BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 1934           Hearing Date:     6/28/2016
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          |Author:   |Santiago                                              |
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          |Version:  |6/14/2016                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Alison Dinmore                                        |
          |:         |                                                      |
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          SUBJECT:  Planning and zoning:  development bonuses:  mixed-use  
          projects


          DIGEST:  This bill 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.  

          ANALYSIS:
          
          Existing law:

          1)Requires all cities and counties to adopt an ordinance that  
            specifies how they will implement state density bonus law.   
            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 cities and counties 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 of a housing for very low-income  
               households







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             c)   A senior citizen housing development or mobile home park

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

          1)Requires that the applicant agree to, and the city or county  
            ensure, continued affordability of all low- and very  
            low-income units that qualified the applicant for the density  
            bonus for at least 55 years.


          2)Requires cities and counties to provide an applicant for   
            density bonus concessions and incentives based on the number  
            of below market-rate units included in the project as follows:


             a)   One incentive or concession, if the project includes at  
               least 10% of the total units for low-income households, 5%  
               for very low-income households, or 10% for moderate-income  
               households in a CID


             b)   Two incentives or concessions, if the project includes  
               at least 20% of the total units for low-income households,  
               10% for very low-income households, or 20%  for  
               moderate-income households in a CID


             c)   Three incentives or concessions, if the project includes  
               at least 30% of the total units for low-income households,  
               15% for very low-income households, or 30% for  
               moderate-income households in a CID


          3)Specifies that concessions or incentives may include the  
            following:


             a)   A reduction in site development standards 


             b)   A modification of zoning code requirements or  
               architectural design requirements that exceed the minimum  
               building standards, including a reduction in setbacks,  








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               square footage requirements, or parking requirements, that  
               results in identifiable, financially sufficient, and actual  
               cost reductions


             c)   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 nonresidential uses are compatible  
               with the project


             d)   Other regulatory incentives or concessions proposed by  
               the developer or the city or county that result in  
               identifiable cost reductions


          This bill:

          1)Creates a development bonus for commercial developers that  
            agree to partner with an affordable housing developer to  
            construct a joint project or two separate projects  
            encompassing affordable housing, in addition to granting  
            incentives and concessions under State Density Bonus Law.  

          2)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

             c)   Is located within one-half mile of a major transit stop

          1)Provides that the development bonus granted to the commercial  
            developer shall mean 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









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             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

          1)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.

          2)For purposes of this section, 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 shall be used towards  
               the costs of affordable housing construction on a pending  
               project.

          1)States that State Density Bonus Law applies.

          2)Provides that nothing shall preclude any additional allowances  
            or incentives offered to developers by local governments  
            pursuant to law or regulation.


          3)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.

          4)Defines "commence with construction" as either of the  
            following:

             a)   Commence with the construction of affordable units

             b)   Issuance of building permits for the construction of the  








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               affordable units  

          COMMENTS:

          1)Purpose . According to the author, California's housing costs  
            have far outpaced those of other states in the last  
            half-century.  As of 2015, the typical California home costs  
            $440,000, or two-and-a-half times the national average; and  
            the average monthly rent in California is $1,240, or about 50%  
            higher than in other states.  It is possible to offset the  
            effects of high land costs through more dense development.   
            For this reason, California has enacted an affordable housing  
            density bonus law.  Local governments, however, can be wary of  
            high-density residential development because of the  
            corresponding increase in demand for public services and  
            infrastructure.  Conversely, local governments have more  
            incentive to approve commercial developments, which increase  
            revenues (i.e., through transient occupancy taxes or retail  
            establishments that generate sales taxes). 

            This bill seeks to marry two needs - the need for more  
            affordable housing and local government's desire for increased  
            revenue - by encouraging non-traditional housing developers to  
            enter the market.  This bill creates a new development bonus  
            that shall be provided by local governments to affordable  
            housing developers and commercial developers who partner  
            together to construct affordable housing.  The variances  
            include, but are not limited to: an increase in floor-area  
            rations; a specific use of a limited use/limited application  
            elevator; a decrease in the required minimum amount of parking  
            spaces; an increase in building height; a decrease in set-back  
            requirements; or other incentives as agreed to by the local  
            government and the commercial developer. 

          2)Density bonus law.  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 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  








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            units more broadly 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 from  
            utilizing the density bonus or incentives; and reduced parking  
            standards.

          3)Development bonuses and affordable housing.  This bill seeks  
            to encourage greater production of affordable housing by  
            creating a development bonus for commercial developers who  
            partner with affordable-housing developers to construct  
            affordable-housing units.  The affordable-housing developers  
            would receive a density bonus that corresponds with the number  
            of affordable units included in the development, as well as  
            receive concessions and incentives.  The commercial developer  
            would receive a "development bonus," which means incentives  
            agreed upon by the commercial developer and the local  
            government, such as variances in zoning regulations that  
            result in significant cost reductions. 

