Discussing Transit-Oriented Communities (TOC)
Living in Los Angeles has its ups and downs. For one, anyone who is a Los Angeles native knows all about the frequent congestion in traffic. When sitting at a complete standstill on the freeway, we’ve all often thought, “where did all these people come from?” Moreover, “where do all these people live?” As California keeps growing, the need for proper housing accommodations keeps rising. Given this urgency, Los Angeles has passed an ordinance to benefit residential developers to provide more housing for all.
Overall, the ordinance allows developers to create a much larger-scale project than what is normally allowed. The underlying hope is to build more affordable housing near major transit stops to promote a lesser need for Angelinos to rely on their cars for traversing the city.
This opportunity should push investors to build these larger projects while benefiting the community’s current affordable housing needs. Every lot within a TOC Affordable Housing Incentive Area will be determined by the shortest distance between any point on the lot and the major transit stop. In addition, the developer has a responsibility to provide documentation which states their desired project is within a TOC-permitted area. Development of the residency will take effect once the city has given its approval.
TOC Incentive Requirements
To completely satisfy Los Angeles’ ordinance requirements, several qualifying factors must be met. These are the nuts and bolts of getting a TOC project approved by the city:
1. On-Site Affordable Housing - Every tier will have On-Site Restricted Affordable Housing, as determined by the Housing Development. The minimum number of affordable units will be determined by the overall number of units in the final project. These On-Site Affordable Housing Units will be available at the below percentage rates:
Tier 1: 8% of these units should be available to those of the Extremely Low Income (ELI) households, or 11% of these units for Very Low-Income households, or 20% of the units for Lower-Income households.
Tier 2: 9% for the Extremely Low-Income households, or 12% for Very Low-Income households, or 21% for Low-Income households.
Tier 3: 10% for the Extremely Low-Income households, 14% for Very Low-Income households, or 23% for Lower-Income households.
Tier 4: 11% for Extremely Low-Income Households, 15% Very Low-Income households, or 25% for Lower-Income households.
2. One-Half Mile from Major Transit Stop – This is perhaps one of the most crucial elements when planning a development with TOC-supplied incentives. Each residential project must be within 2,640 square feet of a major transit stop. When referring to bus stops, such development must be within at least two major bus stops. This does not include bus stops along the same road, as they must be perpendicular.
3. Housing Replacement – For the development to be effective, it must fulfill the applicable housing replacement requirements set forth by the California Government Code Section 65915(c)(3). In addition, before obtaining the building permit, the Department of Housing and Community Investment must first verify you meet the affordable housing replacement needs.
4. Density and Development Bonus Restrictions – Under the California Government Code Section 65915, the housing development under TOC compliance is not permitted to receive other density or development bonuses. This includes restrictions from any other State or local programs that typically provide such development incentives. Lastly, these restrictions apply to bonuses or incentives that would grant additional units through a General Plan Amendment, Zone Change, or Height District Change. Affordable housing development bonuses within a Transit Neighborhood Plan, Specific Plan, overlay district, or Community Plan Implementation Overlay (CPIO) will not be permitted to request nor obtain, either.
5. Base and Additional Incentives – Housing Developments involved with the TOC ordinance can receive Base Incentives, or “Base Units,” which are the maximum allowed density for its zoning. On-Site Restricted Affordable Housing Units may also apply to the affordable housing units in its section. For more detailed information on the allowable incentives, please refer to Los Angeles’ TOC Guidelines.
6. Projects Adhering to Labor Standards – For projects that have accommodated the required labor standards, the grant of two additional incentives (or a total of five incentives) may be permitted.
7. 100% Affordable Housing Developments – An increase in tier will be permitted to Eligible Housing Development buildings that contain 100% On-Site Affordable Housing Units.
The incentives offered to developers increase depending upon how close or how far a parcel is from a particular transit type. The specifics are detailed in the chart above. Closer proximity will put a project in a higher tier, thus allowing a larger, more dense structure. When exploring your options for a TOC project, it’s important to understand what tier specifications are available. For your development to build efficiently, it’s important to set your project in an R3 tier (at minimum). Though R4 tiers are preferred, establishing such in any Tier 4 may be nearly impossible. The higher the Tier, the better. Tier 3’s may greatly benefit developers, especially given this factor will allow a maximum of 0.5 spaces per unit, regardless of bedroom count.
Two main base incentives have the largest impact on the size and scope of a TOC project. They increase the number of dwelling units (density) and increase the buildable square footage (floor area ratio, or FAR). Once you break it down, it may look like this:
Tier 1 - 50% increase in density / 40% increase in FAR Tier 2 - 60% increase in density / 45% increase in FAR Tier 3 - 70% increase in density / 50% increase in FAR Tier 4 - 80% increase in density / 55% increase in FAR
To begin executing the TOC residency, developers must build units off-site or on-site, obtain and preserve at-risk (affordable) properties, or pay an in-lieu fee. As stated in Measure JJJ, the in-lieu fee would be 1.1 multiplied by the number of units provided by the developer, then multiplied by the region’s “affordability gap.” The development’s number of bedrooms and other underlying factors must coincide with the in-lieu fees of the project. Such in-lieu fees would consist of the following:
$43,695 per studio unit - $46,350 per one-bedroom unit - $51,313 per two-bedroom unit - $56,965 per three-bedroom unit The above fees in-lieu pertain to 5% of designated units for extremely low-income and low-income households, thus granting the lower fee. In contrast, for projects that are being executed in regions where residential use was not previously permitted, the in-lieu fees are as follows: $62,826 per studio unit - $66,585 per one-bedroom unit - $73,704 per two-bedroom unit - $81,817 per three-bedroom unit Los Angeles Transit-Oriented Communities Overall, investors and developers in Los Angeles should be aware of the city's great incentive. Los Angeles itself is a city that keeps growing and growing. With the extreme housing need filling our community, it's important developers consider a residential project that will benefit their development and benefit the community.