Posted July 2026 | Updated October 21, 2026 | By Eric Engelbert | Updated as the plan progresses.
Updated October 21, 2026 with a table of every Housing Element site, the July 2026 pause of the Downtown Specific Plan environmental review, and the income mix at 340 St. Ann's Drive.
Laguna Beach is not a typical Orange County city facing a typical housing problem. It is a small coastal art colony with seven miles of Pacific oceanfront, 27 beaches and coves, surrounded by steep canyons and more than 23,000 acres of permanently preserved open space. The galleries on Forest Avenue have operated for over a century. The Festival of Arts has run continuously since 1932. People pay $3 million and more for homes here specifically because the city looks and feels the way it does, and because decades of deliberate preservation decisions have kept it that way.
California does not particularly care about any of that. The state's 6th Cycle Housing Element mandate requires Laguna Beach to plan for 394 new housing units by 2029, including 198 units for extremely low, very low, and low-income households. The city must identify real sites, rezone them if necessary, and remove barriers to development. The ocean still blocks the west. The canyons still block every other direction. The Coastal Commission still has jurisdiction over most of the city. And the residents who chose Laguna Beach precisely for its character are organized, vocal, and unwilling to watch it change without a fight.
This is not a story about affordability for the people who already live here. Nobody moves to Laguna Beach expecting to find cheap housing, and the people who work in the restaurants and hotels have never expected to live here. They commute in from surrounding communities. This is a story about what happens when the state tells a carefully preserved coastal city to pack in more properties where they simply do not fit.
The Closest Comparison Is Carmel-by-the-Sea. And Carmel Has the Same Problem.
If you want to understand what Laguna Beach is dealing with, look 400 miles north to Carmel-by-the-Sea. The similarities are striking. Both are small artistic Pacific coastal cities that have drawn painters, writers, photographers, and architects for over a century. Both are defined by their natural beauty, walkable village cores, and a carefully maintained aesthetic that distinguishes them from every other California city around them. Both attract wealthy buyers who pay a significant premium specifically for the way the city looks and feels. Neither houses its own workforce. The hotel staff, restaurant workers, and shop employees in both cities live somewhere else and drive in.
Carmel's 6th Cycle RHNA allocation is 349 units. Laguna Beach's is 394. The two numbers are almost identical. Carmel's previous cycle required only 31 units. The jump from 31 to 349 hit Carmel like Laguna Beach's mandate hit Laguna Beach: a sudden, dramatic state demand on a city with virtually no land to absorb it.
The Carmel Residents Association has documented the conflict between state requirements and the city's 1929 ordinance, which established the city's residential character and specifically directed that Carmel should subordinate other activities to preserve its unique nature. HCD found Carmel's Housing Element in substantial compliance in April 2024. The city then began working on an amendment to remove housing sites at the Sunset Center and Vista Lobos properties that residents considered incompatible with the city's character. The draft amendment went to HCD in November 2025, and HCD sent back a comment letter in January 2026. The amended element went to HCD again on March 27, 2026, just after Carmel's own mayor wrote to the state urging it to reject the amendment, a move that stunned many residents. Carmel's City Council had adoption of the amendment on its agenda in early July 2026, and the final outcome had not been confirmed at the time of this update.
Laguna Beach is fighting the same fight with essentially the same number, the same constraints, and the same deeply held community conviction that the character of the place is worth protecting.
The Geography: Why 394 Units Is Not a Simple Ask
To understand the mandate's difficulty, you have to understand Laguna Beach's physical situation. The city is not a grid of blocks waiting to be rezoned. It is a narrow coastal settlement squeezed between the ocean and the canyon ridgelines of the Santa Ana Mountains, with permanently preserved open space on three sides and federal coastal regulations on the fourth.
The Open Space Boundary
Laguna Beach and surrounding agencies have preserved more than 23,000 acres of open space through a combination of city purchase, conservation easements, county acquisitions, and state land designations. This is one of the most extensive land preservation programs of any small California city, and it is both a genuine environmental achievement and an absolute barrier to outward growth. The ridgelines above the city are not zoned residential. They are not available. The city's boundaries are effectively fixed.
The Coastal Commission Layer
A large portion of Laguna Beach falls within the California Coastal Zone. Any development project within that zone requires a Coastal Development Permit in addition to all local approvals. That process adds cost, time, and genuine uncertainty. Projects must demonstrate they do not harm coastal access, views, habitat, or water quality. The Commission has broad authority to modify or deny projects it finds inconsistent with the Coastal Act. This is not a rubber stamp. It is a second full approval process that many developers in less constrained markets would simply not bother with.
