BILL ANALYSIS Ó AB 2222 Page 1 Date of Hearing: May 7, 2014 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT K.H. "Katcho" Achadjian, Chair AB 2222 (Nazarian) - As Amended: May 5, 2014 SUBJECT : Housing: density bonus. SUMMARY : Modifies provisions of density bonus law. Specifically, this bill : 1)Increases the affordability requirement of all low- and very low-income units that qualified an applicant for a density bonus from 30 years or longer to 55 years or longer. 2)Prohibits an applicant from receiving a density bonus or any other incentives or concessions if a proposed housing development or condominium project is located on any property that includes a parcel on which dwelling units have, at any time in the five-year period preceding the application, been: a) Occupied by lower- or very low-income households; b) Subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower- or very low-income; or, c) Subject to any other form of rent or price control through a public entity's valid exercise of its police power. 1)Provides that the prohibition in 2), above, shall not apply if the proposed housing development or condominium project would replace the existing units with at least the same number of units of equivalent size or type, or both, to be made available for rent at affordable housing costs to, and occupied by, persons and families in the same or lower income category in the same proportion as the existing affordable units, and either of the following applies: a) The proposed housing development includes the additional required set aside of affordable units at the percentages set forth in existing law; or, b) Each unit in the development is affordable to, and AB 2222 Page 2 occupied by, either a low- or very low- income household. EXISTING LAW : 1)Defines "density bonus" as a density increase over the otherwise maximum allowable residential density as of the date of application by the applicant to the local government. 2)Requires all cities and counties to adopt an ordinance that specifies how they will implement state density bonus law. 3)Requires local governments to grant a density bonus when an applicant for a housing development of five or more units seeks and agrees to construct a project that will contain at least any one of the following: a) 10% of the total units for lower-income households; b) 5% of the total units for very-low income households; c) A senior citizen housing development or mobilehome park; and, d) 10% of the units in a common-interest development (CID) for moderate-income households. 4)Provides that, when an applicant for approval to convert apartments to a condominium project agrees to provide at least 33% of the total units of the proposed condominium project to persons and families of low- or moderate-income, or 15% of the total units of the proposed condominium project to lower-income households, and agrees to pay for the reasonably necessary administrative costs incurred by a local government, the local government must either grant a density bonus or provide other incentives of equivalent financial value. 5)Provides that a local government, when considering an application for approval to convert apartments to a condominium project, may place reasonable conditions on the granting of a density bonus or other incentives. 6)Provides that the density bonus for low-, very low-, and moderate-income units increase incrementally according to a set formula. AB 2222 Page 3 7)Requires that the applicant agree to continued affordability of all low- and very low-income units that qualified the applicant for the density bonus for at least 30 years. 8)Requires that applicants receive incentives or concessions, unless the local government makes a written finding, based upon substantial evidence, that: a) The concession or incentive is not needed to provide the affordable housing; b) The concession or incentive would have a specific adverse impact on health and safety, the environment, or an historical resource; or, c) The concession or incentive would be contrary to state or federal law. 9) Specifies that concessions or incentives may include the following: a) A reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards; b) Approval of mixed-use zoning in conjunction with the housing project if commercial, office, industrial, or other land uses will reduce the cost of the housing development and are compatible with the project and the surrounding area.; and, c) Other regulatory incentives or concessions proposed by the developer or the local government that result in identifiable, financially sufficient, and actual cost reductions. 1)Requires local governments to provide applicants with the following number of incentives or concessions: a) One incentive or concession for projects that include at least 10% of the total units for lower-income households, at least 5% for very low-income households, or at least 10% for persons and families of moderate-income in a common interest development; AB 2222 Page 4 b) Two incentives or concessions for projects that include at least 20% of the total units for lower-income households, at least 10% for very low-income households, or at least 20% for persons and families of moderate-income in a common interest development; and, c) Three incentives or concessions for projects that include at least 30% of the total units for lower-income households, at least 15% for very low-income households, or at least 30% for persons and families of moderate-income in a common interest development. 