BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                       AB 1934|
          |Office of Senate Floor Analyses   |                              |
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          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  AB 1934
          Author:   Santiago (D) 
          Amended:  8/1/16 in Senate
          Vote:     21 

           SENATE TRANS. & HOUSING COMMITTEE:  10-0, 6/28/16
           AYES:  Beall, Cannella, Allen, Gaines, Galgiani, Leyva,  
            McGuire, Mendoza, Roth, Wieckowski
           NO VOTE RECORDED:  Bates


           ASSEMBLY FLOOR:  68-9, 6/2/16 - See last page for vote

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

          SOURCE:    Author

          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.  


          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  


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                                                                     Page 2

            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  

             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

          3)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.

          4)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  


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                                                                     Page 3

               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

          5)Specifies that concessions or incentives may include the  

             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,  
               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  


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                                                                     Page 4

             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  

           3) 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  

              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

           4) Provides that the agreement for partnered housing and  


                                                                    AB 1934  
                                                                     Page 5

             commercial developments shall be approved by the affordable  
             housing developer, the commercial developer, and the local  

           5) Provides that for purposes of this bill, 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.

           6) States that State Density Bonus Law applies.

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

           8) Requires, in order to qualify for a development bonus under  
             this bill, a commercial developer to 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.

           9) Provides that a development bonus shall not include a  
             reduction of fees for affordable housing or authorize  
             noncompliance with other affordable housing requirements  


                                                                    AB 1934  
                                                                     Page 6

             within a local commercial linkage and impact fee ordinance.

           10)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 the commercial development  
             under construction until the developer has completed  
             construction of the affordable units.

           11)Defines "commence with construction" as either of the  

              a)    Commence with the construction of affordable units

              b)    Issuance of building permits for the construction of  
                the affordable units  


          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). 


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                                                                     Page 7

            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  
            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  


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                                                                     Page 8

          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 or 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.

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

          SUPPORT:   (Verified8/8/16)

          California Apartment Association
          California Association of Realtors
          California Building Industry Association
          California Business Properties Association
          California Chamber of Commerce
          California Council for Affordable Housing
          California Housing Consortium 
          San Francisco Council of Community Housing Organizations
          San Gabriel Valley Economic Partnership


                                                                    AB 1934  
                                                                     Page 9

          OPPOSITION:   (Verified8/8/16)

          City of Camarillo
          City of Sacramento
          City of San Dimas
          City of San Marcos
          League of California Cities

          ASSEMBLY FLOOR:  68-9, 6/2/16
          AYES:  Achadjian, Alejo, Arambula, Atkins, Bloom, Bonilla,  
            Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez,  
            Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd,  
            Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia,  
            Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Roger  
            Hernández, Holden, Jones, Jones-Sawyer, Kim, Lackey, Levine,  
            Linder, Low, Maienschein, Mayes, McCarty, Medina, Mullin,  
            Nazarian, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas,  
            Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond,  
            Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
          NOES:  Travis Allen, Baker, Brough, Hadley, Harper, Irwin,  
            Lopez, Mathis, Obernolte
          NO VOTE RECORDED:  Bigelow, Beth Gaines, Melendez

          Prepared by:Alison Dinmore / T. & H. / (916) 651-4121
          8/10/16 16:00:44

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