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NIMBYism, Bureaucracy Still Pose Threat To LA Rebuilding After Executive Orders

State and local leaders have issued executive orders meant to ease the rebuilding process for people who lost property in the historic fires that have loomed over Los Angeles for the last eight days.

And although these measures are generally considered beneficial in a place where permits notoriously plod slowly, land-use attorneys and developers revealed pain points that need to be addressed, both with the measures in place and in directives still to come. Not the least of these concerns is the sheer size of the bureaucracy involved.

“Even if the city says they’ll be fast, it’s still the city of LA,” LaTerra Development Managing Director Chris Tourtellotte said. “It’s big, it’s bureaucratic.” 

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Crews have worked for over a week to knock down the fires that have burned thousands of structures.

California Gov. Gavin Newsom over the weekend issued an executive order waiving the California Environmental Quality Act and California Coastal Act for those seeking to rebuild the estimated 12,000 structures that have burned. Los Angeles Mayor Karen Bass issued her own order Monday requiring city staff to complete project reviews in 30 days and waiving some discretionary hearings.

One issue dates back to before the fires.

“The problem we have in the city of Los Angeles, is they have still not gotten back to work as usual,” said land use attorney Ellia Thompson, a partner at Venable. In her experience, planning and housing department staff as well as some building and safety department staff are not back in their offices, complicating the process of securing approvals. 

Thompson said response times have been slower since the coronavirus pandemic, which was when the city sent staff home to work remotely. Since then, Thompson said service has been sluggish and more frustrating as she is often not speaking directly to a person who can handle her requests. 

Though the orders from Newsom and Bass make it clear that the city and state want people to be able to sidestep normal processes to rebuild quickly, Thompson said she still expects that NIMBYism will rear its head as people attempt to reconstruct properties. 

Thompson said in a neighborhood where there is a mix of older ranch-style homes and perhaps newer, taller construction, it’s not hard to imagine that some neighbors who had longstanding complaints about the taller homes blocking their view will still have those same complaints and will find a way slow projects down despite high-level attempts to move rebuilding ahead. 

“Suddenly, it's going to change, everyone's going to want to hold hands and sing Kumbaya?” Thompson said. “I don't think so.” 

These early efforts will likely evolve as the fires are put out and the full scope of what’s needed and when is revealed. In recent crises, such as the pandemic, executive orders from government leaders were updated numerous times, and many of the CRE professionals speaking with Bisnow said they expected that to happen here as well. 

Newsom’s order included asking for reports from various state departments in a month, specifically to identify other state permitting requirements “that may unduly impede efforts to rebuild properties or facilities destroyed as a result of this emergency that should be considered for suspension,” a sign that these orders will evolve as needed and as the scope of the situation continues to become clear. 

Tourtellotte, who has worked in the city of Los Angeles and now has two projects underway in Burbank, voiced another concern with Bass’ order — it says nothing of the city’s transfer tax.

The real estate transfer tax applies to all sales over $5M, with some exemptions, such as for nonprofits. Someone rebuilding an apartment building in the city of Los Angeles, which includes areas burned by the Palisades fire, would have to contend with the tax and factor it into their overall costs. 

The tax, referred to as the “mansion tax,” has been blamed for stifling investment and transactions in the city of Los Angeles since it went into effect in April 2023. Tourtellotte said his investors had already essentially put a pause on investing in Los Angeles and Santa Monica because of these taxes, and he wonders how rebuilding can happen without additional investment to fund it.

“Until the mansion tax does not apply to residential I don't know what will happen, I really don't,” Tourtellotte said. “I don't understand how we'll ever build housing of any significant scale in the city of LA and city of Santa Monica,” which also has a real estate transfer tax, Tourtellotte said. 

Other members of the real estate community, including high-end residential real estate agents, have also called out the mansion tax as one of a handful of additional regulations they believe need to be paused for rebuilding to proceed smoothly, The Real Deal previously reported. The letter called for sales of fire-affected land to be exempt from the tax. 

Though the orders from Bass and Newsom indicate a desire to help people rebuild their communities as quickly as possible, some question whether rebuilding things the way they were before – including with any vulnerabilities laid bare by the fire – could create its own problems.

The suspension of CEQA is an important part of clearing the path to rebuilding, especially for larger structures, but doing so also suspends fire resilience measures surrounding issues like fire evacuation routes, said Reed Smith partner Phillip Babich. Some community members, residents and developers seeking to protect their investments may push for those resilience measures to be considered, given the extent of the devastation in the ongoing fires. 

“It's important for developers and residents to be aware that there may be some tension between the governor's order and a desire and need for improving the mitigation measures for wildfire risks in fire-prone areas,” Babich said.