What Is Actually Left Inside the City
Within the existing city limits, Laguna Beach is already developed. The downtown core is low-rise commercial and mixed-use, most of which is occupied. Residential neighborhoods are single-family homes on lots that range from small to steep. There is no former industrial district to rezone. There is no vacant big-box retail site. There is no surplus land the city has been holding in reserve. There are individual lots, underutilized commercial buildings, and a handful of sites where a second unit or a floor of apartments above a shop might be feasible. That is the entire toolkit the city has to work with. Even new for-sale construction tends to happen one lot at a time, mostly teardown rebuilds in neighborhoods like Woods Cove, North Laguna, Temple Hills, and Top of the World, rather than in new subdivisions.
What the City Is Actually Planning
Given these constraints, Laguna Beach's Housing Element relies on strategies that work at the parcel level rather than the block or district level. None of them involve tearing down what exists and starting over. All of them involve finding small amounts of capacity in places that already have buildings on them.
Accessory Dwelling Units
State law has significantly loosened the rules around adding secondary units to existing residential properties. A converted garage, a detached backyard cottage, or a junior unit within the primary home all count toward the housing total. In a city full of large hillside lots with existing structures, ADUs represent the path of least resistance: they add units without visible density change and require no site assembly. The challenge is that actual ADU production depends on individual homeowner decisions, which the city cannot mandate or predict with precision.
Residential Above Commercial Downtown
The city is working to allow and encourage residential units above ground-floor commercial in the downtown core. Phase II of the Downtown Specific Plan update is the main vehicle. In July 2026 the City Council paused its environmental review and narrowed the effort to targeted amendments, starting with Arts District housing rules. The broader plan that was studied would change building height limits, maximum residential density, lot merger rules, and parking requirements, with new allowances for second and third floor additions and for merging parcels to make affordable projects workable. Mayor Alex Rounaghi has said the update is needed to keep the city on track with its housing element, and has pointed to areas near The Hive as places where three-story housing could work without changing the character of downtown. He has also warned that falling short of the housing element could expose the city to the builder's remedy. The economics are marginal in Laguna Beach, where coastal permitting costs and long approval timelines make small residential projects expensive to build, and the final rules have not yet been adopted.
SB 9 Lot Splits
State law SB 9, effective 2022, allows qualifying single-family lots to be split into two parcels with up to two units each, theoretically enabling four units where one house stood. In a city with expensive lots, SB 9 can make financial sense. Uptake has been limited statewide, and Laguna Beach is no exception, because the permitting requirements and site constraints filter out many lots that might otherwise qualify.
The Neighborhood Congregational Church Project at 340 St. Ann's Drive
Full details: see our 340 St. Ann's Drive affordable apartments post for income levels, rents, financing, and how to apply.
The most important site in the housing element is not a commercial building or a vacant parcel. It is the Neighborhood Congregational Church at 340 St. Ann's Drive, one of four sites the city has identified for potential new affordable housing. Working with developer Related California, the church is replacing its parking lot and former parsonage with a three-story, 30,690-square-foot building holding 28 deed-restricted affordable apartments plus one manager's unit, with a 41-stall parking garage. Earlier versions of the plan were larger. The church says the project was scaled back after community feedback and a 44 percent cut in federal affordable housing funding.
The project has moved quickly through the approval process this year. The Planning Commission unanimously approved the design review and coastal permit on June 3, 2026, using a 2023 state law that streamlines affordable housing on land owned by faith institutions. The City Council approved the required lot merger and coastal permit in July, and on July 15 it voted unanimously to commit about $6.71 million in funding, a package that includes a $2.5 million state grant, a $2.5 million city match, fee waivers, and a reduced city gap loan. The city attorney reminded the council that the housing element contains enforceable programs, and that failing to produce affordable units has consequences for the city.
The remaining hurdle is financing. The project depends on state and federal tax credits, and the application deadline was July 21, 2026, with the next opportunity not until April 2027. Earlier reports said construction could begin as early as December 2026 if everything lined up, but as of October 2026 I could not confirm whether the tax credit application was awarded. Of the 28 affordable apartments, 9 are planned for extremely low-income, 3 for very low-income, and 16 for low-income households, with affordability for 55 years. The units carry a preference for people who work in Laguna Beach, including local workers, seniors, artists, and families. It would be the first 100 percent affordable development built in Laguna Beach in more than two decades.
