BILL ANALYSIS Ó AB 1934 Page 1 ASSEMBLY THIRD READING AB 1934 (Santiago) As Amended June 1, 2016 Majority vote ------------------------------------------------------------------- |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+---------------------| |Housing |6-0 |Chiu, Steinorth, | | | | |Burke, Chau, Lopez, | | | | |Mullin | | | | | | | |----------------+-----+----------------------+---------------------| |Local |8-0 |Eggman, Waldron, | | |Government | |Alejo, Bonilla, Chiu, | | | | |Cooley, Gordon, | | | | |Linder | | | | | | | |----------------+-----+----------------------+---------------------| |Appropriations |15-1 |Gonzalez, Bloom, |Obernolte | | | |Bonilla, Bonta, | | | | |Calderon, McCarty, | | | | |Eggman, Gallagher, | | | | | | | | | | | | | | |Eduardo Garcia, Chau, | | | | |Holden, Quirk, | | | | |Santiago, Weber, Wood | | AB 1934 Page 2 | | | | | | | | | | ------------------------------------------------------------------- SUMMARY: Creates a development bonus for commercial developers that partner with an affordable housing developer to construct a joint project or two separate projects encompassing affordable housing. Specifically, this bill: 1)Provides that when a commercial developer agrees to partner with an affordable housing developer to construct a joint project or two separate projects encompassing affordable housing, a local government must in addition to granting incentives and concessions under State Density Bonus Law also grant the commercial developer a development bonus. 2)Provides that the development bonus for the commercial developer means: incentives, mutually agreed upon by the developer and the jurisdiction, that may include, but are not limited to, any of the following: a) Up to a 20% variance in maximum allowable intensity in the General Plan, zoning ordinance, or other regulation. b) Up to a 20% variance in maximum allowable floor area ratio. c) Up to a 20% variance in minimum parking requirements. d) A specific use of a limited-use/limited-application elevator for upper floor accessibility. AB 1934 Page 3 3)States that "offsite housing" shall be all of the following: a) Within the boundaries of the local government; b) In close proximity to public amenities including schools and employment centers; and c) In close proximity to both pedestrian amenities and transit corridors. 4)Provides that the agreement for partnered housing and commercial developments shall be approved by the affordable housing developer, the commercial developer, and the local government. 5)Provides that affordable housing may be contributed by the commercial developer in one of the following manners: a) The commercial developer may directly build the units. b) The commercial developer may dedicate a portion of the site or property elsewhere to the affordable housing developer for use as a site for affordable housing. c) The commercial developer may make an in-lieu payment to the affordable housing developer that must be used towards the cost of affordable housing construction on a pending project. AB 1934 Page 4 6)States that the affordable housing replacement provisions in State Density Bonus Law apply. 7)Provides that nothing shall preclude any additional allowances or incentives offered to developers by local governments pursuant to law or regulation. 8)Provides that, if the developer of affordable units does not commence construction of the units in accordance with the agreed upon timeline, the local government may withhold certificates of occupancy for any market rate units under construction until the developer has completed construction of the affordable units. 9)Defines "commence with construction" as either of the following: a) Commence or complete the construction of affordable units; or b) Issuance of building permits for the construction of the affordable units. 10)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. 11)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. AB 1934 Page 5 FISCAL EFFECT: According to the Assembly Appropriations Committee, no state fiscal impact. Local agencies have the authority to levy fees for related costs and thus, any local costs are not reimbursable. 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 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. AB 1934 Page 6 This bill seeks to encourage greater production of affordable units by creating a "development 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. In addition to the density bonus and concessions and incentives provided for the affordable units, the commercial developer would receive a "development bonus" which means incentives agreed upon between the commercial developer and the local government, such as variances in zoning regulations that result in significant cost reductions. The types of projects promoted by this bill could result in mixed-use developments, or could result in the commercial and residential developments on separate sites. A commercial developer may choose to build the units itself, or may opt to have an affordable housing developer build the units either onsite or offsite. A commercial developer also has the option of making an in-lieu payment to an affordable housing developer to be used towards the costs of construction on a pending affordable housing project. If the affordable housing developer does not commence with construction at the agreed upon time, the local government may withhold certificates of occupancy for any market rate units under construction until the affordable units are completed. 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. hotels with transient occupancy tax or retail establishments which generate sales tax). AB 1934 represents a solution to all AB 1934 Page 7 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 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." Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (916) 319-2085 FN: 0003385