Loophole Lets Developers Build New Homes and Call Them Remodels

Land Use UNVEILING THE UNSEEN

Thanks to a Loophole, Remodels Along the Coast Are Actually New Homes

Developers on the coast have learned to use a loophole that lets them tear down old homes, replace them with bigger ones and call it a remodel. Neighbors have hated it for years, and now are pushing for a fix.
New homes in Bird Rock stand in stark contrast to their smaller, older neighbors. / Photo by Adriana Heldiz

Coastal residents have for years hated that developers can tear down small homes in older neighborhoods and build much bigger ones in their place.

They say the new homes are big and ugly, block the sun and the breeze and strangle the sensation that you’re on the coast. The catch-all complaint is that the new, big homes are destroying the “community character” of established neighborhoods.

One specific loophole in the city’s development regulations makes it a relatively easy process – at least easier than the alternative – and a handful of local developers have turned it into a lucrative business.

Developers can acquire permits to tear down and rebuild a new home in as little as a day, if they keep 50 percent of the existing home. Otherwise, they’d have to get a coastal development permit, which requires a political process developers say adds $100,000 to a project and delays it by about a year.

The law as written is intended to make it easy to remodel a home, but developers have learned they can usually figure out how to keep enough walls to build a new home from scratch and qualify as a remodel.

It’s a way of circumventing a permit only required on the coast, thanks to the 1976 Coastal Act, which intended to control development on the coast and protect coastal resources.

“The reality is that the CDP process is so onerous and broken that everybody does everything they can to avoid a coastal permit,” said Mark Morris, an architect with Oasis Architecture and Design, which is active on the coast.

He’s not kidding. According to city data, nearly 10 permits receive an exemption from the coastal development permit requirements for every one that goes through the standard process.

The loophole has swallowed the rule.

The 50 percent rule is enticing all over the coast, because it saves significant time and money. But it’s become especially controversial in Bird Rock, where there’s been a rash of rebuilds in recent years. Old, small beach bungalows there have provided a ready-made supply of chances to buy, demolish and rebuild them into big, modern homes.

What isn’t clear is whether the Coastal Commission, the state agency that oversees coastal development and signed off on the city’s regulations that exempt certain projects from getting a coastal development permit, cares about any of this.

A Coastal Commission staffer said the Coastal Act was meant to protect coastal resources from new development – and that “community character” is one of those resources.

Every five years, the commission is supposed to check in on whether the plans it approved to let cities exempt certain projects from coastal requirements are being implemented in the spirit of the Coastal Act.

In practice, that basically never happens.

“Unfortunately, the commission has never had the funding to carry this out in a systematic way. We’ve only done three or four in 40 years,” said Sarah Christie, legislative director of the California Coastal Commission.

After years of growing discontent, a group that started in Bird Rock is now pushing the city to adopt a new set of rules.

They’ve barnstormed community planning groups in Point Loma, La Jolla, Ocean Beach, Pacific Beach and Torrey Pines looking for support. The groups have now sent letters of support to the City Council members who represent the coast, Barbara Bry and Lorie Zapf.

“We’re concerned about developers, flippers, coming in, developing homes of large bulk and scale, out of character with the neighborhood, out of character with the community plan,” said Sharon Wampler, a leader of the group, at a meeting last year of the Peninsula planning group.

They hope the city will pick up their list of changes to pass an anti-mansionization ordinance, as Los Angeles did last year when confronted with the same types of community concerns.

50 Percent, Times Two

Dave Ish was alarmed watching the construction across Linda Rosa Avenue from his Bird Rock home.

A green fence went up around the small, unassuming house across from him on Linda Rosa Avenue, and he figured there was another 50 percent project on the way.

The developer was Ben Ryan, of Tourmaline Properties. He builds about 15 projects a year, up and down the coast.

“Ultimately, our goal is to achieve the best design,” Ryan said. “If it’s possible to achieve a great design by using the 50 percent rule, we do, and if not then we get a coastal development permit.”

In this case, he had indeed figured out how to build the new home he wanted within the loophole.

He used the loophole twice, though.

