Urban Farming Sprouts Commercial Opportunities

As cities and counties across California begin implementing a new state law incentivizing urban agriculture, food entrepreneurs and businesses may see huge potential in a young and growing industry.

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Earlier this week, the L.A. Times interviewed Alma Backyard Farms, an urban farm organization in Compton, about its work in enriching the lives of the formerly incarcerated, putting vacant land to productive use, and fighting food waste.

Although the article was published, in part, to build excitement for the inaugural Feeding the 5000 LA—a one-day volunteer-driven initiative in Pershing Square that will produce meals made entirely from food otherwise destined to become waste—the interview made me especially excited about the commercial opportunities of urban farming in Los Angeles and California.

Urban Land at Rural Prices

California wants more urban farms. To facilitate their growth, the California legislature and Governor passed the Urban Agriculture Incentive Zones Act (“UAIZ Act”) in 2013. This Act plays an important role in fostering urban agriculture in two important ways: (1) creating a statewide mechanism for urban farmers and land owners to formally enter into lease agreements, and (2) incentivizing these leases by giving potentially large tax breaks to land owners.

First, the UAIZ Act requires a few things for a lease to be valid.

  • Vacant and unimproved land only: Land must be “vacant, unimproved or blighted lands used for small-scale agriculture.”
  • 5-year commitment: The lease must last initially for at least five years.
  • Minimum and maximum acreage: The land used for urban farming must be at least 0.10 acres, but not larger than three acres.
  • Property used for farming only: All land covered by the lease must be used for agriculture, either commercial or noncommercial.  In this case, “agriculture use” has a broad definition of “farming in all its branches.”
  • No dwellings: No dwelling can be on the leased land while farming it.

Next, the UAIZ Act guarantees a couple things:

  • Use of farm-related structures: A lease cannot prohibit the use of toolsheds, greenhouses, produce stands, instructional space, or other structures “that support agricultural activity.”
  • Organic pesticides & fertilizers: A lease that prohibits pesticides and fertilizers cannot prohibit pesticides and fertilizers allowed by the USDA National Organic Program.

In return for these requirements and guarantees, the Act allows a land-owner to have his or her land valued by the tax assessor as if the land were used for traditional agriculture.  In other words, a land owner taking advantage of one of these urban farm leases will have his or her land assessed at a lower value, since rural (agricultural) land is usually cheaper than urban land. (Although the Act does have protections built in, just in case the rural value is somehow greater than the actual value of the owner’s land.)

This innovative tax scheme provides benefits to both parties:

  • For the land-owner, more cheaply valued land means less taxes owed on that land.
  • For the urban farmer, more cheaply valued land means less costs to lease it, at least compared to the same land at city values.

Finally, the UAIZ Act applies only to U.S. Census Urban Areas with more than 250,000 people:

U.S. Census Urban Areas in California Population (2010)
Los Angeles — Long Beach — Anaheim 12,150,996
San Francisco — Oakland 3,281,212
San Diego 2,956,746
Riverside — San Bernardino 1,932,666
Sacramento 1,723,634
San Jose 1,664,496
Fresno 654,628
Concord 615,968
Mission Viejo — Lake Forest — San Clemente 583,681
Bakersfield 523,994
Murrieta — Temecula — Menifee 441,546
Stockton 370,583
Oxnard 367,260
Modesto 358,172
Indio — Cathedral City 345,580
Lancaster — Palmdale 341,219
Victorville — Hesperia 328,454
Santa Rosa 308,231
Antioch 277,634
Santa Clarita 258,653

Source: Univ. California Cooperative Extension, Agriculture & Natural Resources

Currently, these cities and their counties are still developing and implementing local ordinances to allow residents to take advantage of the Act. After all, each has its own zoning and licensing schemes that must harmonize with the new laws.

For example, Los Angeles County has implemented a local ordinance under the UAIZ Act that applies only to unincorporated areas of the county.  The City of Los Angeles, however, is still conducting hearings on a city UAIZ ordinance.

As we wait for Los Angeles to implement its ordinance, it is encouraging to see San Francisco has already executed its own ordinance and application process.

What Does Commercial Urban Farming Look Like?

The Urban Farmer. For 12 years, Silver Lake Farms had sold cut-flowers and select fruits and vegetables grown right in one of Los Angeles’s first urban farms to individuals and businesses. Tara Kolla had founded the farm after the dot-com crash and built a business that eventually earned her national recognition.

The Urban Farm Builder. As the “largest urban farming venture in California”—based in Los Angeles and Oakland—Farmscape has the resources and network to work with individuals, businesses, and developers to build urban farms. It has built more than 600 urban gardens and farms, of which it maintains 250.

The Urban Farm Innovator. With its staff of about two dozen, LA Urban Farms is adding its own towers to the Los Angeles skyline. From Tender Greens to Disney, this urban farm innovator works with many clients to install and maintain highly productive and efficient aeroponic tower farms.

These are but a handful of Los Angeles commercial urban farm operations. With the UAIZ beginning to take effect, we can expect this bourgeoning industry to proliferate.

ON THE FARM SIDE

  • Community Composters
  • Land Owners, Developers
  • Urban Farmers
  • Urban Farm Designers
  • Urban Farm Technology
ON THE END-USER SIDE

  • Distributors
  • Farm Stands, CSAs
  • Farmers Markets
  • Food Producers
  • Restaurants

In fact, according to Cultivate LA, a research project launched by UCLA urban planning students that tracks urban farming activity in Los Angeles, there are more than 1,000 urban agriculture sites in Los Angeles.

The L.A. Food Policy Council estimates that there could be up to 8,600 eligible parcels in Los Angeles under the UAIZ Act. Already, LA Open Acres maintains a map of vacant spaces throughout Los Angeles, helping connect urban farmers and land owners.

While there are many legal issues facing urban farmers—premises liability, business formation, taxation, food product liability insurance, employment, commercial contracts, and compliance with environmental regulations, to name a few—Los Angeles and California are creating a program that will make it easier for urban farm entrepreneurs and businesses to start planting their roots.

4 thoughts on “Urban Farming Sprouts Commercial Opportunities

    1. Hi, Caliche Chick. Thanks for visiting!

      It seems like you are asking whether this new California law provides tax incentives (in addition to already-existing federal tax incentives) to people who sell what is grown on a UAIZ-approved lot. AB 551 does not provide for any sort of tax deduction for sellers. The San Francisco ordinance does not appear to, either. (Disclosure: I am not a tax attorney, and this is not legal advice.)

      On a separate note, if you are thinking of selling what you grow or what is grown by an urban farmer, you may need to get additional state and local permits, depending on what and where you sell.

      Like

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