Will Macht examines the growing practice of small lot development, by first explaining its popularity with developers: "The Great Recession halted the building boom, leaving many developers and architects averse to large-scale projects with greater financial risk and exposure to long-term construction liability. In response to these factors, as well as changing market preferences, some developers are now experimenting with small- and intermediate-scale projects to increase density in a shorter time frame and at lower risk."
Designers love the small lot typology as well: "At the same time, most architecture firms no longer design single-family houses except for very wealthy clients. Some firms are experimenting with designing single-family homes at intermediate densities that enable them to spread their fees over more projects than when they work on one-off, high-design, custom-built houses."
The article continues into great detail about a case study of small lot development in Los Angeles, and to make the case for the flexibility offered by "fee-simple" lots.
On a related note, the Los Angeles Department of City Planning announced an improvement to the permitting process for small lot projects. Here's how an emailed statement explains the update, with will take effect on September 16, 2014:
"Previously, a glitch in City regulations required developers with approved plans to either wait upwards of two years for final maps to record or file for code deviations in order to receive building permits. This inefficiency cost developers and the Planning Department valuable time and left neighborhoods with delayed projects and confusing project descriptions."
"The [approved] code amendment will immediately relieve 59 code-compliant projects of the need to file for deviations or wait lengthy periods of time before beginning construction. Simultaneously, the Department will have more time to focus on the project, rather than processing additional requests."