First, he used it for something that resembles a remodel: He added a closet to the side of the house that expanded the home’s footprint.

A developer added an extension to a Bird Rock home, then quickly demolished it so he could get the most out of the city’s development rules. / Photo by Adriana Heldiz

Then he used the loophole again, tearing down what he had just built but maintaining the new walls so he could build the new, bigger home that he wanted.

“Doing a sequence of 50 percents allowed us to do a better design,” he said.

The new home will be quite a bit bigger than the one it replaced, but still within what’s allowed by the city’s zoning.

But that project has run into a series of problems, as Ish has kept track of the rebuild and repeatedly contacted the city’s Development Services Department with what he thought were problems.

First, he noticed the shoddy craftsmanship of the first addition – expecting that the intent was to tear it down. The city signed off on the final inspection of that work, until Ish’s badgering led them to revoke the approval in January. In an email, a Development Services official acknowledged that was because Ish alerted them to violations.

“It’s a joke,” Ish said. “The city is complicit in this. They just go along. They could make it so that once you get a permit, you have to wait a period to get another one. I don’t know what’s going on, but it’s really outrageous.”

Ryan, though, simply needed to improve the work and pass final inspection again, which he did. His request for a second permit was on hold until that happened. He has since received it and construction has resumed.

A developer tore down a home he had just remodeled to take advantage of the city’s 50 percent rule, a development loophole. / Photo by Adriana Heldiz

But Ryan used another clever interpretation to his advantage. City zoning stipulates that homes can be a certain square footage, relative to the size of their lot. Car ports – defined as anything with three open walls – don’t count toward that square footage, while garages do.

Ryan turned the garage into a car port. A DSD official confirmed that meant the garage’s square footage could then be redistributed to the new home.

A developer turned a garage into a car port, taking advantage of a quirk in the development code that let him build a bigger house. / Photo by Adriana Heldiz

Ultimately, it’s the size of the new homes that the neighbors dislike. Unlike most other neighborhood-developer fights, this isn’t about density; these are old single-family homes getting replaced by new single-family homes. But neighbors think the bigger homes are outside the “bulk and scale” of the neighborhood.

“The property rights of the person developing the property outweigh the property rights of everyone in the surrounding neighborhood,” Ish said. “That doesn’t fly. If anything, I think the property rights of the existing property owners outweigh, and they should at least control what the person can develop.”

One developer once told him that putting strict regulations that limit new development would simply hurt the value of everyone’s property, in some cases as much as $500,000.

“I don’t really give a damn about you, or the guy who wants to build a mansion – I don’t care about his bank account,” Ish said. “But look, if these things go up next to you, they don’t increase your property value.”

Empty Promises

Joe LaCava is a Bird Rock resident and veteran of community planning in San Diego. He’s been a longtime member of the La Jolla Community Planning Association, and the chair of the Community Planners Committee, the umbrella group for planning groups citywide. He’s also a land use consultant.

He’s not convinced the mansionization problem – a term he doesn’t like in the first place – is as big an issue as many of his neighbors think.

Mainly, that’s because he isn’t so sure the point of the Coastal Act was ever to regulate single-family home-building in single-family neighborhoods.

In other words, why not forget about the loophole, and just let developers tear down and rebuild homes on the coast?

That’s a perspective Morris, one of the active coastal architects, shares too.

“It seems to me their larger concerns are power plants on the beach, or digging into a hillside that threatens a coastal bluff,” he said. “That’s why the requirement exists. If you look at the entire coastal zone, and look at properties in the flats of PB, why would they need a coastal permit?”

The coastal zone extends outside what you might consider close to the coast. Homes that are west of the closest roadway to the ocean aren’t eligible for exemption – they all get reviewed. But the coastal zone extends all the way to I-5 in Pacific Beach. Want to rebuild a single-family home near the Wienerschnitzel on Garnett? Find a loophole, or get ready to wait.

Although LaCava doesn’t take issue with the city’s exemption process, he thinks it is still responsible for the anger among neighbors, because of how it sells community plans.

