Developer WS Communities Close To Builder’s Remedy Deal With Santa Monica

Nearly seven months ago, the Santa Monica-based WS Communities helped kick off a statewide mania — and a local panic — by filing more than a dozen builder’s remedy applications that totalled more than 4,500 units.

But now the developer is close to a comprehensive settlement deal with the city and could end up tabling all but one of its 14 applications. In exchange, the City of Santa Monica would provide additional incentives if WSC filed new project applications at the properties that fit the city’s recently adopted, more permissive zoning. The agreement would also settle unrelated litigation between the two parties, including allegations that WSC had violated tenant protection laws.

“It really is a good deal for both sides,” said Dave Rand, a land use attorney with Rand Paster Nelson who represents WSC. “Whenever there’s a settlement everyone says, ‘It’s a win-win’ … but in this case it actually, truly is, and the result is going to be a lot of new housing units at these properties that will get done faster and with more certainty.”

The deal is not in place yet, however. The outline for the agreement came after extensive talks between WSC and the city, and on Monday the city attorney sent a report to the city council recommending its approval. Council members are set to vote on the matter on May 9.

The seven-member council, who all lean left but often represent a range of views toward housing, have not publicly signaled how they plan to vote; one member, actor Phil Brock, who initially expressed outrage at some of the builder’s remedy applications but later urged a more collaborative approach, did not respond to a request for comment. Scott Walter, CEO of WSC, also did not immediately respond. (The firm is an affiliate of Neil Shekhter’s NMS Properties.)

The settlement also does not specify exactly how many units could be entitled if WSC opts to file new projects at the properties.

Entitlements for new projects the developer would file under the settlement deal — including for the controversially large 3030 Nebraska project — would become smaller, although the firm has not actually developed new plans yet, Rand said.

The deal is structured to allow the developer an option to pool the projects’ required affordable units into one project, a stipulation that can make building easier; it would also help the firm achieve state density bonus waivers and ease parking requirements.

The major benefit to WSC would be a streamlined, by-right approval process that is no longer subject to the California Environmental Quality Act, the signature state law that’s used to slow down or stop major development projects. Builder’s remedy projects, by contrast, are still subject to CEQA, and carry an additional level of risk for developers and investors because they remain legally untested, with numerous lawsuits and battles over the provision currently playing out around the state.

“The builder’s remedy — it’s big, it’s bold, it’s potentially significant in terms of the increased density that could be achieved,” said Rand. “But it’s not fast.”

The potential settlement was made possible by Santa Monica’s pivot toward density. Under state directives, the city faced an October 2021 deadline to update its Housing Element, the city document that outlines housing planning, to accommodate nearly 9,000 new units over eight years, a majority of which must be affordable.

By the fall of 2022, Santa Monica had failed to update its plan, which left it vulnerable to automatic entitlements and other penalties, but in October, soon after the applications were filed, councilmembers adopted a new Housing Element and subsequently received the state sign-off. The city has since taken steps to implement its new, more development-friendly planning, including with additional zoning amendments.

The settlement would effectively allow Santa Monica to regain control of the projects under the city’s own updated zoning rules.

“The overall result is that WS will utilize the Housing Element implementing ordinances with expedited processing rather than the Builder’s Remedy statute to develop housing,” Doug Sloan, the city attorney, wrote in his report to City Council, “and the housing built by the owners will satisfy a significant portion of the City’s regional housing needs.”

“The important takeaway is this is not La Cañada Flintridge,” added Rand, referring to the wealthy northern L.A. County city that’s now in an escalating battle with the state over builder’s remedy. “This is a city that is pro housing. It’s a city that took major steps to come into compliance … and so there was an opportunity to work with the city and get an outcome that is mutually beneficial.”

Not that all Santa Monicans are happy about the potential deal.

On May 8, the Santa Monica Coalition for a Livable City — a “slow-growth” group that has previously endorsed Brock and two other councilmembers — wrote its own letter to council urging it to reject the agreement. The deal has numerous “key deficiencies,” the letter says, including the lack of hard project numbers, the waiving of environmental reviews and information on the one builder’s remedy project that’s excluded from the deal, where WSC has filed for a 200-unit project.

“Absent this critical information the Council should not move forward,” it says. “It’s impossible to determine what the Council actually would be approving to be built — is it what was originally proposed or is it being modified?”

The letter also takes aim at “the well-known history of WSC’s predecessor” — Shekhter’s NMS Properties, which has been involved in various disputes with the city.

In another twist, WSC is also testing the market: Last month the firm listed some of the sites, including 3030 Nebraska Avenue, in a splashy new package dubbed “The Santa Monica Six.” The unpriced listing does not mention builder’s remedy but does claim entitlements through the city’s new zoning rules and state density bonus incentives, promoting project sizes that are similar to those outlined in the firm’s builder’s remedy applications.

“All 14 of those builder’s remedy projects — they are now vested in perpetuity,” Walter said last month. “But we anticipate people looking at alternatives to the builder’s remedy projects because the zoning code has now been updated.”