Where the Homes Could Go: The Housing Element Sites
The city's certified Housing Element counts on a short list of specific sites, plus about 120 ADUs over eight years. Here is each site and what we know about it as of October 2026:
| Site | Plan in the Housing Element | Status (Oct 2026) |
|---|---|---|
| 340 St. Ann's Drive (Neighborhood Congregational Church) | About 31 lower-income homes | Approved June 2026: 28 affordable apartments plus a manager unit by Related California; city committed about $6.71M in July 2026; awaiting tax credits |
| 21632 Wesley Drive (Laguna Beach Methodist Church parking lot) | About 30 low-income homes, 100% affordable | Identified site; no project announced |
| 31778 Sunset Avenue (vacant lot across from Providence Mission Hospital) | About 68 homes (49 low, 19 moderate) | Identified site; hospital requested inclusion; no project announced |
| 305 to 397 N. Coast Highway (seven commercial parcels, one owner) | About 37 homes (10 low, 27 moderate); owner interested in senior affordable housing | Identified site; no project announced |
| 350 Artisan Drive (Artisan Laguna Beach apartments, El Toro Road) | Owner proposed up to 147 more apartments, with 37 lower-income | Concept submitted in 2021; no application announced |
| 770 Hillcrest Drive (near Boat Canyon) | 13 condominiums added to an existing complex, 4 low-income | In entitlement review at adoption; status unconfirmed |
| Accessory dwelling units | About 120 ADUs over eight years | Ongoing; dozens of ADU permits issued each year |
The Housing Element also points to ArtLofts at 20412 Laguna Canyon Road, a 28-unit artist work/live project approved at about 52 homes per acre, as proof that this kind of density can work in Laguna Beach. It is now open and leasing. Read more in our Laguna Canyon artist lofts post. Separately, the city loaned $8 million to the Laguna Beach Community Land Trust in early 2026 to preserve 25 artist live-work units at 2307 and 2535 Laguna Canyon Road, and earlier studied three public sites for affordable housing: the Vista Aliso senior community on Wesley Drive, the school district bus yard at 2003 Laguna Canyon Road (about 68 homes), and a downtown parking lot on Ocean Avenue.
| Laguna Beach RHNA (2021-2029) | Homes |
|---|---|
| Very low income | 118 |
| Low income | 80 |
| Moderate income | 79 |
| Above moderate | 117 |
| Total | 394 |
The Resident Pushback: Protecting What They Paid For
The residents pushing back on housing mandates in Laguna Beach are not doing so because they dislike housing in general. They are doing so because they paid $3 million or more for a home in a city that has been deliberately preserved, and they are watching the state try to change the rules after the fact. The argument is not that housing is bad. It is that Laguna Beach is a specific kind of place, that its specific character is why they are there, and that the state's mandate threatens to change that character in ways that cannot easily be undone.
Measure Q and the Ballot Strategy
In November 2022, Laguna Beach voters decided Measure Q, a resident-backed initiative from the group Laguna Residents First. It would have created an overlay zone covering property within 750 feet of Coast Highway and Laguna Canyon Road and required a public vote for any major development there, with major projects defined by factors such as height, floor area, and added traffic. Projects made up entirely of low-income housing were exempt. The city council opposed it, and voters rejected it by roughly 65 to 35 percent. A companion measure targeting hotel development lost by an even wider margin. The result suggested that most voters believed the city's existing review process was enough.
Ordinance 1675
While Measure Q was heading to the ballot, the City Council adopted Ordinance 1675 in August 2022 on a 3 to 2 vote. It was an alternative set of standards for large-scale development, meant to give voters a different option. After public outcry, the council voted 3 to 0 in 2024 to repeal it. The episode showed both sides of the pressure the city faces: residents who want tighter control over development, and a state government with real enforcement tools for cities that fall out of compliance.
Why a Ballot Measure Cannot Stop the State
Measure Q was aimed at commercial development, not at the housing element, and it failed. But the larger question hangs over every city in this position: can residents use the ballot box to block state-mandated housing? The clearest precedent comes from Encinitas, a coastal San Diego County city with a similar profile: wealthy, scenic, politically engaged, resistant to density. Encinitas put its housing element to a public vote not once but twice. Residents rejected it both times. A judge ultimately allowed city leaders to proceed with the rezoning anyway.
