BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1934


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          Date of Hearing:  April 13, 2016


               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT


                                  David Chiu, Chair


          AB 1934  
          (Santiago) - As Amended April 4, 2016


          SUBJECT:  Planning and zoning:  density bonuses:  mixed-use  
          projects


          SUMMARY:  Creates a density bonus for commercial developers that  
          partner with an affordable housing developer to construct a  
          mixed-used development.  Specifically, this bill:  


          1)Provides that when a commercial developer agrees to partner  
            with an affordable housing developer to construct a mixed-used  
            project with housing located on site or located within a  
            one-mile radius of the proposed development, a local  
            government must in addition to granting incentives and  
            concessions under State Density Bonus Law also grant the  
            commercial developer a density increase of up to 20% variance  
            of the local governments zoning ordinance or regulation,  
            including but not limited to, floor area ratios or reduction  
            of commercial linkage fees.  


          2)Provides that no reimbursement is required by this act because  
            a local agency or school district has the authority to levy  
            service charges, fees, or assessments sufficient to pay the  
            program or level of service. 









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          3)Makes findings and declarations that the development of  
            affordable housing is a matter of statewide concern and it is  
            not a municipal affair, and therefore, this bill applies to  
            all cities including charter cities.  


          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,








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               d)     10% of the units in a common-interest development  
                 (CID) for moderate-income households.






          1)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.

          2)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. 



             c)   Other regulatory incentives or concessions proposed by  
               the developer or the local government that result in  
               identifiable, financially sufficient, and actual cost  
               reductions.










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          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.

             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.

             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.
          


          FISCAL EFFECT:  Unknown. 


          COMMENTS:  


          In 1979 the Legislature enacted density bonus law to help  
          address the affordable housing shortage and to encourage  
          development of more low- and moderate-income housing units.   
          Density bonus is a tool to encourage the production of  
          affordable housing that is used by both market rate and  
          affordable housing developers. In return for inclusion of  
          affordable units in a development, developers are given an  
          increase in density over a city's zoned density and concessions  
          and incentives.  The increase in density and concessions and  








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          incentives are to offset the cost the affordable units which  
          will be offered at a lower rent, as low as 30% of area median  
          income.  Developers that seek a density bonus must agree to  
          restrict very low- and low-income rental units to affordable  
          levels for 55 years.   


          State law specifies concessions and incentives that a local  
          government may include in its density bonus ordinance including  
          a reduction in site development standards, or a modification of  
          zoning code requirements, or architectural design requirements  
          that exceed the minimum building standards, and  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.  A developer or city can also  
          propose other regulatory incentives or concessions that result  
          in identifiable, financially sufficient, and actual cost  
          reductions.

          This bill seeks to encourage greater production of affordable  
          units by creating a "density bonus" for commercial developers  
          who partner with an affordable housing developer to construct  
          affordable units.  Affordable housing developers would receive a  
          density bonus commensurate with the number of affordable units  
          included in the development plus concessions and incentives. The  
          affordable units could be built on the same site as the  
          commercial development or within one mile.  In addition to the  
          density bonus and concessions and incentives provided for the  
          affordable units, the commercial developer would receive a  
          "density bonus" equal to an increase of up to 20% of the  
          variance in the floor area ratios and commercial linkage fees. 
             
           Purpose of this bill  : According to the author, "Local  
          governments can be wary of high density residential development  
          because of the corresponding increase in demand for public  
          services and infrastructure.  Conversely, in an era of tight  
          budgets, local governments have more incentive to approve  
          commercial developments which will increase revenues (i.e.  








