Note: This story was published on BeverlyHillsCourier.com on Sept. 8 and has been updated in part.
On the surface, the parallels between Beverly Hills and Redondo Beach may not spring readily to mind. The bustling beach city in the South Bay conjures up images of an iconic pier, beach volleyball, “Baywatch” and the aerospace industry. Its population is more than double that of Beverly Hills.
Redondo Beach does share something in common with Beverly Hills on the land use planning front, however. Both cities are engaged in litigation with the real estate investor-developer, Leo Pustilnikov.
Pustilnikov, whose real estate ventures in the Southland are substantial, has become a high-profile figure in the Builder’s Remedy arena. That concept is part of the Housing Accountability Act (HAA) and requires cities to approve development projects even if they don’t comply with local zoning laws, so long as preliminary applications were filed while the city lacked a certified state Housing Element.
The current Housing Element cycle began in October 2021 and extends through October 2029. October 2021 was also the deadline for cities and counties to have their Housing Elements adopted by the state. Although Beverly Hills did submit its original Housing Element in 2021, it was not approved until 2024. In the interim, the city’s plan to create capacity for more than 3,000 state-mandated units was rejected and revised three additional times before the California Department of Housing and Community Development (HCD) agreed to certify it.
While city staff and officials were engaging in the three-year back-and-forth with HCD, Pustilnikov and others exercised their statutory right to submit Builder’s Remedy project applications. In total, more than a dozen were filed (five by Pustilnikov) and still considered active. A handful are now in various stages of litigation, with Pustilnikov securing a major win recently.
On Aug. 12, Los Angeles Superior Court Judge Curtis A. Kin issued a writ of mandate ordering Beverly Hills to process the application for Pustilnikov’s Builder’s Remedy project at 125-129 S. Linden Drive.
A Pustilnikov case in Redondo Beach may also raise concern.
The Second District Court of Appeal has issued a tentative ruling in a case Pustilnikov brought against the city of Redondo Beach. If the tentative remains unchanged (and there are no signs that it will change), the ruling is expected to become final in the next month. It will likely invalidate the entire Housing Element passed by the Redondo Beach City Council and certified by the HCD.
It is a feat that Pustilnikov believes he can duplicate in Beverly Hills.
Last week, in his first-ever comprehensive interview, Pustilnikov spoke to the Courier about the state of play for his Linden Drive project, what he’s prepared to do to get housing built in Beverly Hills and how he became synonymous with Builder’s Remedy (though it is but a small part of his endeavors).
For Pustilnikov, it’s about housing.
As he explained to the Courier, “With Linden, it started as a project that I think is needed in Beverly Hills. And when you talk to people that are my age or younger, their struggle is being able to afford living in Beverly Hills. And a lot of people move out of Beverly Hills because they can’t afford to live here. That’s a problem if you can’t build units. How do you accommodate for growing families? How do you accommodate for growth?”
As Pustilnikov sees it, Beverly Hills is woefully short of leverage now when it comes to ongoing Builder’s Remedy battles with him
or other developers. In his words, the city is “at the end of its rope,” but he still hopes to work things out.
He also said that the more time goes by, the more complicated the situation becomes. If time is money, it is also a stack of building blocks piling atop each other against a ticking clock. When Pustilnikov announced at the end of August that the previous 19-story Linden Drive project had now expanded to 36, few were surprised.
“I have a number of Builder’s Remedy projects in Beverly Hills. And the more that they make it difficult to process anything, the more I need to make back my investment,” he explained.
He justified the additional stories with an economies of scale argument.
“You have to realize since I started, we’ve had increases in costs of development. We’ve had parts of the cities around us destroyed. I lived in the Palisades; my home is no more. So, construction costs continue to go up. We have this ongoing debate with tariffs and what’s going to happen with steel, what’s going to happen with other raw materials like copper. And so, the longer it takes, it seems like the more expensive it’s going to get. Well, if you’re building 10 stories or 20 stories, the land only costs you once. You’re doing the same process over and over, so you’re able to have cost savings,” he said.
He did add a caveat.
“The 36 stories is under the assumption that I have to keep fighting the city. That’s the project I need to build to make it viable. If the city works with me, we could maybe do something not quite as large. It’s just you need a constructive partner in anything you do. And absent that, you’re left to your own devices.”
Those devices include a repeat of what he appears to have accomplished in Redondo Beach.
“I have a fairly good track record in the courts,” he explained.
“The only other jurisdiction I’m familiar with that likes to think that the law doesn’t apply to them is Redondo. And recently I invalidated Redondo’s Housing Element,” he said.
“So now Builder’s Remedy is going to apply all over Redondo a second time. And if Beverly Hills chooses not to work with me, I wouldn’t rule that out for Beverly Hills either. And so, if they’re not happy with the 12 or so Builder’s Remedies, they might end up with a lot more than that,” said Pustilnikov.
He also made the observation that the city (for reasons he would only share off the record) is perhaps a bit in denial about its relative bargaining position or lack thereof.
“I don’t know, but if I were a gambling man, and I gamble on real estate, so I essentially am a gambling man in that regard. I don’t think the city has gotten its arms around what it’s facing or what it could face because there’s one thing to deny my projects and continue fighting. If they appeal [the writ], there would be a bond hearing. The bond hearing would essentially necessitate the city to post such a large bond that, I would venture to say, it becomes insolvent.”
He noted that a $14 million bond was recently required in a La Canada-Flintridge case involving a project much smaller than Linden Drive. The court in that case considered the costs of delay of the project in calculating the amount of the bond.
