BILL ANALYSIS Ó
AB 2501
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Date of Hearing: April 13, 2016
ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT
David Chiu, Chair
AB 2501
(Bloom) - As Amended April 5, 2016
SUBJECT: Housing: density bonuses
SUMMARY: Makes changes to the density bonus law. Specifically,
this bill:
1)Prohibits a local government from conditioning the submission,
review, or approval of an application for a density bonus on
the preparation of any additional report or study that is not
already required in state Density Bonus law.
2)Provides that a local government is not required to publicly
notice a density bonus application or hold a public hearing on
the application.
3)Provides that a local government's action on a density bonus
application is considered a ministerial act.
4)Requires a local government to include the following in its
density bonus ordinance in order to provide for the
expeditious processing of a density bonus application:
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a) A procedure and timeline for processing the application;
b) A list of all of the documents and information that must
be submitted with the application in order for the density
bonus to be deemed complete;
c) A procedure for notifying the applicant, within no less
than 30 days, that the application is complete or if an
additional item is required identification of that item;
a) A procedure for making a final determination on the
application no more than 60 days from the date the
application is deemed complete.
1)Provides that if a local government fails to notify an
applicant within 30 days that an application is complete or
additional items are needed then the application is deemed
complete.
2)Provides that if a local government fails to make a final
determination on an application within 60 days from the date
it is deemed compete then the application is deemed approved.
3)Modifies the circumstance under which a local government can
refuse to grant a concession or incentive to a developer to
when a concession or incentive "does not reduce the cost of
the development" rather than when it "is not required in
order" to provide for the affordable housing costs.
4)Provides that a local government must bear the burden of proof
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for the denial of a requested concession or incentive.
5)Provides that denial of a requested concession or incentive
will be deemed to have exhausted the applicant's existing
administrative remedies.
6)Clarifies that "density bonus" means the maximum allowable
gross residential density.
7)Clarifies that a developer that makes an application for a
density bonus may elect to accept no increase in the density
of a project.
8)Clarifies that the definition of "density bonus" includes any
incentive or concessions, or wavier or reduction of
development standard, provided to the applicant for the
production of housing units and child care facilities.
9)Provides that the granting of a concession or incentive
cannot, in and of its self, require a special study.
10)Deletes the requirement that incentives or concessions
proposed by a developer or local government result in
"identifiable, financially sufficient" and actual cost
reductions and instead require the "identifiable" and actual
cost reductions.
11)Provides that a developer determines if other regulatory
incentives or concession proposed by the developer or local
government result in "identifiable" and actual cost
reductions.
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12)Provides that a developer or local government cannot propose
an increase in density above the percentages allowed in state
law, as a regulatory incentive or concession, except that a
local government can offer additional density in exchange for
additional affordable units.
13)Adds "mixed use development" to the definition of "housing
development." Mixed use development means developments
consisting of residential and nonresidential uses in which the
nonresidential uses are less than 50% of the total square
footage of the development and are limited to neighborhood
commercial use and to the first floor of the buildings that
are two or more stories. Neighborhood commercial means small
scale-general or specialty stores that furnish goods and
services primarily to residents of the neighborhood.
14)Clarifies that each component of any density bonus
calculation, including base density and bonus density,
resulting in fractional units will be separately rounded up to
the next whole number. Finds and declares that this provision
is declaratory of existing law.
15)Provides that the State Density Bonus Law shall be
interpreted liberally in favor of producing the maximum number
of total housing units.
EXISTING LAW:
1)Requires all cities and counties to adopt an ordinance that
specifies how they will implement state density bonus law.
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
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least any one of the following:
a) Ten percent of the total units for lower income
households;
b) Five percent of the total units of a housing for very
low income households;
c) A senior citizen housing development or mobilehome park;
and,
d) Ten percent 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 unites that qualified the applicant for the density
bonus for at least 30 years.
2)Requires that the applicant agree to, and the city or county
ensure, that the initial occupant of the moderate-income units
that are directly related to the receipt of the density bonus
in a CID are moderate-income and that the units are offered at
a cost affordable to moderate-income households.
3)Requires the local government to enforce an equity-sharing
agreement upon the resale of any moderate-income units that
qualified a housing development for a density bonus.
