Introduced to Los Angeles in 2005, the Small Lot Subdivision Ordinance regulates the construction of single-family infill housing in commercial and multi-family neighborhoods. The ordinance aims to create a new path for homeownership for first-time buyers.
Conceived by smart growth proponents as a viable solution to Los Angeles’ tight housing market, the City of Los Angeles adopted the Small Lot Subdivision Ordinance in 2005. The ordinance aimed to encourage the construction of smaller, more affordable infill housing to target first-time homebuyers in an increasingly unaffordable market.
The ordinance allowed for the creation of detached townhouses on land zoned for commercial and multi-family use, reducing setback requirements and minimum lot sizes from five thousand to six hundred square feet. In turn, these properties could be sold outright to homebuyers, a process that distinguishes small lot homes from condominiums or apartments.
Though the Small Lot Subdivision Ordinance presents an innovative solution to Los Angeles’s housing shortage, the ordinance has also faced opposition from residents, neighborhood groups, and affordable housing advocates.
Cities that continuously attract new residents must identify new housing options that will accommodate a financially diverse population. The following are several reasons why small-lot developments are beneficial to build in today’s economy:
Small lot developments increase homeownership at reduced costs. Small lot developments are fee-simple units that increase homeownership opportunities while working within existing land use designations. Because these units are fee-simple, homeowners acquire ownership of the housing structure, as well as the land on which it’s built. When the amount of land needed for housing construction is decreased, the savings in land costs can be passed on to the homebuyer.
Small lot developments increase housing production. Although small lot developments do not technically increase zoning density, they are usually built on underutilized lots, thereby increasing the number of units made available to the public.
Small housing developments are not subject to monthly homeowners’ association (HOA) fees. HOAs are corporations with formal bylaws created to maintain common areas within a certain development. Members are charged monthly fees ranging from $250 to $750 (depending on the area) to cover the cost of property management. Small lot developments are constructed without common walls or foundations and therefore do not require HOAs, They do sometimes have maintenance fees but they are usually under $250.
Small lot developments are easier to finance than condominium projects. New housing development in Los Angeles has come to a standstill. Stringent lending practices and insurance liabilities have made condominium projects (which are usually targeted to median-income residents) nonexistent. An increase in construction defect litigation has forced condominium HOAs to require additional insurance that can cost more than $20,000 a unit. Because small-lot developments do not require HOAs, they do not face mandatory additional insurance costs, which makes obtaining bank financing easier.