BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
                              Senator Jim Beall, Chair
                                2015 - 2016  Regular 

          Bill No:          AB 2501           Hearing Date:     6/28/2016
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          |Author:   |Bloom                                                 |
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          |Version:  |6/15/2016                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Alison Dinmore                                        |
          |:         |                                                      |
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          SUBJECT:  Housing:  density bonuses


            DIGEST:  This bill makes a number of changes to density bonus  
          law, including clarifying the processing of a density bonus  
          application.

          ANALYSIS:
          
          Existing law:
          
            1)  Requires all local governments to adopt an ordinance that  
              specifies how they will implement state density bonus law.


            2)  Requires local governments 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

               d)     10% of the units in a common-interest development  







          AB 2501 (Bloom)                                    Page 2 of ?
          
          
                 (CID) for moderate-income households

            1)  Requires that the applicant agree to, and the local  
              government to 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 the local government 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.


            3)  Requires that the density bonus for low-, very low-, and  
              moderate-income units increase incrementally according a set  
              formula.


            4)  Requires cities and counties to provide an applicant for a  
              density bonus with 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










          AB 2501 (Bloom)                                    Page 3 of ?
          
          
            1)  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


               d)     Other regulatory incentives or concessions proposed  
                 by the developer or the city or county that result in  
                 identifiable cost reductions


            2)  Requires the local government to grant the incentive or  
              concession requested by the developer, unless the city or  
              county makes written findings that the concession or  
              incentive is not needed to provide the affordable housing;  
              or that the concession or incentive would have a specific  
              adverse impact on health and safety, the environment, or an  
              historical resource.


            3)  Allows a developer to request a waiver or reduction of  
              development standards.


            4)  Specifies that the developer must show that the requested  
              waiver or modification of development standards is necessary  
              to make the housing units economically feasible.  Defines  
              development standard to include site and construction  
              conditions that apply to a residential development, pursuant  








          AB 2501 (Bloom)                                    Page 4 of ?
          
          
              to any ordinance, general plan element, specific plan,  
              charter amendment, or other local condition, law, policy,  
              resolution, or regulation.


            5)  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%.


            6)  Provides that upon the request of a developer, a city,  
              county, or city and county shall not require a vehicular  
              parking ratio, inclusive of handicapped and guest parking,  
              that meets the following ratios:


             a)   Zero to one bedroom - one onsite parking space


             b)   Two to three bedrooms - two onsite parking spaces


             c)   Four and more bedrooms - two and one-half parking spaces


          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, county, or  
              city and county, that local government shall comply with  
              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 or required by state  
              law. 

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








          AB 2501 (Bloom)                                    Page 5 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 and consistent with density bonus law
               c)     Notify the applicant for a density bonus whether the  
                 application is complete, consistent with the Permit  
                 Streamlining Act

            4)  Modifies the circumstance under which a local government  
              can refuse to grant a concession or incentive to a developer  
              when a concession or incentive "does not reduce the cost of  
              the development" from that when "it is not required in  
              order" to provide for the affordable-housing costs.

            5)  Provides that the city, county, or city and county shall  
              bear the burden of proof for the denial of a requested  
              concession or incentive.  

            6)  Clarifies that "density bonus" means the maximum allowable  
              gross residential density, or if elected by the applicant, a  
              lesser percentage of density increase, including but not  
              limited to no increase in density.  

            7)  Adds "mixed-use development" to the definition of "housing  
              development."  

            8)  Provides that the granting of a concession, in and of  
              itself, cannot require a special study.

            9)  Deletes the requirement that incentives or concessions  
              proposed by the developer or local government result in  
              "identifiable, financially sufficient" and actual cost  
              reductions, and instead require the "identifiable" and  
              actual cost reductions.

            10) 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. 








          AB 2501 (Bloom)                                    Page 6 of ?
          
          

            11) States that a request for a reduction in parking ratio,  
              under existing law, shall neither reduce nor increase the  
              number of incentives or concessions to which the applicant  
              is entitled.  

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

            1)  Purpose.  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 for  
              density bonus law to be an effective incentive to produce  
              affordable housing.  Right now that certainty is lacking.

          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  








          AB 2501 (Bloom)                                    Page 7 of ?
          
          
              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)     Clarifying application requirements and processing  
              timelines.  Current law does not set a timeline by which a  
              local government must process an application for a density  
              bonus.  This bill requires the local government, in order to  
              provide for expeditious processing of a density bonus  
              application, to adopt procedures and timelines for  
              processing a density bonus application; provide a list of  
              all documents and information required to be submitted with  
              the density bonus application, and notify the applicant for  
              a density bonus whether the application is complete.   
              Further, this bill 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  
              and that the granting of an application, in and of itself,  
              cannot require a special study.  Adding a timeline and  
              clarifying the application requirements will provide greater  
              certainty to developers and help inform their decisions  
              regarding a development.  

