Los Angeles Business Journal

Small Plots Pull Lots of Attention

DEVELOPMENT: Lennar plans residences for urban infill areas. By Bethany Firnhaber Monday, September 2, 2013

The Melrose project will offer two floor plans: a 1,600-square-foot, two-bedroom and two-bathroom unit and a 1,900-square-foot, three bedroom and three-and-a-half bathroom unit. Homes at the Cahuenga development will range from 1,900 to 2,600 square feet and have similar bed and bath configurations as those on Melrose. Both projects will have second-story balconies and enclosed garages.

Janet Price, a spokeswoman for Lennar in Aliso Viejo, said the company is not preselling the two projects, preferring to begin marketing once construction nears completion in the spring.

Given the heated nature of the market, waiting also allows Lennar to lock in construction costs now and bet home prices will be even higher when they are ready for delivery next year.

Price didn’t think Lennar would have trouble finding buyers.

“Small-lot homes have become a niche option for buyers in Los Angeles, providing a townhome style of living with the benefits of single-family home ownership,” she said. “The L.A. housing market has a healthy buyer demand and we are looking forward to entering it.”

David Hurtado, a broker at Keller Williams Realty’s downtown L.A. office, said that with inventory low and demand rising he didn’t think developers will have a problem moving these types of units. He saw the sale of 14 similar units on Las Palmas Avenue in Hollywood over only two weekends earlier this year.

“I think (small-lot homes) can work anywhere in Los Angeles, but specifically in places like Hollywood and along the beaches where developers can draw buyers willing to spend $700,000 or $800,000,” he said.

Changing nature

While embraced by planners, small-lot urban infill projects have met resistance from neighbors in some pockets of the city.

The Atwater Village Neighborhood Council, for example, where bungalows and single-family homes abound, late last month voted against recommending a plan that called for three two-story residential buildings on a single lot, claiming the project would change the character of the area and encourage more high-density projects. While advisory, neighborhood council votes do send a message to both developers and members of the City Council.

Habibi said this sort of opposition was to be expected, but that developers that were prepared should be able to move through the approvals process.

However, City Councilman Tom LaBonge expressed support for the work Lennar is doing in Hollywood.

“I think these small-lot subdivisions are going to be the rage of the future,” he said.

Habibi said that when Los Angeles passed the small-lot ordinance eight years ago, it attracted the attention of homebuilders who traditionally work with large-scale suburban developments and are eager to get a foothold in urban areas.

The small-lot single-family homes, he said, make economic sense and are more familiar to these builders than towering multifamily and condominium projects.

“In a place like Hollywood, it’s not easy to build single-family detached homes like you would in Calabasas, so a lot of homebuilders have turned to building these small-lot subdivisions,” he said.

But, he added, it takes a different set of skills to develop high-density urban infill projects than it does to build full-lot single-family communities.

“It’s just a different type of construction, so like anything else, if you’re not a specialist in it, you come in at a higher price with a longer timeframe, and that diminishes your return,” he said. “It remains to be seen how successful Lennar and these other big homebuilders will be.”

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