4)Allows, upon sale of the unit, the seller to keep the value of
any improvements, the down payment, and the seller's
proportionate share of appreciation.
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5)Provides that the local government shall recapture its
proportionate share of appreciation, which shall be used
within three years for promotion of affordable homeownership.
6)Requires the city or county to allow an increase in density of
20% over the otherwise maximum allowable residential density
under the applicable zoning ordinance and land use element of
the general plan for low-income, very low-income, or senior
housing, and by five percent for moderate-income housing in a
CID.
7)Requires that the density bonus for low-, very low-, and
moderate-income units increase incrementally according to the
following formula:
a) For each 1% increase above 10% for low-income units, the
density bonus shall increase by 1.5% to a maximum of 35%;
b) For each 1% increase above 5% for very low income units,
the density bonus shall increase by 2.5% to a maximum of
35%; and,
c) For each 1% increase above 10% for moderate-income
units, the density bonus shall increase by 1% to a maximum
of 35%.
8)Requires cities and counties to provide an applicant for a
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;
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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; and
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.
9)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,
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; or
d) Other regulatory incentives or concessions proposed by
the developer or the city or county that result in
identifiable cost reductions.
10)Requires the local government to grant the incentive or
concession requested by the developer unless the city or
county makes written findings that:
a) The concession or incentive is not needed to provide the
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affordable housing; or
b) That the concession or incentive would have a specific
adverse impact on health and safety, the environment, or an
historical resource.
11)Prohibits a city or county from applying any development
standard that will have the effect of precluding the
construction of housing that qualifies for a density bonus at
the densities or with the concessions or incentives required
by density bonus law.
12)Allows a developer to request a waiver or reduction of
development standards.
13)Specifies that the developer must show that the requested
waiver or modification of development standards is necessary
to make the housing units economically feasible.
14)Defines "development standard" to include site and
construction conditions that apply to a residential
development pursuant to any ordinance, general plan element,
specific plan, charter amendment, or other local condition,
law, policy, resolution, or regulation.
15)Requires a city or county to grant either an additional
density bonus or and additional concession or incentive when
the applicant proposes to include a child care facility in or
adjacent to the housing development.
16)Provides a 15% density bonus to the developer of any
market-rate housing project who donates land to a city or
county that could accommodate housing for very low-income
households equal to at least 10 percent of the number of units
in the market-rate development. For each one percent increase
above the 10 percent the density bonus shall increase by one
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percent up to a maximum combined density increase of 35
percent.
17)Provides that to be eligible for the land donation density
bonus, all of the following conditions must be met:
a) The applicant must donate and transfer the land no
later than the approval of the final subdivision map,
parcel map or development application;
b) The land being donated is suitable to accommodate units
affordable to very-low income households in an amount not
less than 10% of the number of residential units of the
proposed development;
c) The transferred land is at least one acre or can
accommodate 40 units, has the appropriate general plan
designation, is appropriately zoned for affordable housing,
can be served by infrastructure, and the land has all the
necessary permits and approvals;
d) The land is subject to deed restrictions ensuring
continued affordability;
e) The land is donated to the local agency or to a housing
developer approved by the local agency; and
f) The transferred land is either within the boundary of
or, if the local agency agrees, within 1/4 mile of the
proposed development.
18)Provides that, upon the developer's request, the local
government may not require parking standards greater than the
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following (the developer may, however request additional
parking incentives or concessions):
a) Zero to one bedrooms: one onsite parking space;
b) Two to three bedrooms: two onsite parking spaces; and
c) Four or more bedrooms: two and one-half parking spaces.
19)Clarifies that local governments may still grant density
bonuses greater than what is provided under state law, or
lower for developments that do not meet the requirements of
state law.
FISCAL EFFECT: Unknown.
COMMENTS:
Density bonus law was originally enacted in 1979, but has been
changed numerous times since. The Legislature enacted the
density bonus law to help address the affordable housing
shortage and to encourage development of more low- and moderate
income housing units. Nearly forty years later, the Legislature
faces the same challenges. Density bonus is a tool to encourage
the production of affordable housing by market rate developers,
although it is used by developers building 100% affordable
developments as well. 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 intended to financially support the inclusion of
the affordable units. Because of numerous amendments over the
years, State Density Bonus Law is confusing and subject to
interpretation by both developers and cities as to its meaning.
