April 1, 2019 by Joseph Pimentel

How LA’s TOC Program Could Kick-Start More Transit-Oriented Development

Photo: Courtesy of Abode Communities

A year and a half since the TOC program started in 2017, the more than 8,000 units under the new program will not only add to the city’s housing stock but also generate much-needed affordable housing units. 

"We've been very pleased with the volume and the response we've gotten from the private sector," city of Los Angeles Chief Design Officer Christopher Hawthorne said. "I think it's one of the most successful housing policies [Los Angeles Mayor Eric Garcetti's] administration has pursued."

Abode Communities President Robin Hughes said it has been a robust program that has provided an incentive for for-profit developers to develop housing and include affordable units within that housing.

Abode is a nonprofit that develops and manages affordable housing projects in Los Angeles.

“It’s addressing the housing affordability crisis by creating market-rate and low-income housing.”

While providing affordable housing to proposed projects is a good thing, others see this program as the start of a much bigger trend happening in and around Los Angeles — the rise of transit-oriented development that builds housing, office and retail next to mass-transit stops.  

Los Angeles could, and should, become the West Coast version of New York, Nadel Architects Director of Multifamily Robert Gross said. 

“I think the politicians are realizing and looking at the bigger picture of what’s happening in this city and across the state,” Gross said, referring to the population increasing. “If you think of Manhattan, New York, that’s the ultimate TOD — there’s retail on the ground floor and either office or residential above. I think you’re going to see more of that here in Los Angeles.”

There is a generational shift happening when it comes to housing, Gross said. Millennials want to live next to transit areas.

“In this current generation there is less of a need or want for driving or a car,” Gross said. “There are some people that don’t want to even own a car.”

Will residents of car-centric California and Los Angeles, where driving is more of a requirement and not merely an option, be open to such density and development?

They have to be, Gross said.

Photo: Courtesy of Abode Communities

Gross, who moved here from New York nearly 20 years ago, remembers when residents were able to drive from downtown Los Angeles to the west side in 15 minutes. That drive now is 30 minutes or more.

Traffic is getting worse, he said.

More people are continuing to move to Los Angeles and there is going to be a growing need and demand to house these people, Gross said. The only way to meet that demand is to build multistory buildings and support and improve the city’s mass-transit system, he said.

LA's Hawthorne dismissed the Los Angeles and New York comparison, saying the city has to build housing appropriate for its geography. 

"We need to pursue adding to our housing stock in a way that's appropriate to Los Angeles — connected to our own history and innovations," Hawthorne said. "But we're seeing much closer relationship from a policy point of view and public discussions between transportation and land use.

"That's the only way we're going to solve the problem — by linking those two together."

The TOC Program

In the TOC program’s first full year in 2018, 30% of the proposed housing units in the city — 8,184 out of 27,366 units — were filed under the Transit Oriented Communities program, according to the Los Angeles City Planning Department. 

Of the 8,184 units through the TOC program, nearly 3,000 units are reserved for affordable housing. Nearly half of the proposed affordable housing units are reserved for extremely low-income households, those that earn $29,050 or less for a family of four.

Under the program, developers who provide certain levels of affordable housing for low-income, very-low-income or extremely low-income tenants receive an increase in density and floor-to-area ratio. 

The program has four tiers that vary on how close a project is to mass transportation. The closer the project is, the more incentives. 

Developers can receive incentives of up to an 80% density bonus, 55% FAR and a substantial reduction in residential on-site parking and streamline assurance.

“Some have called it density on steroids,” Hughes said.

Abode has two projects at various stages of planning in TOC areas: The Grandview Apartments, a 100-unit, 100% affordable housing development near the MacArthur Park neighborhood in Los Angeles, and Chavez Fickett, a mixed-use development with 60 units of affordable housing on top of 25K SF of retail in Boyle Heights. 

Hughes said she loves the program because it provides certainty.

In a time of uncertainty when it comes to multifamily development due to NIMBYs and community opposition, financing challenges, construction costs, length of construction and other unpredictable factors, the TOC gives companies like hers a better chance and more certainty to build projects, she said.

“We have greater certainty in the streamline process,” Hughes said. “It gives us greater predictability and speeds up the timing.”

Photo: Cityview

“We like it a lot, too,” said Cityview CEO Sean Burton, who is working on several projects in TOC areas but did not disclose them. 

“One of the challenges of being a developer in Los Angeles or any city is not really understanding what kind of entitlements are available and the kinds of projects you can build in a certain location,” Burton said. “That uncertainty creates confusion and cost goes up. The TOC program creates some certainty in that process and in addition provides a menu of different options and allows a developer to design a project that can fit into a community.” 

