Ben Reznik on Why State Housing Mandates Are Long Overdue

TPR: When we last spoke in 2005, your focus was reform of local zoning and the need for affordable housing. As one of the top 100 real estate lawyers in the country, you’ve successfully lawyered the approval of many housing projects and are currently advocating for much more housing production and greater local government accountability for permitting this housing. What motivates your law practice and how challenging is it today to build housing in metro Los Angeles?

Ben Reznik: What's motivating me is, of course, the fact that I'm not ready to retire; also, the sense of accomplishment from taking on these battles one at a time and the sense of satisfaction when we finally succeed and can get a project done and approved. I've assembled a team of terrific land use lawyers over the years so I am also definitely motivated by working alongside them and seeing them implement a lot of these policies. Again, we're not a policy group. We haven't been lobbying for policy, other than through projects that we look to implement.

Since we last spoke in 2005, there's been an evolution of the state legislature as a result of people just getting fed up and frustrated with the local jurisdictions. Los Angeles, in particular, but other areas as well. We have experienced, dating back over many years, the inability to implement the density bonus laws by affordable housing projects because cities didn't want them and they always had an out. There is always some reason you're not fulfilling the requirements or the building code or the limitations on the size of a structure. For years, it was frustrating, and we couldn't get these projects done. That, in my opinion, is the reason why we ended up with a whole slew of state mandates in the last several years that have taken away discretion from local jurisdictions and their ability to stop these projects.

So my motivation is to see more affordable housing developed and it is our challenge to implement the policies that the legislature gave us. This is certainly a motivating factor to go to court now and have a fighting chance because of the state mandates. We've done well the last several years in litigation in overturning denials to project approvals.

Ben, who — the State or local government — ought to be the steward of a neighborhood’s built environment? What role, going forward, should City Planning & Building Departments have in determining what is built where — and with what local amenities?

My answer would be that we're a state of local control. The whole state system has been based on local control and our state constitution was founded on that. Everybody understands this California legislative process structure but, would contend, there's been an abuse of local control. So, I'm defending the legislature. I don't think they want to be the local regulators but the group of legislators elected in the last 10 to 12 years or so just got fed up. They were convinced that unless these mandates were passed, housing was not going to get built.

Here is an example of how city’s abused their authority and responsibility in providing housing. I represented a project a block from the beach in Del Rey for 77 units which included 11% affordability. That's eight affordable units. The zoning actually permitted a total of 120 units, but the developer preferred a more modest 4-story project consistent with other buildings in the area. The project drew supporters and opponents.

The project complied with all the city zoning regulations and the planning commission approved it. However, at the insistence of the councilman in whose district the project was located, the city council denied the project by claiming that it was not compatible under the Coastal Act due to its height. Under their own rules they couldn't deny it, but by resorting to a completely subjective criteria in the Coastal Act they did deny it. I use this as an example of motivation. We had a progressive councilman who claimed to support affordable housing and a city council that claimed to support affordable housing. Yet, as I was standing in front of them arguing to preserve the Planning Commission's approval and reminding them that the city has not approved an affordable unit in the coastal zone in nearly 20 years, it made no difference because they found a way using the Coastal Act to deny it.

Could it be that these “new” legislators voting to allow greater density in residential zones are oblivious to the impacts of CA’s Prop 13 and the consequential negative incentives for cities to build more housing given there will be increased constituent demand for unfunded services to serve and maintain the new housing? Paradoxically, as you well know, these same legislators have not been voting to date for increased local infrastructure money to assure & maintain more livable neighborhoods.

I don't think they are oblivious. After all, the high demand for additional housing already exists.  The residents are here now, with some on the streets or in shelters. I think you may be correct that the motivation for some cities to deny housing projects was to control and limit their population, but that placed greater pressure on surrounding cities. The state housing mandates that have been adopted remove the tools used by local jurisdictions in the past to deny housing projects. Cities can still deny projects but the burden of proof for justifying such denials is now on the city itself. Hence, courts will not give cities the benefit of the doubt and defer to their judgment unless a city can demonstrate with objective criteria and impacts the reason for such project denial.