All local governments are required to adopt an ordinance that
provides concessions and incentives to developers that seek a
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density bonus on top of the cities zoned density in exchange for
including extremely low, very low, low, and moderate income
housing. Failure to adopt an ordinance does not relieve a local
government from complying with state density bonus law. Local
governments must 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:
Ten percent of the total units for lower income
households;
Five percent of the total units of a housing for very
low income households;
A senior citizen housing development or mobilehome park;
and,
Ten percent of the units in a common-interest
development (CID) for moderate-income households.
A developer can submit a request to a local government as part
of their density bonus application for incentives and
concessions. Developers can receive the following number of
incentives or concessions:
One incentive or concession for projects that include at
least 10% of the total units for lower income households,
at least 5% for very low income households, or at least 10%
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for moderate income households in a common interest
development
Two incentives or concessions for projects with at least
20% lower income households, at least 10% for very low
income households, or at least 20% for moderate income
households in common interest developments.
Three incentives or concessions for projects with at
least 30% lower income households, at least 15% for very
low income households, or at least 30% for moderate income
households in common interest developments.
Timeline for reviewing density bonus application :
Existing law does not set a timeline by which a local government
must process an application for a density bonus. AB 2501 would
require a local government to list in its ordinance the
documents and information it requires to process an application.
Within 30 days of receiving the application, a local government
would be required to notify an applicant if the application is
complete or provide a list of items that are required to
complete it. Also, a local government must provide a process
for making a decision on a density bonus application within 60
days from deeming the application complete. If a local
government does not take any action within 60 days of
determining that the application is complete then it is deemed
approved. Adding a timeline to statute will provide greater
certainty to developers and help inform their decisions
regarding a development. Without knowing the average time it
takes a local government to process a density bonus application
it's unclear if these are the appropriate timelines.
Electing to accept no density increase:
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State law allows a developer a percentage increase in density in
return for inclusion of a corresponding amount of very- low,
low, moderate income units. The maximum amount of density
increase a developer can seek is thirty-five percent. Existing
law allows a developer to choose to accept less of a density
increase than he or she is entitled under the statute. The
statute does not state explicitly that a developer can seek an
amount equal to zero above the zoned density however some have
interpreted the law to allow this. AB 2501 would explicitly
state that a developer can elect to accept no increase in
density.
Determining the value of concessions and incentives.
Developers are allowed to submit a proposal for specific
incentives and concession as part of the application for a
density bonus. Local governments are required to grant the
concessions or incentives a developer requests unless they make
written findings based on substantial evidence that the
concession or incentive are not required in order to provide the
affordable housing, would have specific adverse health and
safety impacts, or have an adverse impact on a property
registered historic property that cannot be mitigated. When
seeking a reduction in a site development standard or
modification of zoning requirements or architectural design
requirements, or other regulatory incentives and concessions,
existing law requires that reduction or modification result in
"identifiable, financially sufficient and actual cost
reductions." This language was added to the statute by SB 1818
(Hollingsworth) Chapter 928, Statutes of 2004. According to the
Assembly Committee analysis of that bill, "Current law requires
local governments to provide applicants for density bonuses with
incentives and concessions in addition to a density bonus, but
the law does not quantify the value of the incentives and
concessions that must be offered. SB 1818 requires that the
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incentives and concessions "result in identifiable, financially
sufficient and actual cost reductions".
According to supporter of this bill, the intent of this language
to ensure that the concessions and incentives are financially
sufficient to reduce the cost of the development to make the
affordable housing units financially feasible. Further,
according to supporters of this bill, in some cases local
governments interpret this language to require developers to
submit pro formas showing the amount of profit they will make on
a project. The question becomes who determines whether or not a
concession or incentives is "financially sufficient" to make the
affordable housing units pencil out. To resolve this dispute, AB
2501 states that the reduction in site development standards or
modification of zoning requirements result in identifiable and
actual cost reductions as determined by the developer.
