If the regulatory environment is anything like in SF, it's less about cheaper permits and more about not getting into a years-long battle with the planning commission and NIMBYs. Many people simply give up.
Realistically your only choices are to hack the system or don't touch the property. The only winning move is to not play the game.
Planning has been making noise about cracking down on these “tantamount to demolition” projects. I wouldn’t expect the loophole to be particularly durable.
They have in SF, too. It's because of pressure by NIMBYs. But it's not like this loophole is new. The trick has been used for decades and it's almost standard operating procedure for low-budget "new" construction.
It's a polite fiction that has persisted because planning commissions aren't oblivious to the problems. But they're beholden to the political power of NIMBYs. The hack operated as a safety value that gave commissions plausible deniability when NIMBYs bring their pitchforks and torches. Once its gone it'll push the cost of newer development further beyond the reach of small-time developers and homeowners, and there'll be even less of the so-called missing middle housing coming online. It'll hasten the trend to large, more upscale developments.
That said, I'm dubious the loophole will go away anytime soon. The entire system would seize up and so I expect municipalities to keep deflecting as long as they can.
I'm not defending the practice. But such absurdities are inevitable when communities push for policies completely at odds with economic realities.
Realistically your only choices are to hack the system or don't touch the property. The only winning move is to not play the game.