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Planning Commission recommends exempting the smallest lots and temporary fee relief for small‑lot land‑value recapture
Summary
After hours of public testimony, the Planning Commission voted unanimously to recommend City Council exempt 1–2‑unit small lots from land value recapture (LVR), direct staff to explore zoning incentives, and approve a temporary reduced fee for 3–4 unit small lots (recommendation included 24 months at $40/sf as proposed by the commission).
The Hermosa Beach Planning Commission on Nov. 18 recommended that City Council adjust the city—s land value recapture (LVR) ordinance to address feasibility concerns on small commercial lots converted to residential or mixed use.
Staff explained that the LVR ordinance, adopted in January 2024 and effective August 1, 2024, requires developers on housing‑element overlay sites to either build on‑site affordable housing or pay an LVR fee (tier 1: $76 per square foot for 1–4 unit small lots; tier 2: $104 per square foot for 5+ units). Staff told commissioners the program has yielded no paid fees or LVR‑triggered projects since becoming effective, and that small lots account for roughly 25% (137) of the city—s 558 RHNA capacity.
Speakers representing small business owners and owners of downtown properties urged relief for the very smallest parcels, arguing that the current fee structure makes modest redevelopment infeasible. Public commenters called for incentives rather than penalties and warned that the higher fees could encourage consolidation by large developers and undermine downtown character.
Vice Chair Aizon moved a bundled recommendation that the commission forward to the City Council: (b) exempt very small lots that can only develop one or two units from any LVR fee; (d) direct staff to evaluate zoning regulations that would encourage residential development on small lots; and (e) implement a temporary reduced fee for small lots that can build 3–4 units (the commission recommended 24 months at $40 per square foot for that category). The motion passed unanimously.
Commissioners stressed the recommendations were intended to preserve the overlay—s goal of creating sites for housing while recognizing the practical economics of very small properties. Staff will prepare a Council report with technical analysis and, if necessary, consult HCD on whether the changes would trigger a mid‑cycle housing element revision.
What happens next: The Planning Commission—s recommendation will be packaged by staff and presented to City Council for final action; staff said it may also update the economic feasibility analysis and return to the commission if additional fee tiers or zoning changes are pursued.
Sources: LVR staff report and presentation and Planning Commission deliberations, Nov. 18, 2025.
