An innovative approach to the housing crisis in Hermosa Beach is capturing the attention of housing experts and other municipalities.
Hermosa has been under immense pressure to meet state housing requirements. In December, the city council voted 3-2 to approve a new Land Value Recapture (LVR) program, aimed at increasing the development of affordable housing. The purpose of the program is to recover and reinvest land value increases in commercial districts.
In the fall, the city rezoned dozens of commercial properties for mixed use. Under the LVR program, developers in these areas will be charged $76 to $104 per square foot to build market-rate housing, depending on the number of units. As The Real Deal’s Andrew Asch explains, “the concept is that developing land increases its value, and the program ‘recaptures’ some of that value.”
Developers who build affordable housing are exempt from the fees, incentivizing more affordable housing development. The revenue earned from LVR fees on market-rate units will be used to subsidize affordable housing in the city.
“It’s almost a double bonus,” community development director Carrie Tai told The Real Deal. “If they build a mixed-income property — market rate and a certain amount affordable — they will not have to pay a fee and they also benefit from the state’s density bonus program, enabling them to build more units than they’d previously be allowed.”
The carrot-and-stick approach is believed to be the first of its kind for a California city. An analysis by Kosmont Companies, which created the plan, found the LVR program is likely to succeed with an impressive return. If so, it will be a model for many other cities struggling to meet regional housing needs obligations.
Read more about the LVR program, including some of the criticisms, here.