While the bond amount is in the court’s discretion, the requirement of a bond is not. The HAA specifically spells out the need to post a bond “to the benefit of the plaintiff if the plaintiff is the project applicant.” Moreover, the HCD has stated in an opinion letter on this topic that in fixing the bond amount, the court shall “afford the fullest possible weight to the interest of, and the approval and provision of, housing.”
As for what comes next for Linden Drive, the matter was listed on the City Council Closed Session Agenda of Sept. 9, but was continued, presumably to Sept. 16.
“[Beverly Hills] could try to delay it, could try to fight it, it could throw money at the problem, but in the end, it’s making the problem worse, especially since I think I’ve made it clear to the city, to the extent they fight the project any longer, all the other projects will get bigger,” said Pustilnikov.
He also reiterated that he is prepared to attack the city’s Housing Element.
“I’ll fight their Housing Element as not being sufficient. And if their Housing Element is deemed insufficient by the courts, which I’ve already done once to another city, now it opens up a whole other can of worms. Then let the city fight every other guy that wants to propose a Builder’s Remedy,” he said.
Indeed, the picture Pustilnikov is painting is one in which “the entire city will be rebuilt because no one’s going to miss the opportunity to jump on it” should the city once again lack a compliant Housing Element.
Pustilnikov, a favorite subject of real estate publications, didn’t set out to become the poster boy for Builder’s Remedy. But he is rightfully considered a pioneer who took a chance on an untested area of the law. Though not an attorney, he is an expert on the Builder’s Remedy provisions of state housing laws.
“It is actually funny, because even most attorneys don’t know the nuances of what goes into this,” said Pustilnikov.
“When I started this, it was unknown law,” Pustilnikov recalled. He credited two attorneys, Matt Gelfand of the nonprofit Californians for Homeownership and land use attorney Dave Rand, as his guiding lights.
“What happened is I read about some of Matt’s lawsuits on the Housing Element, and I called him because I was intrigued. I’ve seen different practitioners sue under the Housing Accountability Act [in the Government Code], and I thought it might have some benefit to me. So, I called Matt, and we had a discussion. He’s like, ‘I don’t see why anyone doesn’t do Builder’s Remedy.’ And we hung up, and I’m like, what the hell is Builder’s Remedy?”
Pustilnikov then proceeded to scour the Government Code and started asking his own attorneys to file projects under the Builder’s Remedy statutes in cities lacking certified Housing Elements.
“Every attorney I called and many with whom I’d worked for decades said, ‘You are out of your mind. You can’t do this. You can’t believe it works.’ And then I met Dave Rand, and I realized he’s absolutely the best practitioner of real estate law I’ve ever met. Dave actually agreed with me. But he wanted something from verifying it. So, I submitted my Builder’s Remedy. Dave submitted his first ones. I guess we were both independently right on the law. And since then, we’ve had AB 1893, AB 130, no shortage of legislation, essentially taking it from an unknown stepchild to a very easily understood and required law, the prescriptive law that cities have to abide by,” said Pustilnikov.
He pointed out that the consequences of not abiding by that law can be expensive. Beverly Hills is liable for Pustilnikov’s attorney’s fees in the Linden Drive writ case in addition to its own attorney’s fees. The attorneys for Beverly Hills in the writ case also represented Redondo Beach in the case that was reversed on appeal.
Pustilnikov said Linden Drive will now be resubmitted to the city and processed. He maintains a core belief that the development is a sensible one that will bring critical housing.
He also noted, “Linden is also unique in that it’ll be the only one that’ll have a hotel component because it is a great part of town. It’s right by the Triangle. It’s very walkable. You have restaurants nearby. You have Steak 48 that opened. It used to be a retail dead zone. You have a lot of new openings on Wilshire, and it’s becoming this walkable street that I think was envisioned 60 years ago.”
He believes that the project will enhance the connection among the city, One Beverly Hills, the Metro and Saks development.
“I’m hopeful that the city will see that and become less resistant because I would like to work with them and see these projects be built rather than be fought over in the courts,” he said.
Out of his four additional pending Builder’s Remedy projects, Pustilnikov says one of them, at 346 N. Maple Drive, is being contemplated for expansion. The property is next door to the Beverly Hills Tennis Club.
“So, Maple will be a larger project, and then depending on how the city works through the next few weeks, the appeal, the processing and so forth, the others might grow and there might be more coming if they continue to be resistant,” he said.
Looking back on how Linden Drive has unfolded, Pustilnikov believes that the city made a miscalculation in not working with him early on, before he submitted his other projects.
“The city had the opportunity of just working with me on Linden and me helping them get a certified housing element as someone that is fairly well-versed in housing these days. But they chose to fight. So, if they choose to fight again, well I don’t envy them,” he said.
In addition to an obvious tenacity and willingness to try novel arguments, Pustilnikov is driven by a basic belief that he returned to in our conversation.
“At the end of the day, I like real estate and residential real estate because everyone needs to be housed. I’m a firm believer that housing is as close to the universal right as we have, and that people shouldn’t be left to suffer on the streets,” he said.
Pustilnikov, who is not yet 40, notes that his background as an immigrant from Odessa (he came here as a young child) has also shaped him.
“You have to realize even though I was born in what was then the USSR, what is now Ukraine, my nationality when I lived there was neither Russian nor Ukrainian. It was Jewish. So even there I was separated, and even there we were discriminated against. We were a minority. So here you have the same issues where people that have try to say, ‘You know what? You can’t do this here because this is ours and not yours.’ I grew up with that, and now I have an opportunity to fight it. And my philosophy is, if I’m not going to do it, I don’t know how many others will.”
