Increasing Los Angeles Property Value with Entitlements

What are entitlements?

Los Angeles entitlements are land use permits that enable you to increase the value of your property by expanding the boundaries of what you can build (ex. increasing the amount of units allowed) and what you don’t have to build (ex. lessening the amount of required open space). These permits are necessary to the development process when seeking an optimal return on investment.

The City of Los Angeles offers entitlements as incentives for developers to build in targeted areas, build properties with more affordable housing units, and develop projects that are beneficial to a given neighborhood.

In this article, we will review the Los Angeles entitlements process, some of the different types of entitlements you can take advantage of, and why it's crucial to complete permit applications correctly the first time around.

The Los Angeles Entitlements Process:

The entitlement process can look like a huge and daunting task and, unfortunately, it is! However, if done correctly, entitlements will add tangible value to your development. The entitlement application includes all required elements of project proposal and the site specific entitlement permits you are requesting.

Developers run the risk of "under-entitling" their land when they want to decrease project time, are unaware of certain incentives, or incorrectly assume the entitlements they want are already included in their by-right plans. This is why it is crucial to consult with a professional firm before submitting your proposal.

The chart below gives an overview of what the entire entitlement process looks like for the City of Los Angeles and further emphasizes the importance of working with a professional.

Different Types of Entitlements:

Conditional Use Permits (CUPs):

Certain land uses require Conditional Use Permits (CUPS) , which are special conditions that ensure compatibility with surrounding properties. It is crucial to obtain a Conditional Use Permit (CUP) if the owner wants to open businesses in most local districts. Often, the City and County require a discretionary permit with set conditions to regulate specific businesses within their jurisdictions. CUP is time–sensitive and marked with a termination date. However, only extensive research will reveal the status of a CUP.

Various types of businesses require special permits (ex. an ABC License CUP for the Sale of Dispensing of Alcoholic Beverages).

Zone Variance:

Anything above a minor zoning regulation adjustment requires zone variance approval. Variance requests can include height increases, lesser amounts of open space, more density, and other adjustments that can increase buildable value . Although the city still employs rigorous assessment structures before approving variance requests, the permits, if granted, are highly worth the effort. Zone variance allows for more flexibility when developing a property.

Density Bonus:

LA's Density Bonus program allows for more residental units and less parking, which increases property value. A certain number of affordable and/or senior housing units determine qualification for this bonus.

Number of affordable units and the income tier that the affordable housing falls into determines density bonus size.

Typically, the density bonus offers up to three incentives from a menu of options including height increases, yard/setback modifications, increased number of stories, etc. The specific needs of the property determine the incentives used.

Properties zoned as TOC (Transit Oriented Community) qualify for incentives that function like the density bonus with even more perks.

Hint: properties/land in TOC zones are definitely worth looking into!

Density and TOC bonuses provide allowances within the land's designated zone. However, they do not permit you to build outside of the what the land is zoned for. For example, a mixed-use property cannot be built on land zoned for multi family residential use. Further modifications ( i.e. zone variance) have to be requested.

These are great examples of what types of entitlements are out there. However, you will want to check with a consultant to see what what works and is available for your specific property.

Why Use Los Angeles Entitlements Professionals?

Obviously, the entitlement process is a complicated one. Developers who try and take on their own entitlements without guidance may cost themselves time and money if something goes wrong with their application, while developers who choose to forgo entitling their property all together miss out on crucial financial gains.

In fact, even after the planning office approves property plans and issues a Letter of Determination, the approval remains conditional. Elements such as final parking count, affordable units, level of affordability, setbacks, etc. will need to be assessed again. In some instances, these special conditions affect the sales price. It's recommended that you work with a firm, like The Code Solution, to optimize property value and returns.

Next Steps After Entitlements:

After the entitlements stage is complete, you might want to sell if you have multiple properties in the pipeline and are diversifying your options/return potentials. However, in order to optimize revenue potential, transitioning into the RTI or “ready to issue” stage of the development process is most recommended. A professional firm like The Code Solution will be able to give you guidance in regards to your specific circumstance.

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