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          hotels with transient occupancy tax or retail establishments  
          which generate sales tax).   AB 1934 represents a solution to  
          all three of these dilemmas: a piece of California's affordable  
          housing crisis solution which brings both residential and  
          commercial developers to the table.  AB 1934 creates a new  
          combined bonus that shall be provided by local governments to  
          affordable housing developers and commercial developers who  
          partner together to construct a mixed-use project in which  
          affordable housing will either be on-site or located within a  
          1-mile radius of the sister development.  The variances can  
          include, but are not limited to, floor area ratios and  
          commercial linkage fees. AB 1934 seeks to marry two needs: a)  
          the state's need for affordable housing; and b) local  
          government's desire for increased revenues, by encouraging  
          non-traditional housing developers to enter the market and think  
          outside the box in their developments." 

           Arguments in support:   The California Apartment Association  
          states in support, "California is struggling to meet the needs  
          of its citizens when it comes to housing production, especially  
          housing that is affordable near job centers and public  
          transportation.  We appreciate your proposed solution that meets  
          the needs of local governments for economic development along  
          with the construction of affordable housing for individuals and  
          families who work in our communities.   


           Arguments in opposition:  According to the League of California  
          Cities, they have a number of concerns with the bill:  "First  
          density bonus law applies to housing developments of five or  
          more units. It's based upon the premise that density bonus  
          increases (and other concessions and incentives) allow a  
          developer to recover the cost of constructing housing units that  
          are affordable to certain income categories. The tradeoff is:   
          Developer gives city affordable units; city gives developer  
          density bonus and other concessions and incentives that reduce  
          developer's costs. This bill says that a commercial developer  
          which might have no connection to the housing developer gets a  
          20% variance from regulatory requirements (including floor area  








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          ratios) and fees. The bill simply requires the commercial  
          developer to partner with the housing developer. There is no  
          definition of "partners." There is also no definition of  
          "commercial development". There is no fair trade off in this  
          bill. The developer of the commercial development is giving the  
          city nothing; yet the city gives the commercial developer a 20%  
          variance in the regulatory requirements and fees. 


           Staff comments:


           It's unclear to staff what are the appropriate types of  
          concessions and incentives that a commercial developer should  
          receive in return for partnering with an affordable housing  
          developer. The bill would give a commercial developer a 20%  
          variance of the local governments zoning ordinance or  
          regulation, including but not limited to, floor area ratios or  
          commercial linkage fees.  In addition, commercial linkage fees  
          are often used to fund production of a affordable housing.   
          Modifying those fees could reduce funding overall for affordable  
          housing.  The committee may wish to consider modifying the  
          language to more closely align with the state density bonus law  
          by amending the language as follows:


          This bill would also allow the affordable housing to be built  
          within one-mile of the commercial development. The committee may  
          wish to consider if that policy supports the goals of the bill  
          to encourage mixed use development that combines commercial  
          space and affordable housing development or if it should be  
          deleted. 


           Committee amendments  : 


          (a) When an applicant for approval for commercial development  
          agrees to partner with an affordable housing developer to  








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          construct a mixed-used project for which the housing will be  
           either  located onsite at the proposed commercial development  or  
          located within a one-mile radius of the proposed commercial  
          development  , the city, county, or city and county shall, in  
          addition to any density bonus and incentives or concessions  
          granted to the affordable housing developer as prescribed in  
          Section 65915 grant to the commercial developer a density bonus  
          as prescribed in subdivision (b).  


          (b) The density bonus granted to the commercial developer shall  
           mean exceptions resulting in significant cost reductions over  
          the maximum allowable intensity in the general plan, zoning  
          ordinance or other regulation,   a density increase of up to 20  
          percent variance  of the city, county, or city and county  's  
          zoning ordinance or regulation,  including, but not limited to,  
          floor area ratios  and may include modification to development  
          standards such as heights and parking requirements.   or  
          commercial linkage fees.  


           Double referred:  If AB 1934 passes this committee, the bill will  
          be referred to the Committee on Local Government.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Apartment Association




          Opposition








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          American Planning Association California Chapter


          League of California Cities 




          Analysis Prepared by:Lisa Engel / H. & C.D. / (916) 319-2085,   
          Lisa Engel / H. & C.D. / (961) 319-2085