocate for the department at the city council and with the community. You can be a visionary all you want, but if communities are going to feel that your vision effectively limits their power, then they will oppose you and your vision is not going to go very far. Historically, the City Council has not implemented a vision that upsets an entire community.

Will who the next mayor is have a significant affect on who is hired as planning Director?

I think both candidates would pick a qualified and responsible person for the position. I don't think it matters.

Will who the next mayor is matter with regard to the future of the inclusionary zoning ordinance?

There are many moderating forces. I know what the candidates have said publicly about their positions. In the final analysis, there is no way that this city is going to be able to adopt an inclusionary housing ordinance that effectively risks shutting down housing development. I think there are forces that would moderate the choices made by either candidate. If one candidate chose a more liberal planning director, the effect of that is that is going to be moderated by the politics of the city and the concerns I've heard from communities about protecting their specific plans. Any ordinance that would automatically override those plans probably would not pass.

Lastly, you've been working for clients who are providing assisted living housing. Touch on what the challenges are for introducing that form of housing into the LA market.

I've been involved on behalf of Belmont Village, a leader in providing assisted living housing in the country. They wanted to break into the LA market and quickly ran into our 1945 zoning codes that just don't work for today's modern development, or our modern notion of what assisted living or senior housing should be about. In the first project I went through, on Highland next to the Hollywood Bowl, I had to get a whole slew of variances. It was a complicated package of entitlements because we needed separate variances for parking, density and other issues. As a few more problems came on line, Bob Janavici took the lead in addressing the issue with a new elder care ordinance that would make it easier to obtain entitlements for this kind of housing. Unfortunately that ordinance has not yet been adopted. It is sitting somewhere in city hall, I'm not sure where. In my mind the city needs to move a little more quickly to address today's housing needs. The elder housing is just one example. You don't need many parking spaces for assisted living. We shouldn't treat the rooms as dwelling units and apply the density limitations in the same way. A dwelling unit is defined by whether or not it has a kitchen, and a kitchen is defined by whether or not you can prepare food. So, should the senior person who lives in an assisted living be denied a sink and a microwave? What impact does that have? It's a major barrier to decent housing for the elderly, and it's ridiculous that we apply those criteria.


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