BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 2222
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: Nazarian
VERSION: 6/17/14
Analysis by: Mark Stivers FISCAL: no
Hearing date: June 24, 2014
SUBJECT:
Density bonus law
DESCRIPTION:
This bill generally makes an applicant ineligible for a density
bonus if the proposed housing development will displace units
that are affordable to, or occupied by, lower income households.
ANALYSIS:
Given California's high land and construction costs for housing,
it is extremely difficult for the private market to provide
housing units that are affordable to low- and even
moderate-income households. Public subsidy is often required to
fill the financial gap on affordable units. Density bonus law
(referred to below as the traditional density bonus) allows
public entities to reduce or even eliminate subsidies for a
particular project by allowing a developer to include more total
units in a project than would otherwise be allowed by the local
zoning in exchange for affordable units. Allowing more total
units permits the developer to spread the cost of the affordable
units more thinly over the market-rate units. The idea of
density bonus law is to cover at least some of the financing gap
of affordable housing with regulatory incentives rather than
additional subsidy.
Under existing law, if a developer proposes to construct a
housing development with a specified percentage of affordable
units, the city or county must provide all of the following
benefits:
A density bonus
Incentives or concessions (hereafter referred to as
incentives)
Waiver of any development standards that prevent the developer
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from utilizing the density bonus or incentives
Reduced parking standards
To qualify for the benefits of this provision, a proposed
housing development must meet one of the following criteria: 1)
include at least 5% of the units affordable to very low-income
households, 2) include at least 10% of the units affordable to
low-income households, 3) include at least 10% of the units in a
for-sale common-interest development affordable to
moderate-income households, or 4) be a senior housing
development. Units affordable to lower income households must
remain affordable for 30 years, and for-sale units affordable to
moderate-income households must be subject to an equity sharing
agreement that returns a proportionate share of appreciation to
the local governments upon resale of the home. If one of these
four options is met, a developer is entitled to a base increase
in density for the project as a whole (referred to as a density
bonus) and one regulatory incentive. At higher levels of
affordability, the developer is entitled to a sliding scale of
density bonuses, up to a maximum of 35% of the maximum zoning
density and up to three incentives.
While a local government is not required to provide financial
assistance or fee waivers, the incentives a local government
must grant include any of the following:
A reduction in site development standards
A modification of zoning code requirements (including a
reduction in setbacks, square footage requirements, or parking
spaces, or architectural design requirements that exceed the
minimum building standards)
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 if such
non-residential uses are compatible with the project
Other regulatory incentives or concessions that result in
identifiable, financially sufficient, and actual cost
reductions
A local government may not apply development standards that
preclude the density bonus or incentives from being used unless
waiving such standards would have a significant, adverse impact
upon public health, public safety, or the environment.
In addition, parking requirements are capped for density bonus
developments. A city or county may not require more than one
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parking space per studio or one-bedroom unit, two parking spaces
per two- or three-bedroom unit, or two and one-half parking
spaces per four-bedroom or larger unit. In addition, a
developer may meet these standards with uncovered spaces or
tandem parking. These parking caps are automatic. A developer
may request further parking reductions by using one of the
incentives to which the development is entitled.
A similar section of law (referred to here as the conversion
density bonus) requires a local government to grant a developer
a density bonus of 25% or other incentives of equivalent
financial value if the developer is converting apartments to
condominiums and agrees to make at least 33% of the units
affordable to low- or moderate-income households or 15% of the
units affordable to low-income households.
This bill , with respect to both the traditional density bonus
and the conversion density bonus statutes, makes an applicant
ineligible for a density bonus or the incentives described above
if the proposed housing development is located on a parcel from
which dwelling units have, at any time in the previous five
years, been occupied by low-income households, been subject to a
recorded covenant or law that restricts rents to levels
affordable to low-income households, or been subject to any
local rent-control ordinance, unless the proposed housing
development replaces these units.
At a minimum, the replacement units must be of equivalent size
or type and affordable for 55 years to the same or lower income
category as the units to be replaced. The replacement units do
not count towards the qualifying percentages for the density
bonus (i.e., the density bonus units are in addition to the
replacement units), unless the proposed project will already be
100% affordable to low-income households. The number of units
the developer must replace is calculated as follows:
For developments occupied on the date of application, the
developer must replace all units occupied by lower-income
households at the same or lower level of affordability.
Unoccupied units within the development are replaced in the
same proportion as the occupied units.
For developments vacated or demolished within the five-year
period preceding the application, the developer must provide a
number of units at the same or lower level of affordability
that is equivalent to the highest number of units affordable
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to or occupied by low-income households as existed in that
five-year period. If the incomes of the former residents were
unknown, then one-half of the replacement units must be
affordable to very low-income households and one-half to
low-income households.
The bill further provides that all affordable ownership units
that qualify a development for a density bonus shall be subject
to an equity sharing agreement, as opposed to a resale
restriction. Lastly, the bill clarifies that, other than
through the incentive or concession provisions described above,
the granting of a density bonus does not require the waiver of a
local ordinance or provisions of a local ordinance unrelated to
development standards.
COMMENTS:
1.Purpose of the bill . According to the author, density bonus
law is intended to encourage private developers to increase
the supply of affordable housing. Because the law does not
require replacement of existing affordable units, however, a
density bonus project may result in fewer affordable units
than previously existed on the parcel. This bill seeks to
correct this unintended consequence by requiring that density
bonus projects start with the same number of affordable units
before calculating the bonus. This will ensure an overall
increase in affordable housing.
2.Equity sharing for homeownership units . Current law provides
that lower-income homeownership units in a density bonus
project must remain affordable to and occupied by lower income
households for 30 years. As a result, a homebuyer who later
seeks to resell is limited in whom he or she may sell to and
in the price he or she may ask. This creates complicated
sales and often results in the homebuyer seeing little to no
price appreciation, except for whoever owns the property at
year 30 and may sell the home at full market value for a
windfall profit. Moreover, local governments rarely monitor
these requirements, and many cases exist of the homeowner
simply receiving a windfall profit at sale prior to year 30.
Moderate-income density bonus units, on the other hand, are
subject to an equity sharing agreement, whereby the homeowner
may later sell the home at any price to any buyer, but must
repay to the local government the initial price break he or
she received as well as a proportionate share of appreciation.
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While the original unit is no longer affordable, the city
must reuse these proceeds to assist another homeowner buy a
home. As a result, the equity sharing model is
administratively simpler and ensures perpetual affordability,
as opposed to 30-year affordability. This bill places all
density bonus homeownership units under the equity sharing
model.
3.Technical amendments .
On page 5, line 31, after "development" insert ",
exclusive of a manager's unit or units,"
On page 6, lines 1-2, strike "this paragraph" and insert
"subparagraph (A)"
On page 6, line 25, after the period insert "All
replacement calculations resulting in fractional units
shall be rounded up to the next whole number."
On page 18, line 4, after "development" insert ",
exclusive of a manager's unit or units,"
Assembly Votes:
Floor: 72-0
L Gov: 8-0
H&CD: 7-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 18,
2014.)
SUPPORT: Association of Regional Center Agencies
Western Center on Law and Poverty
California Rural Legal Assistance Foundation
Studio City Neighborhood Council
Councilmember Mike Bonin, City of Los Angeles
City of Los Angeles
Coalition of Economic Survival
Public Counsel
Women Organizing Resources, Knowledge, and
Services
OPPOSED: None received.
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