BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 1229
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: atkins
VERSION: 2/22/13
Analysis by: Mark Stivers FISCAL: no
Hearing date: July 2, 2013
SUBJECT:
Local inclusionary zoning ordinances
DESCRIPTION:
This bill overturns the Palmer decision and expressly authorizes
a county or city to establish inclusionary housing requirements
as a condition of development.
ANALYSIS:
Article XI, Section 7 of the California Constitution grants
counties and cities the power "to make and enforce within its
limits all local, police, sanitary, and other ordinances and
regulations not in conflict with general laws." This is
generally referred to as the police power of local governments.
The Planning and Zoning law within state statute is a general
law that sets forth minimum standards for counties and cities to
follow in land use regulation, but the law also establishes the
Legislature's clear intent to "provide only a minimum of
limitation in order that counties and cities may exercise the
maximum degree of control over local zoning matters."
Using this police power, many counties and cities have adopted
ordinances, commonly called "inclusionary zoning ordinances,"
that require developers to ensure that a certain percentage of
housing units in a new development be affordable to lower income
households. According to the California Rural Housing
Coalition's database, 140 jurisdictions in California currently
have mandatory inclusionary zoning ordinances. These ordinances
vary widely in the percentage of affordable units required, in
the depth of affordability required, and in the options through
which a developer may choose to comply. Most if not all such
ordinances apply to both rental and ownership housing.
In 2009, in the case of Palmer v. City of Los Angeles, the
Second District California Court of Appeal opined that the
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city's affordable housing requirements associated with a
particular specific plan (akin to an inclusionary zoning
ordinance), as it applied to rental housing, conflicted with and
was preempted by a state statute known as the Costa-Hawkins
Rental Housing Act. The Costa-Hawkins Act limits the
permissible scope of local rent control ordinances. Among its
various provisions is the right for a rental housing owner
generally to set the initial rent level at the commencement of a
tenancy, even if the local rent control ordinance would
otherwise limit rent levels across tenancies. This provision is
known as vacancy decontrol because the rent level is temporarily
decontrolled after a voluntary vacancy. The act also gives
rental housing owners the right to set the initial and all
subsequent rental rates for a unit built after February 1, 1995.
The court opined that "forcing Palmer to provide affordable
housing units at regulated rents in order to obtain project
approval is clearly hostile to the right afforded under the
Costa-Hawkins Act to establish the initial rental rate for a
dwelling or unit."
This bill expressly authorizes a county or city under the
Planning and Zoning Law to establish as a condition of
development inclusionary housing requirements, which may require
the provision of affordable residential units for low-, very
low-, or extremely low-income owners or tenants. The bill
further declares the intent of the Legislature to supersede any
holding or dicta in Palmer v. City of Los Angeles that conflicts
with this authority.
COMMENTS:
1.Purpose of the bill . According to the sponsors, local
inclusionary housing programs have proven to be one of the
most effective tools for producing new homes affordable to
working families and creating strong, diverse neighborhoods
with a range of housing choices. Inclusionary ordinances have
provided quality affordable housing to over 80,000
Californians, including the production of an estimated 30,000
units in the last decade alone. While many of these local
programs have been in place for decades, the recent Palmer
decision has created uncertainty and confusion for local
governments and housing advocates regarding the future
viability of this important local land use tool. According to
the author, this bill resolves a conflict between local
inclusionary zoning ordinances and the state's Costa-Hawkins
Rental Housing Act, thereby restoring the ability of local
governments to use one of the most effective tools at their
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disposal to promote the production of both ownership and
rental homes that are affordable to California's lower income
working families.
2.The inclusionary zoning debate . The purposes of inclusionary
zoning ordinances are twofold. First, inclusionary zoning
ordinances are intended to increase the production of
affordable housing by leveraging additional resources and
opportunities. While developers often do not build the
mandated affordable units themselves or pay their full cost,
inclusionary zoning ordinances generally place the burden on
the developer to ensure construction of the affordable units.
To fulfill this obligation, developers often donate land or
make a financial contribution, or both, towards development
costs. Many ordinances also allow a developer to fulfill his
or her obligation by paying an in-lieu fee, which the city or
county uses to help finance its own development.
The second purpose of inclusionary zoning ordinances is to
achieve "inclusion" in newly-developing communities. Over the
past few decades, development in California has generally
resulted in single-product neighborhoods, often single-family
home subdivisions. In many cases, the prices of these new
homes are affordable only to the upper end of the market.
Because inclusionary zoning results in some homes being sold
at below-market rates or in a greater mix of housing products
(duplexes, townhomes, condos, apartments) that come at a
greater variety of prices, it increases economic diversity
within neighborhoods and meets a greater range of the
community's housing needs.
