Why Are L.A.’s Leaders Fighting State Law Incentivizing Transit-Oriented Housing?

When California Gov. Gavin Newsom signed a landmark housing bill last fall allowing upzoning near mass transit, supporters hailed it as a “YIMBY Holy Grail.”

Advocates for more apartment construction celebrated Senate Bill 79. This long-in-the-works victory would help override restrictive municipal zoning rules and to start to close the state’s yawning housing gap, and eventually help address its chronic homelessness problem.

In typical Los Angeles fashion, the hailed solution hasn’t just led to a backlash — it’s birthed local lawmaker opposition and a sense that no good legislation goes unpunished. In a year when housing will become a focal point of the city’s mayoral race, L.A. City Hall has pushed to stifle this law’s implementation, underscoring the continuing struggles the city faces to get out of its own way and jumpstart much-needed construction.

“The deeper principle is, once again, L.A. is looking not just for the bare minimum, but the bare minimum of the bare minimum, saying this is the best we can do,” said Matthew Lewis, director of communications for California YIMBY, a housing advocacy group that backed the law. “It’s a sign of the completely failed leadership from City Hall on housing — again.”

SB 79 incentivizes housing projects within a half-mile of a rail or a bus rapid transit stop in eight urban counties in California regardless of local zoning. The law permits 80 units per acre and up to six stories a half mile away from transit; and up to 160 units per acre on nine stories on sites directly adjacent to public transit stops.

But, when SB 79 was signed last October, the final maps hadn’t been drawn. Regional groups, like the Southern California Association of Governments, and municipalities would finalize maps, with the option to submit optional zoning plans.

With L.A.’s longtime aversion to relinquish discretion of development, Mayor Karen Bass and members of the City Council campaigned against SB 79’s passage, citing local precedent.

“The City of Los Angeles has a strong interest in maintaining, what little remains, of local control over land use and zoning laws to best serve the needs of its residents, ensure community input, and protect the unique character of its neighborhoods while still complying with state housing needs,” read an approved resolution against SB 79.

The L.A. City Council then passed a bill to delay the implementation of the law, taking advantage of a provision allowing such wiggle room. Championed by Councilmember Bob Blumenfield, the measure would allow for buildings with just four to 16 units, capped at four stories, in 55 areas clustered in Central L.A., West L.A., the Eastside and the San Fernando Valley.

“You might think that SB 79 would be something where developers would be coming up with a plan to be ready to go as soon as it came through,” said Gary Benjamin, founder and principal of Alchemy Planning + Land Use, a local consulting firm. “But I have not seen that, just because of the degree of uncertainty.”

As the ultimate rollout, regulations and impact of SB 79 slowly take shape, the housing numbers for the L.A. region continue to get worse.

The county lost 54,000 residents last year due to a combination of immigration restrictions and outmigration, and the city’s creative economy, buoyed by film and television production, has been hammered. A recent report found the state lost 14 percent of such jobs between 2022 and 2025, or 114,000 positions.

The 88 cities of L.A. County, which face a shortage of roughly 485,000 affordable units, need to add 101,500 housing units a year to hit state-mandated goals; in 2024, they built just 28,453 (2025 data isn’t out yet).

The picture in the City of L.A. is even more dire: The city issued only 8,703 residential permits in 2024, which inched up to 8,714 total last year. The pace, far below production 10 years ago, simply isn’t meeting demand. 

Even existing city efforts to jump-start more apartment creation — the city recently expanded the successful adaptive reuse ordinance, which has brought thousands of new units  — haven’t been able to meaningfully shrink the housing shortage. The 2025 implementation of CHIP — the Citywide Housing Incentive Program, an effort to upzone around transit hubs — excluded neighborhoods zoned single-family, and as early analysis spelled out, would concentrate development in areas where mixed-use development was unfeasible and ultimately struggle to help achieve the city’s housing goals. (“​​City Hall is running scared of the HOAs when they should be running scared of the voters who are freaking out about housing costs,” Lewis said about what he sees as a homeowner-focused approach.)

