Compare selling your land, building homes for sale, or holding rentals to evaluate your SB 79 opportunity after taxes.
Correction at 0:52: I said “up to 30 homes per acre.” Under SB 79, 30 dwelling units per acre is generally a minimum, not a maximum. A higher local minimum may apply. Permitted height and density depend on the qualifying transit stop, distance, and applicable local rules. An ordinary bus stop does not automatically qualify a property.
Measure ULA clarification (effective July 1, 2026): For taxable property transfers within the City of Los Angeles, ULA is 4% above $5.4 million and below $10.9 million, and 5.5% at $10.9 million or more. Thresholds change annually; verify the rules for your closing date.
California SB 79 could create redevelopment opportunities for property owners near qualifying transit. Stephen Morris of Advise RE explains how to evaluate your property’s eligibility and compare selling with developing.
Before accepting an offer or starting construction, consider:
• Whether your lot qualifies for SB 79 development opportunities.
• Whether to sell the land, build homes for sale, or hold rental housing.
• How dealer versus investor treatment affects your tax outcome.
• Potential Los Angeles Measure ULA tax exposure.
• Whether to partner with an experienced developer.
Contact Advise RE to discuss your property’s development options and tax considerations.
Educational information only, not tax or legal advice. Verify current SB 79 eligibility requirements and applicable Measure ULA thresholds before acting.
Transcript
[00:00] Everyone, Stephen Morris here with Advise RE. Today, we’re gonna talk about another exciting development in the state of California as it relates to the new law called SB 79. July 1 was the effective date, and the house that you live in might actually be worth less than the dirt right under it. Let me explain to you what that all entails. So what’s SB 79 in a nutshell?
[00:28] Well, it’s an override to local zoning. And so if you’re in like us, the city of Los Angeles, well, we’ve seen pretty restrictive zoning. Not really a lot that you can build in the city, especially since the vast majority of the city is covered in single family housing. This law now overrides that. You’re right in front of a train station, it doesn’t matter if you’re zoned single family, you can build a property up to nine stories right there in front of the train station.
[00:52] If you’re within half a mile of any sort of major public transit, bus stops, train stations, you can build up to five stories in height and up to 30 homes per acre. This is a big deal, and this opens up a lot of development opportunities that just weren’t available before. On top of that, California recently reformed CEQA, or the California Environmental Quality Act. This law used to be used by, well, folks who were anti development to basically drag out any property that was under development for a substantial period of time, thus pretty much putting a permanent roadblock in most projects, increasing the development cost in such a way that most developers are gonna walk away from it. Now with CEQA dramatically pared back, more projects can make it through the pipeline without these blockers that existed before.
[01:37] So you’re gonna see a lot of new projects start to come up, around public transit in major dense infill areas, Los Angeles being a major candidate for one. What does that mean for you homeowners? The very first thing I would do is try to determine whether or not you’re within half a mile or you probably know if you’re right in front of a train station and see what the property value is. Don’t be surprised if randomly some developer is gonna come up to you and offer you a fat check. Okay?
[02:02] And they want to buy your piece of dirt because they wanna put a lot of apartments on your property. This is a good thing. You’re about to have a huge windfall. One thing to consider, don’t forget our other video which we’ll link below about measured ULA. If the sale price of your property crushes that $5,400,000 threshold, you now have a 4% tax on top of the sale price.
[02:23] That’s a huge deal. Consider it, and there might be ways to structure around it. You can contact us or you can contact your attorney, and we can kind of figure out ways to help you figure that out. But just keep that in mind, especially if you’re sitting on an extremely valuable piece of dirt like right in front of the train station. Don’t be surprised if you’re getting multiple offers very quickly, if you haven’t already.
[02:44] The next consideration you might have is around, well, what if I do the development? I’m sitting on a valuable piece of dirt. Why don’t I make all the money? I gotta tell you, development’s not easy. Actually, I have a link here below on what it takes to become a developer.
[02:57] Not an easy endeavor. You really wanna do it and it’s always been in your plans, I highly encourage it, but this is not something you undertake casually. That all being said, if you’re gonna develop the property to build homes and sell them primarily, you’ve gotta consider the tax consideration. And that consideration is that if the properties are held for sale, you look like a dealer and therefore the gain on the sale of those homes would be subject to ordinary rates of up to 37%. You might be thinking, isn’t all real estate subject to a long term capital gains rate of 20%?
[03:29] Only if you held it as an investor. So you’ve gotta keep that in mind, dealer versus investor. Taking your property and subdividing the 10 single family homes and selling it off to public, probably gonna land you into the dealer category versus if you build an apartment building, hold it, eventually sell it, you’re probably looking more like an investor. We do talk about dealer versus investor in our other videos as well if that helps out. Kinda carrying on with the point about this strategy of developing it and holding it yourself, not a bad idea.
[03:58] I could actually strongly recommend it. If it’s your first project, however, you may wanna consider collaborating with an experienced developer. And by doing so, you’ll avoid a lot of the problems that first time developers face like underestimating cost, underestimating engineering, underestimating how long it’ll take to get to the city. All these type of problems can be mitigated by working with somebody who has a lot of experience. Of course, that means you’re gonna have to split the profit, but that generally may be a lot better strategy than you trying to figure it all out on your own.
[04:29] As generally speaking, construction, if done poorly, can actually be a huge financial burden on you, And we’d actually do talk about this in yet another one of our videos about how construction works, especially around construction litigation. Strongly, strongly, strongly recommend that if this is your first project, work with an experienced person. We offer this type of service as well, and we’re more than happy to help you figure this out. You can reach out to us and talk about it if development is in your future. So in short, two takeaways for you to consider as you’re evaluating your property.
[04:59] First thing I would do after this video is figure out whether or not you’re within half a mile of a public transit station and that your lot is subject to s b 79 exemption. If so, you have a very valuable piece of property and you may wanna start going through this math of selling it versus developing it yourself or developing it with a joint venture like an experienced developer. The next is the tax consideration. Never forget it. The tax rules haven’t changed.
[05:24] Only the zoning has. This dealer versus investor concept could dramatically change the tax outcome and fundamentally the math of what you’re considering to do. And so you know who to contact. We’re here to help you out with whether or you want to evaluate building the property and of course the tax considerations that flow from doing so. Thank you so much for watching and we look forward to seeing you in our next video.