            The housing contemplated in this bill could be mixed-use  
            developments, workforce housing on the same property as the  
            commercial development, or the housing could be "off-site."   
            The off-site housing must be within the boundaries of the  
            local government, in close proximity to schools and employment  
            centers, and within a half-mile of public transit.  The  
            housing could be built by either the commercial developer or  
            the affordable- housing developer.

          4)  Ensuring affordability.  According to the author, the intent  
            of this bill is to encourage non-traditional developers to  
            enter the housing market to construct affordable housing.   
            Presently, this bill states that if the commercial developer  
            does not begin construction in accordance with the timelines  
            agreed to by the local government, the commercial developer,  
            and the affordable housing developer, the local government may  
            withhold a certificate of occupancy for any market-rate units  
            under construction until the developer has completed  








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            construction of the affordable units.  Given that a housing  
            developer may choose to construct a 100% affordable  
            development, there may not be any market-rate units under  
            construction.  The author will accept an amendment that states  
            instead that the local government may withhold the certificate  
            of occupancy for the commercial development until the  
            developer has completed construction of the affordable units.   

          
            Additionally, this bill does not state the percentage of units  
            constructed that must be available to low-income individuals.   
            The author will accept an amendment to state that, in order to  
            qualify for a development bonus under this section, a  
            commercial developer shall partner with a housing developer  
            that provides at least 30% of the total units for low-income  
            households or at least 15% of the total units for very  
            low-income households.

          5)  Excluding commercial linkage fees. This bill extends the  
            Density Bonus incentives and concessions to commercial  
            developers to encourage them to build or fund affordable  
            housing.  The bill, however, is silent on how this expansion  
            of state density bonus law intersects with existing underlying  
            commercial linkage fees that may already be required by a  
            local jurisdiction.  A commercial linkage fee is a type of  
            impact fee, charged to commercial, industrial, and retail  
            developments, used to reduce the impacts of that development  
            or provide infrastructure associated with the new development.  
             The charge may be in the form of a fee per unit or per square  
            foot of development, and typically the funds are used to  
            finance affordable housing for the low-income workers whose  
            jobs were created by the development.  

            One potential unintended consequence is that the bill could be  
            interpreted to mean a commercial developer would get credit  
            toward density bonuses or concessions and incentives by simply  
            paying the housing linkage fee that they are already obligated  
            to pay, rather than creating an incentive to reach higher  
            affordable housing commitments.  The author will accept an  
            amendment that states fees for affordable housing or other  
            affordable-housing obligations required by a locally adopted  
            commercial linkage/impact fee ordinance of a city, county, or  
            city and county shall not be included.

          6)  Opposition.  According to the League of California Cities,  








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            unlike in existing state Density Bonus Law 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 regulatory requirements  
            and fees.  According to the American Planning Association -  
            California Chapter, there is no clarity on how the level of  
            affordable housing created relates to the proposed commercial  
            intensification. The affordable housing provided could be  
            overwhelmed by impacts from the increased commercial density.   
            Additionally, unlike state Density Bonus Law, this bill would  
            increase the commercial floor- area ratio, which would  
            increase the size of a commercial project, including parking  
            and traffic impacts. 

          Assembly Votes:

               Floor:         68-9
               Appr:     15-1
               L.Gov:      8-0
               H&CD:       6-0
          
          Related Legislation:
          
          AB 2442 (Holden) - requires local agencies to grant a density  
          bonus when a developer agrees to construct housing for  
          transitional foster youth, disabled veterans, or homeless  
          persons.  This bill is pending hearing in the Senate  
          Appropriations Committee. 

          AB 2556 (Nazarian) - requires a jurisdiction, in cases where a  
          proposed development is replacing existing affordable housing  
          units, to adopt a rebuttable presumption regarding the number  
          and type of affordable housing units necessary for density bonus  
          eligibility.  This bill is pending hearing in the Senate  
          Appropriations Committee. 

          AB 2501 (Bloom) - makes a number of changes to density bonus  
          law, including clarifying the processing of a density bonus  
          application.  This bill is also being heard in the Senate  
          Transportation and Housing Committee.

          FISCAL EFFECT:  Appropriation:  No    Fiscal Com.:  Yes     
          Local:  Yes










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            POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,
                          June 22, 2016.)
          
            SUPPORT:  

          California Apartment Association
          California Association of Realtors
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Council for Affordable Housing
          San Francisco Council of Community Housing Organizations

          OPPOSITION:

          American Planning Association, California Chapter
          City of Camarillo
          City of Sacramento
          City of San Dimas
          League of California Cities


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