City planners and elected officials describe community plans as contracts between neighbors, the city and developers about how and where an area will grow.

In practice, plenty of new developments get approved without anyone ever checking them against the existing community plan.

For example, when a developer gets a coastal development permit, city staffers determine whether the project meets the subjective criteria in a community plan.

Take La Jolla’s plan. One of its guiding policies for residential development says the city should “avoid extreme and intrusive changes to the residential scale of La Jolla’s neighborhoods and to promote good design and harmony within the visual relationships and transitions between new and older structures.”

Upset neighbors could point to that policy as evidence that a new proposed home doesn’t meet match the plan, and pressure the developer to make changes.

But a project that uses the 50 percent rule doesn’t require anyone in the city to ever glance at a community plan. City staff simply checks to make sure it meets the hard-and-fast rules outlined in zoning – how tall, how far from the sidewalk, what type of project — and cuts the developer a permit.

“The city needs to stop making promises it can’t keep,” LaCava said. “If they don’t intend to follow through with all the descriptions and renderings they put in community plans, they should stop doing it.”

Gary Geiler, a program manager with the Development Services Department who is the guru of the city’s zoning code, confirmed that city staff doesn’t consult community plans when granting what are known as “ministerial” permits.

“We don’t look at those things against a community plan,” Geiler said. “And right now we’re making more and more things ministerial. The only possibility is the hope that the zone itself will control bulk and scale.”

New homes in Bird Rock are often much bigger than their neighbors, with the help of a development loophole. / Photo by Adriana Heldiz

It isn’t possible to see how many homes used the 50 percent rule, Geiler said. But the city tracks how many times it issues a building permit in the coastal area, and how many times it issues a coastal development permit.

It’s a rough measure, but it shows how many times a developer went through the onerous coastal development process they hate, and how many times they found an exemption, including the 50 percent rule.

In 2016, for instance, the city issued 665 building permits in the area, and just 79 coastal development permits. In 2017 that number was closer to 600 building permits, and about 60 coastal development permits, Geiler said.

That rate – nearly 10 simple permits for every one discretionary one – has been consistent since the recession, though the overall numbers were smaller in bad years.

Knowing Where the Line Is

Bob Vacchi, director of Development Services, said the city has figured out how to police the most creative interpretations of the 50 percent rule.

For instance, developers have tried to maintain half of the walls as they were, then move them to the edge of the yard and lean them against a fence and claim that they’ve maintained half of the structure. That doesn’t fly.

But others realized they can dig out the foundation of a house, leaving nothing but a hole in its place, and suspend the old walls in the air exactly where the walls used to stand.

That’s perfectly legal.

“So the frame wall would be sitting 20 feet in the air, on a single brace, but it’s exactly where it was before, so that would fly,” he said. “We’ve gotten better and better as we’ve gone along because people have tried different things and we’ve always tried to enforce it in a consistent way, and now it’s pretty routine and pretty common.”

The city relies on a memo spelling out how it has decided to interpret what it means to keep 50 percent of a home.

It’s complex, but dependable. To the handful of developers who’ve done it dozens of times, it’s second nature. But to an out-of-town developer, it’s not only confusing, but absurd.

That’s also opened up a business model local developers have been able to exploit.

“Getting around the 50 percent rule is so difficult that you need a local architect to understand it,” Morris said. “If you change it, you’ll have architects from outside the area coming in.”

But the city says it has the process dialed in and is comfortable that developers simply can’t fudge it. They measure to the inch.

“We’ve had neighbors call us and say they moved a wall six inches, and we go out and measure. Once they do that, it’s gone,” Geiler said, meaning developers lost their exemption mid-project and had to halt construction and start the coastal development permit process.

“It’s been years and years now, so the builders are getting pretty savvy in terms of knowing where the line is,” Vacchi said.

Twice last year, Geiler said, developers had to stop midway and go get a coastal development permit.

One of those, in March of last year, was a house in Torrey Pines caught by neighbors who sent photos and an outline of their issues to city staff.

