For any developer working in Los Angeles, the landscape of regulations can feel like a complex, ever-shifting puzzle. However, within that complexity lies immense opportunity. The most significant new tool provided by the city is the Citywide Housing Incentive Program (CHIP), a key part of the 2021-2029 Housing Element Rezoning Program.

At Xtraunit, we don’t just build; we partner with developers to navigate this landscape and maximize the potential of their projects. Understanding CHIP isn’t just about compliance—it’s about unlocking a new level of density and feasibility for your next development. This guide is designed to break down what you need to know.

What is CHIP?

At its core, CHIP is a program designed to incentivize the construction of affordable housing throughout Los Angeles. It replaces the patchwork of older programs (like TOC, Tier 1) with a single, streamlined citywide ordinance. Its goal is to encourage private developers to build mixed-income housing, especially in areas rich with resources and access to transit.

By providing a set percentage of affordable units in a new development, developers gain access to powerful incentives, including significant increases in allowable density, height, and floor area, as well as reductions in standard zoning requirements.

How CHIP Works: The Tier System

CHIP is not a one-size-fits-all program. It uses a tiered system based on a project’s location relative to transit and the level of affordability provided. The more you give, the more you get.

Base Incentives vs. Tiers 1-4

• Base Incentives: All projects that provide a minimum number of affordable units receive a “base” menu of incentives to choose from, such as reduced setbacks or modified open space requirements.
• Tiered Incentives: The real power of CHIP lies in its four-tier system. To qualify for a tier, a project must be located within a specific distance of a major transit stop. The higher the tier, the more powerful the incentives.

Here’s a simplified breakdown:

• Tier 1 & 2: These tiers offer substantial incentives for projects near high-frequency bus lines and other transit options. They provide significant increases in density and floor-area ratio (FAR).
• Tier 3: This tier is often the sweet spot for many developers. For projects located within roughly a half-mile of a major rail station or the intersection of two major bus rapid transit (BRT) lines, developers can achieve major density bonuses—often up to 70-80% more units than the base zoning allows.
• Tier 4: This is the most powerful tier, reserved for 100% affordable housing projects. It provides the maximum possible incentives, allowing non-profit and for-profit affordable developers to create deeply needed housing with streamlined approvals.

The Strategic Advantage for Developers

Understanding and utilizing CHIP is a strategic imperative, not an afterthought. For a savvy developer, it means:

1. Unlocking Underutilized Land: CHIP can make projects feasible on lots that would have been too small or restrictive under old zoning rules. A site that once penciled out for 10 units might now accommodate 17 or 18 with the right CHIP strategy.
2. Increased Profitability: While providing affordable units has a cost, the value gained from the additional market-rate units often far outweighs it. More units mean more revenue and a higher overall asset value.
3. Predictability in Entitlements: Unlike a lengthy zone change or variance process, the CHIP incentives are granted “by-right.” This means if your project meets the specified criteria, you are entitled to the incentives, which dramatically reduces entitlement risk and shortens the pre-construction timeline.

How Xtraunit Navigates CHIP for You

The rules of CHIP are detailed and nuanced. Successfully leveraging the program requires a partner who understands it from both a design and a construction perspective. That’s where Xtraunit provides unmatched value.

• Feasibility & Analysis: Before you even acquire a property, our team can perform a detailed analysis to determine its CHIP potential. We’ll model out different scenarios to show you the maximum density you can achieve and what the financial return looks like.
• Integrated Design: Our in-house architectural and engineering teams design your project from day one to meet the CHIP requirements. We don’t just add affordable units; we integrate them thoughtfully into a cohesive, efficient, and attractive building design.
• Permitting & Agency Coordination: We manage the entire entitlement process with LADBS, preparing all necessary documentation to ensure your project qualifies for the desired CHIP tier. Our expertise minimizes plan check corrections and accelerates the path to an RTI permit.
• Efficient Construction: As a design-build firm, our deep understanding of the project’s design and financial structure allows us to build it with maximum efficiency, ensuring the cost-savings and value engineered into the plans are fully realized during construction.

CHIP is more than a regulation; it’s a new blueprint for development in Los Angeles. Partner with a team that knows how to read it.

Ready to see what CHIP can do for your next project?

Contact us for a free property analysis and let our experts show you how to unlock its true potential.