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Planning commission urges council to ease land‑value recapture for very small lots
Summary
After public testimony and staff briefing, the commission unanimously recommended council exempt 1–2‑unit small lots from the land‑value recapture fee, direct staff to explore zoning incentives and adopt a temporary fee cut for 3–4‑unit small lots (24 months at $40/sf). The vote follows wide public debate on feasibility for small property owners.
Hermosa Beach’s Planning Commission on Nov. 18 recommended changes to the city’s land value recapture (LVR) ordinance, signaling concern that the current fee structure is deterring small‑lot redevelopment and producing no revenue in its first year.
Staff reminded the commission that the LVR ordinance (adopted Jan. 23, 2024; effective Aug. 1, 2024) applies to properties in the housing element overlay: developments must either include required affordable units on‑site or pay a fee designed to capture some of the land value added by rezoning. Council set two tiers: tier 1 at $76/square foot for small lots (4 or fewer units) and tier 2 at $104/square foot for larger developments. Staff told commissioners no entitlement applications have yet triggered the fee and noted small lots account for roughly 25% of the city’s housing element capacity (about 137 units).
Public testimony was strongly divided. Multiple speakers representing downtown small‑lot owners and small business interests said the LVR fee makes small projects economically unviable and urged full exemption of very small lots or outright repeal. Some commenters said the ordinance has prevented previously interested owners and prospective small developers from moving forward. Others, including housing advocates and commenters urging equity, said the public should capture a share of rezoning value to fund local affordable housing and that fees should not be removed without considering regional HCD rules.
Commissioners debated options staff presented: (a) maintain current rules and reevaluate next fall; (b) exempt the smallest lots (minimum density 1–2 units); (c) examine additional fee tiers within the small‑lot category; (d) direct staff to explore zoning tools that encourage residential development on small lots; and (e) implement a temporary fee reduction for small‑lot projects at minimum density. Commissioners emphasized the tension between (1) preserving some public capture of rezoning value and (2) avoiding headwinds to small property owners and the existing downtown character.
Motion and outcome: Vice Chairperson Aizon moved that the Planning Commission recommend that City Council: (1) exempt the smallest lots (those that can only accommodate 1–2 units) from any LVR fee; (2) direct staff to explore zoning regulations that could encourage residential development on small lots; and (3) implement a temporary fee reduction for small lots that can yield 3–4 units — the commission amended staff’s timing and dollar suggestion and recommended a 24‑month temporary reduction at a suggested $40/sf for 3‑4 unit small lots. The motion passed unanimously.
What this means: The commission’s recommendation is advisory; the City Council will consider the amendments and could ask HCD whether a change would trigger a mid‑cycle housing element revision. Staff told the commission that fees were intentionally set to incentivize on‑site affordable construction rather than fee payments, but commissioners and the public asked for updated feasibility analysis and broader stakeholder outreach before Council votes.
