Beverly Hills could be forced to allow hundreds of new apartments

Developer Leo Pustilnikov (right) and his son are with attorney Dave Rand (left), pointing to the spot on what’s now a Beverly Hills parking lot where Pustilnikov plans to build apartments using the “builder’s remedy.” Photo by Anna Scott.

Beverly Hills is the latest in a string of upscale cities that could soon be forced to permit hundreds of new apartments against its will, thanks to an increasingly popular, once-obscure California law known as the “builder’s remedy.” It allows real estate developers to flout local zoning regulations in cities that are out of compliance with the state’s tough new laws around housing production.

Developer Leo Pustilnikov recently filed a half dozen applications for projects in Beverly Hills using builder’s remedy, and says he plans to file a half dozen more. The largest and most controversial would bring an estimated 15-story apartment building to what’s now a parking lot on South Linden Drive, just south of Wilshire Boulevard. Altogether, Pustilnikov’s proposals could create as many as 1,000 new apartments in Beverly Hills — more than twice as many as the city produced during the two decades from 2000 to 2020.

Local leaders don’t like it.

“The builder’s remedy concept takes areas that were thoughtfully designed and upends that,” said Beverly Hills Mayor Julian Gold. “We know best what our community wants.” 

Pustilnikov’s lawyer, Dave Rand, says there’s a simple way for city officials to regain control over land use.

“They just need to comply with state housing law and plan for the housing that the state requires,” he says. “It’s not complicated.”

The builder’s remedy has been part of California state law since 1990, but developers only started exercising it in the last few years, emboldened by tougher state laws around how cities must plan for new housing. Conflicts like the one bubbling up in Beverly Hills reflect a larger tug-of-war over how much control local officials should have over their own growth amid housing shortages and a regional homelessness crisis.

Every eight or nine years, under state law, cities in California are required to create housing plans (or “housing elements,” in policy parlance) to accommodate projected population growth. Cities don’t have to necessarily build the housing; they just have to demonstrate that they’ve analyzed demand and mapped out areas where the needed housing could go, should builders come in with proposals. 

But before 1990, the process wasn’t taken very seriously, says Chris Elmendorf, a law professor at UC Davis who specializes in land use and has studied the builder’s remedy.

“Something like half the cities in the state weren't even bothering to go through the motions of adopting a housing element,” he says. Enter the builder’s remedy. It stipulated that in cities out of compliance with housing element law, developers could come in and circumvent local rules on things like height limits or design specifications. Builder’s remedy projects also have to include some percentage of units priced for low- or moderate-income renters for the area. (The exact ratio depends on the level of affordability.)

At the time the builder’s remedy was introduced, “everybody who was describing why it was such a big deal said it's going to make cities finally take this housing planning process seriously,” says Elmendorf. Which it did, but very much on cities’ own terms. Turns out simply producing a housing element — which predicts demand for housing at various affordability levels and maps out where that potential housing could go — doesn’t guarantee that the plan is robust or realistic.

For example, during one nearly decade-long cycle, Beverly Hills officials calculated that they needed three new units of below market-rate housing.

“Their theory for why they only needed three units was: ‘Our population isn't growing,’” says Elmendorf. “But the reason their population wasn't growing was because they didn't allow any new housing to be built.”

To be fair, Beverly Hill annihilated its three-unit goal by ultimately permitting nine. But Elmendorf says that’s how it went in a lot of California cities in terms of housing production — conservative, self-imposed quotas kept new housing production low.

Since 2019, however, California state officials have passed a slew of new laws adding teeth to housing planning requirements. Officials have also set a statewide goal of 2.5 million new units by 2030, which means higher goals for cities and counties in their local housing elements on top of tougher enforcement. Those developments combined, Elmendorf says, have given developers confidence to seize on the once unused builder’s remedy. By last count, 101 cities and counties were out of compliance with state housing law across California, opening themselves up to builder’s remedy proposals.

Recently, developers have initiated dozens of projects under the law in Santa Monica, Redondo Beach, Del Mar and West Hollywood, to name a few. Pustilnikov’s company has been behind several of the proposals. In May, his company struck a deal with Santa Monica to cancel all but one of 14 builder’s remedy applications they’d filed there in exchange for streamlined approval of 10 smaller versions of those projects. Santa Monica has since come into compliance with housing planning requirements.

“I feel strongly about it because there is a lack of housing,” Pustilnikov says about filing such a high number of builder’s remedy applications. “Rents have increased tremendously throughout the region.”

The builder’s remedy also presents an opportunity for developers. So far, the applications have all been filed in upscale areas, says Elmendorf, because the affordability requirements are based on area median income. Pricey cities offer better potential returns on investment.

Beverly Hills has been tasked by the state with planning for 3,104 units by 2029. So far, its attempts have been rejected by the state, opening the door for Pustilnikov’s builder’s remedy proposals. Mayor Julian Gold says that while the city will keep trying to come up with an acceptable housing element, he considers the goal unreasonable.

“I mean, does somebody really want us to increase our housing by half in eight years?” he asks. His math is based on Beverly Hills having an estimated 8,475 apartments by last count (not counting single-family homes). Gold says he and other city officials are tracking a court case involving Huntington Beach. In March, the state sued the city for being out of compliance with housing planning requirements. Huntington Beach sued right back over the number of housing units it was required to plan for, and the case is still working its way through federal court. Gold says the outcome could be a bellwether for cities like his.

Gold doesn’t view it as the city’s job to address greater LA’s housing crisis, or to make room for people priced out of the local housing market. 

“There is a lot of land in this state,” he says. “County land, state land, certainly the feds have land.” If the state really wants to build housing, he suggested, they should invest in building new communities on cheaper, publicly-owned land. But of course, government officials couldn’t force people to live there.

“You offer people an opportunity,” he says.

Correction 7/7/23: An earlier version of this story incorrectly stated that Newport Beach was sued by the state over its housing element. It is Huntington Beach, not Newport Beach. The story has been updated to reflect that.