We're talking about housing that complies with the general plan and the limitations of what cities have adopted. It's just the ability to get a few extra units to fund the affordability component. Does that really shift the balance that much? If the general plan allows me to build 100 units but I want to build 115 for the extra 15% to subsidize the affordability component, has that really created a burden on the city? I don't think so. I think there are other reasons why cities, at least in my experience, reject these projects, and it wasn't about the infrastructure financing.

Counseling, as you do, the best market-rate housing developers in the city and the state, have you observed a significant increase, as a result of state legislation, in the number of affordable housing units being built? And, by affordable, not $800,000+ a unit.

I have observed a significant increase in the desire and attempts at building more affordable housing units. Remember, these mandates are relatively new and we are just getting into using them. Virtually every multi-family housing project we work on now includes the 15-20% set-asides. Oftentimes communities will argue that it’s so few units that it’s not worth it. If a lot of developments added 10-20% of that affordability component to their projects, we would have many more affordable units in the city and, because these units are built within the project, we would be adding to the inclusionary housing goals that many people desire as opposed to the past when developers would want to build the affordability component off-site because they didn't want it in their project. So in a sense, if we could have these built over time with the inclusionary factor, you would get more affordability and more people of mixed incomes living together.

There appears to be little evidence today, unless you believe in trickle-down economics, that the housing currently being built will eventually become affordable. Does your experience suggest otherwise?

When you have a 2-3% vacancy factor, rents will rise due to the shortage of available units.  Historically, rents have been more competitive when vacancy rates are at 7-10%. How do you get it to a place where it's at 7-10% vacancy factors? Traditionally, when you had a more competitive rental market, landlords would entice people to move in. Remember those days when they would give you two or three months of free rent and give you a washing and drying machine? We need to get back to that vacancy rate because as long as we're at this 2-3% vacancy factor, the overall cost of housing won’t go down. And that simply means building more housing.

The LA Times recently published an article documenting a California housing price paradox in California; the State continues to both lose residents and build more housing, yet housing prices go up. How do you explain the paradox?  

The outflow of residents is a bit overstated and this data is taken during the Covid years. But prices have clearly gone up. We've had serious inflation across the board, not just in housing. You can build housing but the reality is that not enough housing has been built where it needs to be. I don't know if the increased cost of renting is the reason people have moved out because we've had issues with the loss of certain jobs and corporate entities that have abandoned California in the last 20 years. That may be part of the reason but I'm not an economist. I'm the guy on the front line trying to get a project approved.  

Clearly, today’s California housing market is not the same housing market you experienced when you began your legal practice in 1976. Is it significant that presently the largest owner of residential real estate in each of the five largest markets in California are Blackstone & other hedge funds? The latter, it deserves noting, have increasingly been out-bidding individual homebuyers, holding units off the market, and thus keeping home prices rising while driving down vacancy rates. Do you believe, given the aforementioned, any increase in housing supply will necessarily result in housing prices falling in metro Los Angeles?

I don't think it matters who owns it. If there’s a 10-12% vacancy factor, they're going to lower the rents, fill them up, in order to be competitive. As long as the rate of vacancy is down to low single digits, there's no economic need to lower rents and you can keep increasing it. I'm not an economist on this, but I can see the result. We need to get back to at least that level of vacancy and the only way you get there is by building more housing.

Ben, you recently tweeted about California Senator Scott Weiner introducing a bill to streamline the environmental review process for housing construction on the properties of non-profits and faith organizations. Elaborate on your support for this bill and Weiner’s other housing legislation.

Scott's been a target but he's done more to advance housing statewide than anybody else I've seen. He's beloved by his community because he goes after what he believes in. His politics are very progressive and if he happens to challenge jurisdictions because he thinks that you should be able to provide housing, that's fine.

I hate to say it, but the tools we had 10-15 years ago to force cities to provide more housing  were inadequate. When we spoke in 2005, and Geoff Palmer was building large multi-family projects in downtown LA, we did not encounter local opposition to the actual land use component. There was some opposition to him, right? The issue of ignoring affordability was a product of misinformation at that time. The point is, nobody thought it could get done. He was on the wrong side of the tracks, building on the wrong side of the 110 freeway.

