BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2501


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          Date of Hearing:  April 20, 2016


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                           Susan Talamantes Eggman, Chair


          AB 2501  
          (Bloom and Low) - As Amended April 14, 2016


          SUBJECT:  Housing:  density bonuses.


          SUMMARY:  Makes a number of changes to density bonus law.   
          Specifically, this bill:  


          1)Clarifies that when an applicant seeks a density bonus for a  
            housing development within, or for the donation of land for  
            housing within the jurisdiction of a city or county, that  
            local government shall provide the applicant with waiver and  
            reduction of development standards for the production of  
            housing units and child care facilities, in addition to  
            incentives or concessions, as currently provided in density  
            bonus law.


          2)Prohibits a local government from conditioning the submission,  
            review, or approval of an application for a density bonus on  
            the preparation of an additional report or study that is not  
            otherwise described in density bonus law.


          3)Requires, in order to provide for the expeditious processing  
            of a density bonus application, the local government to do all  
            of the following:








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             a)   Adopt procedures and timelines for processing a density  
               bonus application;


             b)   Provide a list of all documents and information required  
               to be submitted with the density bonus application in order  
               for the density bonus application to be deemed complete,  
               consistent with density bonus law; and,


             c)   Notify the applicant for a density bonus whether the  
               application is complete in a manner that is consistent with  
               the Permit Streamlining Act (Act).


          4)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. 


          5)Provides that a local government must bear the burden of proof  
            for the denial of a requested concession or incentive. 


          6)Provides that denial of a requested concession or incentive  
            will be deemed to have exhausted the applicant's existing  
            administrative remedies.


          7)Clarifies that "density bonus" means the maximum allowable  
            gross residential density. 


          8)Clarifies that a developer that makes an application for a  
            density bonus may elect to accept no increase in the density  








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            of a project.   


          9)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. 
          10)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. 


          11)Provides that the granting of a concession or incentive  
            cannot, in and of its self, require a special study.


          12)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.


          13)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. 










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          14)Provides that the density bonus law shall be interpreted  
            liberally in favor of producing the maximum number of total  
            housing units.   


          15)Provides that no reimbursement is necessary because a local  
            agency has the authority to levy service charges, fees, or  
            assessment sufficient to pay for the program or level of  
            service mandated by this act.


          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  
            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;



             c)   A senior citizen housing development or mobilehome park;  
               and,



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









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          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 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 Common Interest Development  
            (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.


          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 5% 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:








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             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;
             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,  








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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; 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  
               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.








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          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 an 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% of the number of units in the  
            market-rate development.  


          For each 1% increase above the 10%, the density bonus shall  
            increase by 1% up to a maximum combined density increase of  
            35%.
          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   








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               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  
            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:  This bill is keyed fiscal.


          COMMENTS:  









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          1)Bill Summary.  This bill makes a number of changes to density  
            bonus law.  The bill clarifies that when an applicant seeks a  
            density bonus for a housing development within, or for the  
            donation of land for housing within the jurisdiction of a city  
            or county, that local government shall provide the applicant  
            with waiver and reduction of development standards for the  
            production of housing units and child care facilities, in  
            addition to incentives or concessions, as provided currently  
            in density bonus law. The bill also prohibits a local  
            government from conditioning the submission, review, or  
            approval of an application for a density bonus on the  
            preparation of an additional report or study that is not  
            otherwise described in density bonus law.  The bill requires,  
            in order to provide for the expeditious processing of a  
            density bonus application, the local government to do all of  
            the following: a) Adopt procedures and timelines for  
            processing a density bonus application; b) Provide a list of  
            all documents and information required to be submitted with  
            the density bonus application in order for the density bonus  
            application to be deemed complete, consistent with density  
            bonus law; and, 
          c) Notify the applicant for a density bonus whether the  
            application is complete in a manner that is consistent with  
            the Permit Streamlining Act (Act).



            Additionally, the bill 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, and provides that a local government must bear the  
            burden of proof for the denial of a requested concession or  
            incentive. 


            This bill is sponsored by the Western Center on Law and  








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            Poverty and the California Rural Legal Assistance Foundation.


          2)Author's Statement.  According to the author, "California  
            remains one of the most expensive housing markets in the  
            United States.  Through the loss of redevelopment agencies and  
            reductions in state and federal housing funding, fewer  
            resources are available to address this need.  One tool for  
            increasing affordable housing production is through regulatory  
            incentives that reduce barriers to the production of  
            affordable housing and encourage market-based solutions.   
            State Density Bonus law (Government Code Sections 65915 -  
            65918) provides concessions and incentives to housing  
            developers who agree to make a percentage of the units in  
            their development affordable to low- and moderate-income  
            households. However, the law has a number of ambiguous  
            provisions that discourage developers from utilizing it, or  
            are used by local governments to prevent developers from  
            accessing the law.


            "Developers and local governments need certainty in order for  
            Density Bonus law to be an effective incentive to produce  
            affordable housing.  Right now that certainty is lacking. 
            AB 2501 would strengthen state Density Bonus law to help  
            encourage market rate developers to include affordable units  
            within residential developments, and reduce costs for  
            affordable housing developers. AB 2501 would address a number  
            of these ambiguous provisions and strengthen the incentives."

          3)Background.  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  








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            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  
            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:


             a)   10% of the total units for lower-income households;



             b)   5% of the total units of a housing for very low-income  
               households;



             c)   A senior citizen housing development or mobilehome park;  
               and,



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








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            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:
             a)   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%  
               for moderate-income households in a common interest  
               development 


             b)   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. 


             c)   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. 


          1)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."











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          2)Arguments in Opposition.  Opponents argue that this bill  
            contains provisions that would limit the ability of a city to  
            interpret its own development standards, diminish the role of  
            planning commissions and impose unrealistic timeframes.


          3)Double-Referral.  This bill was heard by the Housing and  
            Community Development Committee on April 13, 2016, where it  
            passed with a 5-1 vote.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Rural Legal Assistance Foundation [SPONSOR]


          Western Center on Law and Poverty [SPONSOR]


          California Apartment Association


          California Association of Realtors


          California Housing Consortium




          Opposition










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          California State Association of Counties


          Cities of Fontana and Torrance (based on 4/5/2016 version)


          League of California Cities (based on 4/5/2016 version)




          Analysis Prepared by:Debbie Michel / L. GOV. / (916) 319-3958