The Impact of the Small Lot Subdivision Ordinance On Home Buyers

Posted on March 16, 2020June 17, 2020 by Jason Somers

The Small Lot Subdivision Ordinance is a regulation that was adopted in Los Angeles back in 2005. This ordinance is designed to regulate infill housing of single-family units throughout multi-family and construction neighborhoods. The goal of this ordinance is to make it easier and more straightforward for first-time buyers to purchase a home. Small revisions have been made over the years to close various loopholes and make minor alterations. However, the main goal remains the same.

When working as intended, the Small Lot Subdivision Ordinance provides first-time buyers with access to affordable housing. The end result is that homes created on small lots have the function of row townhouses while providing prospective homeowners with the ability to purchase the entire building. In the years since the Small Lot Subdivision Ordinance became law, these smaller lots have become increasingly popular to the point where multi-family residences have been demolished to make way for these properties.

This article goes into greater detail about the impact that the Small Lot Subdivision Ordinance has had on home buyers.

Small Lot Subdivision Ordinance Background

The Small Lot Subdivision Ordinance was conceived by city planners in Los Angeles as an attempt to provide a lasting solution to the tight housing situation that was quickly becoming a problem throughout the city. The ordinance was officially adopted by the city back in 2005 and has since significantly impacted home buyers who are looking to purchase a property.

Once this ordinance was adopted, developers and land owners were encouraged to construct smaller and much more affordable infill housing, which allows for small townhouse-like homes to be created in a row.

Why Did The City Create The Small Lot Subdivision?

The result of this ordinance was that the creation of these small homes allowed for first-time buyers to have access to more affordable housing in a real estate market that was quickly becoming too expensive. As mentioned previously, city planners created this ordinance to solve the issue of not enough housing in the city while also make housing more affordable.

These detached homes were allowed to be created on land that was previously zoned specifically for multi-family use or commercial use. Minimum lot sizes were reduced from a large size of 5,000 square feet to a much more manageable 600 square feet. Once created, the ordinance allowed these homes to be sold outright to prospective buyers, which is what makes them different from apartments and condominiums.

How Does This Affect Home Buyers?

These homes are beneficial for homebuyers in a variety of ways. For one, they are very small detached townhouses that can be purchased outright for a relatively small sum of money. Before this ordinance, home prices in Los Angeles had been skyrocketing without any alternatives for first-time buyers who might need to purchase less expensive properties. Because of their diminutive size, a large number of them can be built in one location, which increases the supply of homes. Having more homes available to buyers reduces competition in the market, which also helps to keep home prices lower.

Another very notable benefit of purchasing one of these homes is that these developments are not subject to HOA fees. Since these developments do not have common foundations or walls, buyers are not required to pay the monthly fees that could range from $250 to upwards of $1,000. Banks are also more likely to finance these properties when compared to condominium projects.

What is a Small Lot Subdivision?

A small lot subdivision is a hybrid form of housing that allows for the construction of numerous attached townhouses or single-family homes on lots that are considerably smaller than standard single-family lots.

While attached townhouses can be developed in these spaces, they must have separate walls as well as some airspace between each home. Unlike condominiums and apartments, these homes are purchased and owned outright, which means that a single buyer can purchase the property. The open space and driveways at these homes are governed via a standard maintenance agreement instead of an HOA.

Why Build Small Lot Developments?

There are many reasons why you might want to opt for building small lot developments as long as you obtain the right building permits. The main reason to build these developments is because they can be monetarily beneficial in the current economy.

Increased Ownership Opportunities

When you build one or more of these developments, you will be able to increase ownership opportunities for buyers while still working with land that has been designated for multi-family neighborhoods and commercial development. Since the amount of land that you need for building a home has decreased with this ordinance, the savings you obtain for land costs can be moved over to the buyer.

Increase in Production of Homes

These developments also allow for an increase in the production of homes. While zoning density hasn’t increased with the Small Lot Subdivision Ordinance, the homes are typically being developed on lots that are underutilized, which allows for more units to be provided to the public. If you’re attempting to finance the development of a housing project, small-lot developments are usually easier to obtain financing for when compared to condominium projects. Because of the insurance liabilities and strict lending practices that have been adopted by financial institutions, it’s almost impossible to receive financing for a condominium project.

Additional Insurance

Due to the increase in litigation for construction defects with condominiums, extra insurance must be purchased for each unit, which can cost upwards of $20,000. This insurance is required for condominium HOAs. Since small-lot developments don’t have HOAs, the additional insurance doesn’t need to be purchased, which should make it easier for you to obtain financing for the project.

There are hardly any downsides to developing small lot subdivisions, which is why you should heavily consider it. Once you decide that you want to develop small lots, our experts at Crest Real Estate can help you expedite the building permit process before development gets underway.

City of Los Angeles Small Lot Design Guidelines

The City of Los Angeles has set small lot design guidelines that every developer must follow. These guidelines are extensive and can be found in their entirety at this link.

The Planning Department in Los Angeles has created these guidelines to help developers navigate the complexities of creating a small lot development project. Every small lot subdivision project in Los Angeles must adhere to these guidelines in order for the city to allow development to continue. Once developed, the project will need to go through the Administrative Clearance process at the department. This application should be filed at the same time as the parcel map application and the tract application, both of which our professionals at Crest Real Estate can assist you with.

These guidelines were first created after the Small Lot Subdivision Ordinance was adopted by the city. The guidelines are broken down into five sections, which provide you with a comprehensive checklist that you will need to follow when developing on a small lot.

The five main sections of these guidelines include:

• Building design
  
• Pedestrian connectivity and access
  
• Landscaping
  
• Mixed-use small lots
  
• Bungalow courts and existing structures
  

No matter what kind of small lot dwelling you are creating, you are required to follow the guidelines set out in the first three components. Existing structures and bungalow courts must adhere to the fifth component of the checklist alone. However, adding another dwelling to the bungalow court or existing structure will require following the first three sections of guidelines as well.

This checklist is extensive in every section. For instance, there are numerous guidelines under building design for dwelling orientation, primary entryways, facade articulation, varied roofline, roof decks, and building massing variation.

While the guidelines are comprehensive and can be difficult to follow, they can be highly beneficial at providing a structure to your development project.

Understanding the Small Lot Subdivision Ordinance

The Small Lot Subdivision Ordinance is relatively straightforward as long as you follow the checklist of guidelines mentioned previously while you develop the project. When looking at the guidelines, there are a few things that you should keep in mind.

For instance, you will need to identify where to place driveways, open space, and parking while also making sure that the actual townhouses are situated properly as they relate to adjoining lots and street frontages. When developing a small lot unit that’s in close proximity to another unit, you must preserve privacy for the residents while also allowing proper ventilation and natural light into each unit.

Because of the many benefits that come with developing small lot subdivisions, you should focus on a better understanding of what a small lot development project entails. Understanding the guidelines associated with the Small Lot Subdivision Ordinance will allow your project to go smoothly once you have started it.