As UC Davis law professor Chris Elmendorf put it when covering the case: "There is no authority of the voters of Encinitas or Menlo Park or any other city to do through direct democracy something that the city council cannot do. Voters cannot exempt themselves from that law by passing a ballot measure."
The state also has a significant deterrent beyond court orders: the "builder's remedy." Under this provision, if a city falls out of compliance with its certified housing element, developers can propose projects that the city cannot deny as long as a percentage of units are affordable. The city loses local permitting control entirely. For Laguna Beach, where design review and community input on development projects is deeply valued, the builder's remedy would be a far worse outcome than the housing element itself. Compliance, as uncomfortable as it is for residents, preserves more local control than the alternative.
What 394 Units Through Infill Actually Looks Like
The fear driving resident opposition is often a visual one: towers, mass density, the end of the Laguna Beach that exists. That fear is understandable but not particularly supported by the mechanics of how these units would actually get built.
394 units spread over eight years through ADUs, apartments above downtown shops, small infill projects, and the occasional lot split is approximately 50 units per year. Laguna Beach is not going to look like a different city. There will not be high-rises on the bluff. The Coastal Commission will not allow projects that compromise coastal views or access. The city's own design review process, which is aggressive and detail-oriented, will apply to every project. What residents will see is gradual, incremental change at the parcel level: a cottage in a backyard, a floor added to a two-story commercial building, a small apartment complex on an underused commercial site. The church project at 340 St. Ann's is a good example of the scale. It is 29 units in a three-story building.
The comparison to Carmel is instructive again. Carmel adopted its housing element and began implementation. The village looks like Carmel. The galleries are still there. The 1929 residential character ordinance is still in force. The state's mandate did not erase what Carmel is. It added pressure, and it required some uncomfortable zoning decisions, but the character of the place is more durable than a RHNA number.
For buyers considering Laguna Beach, none of this changes the fundamental investment case. The constraints that make Laguna Beach scarce are the same constraints that make adding 394 units so difficult: ocean, canyons, 23,000 acres of preserved open space, Coastal Commission jurisdiction. Those constraints do not go away when the housing element is adopted. The supply of Laguna Beach homes remains structurally limited. That has been true for decades and will remain true regardless of what Sacramento requires on paper.
A Realtor's Perspective: What If the City Concentrated Density on Laguna Canyon Road?
The city has not formally proposed this, but it is worth raising as a question: what if Laguna Beach targeted its housing mandate toward the Laguna Canyon Road corridor rather than scattering infill units through the residential neighborhoods and downtown?
Laguna Canyon Road is the main arterial that connects downtown Laguna Beach to the 91 and 5 freeways. It runs inland through the canyon and already hosts a mix of commercial, light industrial, arts, and institutional uses including the Laguna College of Art and Design. It is separated from the beach neighborhoods by topography. Critically, portions of the canyon corridor, particularly east of Laguna Canyon Road and north of El Toro Road, fall outside the California Coastal Zone entirely. That distinction matters: development in those areas would not require a Coastal Development Permit from the Coastal Commission, removing one of the most significant cost and timeline barriers that applies to nearly every other potential site in the city. It also helps that Measure Q, which would have required a public vote for major projects within 750 feet of this road, was defeated, so no voter-approval overlay applies to the corridor.
The argument for concentrating development here is straightforward. Multi-story apartments or condominiums along the canyon corridor would deliver a meaningful share of the 394-unit mandate in a location where the visual impact on the beaches, bluffs, and residential neighborhoods is minimal. A four-story building on a commercial parcel along the canyon does not affect the Forest Avenue gallery district or the Heisler Park coastline. It affects the canyon road, which is already a functional arterial, not a scenic residential street.
There are almost certainly privately owned commercial properties along that corridor where a willing seller exists. Commercial property owners in California have been under pressure for years from rising insurance costs, vacancy rates, and the shift away from traditional retail. A developer offering market rate for a commercial site with an entitlement path to multi-family residential is a compelling proposition for a property owner looking to exit. The city would need to rezone those parcels for residential use, but rezoning a commercial corridor is a different political conversation than asking a residential neighborhood to absorb density.
Whether the city would ever embrace this approach is another question. Laguna Canyon is also the entry point into the city and part of the visual and ecological identity of the place. Residents who moved to Laguna Beach for the canyon views driving in would resist high-density development along that road just as they resist it everywhere else. But from a pure planning standpoint, if you are going to put 394 units somewhere, a canyon commercial corridor outside the Coastal Zone is a more logical place than the back lots of beach neighborhoods or the floors above downtown shops where the economics barely work. The conversation is worth having.