Today, you can't do that. It's much more difficult and these mandates have made it so that local jurisdictions ultimately have to approve them or tell their communities, “I'm sorry but this is state law.” Do I like that? No. It's a state mandate shoved down the throat of the local communities. It’s what we’ve come to and it's the natural progression of what I've seen on the front lines over the past decades. Not just in LA, but in other jurisdictions that find every reason and possible excuse to deny housing projects.

Sen. Wiener is obviously admired by many, indeed he’s been the largest beneficiary ever of real estate developer largesse, but what justifies usurping local control over planning when there’s little evidence that Sen. Wiener’s governance reform remedy actually produces, without negative unintended consequence, the results advertised ?

What justifies adopting those statewide policies is the track record over the past 25 years of local jurisdictions refusing to approve housing projects, especially those projects that included an affordability component. As for negative unintended consequences, I would argue they are the result of the lack of housing and lack of affordable housing, not the new statewide housing policies. Keep in mind that the state density bonus law has been around for 20 years, yet projects with affordable units which required a small increase in the unit count to subsidize for the cost of the affordable units were routinely denied. That’s why the legislature had to step in with laws that made it possible to actually use the density bonus laws.

100 years ago, Henry George asserted that Land Value economics are unlike traditional supply and demand economics. He argued that when governments increase by right a property’s allowable density, the value of that property immediately increases rather than decreases. The result is a rise in the owner’s land value – resulting in a concomitant increase in the cost of new housing. Was Henry George wrong?

It's not about increasing density. It's about allowing the building of affordable housing, which is already included in the general plan. The 77 unit Del Rey project I referenced earlier was allowed 120 units under the zoning but our client did not want 120 units because he would have had to build more parking. So maximizing allowable density is not always the best economic project on particular sites. The increase in housing costs is at best only partially due to increased land values. Labor and material costs have substantially increased and contributed to the rise in the housing costs. And in instances where it takes several years to get a housing project approved, the delay further adds to the cost of housing.

But increasing densities is not necessarily only about attempting to reduce the cost of housing.  It’s about creating neighborhoods that can sustain and support local businesses and public transportation. Additionally, higher densities should lead to more housing units thereby increasing the vacancy factor to a more competitive rate. But the density increase needs to be in the right locations, such as along certain commercial and rail line corridors. We have over 400 square miles of land in the City of LA. There's plenty of density on paper. Surely we can find the room for it.

Underlying recent state housing legislation is a rejection of “zoning,” specifically single family R-1 zoning. Do you view current zoning as a racist practice or as an instrumental part of wise land use law that ought to be sustained?

This one bothers me. I don’t believe we have to carve up single family neighborhoods in order to solve the housing crises. There's room for single-family neighborhoods to co-exist with multi-family housing. It just requires proper planning and the willingness to implement such plans.  The decades long failure of local jurisdictions to approve multi-family projects that include affordable units is what led to these more drastic statewide mandates that invade into the single family areas. I don’t believe that ADU’s and the splitting up of single family zoned lots will add much to the supply of needed housing.

Pivoting to another shelter challenge, it’s obvious that Metropolitan LA is struggling with how best to address homelessness as well as affordability. Your thoughts…

I don't think the city can solve homelessness on its own. I've been arguing this for the last few years and, finally, the LA Times recently wrote about it. I am referring to the loss of hundreds of  board and care facilities that has led to the increased unhoused population on the streets. I know this from personal experience because my family owned and operated a board and care home since the early 1970’s. These are state licensed facilities in which the residents live full time, receive medical and mental care from visiting physicians and clinicians, have their medications properly dispensed, are free to come and go since these are not locked facilities, and so on. Our facility was in a middle class neighborhood and my father and brother who operated it knew the name and story of every one of their 77 residents. There were young adults and seniors, many with serious mental disorders. But interestingly, they created their own community within the facility. They were all on government subsidies. My father and brother were able to earn a modest living. However, as the cost of operations increased substantially in the past several years due to increases in minimum wage, workers compensation, utilities, etc, the amount that the state paid to house such individuals remained stagnant. The amount was $1,050 per month, that’s $35 per day. The facility was losing money every month. The result was that we decided to shut it down completely and rent the facility to a drug rehab operator.  This experience has played out throughout the region resulting in the loss of thousands of beds for people who today are living on the streets.   