Many developers have chastised Measure ULA, the so-called “mansion tax” enacted in April 2023, as a massive impediment to new multifamily, since a transfer tax it imposes in the service of funding affordable housing applies to all property sales over $5.3 million, including a 5.5 percent tax on buildings over $10.6 million, which impact more multifamily buildings. Measure ULA has generated more than $1 billion as of this year.

Benjamin understands the issue with Measure ULA; that tax can cut a sales margin in half. But he sees the larger issue as the way it just adds to other uncertainties and piles on additional costs. Construction material and labor costs and regulatory burdens in L.A. are relatively close to what’s seen across high-cost California markets, including San Francisco, which is seeing an AI-fueled rebirth in the apartment market.

But add in that additional ULA fee, and the roughly 15 percent drop in average overall rents from the start of the year, and it becomes harder for builders to commit. Benjamin said he’s also seeing projects that already were OK’d get stuck in development purgatory because of these new challenges to financing and returns. If, say, the Hollywood job losses accelerate, that may soften rent further and make developers rethink their financial projections for certain markets and neighborhoods in the city.

“It’s pretty widely accepted at the moment that the biggest obstacle to development in Los Angeles is actually high interest rates and the capital markets,” said Joshua Baum, founding principal of Hilgard Economics.

It’s important to note that developers aren’t totally scared of Southern California as they are the City of L.A. Spencer Kallick, a land use law specialist and partner at law firm Allen Matkins, said he’s working on multiple projects in West Hollywood, Beverly Hills, Santa Monica and Culver City, municipalities in the center of Los Angeles County that have different planning and regulatory regimes.

Culver City, a municipality of about 40,000, has a residential pipeline of nearly 4,500 units, which Kalick attributes in part to forward-thinking zoning and city leadership pushing to approve and develop.

“I am seeing large-scale projects move forward,” said Kallick. “It’s very much deal and site specific, but deals are moving forward.”

High borrowing costs, labor issues, and regulatory uncertainty — especially regarding long permitting timelines — remain key issues that would need to be addressed to make noticeable progress. To get a sense of how costs and financing remain a significant burden, the City of LA released a notice announcing $378 million of ULA funding would go toward affordable housing; at current costs, that would only result in 450 to 500 units. 

In addition, the discretionary entitlement and environmental review process in L.A. can delay projects for many years, said Kallick. That’s a whole real estate cycle, and the difference between a project being built or sitting on the shelf.

There’s simply no silver bullet to alleviate the city’s multifaceted multifamily slowdown.

Regulatory uncertainty also damages new projects, said Benjamin. He sees it as a consistent ratcheting up of limitations. First, measure ULA makes it harder to earn a return on multifamily property sales, then rent stabilization rules — Mayor Bass signed a 4 percent rent cap for rent-stabilized units in December — increase the requirements for adding stabilized units to demo-and-rebuild projects. That requirement then made it harder for the city’s CHIPs program to succeed, and underscores the tensions inherent in L.A. housing policy, namely that in the renter-majority city, tenant protections are a significant and important issue.

“This uncertainty causes people to say, ‘I kind of see the direction where things are headed, so is this really a place I want to be invested in for the next several decades?’” said Benjamin.

The city’s mayoral race will likely center on housing, affordability and homelessness. Bass, the beleaguered incumbent, will face a handful of challenges including Councilmember Nithya Raman, a former urban planner championed by pro-housing groups for her advocacy for reform, including permitting reforms and a measure to delay ULA taxes on multifamily projects for 15 years. Lewis said she “stamped out some serious turf around being the standout voice” around housing reform.

SB 79, and the fight over its implementation, has produced significant change; as California YIMBY’s Lewis pointed out, it did push the city to upzone dozens of neighborhoods. But it remains to be seen how quickly this change will ignite the building boom the city needs.  Baum believes things can change quickly. There’s a concerted effort to attract more film production, and there’s lots of housing proposals and clean-up bills in the state legislature. But he does feel like things have hit a low point.

“It all just compounds, and eventually development doesn’t pencil,” said Baum. “The math has to math, and at some point development just gets broken. I think that’s where we are now.”