1)Authorizes an applicant to initiate judicial proceedings if the local government refuses to grant a requested density bonus, incentive, or concession. If a court finds that the refusal to grant the request is in violation of density bonus law, the court will award the plaintiff reasonable attorney's fees and costs. 2)Prohibits a local government from applying any development standard that will have the effect of precluding the construction of housing that qualifies for a density bonus at the densities or with the concessions or incentives required by density bonus law. 3)Authorizes a developer to request a waiver or reduction of development standards that will have the effect of physically precluding the construction of housing that qualifies for a density bonus at the densities or with the concessions or incentives required by density bonus law. FISCAL EFFECT : None COMMENTS : 1)Background on density bonus . To help address California's affordable housing shortage, the Legislature enacted density bonus law to encourage the development of more affordable units. Under current law, a city or county must grant a density bonus, concessions and incentives, prescribed parking requirements, as well as waivers of development standards upon a developer's request when the developer includes a certain percentage of affordable housing in a housing development project. AB 2222 Page 5 Density bonus law was originally enacted in 1979, but has been changed numerous times since. SB 1818 (Hollingsworth), Chapter 928, Statutes of 2004, made significant changes to the law, including reducing the number of housing units required to be provided at below market rate in order to qualify for a density bonus. Developers are entitled to benefits under the density bonus law when they include as few as one affordable housing unit as part of an otherwise market-rate project. A housing project with only 5% of very low-income housing is entitled to a 20% density bonus, one concession, unlimited waivers from development standards, and reduced parking standards for the entire project. 2)Purpose of this bill . This bill makes a number of changes to density bonus law. First, this bill increases the affordability requirement of all low- and very low-income units that qualified an applicant for a density bonus from 30 years or longer to 55 years or longer. Also, the bill prohibits an applicant from receiving a density bonus or any other incentives or concessions if a proposed housing development or condominium project is located on any property that includes a parcel on which dwelling units have, at any time in the five-year period preceding the application, been occupied by lower- or very low-income households, subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower- or very low-income, or subject to any other form of rent or price control through a public entity's valid exercise of its police power. This prohibition shall not apply if the proposed housing development or condominium would replace the existing units with at least the same number of units of equivalent size or type, or both, to be made available for rent at affordable housing costs to, and occupied by, persons and families in the same or lower income category in the same proportion as the existing affordable units, in specified instances. This bill is author-sponsored. 3)Author's statement . According to the author, "Adequate and affordable housing is an issue of statewide concern. Yet, the change made to the density bonus law by SB 1818 had the reverse effect and has resulted in fewer affordable units?.buildings that were built pre- AB 2222 Page 6 SB 1818 that are proposed to be demolished and replaced may now qualify for a density bonus under the new SB 1818 structure. "SB 1818 inadvertently created a loophole whereby developers that propose to demolish pre-SB 1818 buildings are not required to begin the new project with the same number of affordable units. As a result, a new project may result in less affordable units than previously existed on the parcel. "This bill addresses the loophole created by SB 1818 and ensures that affordable units are preserved when a development proposes to demolish a site and the new proposal is to replace the outdated structure with a new residential structure by ensuring that the project begins with the same number of affordable units. Additionally, this bill increases the classification of affordability from 30 years to 55 years. This change is consistent with other state and local programs and ensures that affordable units remain affordable. AB 2222 will preserve and promote the supply of affordable units for years to come." 4)Arguments in support . None on file. 5)Arguments in opposition . None on file. 6)Double-referral . This bill was heard by the Housing and Community Development Committee on April 30, 2014, and passed with a 7-0 vote. REGISTERED SUPPORT / OPPOSITION : Support None on file Opposition None on file Analysis Prepared by : Debbie Michel / L. GOV. / (916) 319-3958 AB 2222 Page 7