A Developer's Guide to TOC
New 2020 guide by Jesamine D. Older version can be found at TCS
Whether it’s the infinite sunshine, sandy beaches, Hollywood stars, or gorgeous rolling hills, there’s always something to love when living in Los Angeles. While a seemingly perfect place to reside, living in LA still has its ups and downs. For one, anyone who’s an LA local knows all about the frequent congestion in traffic. When sitting at a complete standstill on the freeway, we’ve all often thought, “where did all these people come from?” Moreover, “where do all these people live?” As California keeps growing, the need for proper housing accommodations keeps rising.
With rising rent and real estate prices, it’s important for Los Angeles to continue to build. With such a high demand for affordable housing, and with such little supply, something must be done. According to LA Curbed, More than 8,500 units that are income-restricted now are expected to become market-rate over the next five or so years, and it’s estimated that LA County would need to add 517,000 income-restricted units to meet existing demand. Given this urgency, the city of Los Angeles has passed an ordinance to benefit residential developers in an effort to provide more housing for all. Hence, the TOC or “Transit-Oriented Communities Incentive Program” was born.
The ordinance grants developers the opportunity to create a much larger-scale project than what is normally allowed. The underlying hope is to build more affordable housing in close proximity to major transit stops. By developing these housing units by train or bus stations, the hope is to have more locals refer to public transportation, rather than relying on their cars and the usual traffic. A more European-style community where taking public transportation is highly used. This bonus incentive may push developers to build these larger projects, all while benefiting the community’s current affordable housing need.
Every lot within a TOC Affordable Housing Incentive Area will be determined by the shortest distance between any point on the lot and the major transit stop. In addition, the developer has a responsibility to provide documentation which states their desired project is within a TOC-permitted area. Development of the residency will take effect once the city has given its approval.
TOC Incentive Requirements
In order to completely satisfy Los Angeles’ ordinance requirements, several qualifying factors must be met. These are the nuts and bolts of getting a TOC project approved by the city:
1. On-Site Affordable Housing – Every tier will have On-Site Restricted Affordable Housing, as determined by the Housing Development. The minimum number of affordable units will be determined by the overall number of units in the final project. These On-Site Affordable Housing Units will be available at the below percentage rates:
Tier 1: 8% of these units should be available to those of the Extremely Low Income (ELI) households, or 11% of these units for Very Low-Income households, or 20% of the units for Lower Income households.
Tier 2: 9% for the Extremely Low-Income households, or 12% for Very Low-Income households, or 21% for Low Income households.
Tier 3: 10% for the Extremely Low-Income households, 14% for Very Low-Income households, or 23% for Lower-Income households; and
Tier 4: 11% for Extremely Low-Income Households, 15% Very Low-Income households, or 25% for Lower-Income households.
2. Major Transit Stop – This is perhaps one of the most crucial elements when planning a development with TOC-supplied incentives. Each residential project must be within
2,640 square feet from a major transit stop.
3. Housing Replacement – Prior to receiving the building permit, such must be able to fulfill the applicable housing replacement requirements set forth by the California Government Code Section 65915(c)(3). Additionally, the Department of Housing and Community Investment must first verify you meet the affordable housing replacement needs.
4. Density and Development Bonus Restrictions – Under the California Government Code Section 65915, the housing development under TOC compliance is not permitted to receive other density or development bonuses. This includes restriction from any other State or local programs that typically provide such development incentives. Lastly, these restrictions apply to bonuses or incentives that would grant additional units through a General Plan Amendment, Zone Change, or Height District Change. Affordable housing development bonuses within a Transit Neighborhood Plan, Specific Plan, overlay district, or Community Plan Implementation Overlay (CPIO), will not be permitted to request nor obtain, either.