In summing up the inclusionary zoning experience in California
in its 2007 report, the California Coalition for Rural Housing
states, "The single most important conclusion is that
inclusionary programs are putting roofs over the heads of tens
of thousands of Californians. These homes, in turn, are
building mixed-income neighborhoods where houses considered
'affordable' are often indistinguishable from those at
market-rate."
While market-rate housing developers generally do not argue
with the "inclusionary" aspect of inclusionary zoning, they
often do take issue with having to contribute their resources
for a societal benefit. They believe that if a jurisdiction
wants to promote greater affordable housing, it should spend
public resources for this purpose rather than require a
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private entity to do so. Developers also point out that
theirs is one of the few industries that is asked to provide
its product at below-market prices to some of those who cannot
afford the full price.
3.Legislative history on the Costa-Hawkins Act . The Legislature
enacted the Costa-Hawkins Rental Housing Act in 1995 with the
passage of AB 1164 (Hawkins), Chapter 331. The various
analyses for this bill and its predecessor, SB 1257 (Costa),
exclusively discuss local rent control ordinances and do not
once mention inclusionary zoning ordinances, which did exist
at that time. The Assembly concurrence analysis of AB 1164,
which is very similar to the other analyses, states that the
bill "establish[es] a comprehensive scheme to regulate local
residential rent control." The analysis includes a table of
jurisdictions that would be affected by the bill, and the
table exclusively includes cities with rent control ordinances
and does not include any cities that had inclusionary zoning
ordinances affecting rental housing. The analysis also
states, "Proponents view this bill as a moderate approach to
overturn extreme vacancy control ordinances which unduly and
unfairly interfere into the free market." The analysis
further describes strict rent control ordinances as those that
impose vacancy control and states, "Proponents contend that a
statewide new construction exemption is necessary to encourage
construction of much needed housing units, which is
discouraged by strict local rent controls." This legislative
history provides no indication that the Legislature intended
to affect local inclusionary zoning ordinances with the
passage of AB 1164.
4.Limits on authority . Opponents argue that the bill's grant of
authority is unlimited and does not require cities and
counties to offer any incentives or concessions in order to
offset any additional costs associated with providing
affordable housing. In Homebuilders Association of Northern
California v. City of Napa (2001), however, the First District
California Court of Appeal opined that the city's inclusionary
zoning ordinance, on its face, did not result in a taking
because in spite of imposing significant burdens on
developers, it also provided significant benefits to those who
comply with its terms and permitted a developer to appeal for
a reduction, adjustment, or complete waiver of the ordinance's
requirements. In other words, case law recognizes limits to a
city's or county's authority, and this bill does not alter
that.
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5.Arguments in opposition . Opponents argue that inclusionary
zoning is akin to rent control and that this bill therefore
allows local governments to enact and enforce rent control on
newly constructed rental housing units by pre-empting the
Costa-Hawkins Act. They believe that the Costa-Hawkins
protections for new construction are appropriate and should be
maintained and that the bill will seriously hurt the
construction industry. They further believe that the
Legislature intended to overrule inclusionary zoning
ordinances with the Costa-Hawkins Act because otherwise it
would have created another exemption similar to the one
stating that the act does not apply when the developer has
"agreed by contract with a public entity in consideration for
a direct financial contribution or any other forms of
assistance specified in [density bonus law]."
6.Previous legislation . SB 184 (Leno) of 2012 was identical to
this bill. SB 184 failed passage on the Senate Floor.
Assembly Votes:
Floor: 41-31
L. Gov.: 6-1
H&CD: 5-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 26,
2013.)
SUPPORT: California Rural Legal Assistance Foundation
(sponsor)
Western Center on Law and Poverty (sponsor)
California Housing Partnership Corporation
California State Association of Counties
City of Santa Monica
City of West Hollywood
Habitat for Humanity California
Jamboree Housing Corporation
Metropolitan Transportation Commission
OPPOSED: Apartment Association California Southern Cities
Apartment Association of Greater Los Angeles
Apartment Association of Orange County
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Building Industry Association of Fresno/Madera
Counties
Building Industry Association of the Bay Area
California Association of Realtors
California Building Industry Association
California Business Properties Association
California Chamber of Commerce
Diversified Pacific Development Group
East Bay Rental Housing Association
GH Palmer Associates
Highridge Costa Investors
Homebuilders Association of Kern County
Insco Insurance Services
Institute of Real Estate Management of California
LandSite, Incorporated
Melia Homes
Nor Cal Rental Property Association
Pardee Homes
Ponderosa Homes
San Diego County Apartment Association
San Francisco Association of Realtors
Santa Barbara Rental Property Association
Sares Regis Group
Shopoff Group
Summerhill Housing Group
Winn Communities