“I have conducted a site inspection with the field supervisor and agree that the methods were improper,” DSD senior planner Duke Fernandez wrote in an email. “The movement of the walls resulted in the loss of their coastal exemptions, the applicant is now being required to obtain a (CDP).”

To Ish, it all feels a bit silly – and not reassuring – that neighbors keep catching things that Development Services is supposed to be on top of.

This week, Development Services sent him an email saying that Ryan was going to be forced to remove some of a deck and make the house a bit smaller due to additional issues Ish had pointed out.

“Should I send my bill for being a developer COP to the DSD or Police Department?” Ish wrote in an email.

The New Neighbors

Lucas and Marie Rotter are a married couple in their 30s. They just moved to San Diego, opting for the laid-back lifestyle of Bird Rock over the frantic pace (and traffic) of Los Angeles.

They happen to have bought one of the new, big mansions that pissed off so many neighbors.

Lucas Rotter, who runs a software company, said he understands the complaints, but thinks it’d be counterproductive for the city to make it harder to build new homes.

“What’s the alternative? A neighborhood of dilapidated homes,” he said. “This neighborhood used to be a bunch of little bungalows, and now that’s changing. It’s part of life.”

Marie Rotter said they chose the neighborhood because it wasn’t too touristy. She said the new homes people are building are inevitable given the increasing property values on the coast.

“There’s still height and (square footage) restrictions,” she said. “I don’t see what’s wrong with letting people build what they want, within the constraints of zoning. People just don’t want change.”

Morris, one of the active coastal architects involved in ongoing discussions over the proposal, said the city needs to be careful if it tries to rewrite the requirements.

“The community group heading up this push is a small nucleus from La Jolla and they’re trying to push on everyone what they think the character of their community should be,” he said. “I don’t want the coast of San Diego to look like a single development.”

Small beach bungalows that used to define Bird Rock are increasingly replaced by bigger, modern homes. / Photo by Adriana Heldiz

The Proposed Fix

Residents, led by Wampler, are optimistic they can work with the city and developers to put a new, clearer system in place.

Developers themselves are even open, if cautious, to potential alternatives.

“An incentive-based zoning has the potential to be a really good thing for the community if executed well, and I’m hopeful a proposal could be developed and fine-tuned that promotes good design,” Ryan said. “I’m interested in being helpful in that process and being part of that process.”

The thrust of the proposal is to incentivize developers to build a certain type of home. For each characteristic they meet – setting it back from the curb by a certain distance, or keeping it below a certain height – they’d earn more square footage to disperse through the home.

Ideally, they’d want those standards to be clearly defined, so residents could forget about creative interpretations, and developers could have some predictability.

They aren’t there yet. A handful of developers sent the group a letter outlining problems they had with the proposal as written. Mostly it was that the new standards were either subjective, or overly onerous.

“The problem we have with the incentive-based code is they’re using it to restrict homeowners’ rights – people buy a property with an expectation of rights, and the value is based on the right to build to a certain-sized home,” Morris said. He estimated that most of his clients build to over 95 percent of the allowable square footage, maximizing the value their zoning allows.

But an incentive-based code that lets his clients get to that same point, he said, would hypothetically be fine.

Wampler and five others in La Jolla started their group back in 2015 and conducted a year and a half of meetings and information-gathering before issuing a final report that summarized their problems. That’s the basis of their proposal, which they then took to other coastal groups looking for buy-in.

When Wampler presents the group’s proposal to those planning groups, though, she’s talking to a receptive audience.

“What we found is, the root cause and underlying issues of vacation rentals, bulk and scale, community character and lack of enforcement from the city are happening everywhere,” she said. “And we’re not against change, or new builds, but we live in a community, not on individual islands, so it’s important to pull together. The left hand doesn’t know what the right hand is doing, even though we’re all fighting common issues.”

They’ve now got sympathetic letters in hand from all the coastal groups.

The city might not be so eager to jump back into the issue. It already went through the public process of crafting a “categorical exclusion” that would eliminate all the loopholes and interpretations and simply allow developers to demolish non-historic homes and build new ones in their place. That’s been stalled with Coastal Commission staff since 1997.

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