5. Base and Additional Incentives – Housing Developments involved with the TOC ordinance are able to receive Base Incentives, or “Base Units,” which are the maximum allowed density for its zoning. Three additional max incentives listed in section VII may be granted upon the affordability requirements described: Below “Base Units” refers to the maximum allowed density for zoning, prior to any density increase as described through the guidelines. For more detailed information on the allowable incentives, please refer to the city of Los Angeles’ TOC Guidelines.
6. Projects Adhering to Labor Standards – For projects that have accommodated the required labor standards, the grant of two additional incentives (or a total of five incentives) may be permitted.
7. 100% Affordable Housing Developments – An increase in tier will be permitted to Eligible Housing Development buildings that contain 100% On-Site Affordable Housing Units.
8. Multiple Lots – A building that crosses one or more lots may request the TOC incentives that correspond to the lot with the highest Tier permitted by section III.
9. Request for a Lower Tier – While an applicant may be eligible for a certain Tier, they may choose to select a Lower Tier by providing the percentage of On-Site Restricted Affordable Housing units required for any lower Tier and be limited to the Incentives available for the lower Tier.
The incentives offered to developers increases depending upon how close, or how far a parcel is from a particular type of transit. The specifics are detailed in the chart above. Closer proximity will put a project in a higher tier, thus allowing for the development of a larger, more dense structure. When exploring your options for a TOC project, it’s important to understand what tier specifications are available. In order for your development to build efficiently, it’s important to set your project in an R3 tier (at minimum). Though R4 tiers are preferred, establishing such in any Tier 4 may be nearly impossible. The higher the Tier the better. Tier 3’s may be of great benefit to developers, especially given this factor will allow a maximum of 0.5 spaces per unit, regardless of bedroom count.
There are two main base incentives that have the largest impact on the size and scope of a TOC project. They are an increase in the number of dwelling units (density), and an increase in the buildable square footage (floor area ratio, or, FAR). The breakdown looks like this:
Tier 1 - 50% increase in density / 40% increase in FAR
Tier 2 - 60% increase in density / 45% increase in FAR
Tier 3 - 70% increase in density / 50% increase in FAR
Tier 4 - 80% increase in density / 55% increase in FAR
For developers to begin executing the TOC residency, they must build affordable units or pay an in-lieu fee. As stated in Measure JJJ, the in-lieu fee would be 1.1 multiplied by the number of units provided by the developer, then multiplied by the region’s “affordability gap.” The development’s number of bedrooms and other underlying factors must coincide with the in-lieu fees of the project. Such in-lieu fees would consist of the following:
- $43,695 per studio unit
- $46,350 per one-bedroom unit
- $51,313 per two-bedroom unit
- $56,965 per three-bedroom unit
The above fees in-lieu pertain to 5% of units that are designated for extremely low-income and low-income households, thus granting the lower fee amount. In contrast, for projects that are being executed in regions where residential use was not previously permitted, the in-lieu fees are as follows:
- $62,826 per studio unit
- $66,585 per one-bedroom unit
- $73,704 per two-bedroom unit
- $81,817 per three-bedroom unit
On November 8th, 2016, the “Measure JJJ” was approved by the city of Los Angeles. With an astounding backing by 63% of voters, it’s no wonder the populous city has been contributing like efforts and ordinances to accompany affordable housing and organized labor. Pursuant to Measure JJJ, the Transit-Oriented Communities (TOC) Affordable Housing Incentive Program (TOC Program), was born. Measure JJJ requires the Department of City Planning to create TOC Affordable Housing Incentive Program Guidelines (TOC Guidelines) for all Housing Developments located within a one-half mile radius of a Major Transit Stop. The movement added provisions to Los Angeles’ overall municipal code, outlining special requirements for developers who were planning to execute projects in certain residential areas.
Our world is certainly shifting to adapt. While Los Angeles is a dream to reside and work in, space is running out. With a 2019 population of over 10 million individuals in LA County alone, developers must accommodate the rapidly growing housing need. For additional information on Transit Oriented Communities, any development questions, or for a consultation on your next project, contact Realtor Jesamine for immediate support.