BILL ANALYSIS Ó
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
AB 1934 (Santiago) Page 2 of ?
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,
AB 1934 (Santiago) Page 3 of ?
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
AB 1934 (Santiago) Page 4 of ?
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
AB 1934 (Santiago) Page 5 of ?
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
AB 1934 (Santiago) Page 6 of ?
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
AB 1934 (Santiago) Page 7 of ?
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,
AB 1934 (Santiago) Page 8 of ?
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
AB 1934 (Santiago) Page 9 of ?
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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