Just before the pandemic, I called a legislator friend of mine to inform him of this situation. He and his staff were surprised to learn that the state only paid $35 per day to this segment of our population that needed help. He agreed that if the state would raise the amount enough to cover the increased costs then these facilities can remain open and stop the “bleeding” of people moving out and into the streets. Then the pandemic hit and all bets were off. We were forced to shutter the doors of our family board and care facility. The result is the loss of 77 rooms that have housed lower income people in a safe place to live. There are thousands of lost rooms like this throughout the state.

Now, the irony of this is that the current model for providing housing is to build new housing units at $800,000 per unit and to provide supportive services. Setting aside the issue of the cost of building, the concept of delivering supportive services to each building is the exact concept that already existed at the board and care facilities, except that it was far more efficient and economical to provide such supportive services at these board and care homes because of the number of residents housed at each location. There is clearly a relationship between the loss of these board and care facilities and the high number of unhoused people.

I’m pessimistic about our approach to homelessness. We certainly need the temporary approach of moving the unhoused into safe short-term shelters. But we need a better long-term solution. The reality is that a portion of the unhoused are people who just can't  care for themselves be it because of drug addictions or mental illness. We need to be more compassionate about this issue which is why I am so upset about how we've destroyed this whole state model of board and care facilities which, as I have seen with my own eyes, have provided a safe shelter and a supportive community for this segment of our population.

And lest you think we can bring back these lost rooms, I can tell you from experience in representing numerous residential care facilities in their zoning application process that they are not welcomed in many residential neighborhoods. If you wanted to plan for a board and care home in a neighborhood today, good luck. There's no zoning for it in particular. You would need to obtain conditional use permits or variances which are subject to multiple administrative appeals and lawsuits

We’re doing this interview on the day when the governor’s care courts begin. What's your hope or assessment about that?

I don't have an assessment yet. Honestly, I'd like to see what happens with that. Going back to my point, I don’t think we can simply build our way out of homelessness. It's not just about building more housing, it's about helping people. It remains to be seen if the care courts help.  

Reducing parking requirements for new developments is another housing/city planning policy change advanced by the development community. What is your take re the impacts on neighborhoods now subject to accommodating greater housing density of reducing parking requirements?

The promotion of reduced parking requirements is not limited to the development community.  I’ve seen public transportation advocates and environmentalists promote it. As for the impacts of reduced parking, I believe we cannot evaluate it based on past experiences because in the past we did not have the alternative mode of public transportation that we have today and that is clearly going to increase in the future. Our new policies of encouraging ridesharing, public transit and bicycles may reduce the need for code parking requirements. The policy of encouraging the highest density in close proximity to public transit may also prove to show that code parking numbers are outdated.   

If Karen Bass asked you to serve as Chair of the Planning Commission of Los Angeles, would you take it?

First off, she wouldn't. Secondly, it would disqualify me and my entire land use department from working on projects in the City of Los Angeles. So, I would have to respectfully decline.

However, I would offer her a lot of advice and ideas based on my 46 years of practice in this city.  I can identify thousands of annual hours of planning staff time taken up on processes that can be reduced to a fraction of the actual amount spent thereby freeing planning staff to work on more productive and important items.   

I had a client ready to build 25 moderately sized single-family homes throughout the Mount Washington area in East LA. The proposed homes were consistent with all the zoning and planning requirements, including those of the Mount Washington Specific Plan. But because they were located in a specific plan area, they needed to apply for what is called a Project Permit Compliance Application. The idea is simply for the city planners to confirm that the proposed house conforms with the regulations of the specific plan. The applications were filed and sat there for nearly two years. Even calls from the City Council Office could not dislodge these applications. The economic loss is significant as workers are not working and the carrying costs of holding these properties add to the ultimate cost of the final product. These reviews should only take a couple of hours, and in more complicated cases maybe a day or two. I have many more such examples which I will gladly share with the Mayor if asked.   

Lastly, with the knowledge you’ve acquired from facilitating scores and scores of housing projects, why haven’t you developed your own projects?

I tried once when I was in my second year of practice. I bought a small lot with family members  in West LA – what a nightmare that was. Prime interest rates went up to 22% and I realized that it's a different world. It’s not for me or for what I wanted to do. You have to have a strong fortitude these days to go through and entitle some of these development projects.