Summary:
While most states are taking a ‘DOGE’ approach to their bloated bureaucracies, California doubles down on consolidating power and authority, and expanding the scope of the state bureaucracy.
The recent, unprecedented shift in California’s development approval process has significantly reshaped the real property development landscape. This transformation, akin to a seismic shift, carries profound implications for property owners, developers, and local municipalities. Property owners and developers now face a redefined power structure and the daunting task of navigating the intricacies of the new Law. Meanwhile, local municipalities are being stripped of authority over property development, a change that will undoubtedly affect their operations.
Under the new regulations, the California Legislature retains ultimate authority over property development approvals. This means that local municipalities are now limited to granting ministerial approvals that align with state-level mandates. Any objection from the local municipality can trigger legal action and the withholding of state and federal funds.
A new world exists regarding zoning, densities, approvals, and land valuations.
Historically, non-conforming buildings were considered unacceptable under institutional lender requirements. The cash flow analysis did not account for cash flows from the non-conforming units.
Article:
Consider a scenario where a property owner wishes to use their ten-unit apartment building as collateral for a loan, despite the property being officially zoned for only six units. This discrepancy can lead to legal issues, particularly if the additional units were added without obtaining the required building permits. It is a stark reminder of the potential consequences of exceeding zoning limits.
The mortgage broker said:
My client, the owner of a ten-unit apartment complex, wishes to refinance and withdraw cash for investment purposes. The property is an excellent cash-flow vehicle. A typical reference may be a cash cow or an investment that produces a steady income or profit stream. Both may be correct.
The competent lender replied...
The lender has thoroughly reviewed this file, drawing on its extensive experience and expertise. The building has six units, four of which are considered “bootlegged’ or unauthorized. These were created by converting the two-bedroom units into one-bedroom units and adding small bathrooms and kitchenettes. The lender’s expertise in such matters is a cornerstone of its guidance, offering reassurance in navigating these complex laws.
Despite their complexity, these new laws offer a glimmer of hope. They encourage multi-tenant, high-density residential apartments, even those that are bootlegged. This shift in perspective can create new opportunities and optimism for property owners and developers, offering a potential silver lining amid these changes.
Owners with bootlegged units may or may not be able to obtain permits as conforming. This potential for change is why consulting a real estate entitlements lawyer specializing in navigating complex laws and obtaining necessary permits is crucial. Their expertise can guide and reassure property owners and developers as they navigate these complex laws, providing a sense of security in their decisions and a hopeful outlook for the future.
All stakeholders must stay informed about the current situation. This knowledge equips them to make informed decisions, even in the face of uncertainty, and to navigate these complex laws, giving them a sense of control over their property rights. It’s a powerful tool in these changing times.
https://www.latimes.com/homeless-housing/story/2024-04-29/law-that-ended-single-family-zoning-is-struck-down-for-five-southern-california-cities
This dual approach highlights the potential risks and benefits of addressing non-conforming properties, providing hope in a complex situation.
The definitions of conforming, non-conforming, and legal non-conforming properties have been updated through state mandates and oversight of administrative regulations at the state level. It’s crucial to note that local jurisdictions can approve modifications only if they comply with state regulations, underscoring the hierarchical nature of these regulations.
However, transferring decision-making from the local to the state level may prompt local bureaucrats and government officials responsible for implementing and enforcing regulations to resist the change. They may fight to retain their oversight and government roles, leading to further frustration when they are informed that they no longer have the authority to withhold approvals.