Arguments in support : According to the sponsors, Western Center
on Law and Poverty and the California Rural Legal Assistance
Foundation, "AB 2501 is one piece of a multi-pronged effort by
legislators, housing advocates, and other organizations to
address California's unfortunate dominance of the list of the
country's least-affordable housing markets. By reducing
regulatory barriers to housing development, this bill would
stretch any increase in state housing funding further and would
induce market-rate developers to build below-market units
without any public funding. Currently, State Density Bonus Law
provides cost-reducing incentives to developers who agree to
make a percentage of their homes affordable to low- and
moderate-income households. The incentives include reduced
parking requirements, increased density, smaller set-backs, and
other modified development standards that reduce costs and/or
allow a developer to use land more efficiently. Both market-rate
and below-market developers have used the law's incentives to
add to the state's stock of permanently affordable homes.
However, the law has a number of ambiguous provisions that
create uncertainty for developers. Additionally, some local
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governments have deliberately interpreted the law to discourage
developers from accessing its benefits. AB 2501 clarifies a
number of these ambiguous provisions in order to increase the
law's effectiveness as an incentive to build desperately needed
affordable homes. The bill: clearly states the legislature's
intent to encourage the development of affordable housing and
provide incentives by right to developers, establishes a clear
process and deadlines for local governments to approve or deny a
density bonus application, clarifies that an applicant for a
density bonus need only demonstrate that requested incentives
reduce the cost of development, increases certainty regarding
the number of additional units available as a result of the
density increase, limits the ability of local governments to
impose additional requirements to block density bonus projects.
Arguments in opposition :
According to the League of California Cities, "AB 2501 would
make significant changes to existing law. It requires a city to
take action on the density bonus within 60 days of finding the
application complete. This is too short a time frame for those
applications for a density bonus that are filed in conjunction
with another land use approval (e.g. conditional use permit,
subdivision map, etc.). Most applications for a density bonus
are made in conjunction with an application for a land use
approval that requires a public hearing and takes longer to
process. Typically a city will process the granting of the
density bonus in conjunction with the processing of the
application. A city should not grant a density bonus before it
approves the project that the density bonus is attached. "
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Staff comments:
Opponents argue that this bill proposes a state preemption of
local government's policies and development standards. Density
bonus law has been on the books since the late-1970s. The
obligation of a local government to adopt a local density bonus
ordinance and to comply with the state standard if it does not
is existing state law. This bill does not change that
requirement.
The intent of the timelines in the bill is to provide certainty
to a developer who is submitting a density bonus application by
providing a timeline by which the local government needs to deem
the application compete and approved. Although it may make
sense to provide some timeline, it's not clear if the timelines
in the bill are appropriate. The committee may wish to consider
requiring a local government to notify a developer within a
specified time period that an application is deemed complete but
not setting a timeline by which the local government needs to
approve the application. For example, in the Permitting
Streamlining Act requires a local government to determine if an
application for a Subdivision Map Act or zoning change are
complete within 30 days.
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As discussed above this bill attempts to clarify what was
described as the intent in previous legislation [(SB 1818
Hollingsworth) Chapter 928, Statutes of 2004] that reductions in
site development standards and concessions and incentives
result in cost reductions that are sufficient to support the
affordable housing units. This bill would change that language
to require the concessions and incentives proposed by the local
government or developer to be "identifiable" but not
"financially sufficient" as determined by the developer. The
committee may wish to delete the language adding "as determined
by the developer."
This bill proposes to prohibit a local government from requiring
public notice or holding a hearing on a density bonus
application, it further requires that acting on the application
is a ministerial act. The committee may wish to delete this
language.
Committee amendments:
1) On page 3, line 16 through 18 delete the following
language, "The local government shall not require public
notice or hold a public hearing on the application. Acting
on the application shall be considered a ministerial act."
2) On page 17, line 11 and 12, delete "as determined by the
developer."
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3) On page 17, line 21 and 22, delete "as determined by the
developer."
Double referred: If AB 2501 passes this committee, the bill will
be referred to the Committee on Local Government
REGISTERED SUPPORT / OPPOSITION:
Support
California Apartment Association (co-sponsor)
California Rural Legal Assistance Foundation (co-sponsor)
Western Center on Law & Poverty (co-sponsor)
California Housing Consortium
Housing California
Opposition
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American Planning Association California Chapter
California State Association of Counties
City of Lakeport
City of Torrance
Council of Community Housing Organizations
League of California Cities
Analysis Prepared by:Lisa Engel / H. & C.D. / (961) 319-2085,
Lisa Engel / H. & C.D. / (916) 319-2085