Burton and Hughes said the only drawback to the program is that prices in TOC areas in Los Angeles have increased significantly. 

Hughes estimates properties in TOC areas cost at least 10% more than a year ago.

“A broker gets the listing and they calculate how many units a developer could possibly develop on the [TOC] site … these brokers have convinced owners and owners have convinced themselves there is more development capacity, which increases the land value and purchase price,” Hughes said. “This is speculation, but we are seeing higher prices in many of the communities that we are working in the TOCs.”

Just like the new opportunity zone program that allows investors to invest in designated low-income communities in exchange for a hefty tax benefit, Burton said, sellers who own property in TOC areas also have unrealistic expectations on how much their property could fetch on the open market.

“We haven’t seen a lot of deals close in TOC areas,” Burton said. “I think a lot of that is unrealistic expectations of sellers. They feel like they’ve hit the jackpot because the city has changed the requirements for development. 

“Ultimately, the deal still has to pencil,” Burton said “It has to be economically feasible and appropriate.”

Burton said he is excited about the TOC program and what it could mean for the city in the future. Transit-oriented developments are going to be the next wave of housing in LA, he said.

“We haven’t done a great job in the city to create transit options for Angelenos, but I think you’re seeing a lot of significant investment now,” Burton said. “Through the mayor’s leadership, [Los Angeles County Metropolitan Transportation Authority] Metro is doubling the amount of rail lines in Los Angeles. So I think the more attractive the rail and mass transit options, the more people are going to use them.”

Photo: Courtesy of Abode Communities

Imagine, Burton said, if residents can get up in the morning, walk downstairs from their units and jump on a train and take that to their jobs or to downtown to grab something to eat with their friends.

“We do have to change our culture here in Los Angeles,” he said. “But the way you do it is to create more public transit options and create more housing and amenities around Metro and mass transit sites to make it more attractive.”

The Rise of TODs

A 2016 report by consulting giant McKinsey & Co. found that cities such as Los Angeles, Sacramento, San Diego and San Francisco could greatly help California’s housing crisis by creating transit-oriented development.

Not only would cities provide more housing for their residents, the report says, but creating housing within a half-mile of public transit hubs that connect residents to job centers is good for the environment.

“Locating housing on public transit lines increases connectivity and convenience while reducing sprawl, highway gridlock, and greenhouse gas emissions,” the report says. 

By providing density incentives within a half-mile of transit stations, the state could help developers build 1.2 million to 3 million housing units with at least one-third of those, or a little more than 900,000, in Los Angeles alone, the report found.

“These transit areas represent only 0.15% of California’s total land mass, yet they have disproportionate potential to rebalance California’s housing supply,” the report says.

If California state Sen. Scott Wiener's SB-50 legislation passes, cities and local authorities would be required to provide developers a density bonus and other incentives for building housing within a quarter or half-mile of a major bus or transit line. 

These mixed-use urban villages near transit stations are what the city needs to meet growing housing demand, lessen traffic and help the environment, Gensler Senior Associate and Mobility Lab Leader Dylan Jones said.

“We’re all interested in reducing greenhouse gases and creating sustainable communities,” Jones said.

Photo: Courtesy of Gensler

Gensler Associate Jaymes Dunsmore said building out and creating more sprawl to house the current and future population is no longer an option in Los Angeles. 

Los Angeles is estimated to bring in 850,000 more people by 2040, Jones said. 

Building out would just add more traffic and exacerbate the commuter nightmare that already exists, he said.

“Research that has been done shows that there is enough capacity in the half-mile around transit stations around the state to build all the new homes we need to,” Dunsmore said. “We can do this without radically transforming our city by just focusing development in the areas where we’re already investing our public dollars to improve transit and we can tackle together the two issues of traffic and housing — the biggest challenges we have out here in LA.”

Gensler is working with Metro, on Metro-owned land, to redevelop a 15-acre site around the North Hollywood Metro station. 

The mixed-use project will have housing, retail and office, along with new sidewalks and bike paths.

With the influx of ride-sharing and other mobility options such as scooters and bikes, Los Angeles is becoming a multi-mobile society.

Despite LA’s car-centric past, living near transit is LA’s future, Jones said.

“The market is moving that way,” Jones said. “As the mobility paradigm in our communities changes and as our trip dynamic changes … what people want is experience and what they want in that experience is vibrant, robust mixed-use communities and those communities are best able to function when they are served by multiple transit options. What we’re seeing is a market for a mobility-rich community.”