BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                       AB 1934|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |

                                   THIRD READING 

          Bill No:  AB 1934
          Author:   Santiago (D) 
          Amended:  8/18/16 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.  

          Senate Floor Amendments of 8/18/16 make clarifying changes,  
          require a city or county to report to the Legislature if it  
          grants a development bonus, and add a five-year sunset. 


          Existing law:


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                                                                     Page 2

           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 for very low-income households

              c)    A senior citizen housing development or mobile home  

              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  


                                                                    AB 1934  
                                                                     Page 3

              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

           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  


                                                                    AB 1934  
                                                                     Page 4

                identifiable cost reductions

          This bill:

           1) Creates a development bonus for commercial developers that  
             have entered into an agreement for partnered housing to  
             contribute affordable housing through 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 housing shall be constructed on the site of the  
             commercial development or on a site that is all of the  

              a)    Within the boundaries of the local government

              b)    In close proximity to public amenities, including  
                schools and employment centers

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

           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% increase in maximum allowable intensity in  
                the General Plan, zoning ordinance, or other regulation

              b)    Up to a 20% variance in maximum allowable floor-area  


                                                                    AB 1934  
                                                                     Page 5

              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  
             commercial developments shall be approved by the  
             affordable-housing developer, the commercial developer, and  
             the city, county, or city and county.

           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 donate 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 a cash payment to  
                the affordable housing developer that shall be used  
                towards the costs of constructing the affordable housing  

           6) States that State Density Bonus Law applies.

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


                                                                    AB 1934  
                                                                     Page 6

           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 the requirements within an ordinance that  
             requires the payment of a fee by a commercial developer for  
             the promotion or provision of affordable housing.

           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)Requires a city or county to submit to the Department of  
             Housing and Community Development, as part of an existing  
             required annual report, information describing a commercial  
             development bonus, including the terms of the agreements  
             between the commercial developer and the affordable housing  
             developer, the developers and the local jurisdiction, and the  
             number of affordable units constructed as part of the  

           12)Provides that this bill shall only remain in effect until  
             January 1, 2022. 


           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  


                                                                    AB 1934  
                                                                     Page 7

             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  

           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  


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                                                                     Page 8

             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 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


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                                                                     Page 9

          SUPPORT:   (Verified8/18/16)

          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

          OPPOSITION:   (Verified8/19/16)

          City of Camarillo
          City of Sacramento
          City of San Dimas
          City of San Marcos

          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
          8/19/16 18:49:14


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