A Realtor's Perspective: Could Laguna Beach Expand Its Borders to Create More Room?
Another idea worth examining: could Laguna Beach simply acquire land from a neighboring city and expand its boundaries to create room for new development? On the surface it is a reasonable question. If the problem is that the city has no space, and space exists next door, why not negotiate a land sale or boundary adjustment?
The short answer is that the surrounding land does not cooperate with that idea. Laguna Beach is bordered to the northwest by Crystal Cove State Park, which is state-owned and permanently protected. To the east and northeast, the boundary runs along the Laguna Coast Wilderness Park, a 7,000-acre OC Parks preserve that is part of a nearly 20,000-acre protected open space network connecting to Irvine and Aliso and Wood Canyons Wilderness Park. State parks and county preserves cannot be sold to a city for housing development. The preservation that makes Laguna Beach beautiful is the same preservation that makes expansion impossible.
The cities that do share a developed border with Laguna Beach are Aliso Viejo, Laguna Niguel, and Laguna Woods. Those boundaries are not open land. They are existing residential communities right up to the city line. A land transfer between two California cities is technically possible through a process overseen by the Orange County Local Agency Formation Commission, known as LAFCo. Both cities would need to agree, LAFCo would need to approve, environmental review under CEQA would be required, and affected residents in the transferred area would likely have the right to weigh in. That is a long, expensive, politically difficult process even when everyone is willing. In this case, no neighboring city has any incentive to give Laguna Beach a piece of its tax base, and the residents in the transfer zone would almost certainly oppose it.
The cost would also be significant. Acquiring land from another city at market value, running the LAFCo and CEQA process, extending city services into a new area, and then building the infrastructure needed to support new housing would almost certainly exceed what the housing itself could generate. It is not a realistic path for meeting a 394-unit mandate on any reasonable timeline.
The honest conclusion is that Laguna Beach's boundaries are where they are for the same reason the city has no room to build: the geography locked the city in long ago. The ocean, the canyons, the preserved wilderness, and the established neighboring communities form a permanent perimeter. The city cannot grow outward. It can only find space within what already exists, which is exactly why the housing mandate is so difficult and why ideas like the Laguna Canyon Road corridor deserve serious discussion rather than dismissal.
Key Numbers
| Metric | Figure |
|---|---|
| Laguna Beach RHNA allocation (6th Cycle, 2021-2029) | 394 units |
| Of those, units for extremely low, very low, and low-income households | 198 units |
| Carmel-by-the-Sea RHNA allocation (6th Cycle, 2023-2031) | 349 units |
| Carmel's previous cycle requirement (5th Cycle) | 31 units |
| Open space permanently preserved around Laguna Beach | 23,000+ acres |
| Average home value in Laguna Beach (2026) | About $3M |
| Festival of Arts in continuous operation since | 1932 |
| Carmel residential character ordinance enacted | 1929 |
| Laguna Beach Housing Element adopted | January 24, 2023 |
| 340 St. Ann's Drive affordable project | 28 affordable units plus 1 manager's unit |
| City funding commitment for 340 St. Ann's (July 15, 2026) | About $6.71 million |
| Measure Q (November 2022) result | Defeated, about 65% to 35% |
| Average new units required per year to meet mandate | ~50/year |
Questions About Laguna Beach Housing or Real Estate?
We track Laguna Beach's Housing Element sites, the 340 St. Ann's project, the Downtown Specific Plan, and every South County development. Whether you are buying, selling, or own property that could be affected, we can help you understand what is coming.
Homes for sale in Laguna Beach | 340 St. Ann's affordable apartments | Laguna Canyon artist lofts | Downtown Specific Plan | Laguna Niguel | Laguna Hills | Dana Point | Newport Coast | Aliso Viejo | View all OC new developments
:format(webp):quality(80)/u.realgeeks.media/ericengelbert/Orange-County-Weekly-Housing-Market-Reports-And-Statistics.png)
:format(webp):quality(80)/u.realgeeks.media/ericengelbert/Property-Valuation-with-comparable-sales.png)
:format(webp):quality(80)/u.realgeeks.media/ericengelbert/selling-my-house-in-orange-county.png)
:format(webp):quality(80)/u.realgeeks.media/ericengelbert/Call-Orange-County-Real-Estate.png)
:format(webp):quality(80)/u.realgeeks.media/ericengelbert/sell-my-house-instantly-orange-county.png)