              The opposition raised concerns that these provisions would  
              preclude a local government from requiring reasonable  
              documentation related to the eligibility for a density bonus  
              or other concessions or incentives, waivers, or reductions  
              of development standards, or parking standards.  To address  
              this concern, the author will accept an amendment stating  
              the following:  This subdivision shall not prohibit a local  
              government from requiring an applicant to provide reasonable  
              documentation to establish eligibility for a requested  
              density bonus, incentives or concessions, waivers or  
              reductions of development standards, and parking ratios.   









          AB 2501 (Bloom)                                    Page 8 of ?
          
          
          4)  Additional studies.  This bill provides that the granting of  
              a concession or incentive shall not require or be  
              interpreted, in and of itself, to require a study.  The  
              opposition raised a concern that this could be interpreted  
              to preclude a local government from requiring reasonable  
              documentation to establish eligibility for the concession or  
              demonstrate that the incentive or concession meets the  
              definition of a concession or incentive in existing law.  
              To address this concern, the author will accept an amendment  
              stating the following:  "Study" does not include reasonable  
              documentation to establish eligibility for the concession or  
              incentive or to demonstrate that the incentive or concession  
              meets the definition set forth in existing law. 

          5)  Rewording existing law.  This bill makes clarifying changes  
              by restating existing law in 65915(b): A city, county, or  
              city and county shall grant one density bonus, as specified,  
              and incentives or concessions, waivers or reductions of  
              development standards, and parking ratios, when an applicant  
              for a housing development seeks and agrees to construct a  
              housing development with units for specified income levels.   
              The intent was to provide clarity in the law in one place  
              about the four benefits to which a developer is entitled  
              should the developer provide affordable units in their  
              projects under existing law.  Under existing law, in order  
              to obtain concessions or incentives, waivers, and reduced  
              parking ratios, the developer must request them from the  
              city.To address concerns from the opposition, the author  
              will accept an amendment that clarifies that a local  
              government shall grant incentives or concessions, waivers,  
              and reduced parking ratios, if requested by the applicant  
              and consistent with the requirements under existing law. 

          6)     Choosing to accept no density increase.  Current density  
              bonus law permits a developer a percentage increase in  
              density in return for inclusion of a corresponding amount of  
              very low-, low-, and moderate-income units.  The maximum  
              amount of density increase a developer can seek is 35%.   
              Existing law allows a developer to choose to accept less  
              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 say this.  
               This bill would explicitly state that a developer can elect  
              to accept no increase in density.  








          AB 2501 (Bloom)                                    Page 9 of ?
          
          

          7)     Determining the value of concessions and incentives.   
              Under current law, 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 to provide the affordable housing, which would  
              have specific adverse health and safety impacts, or have an  
              adverse impact on a registered historic property that cannot  
              be mitigated.  When seeking incentives and concessions,  
              existing law requires that they 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 Senate  
              Housing and Community Development Committee analysis of that  
              bill:

                 The references to "identifiable and actual  
                 cost reductions ensure that the incentives  
                 have some value. The intent of adding  
                 "financially sufficient" is to ensure that  
                 that value is more than nominal and actually  
                 of benefit to the developer.  However, the  
                 term suffers from vagueness and as a result  
                 lacks practical meaning.  What is the  
                 standard against which sufficiency is to be  
                 judged? 

              The intent of the language is to ensure that the concessions  
              and incentives actually reduce the cost of the development  
              to make the affordable housing units financially feasible.   
              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 incentive is  
              "financially sufficient" to make the affordable housing  
              units pencil out.  This bill proposes to resolve that issue  
              by stating that the reduction in site-development standards  
              or modifications of zoning requirements result in  
              identifiable and actual cost reductions as determined by the  
              developer.   

          8)      Opposition.  According to the opposition, this bill  








          AB 2501 (Bloom)                                    Page 10 of ?
          
          
              violates the separation of powers and limits the ability of  
              a local government to interpret its own development  
              standards.  Additionally, this bill would limit a city's  
              ability to reduce development standards without waiving them  
              and allow developers to determine whether project  
              modifications result in cost reductions rather than the  
              city.  Local governments process many permits for  
              development projects and request studies if the project  
              necessitates more analysis.  Disallowing full project  
              analysis may be detrimental to the welfare of the local  
              community.   

          Assembly Votes:

               Floor:         50-11
               Appr:     14-2
               L.Govt:        7-0
               H&CD:     5-1
          
          Related Legislation:
          
          AB 1934 (Santiago) - 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.  This bill will also be heard in this  
          committee today.

          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 currently pending 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 currently pending in the Senate  
          Appropriations Committee.

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


            POSITIONS:  (Communicated to the committee before noon on  








          AB 2501 (Bloom)                                    Page 11 of ?
          
          
          Wednesday,
                          June 22, 2016.)
          
            SUPPORT:  

          California Rural Legal Assistance Foundation (co-sponsor)
          Western Center on Law and Poverty (co-sponsor)
          California Apartment Association
          California Association of Realtors
          California Economic Summit
          California Housing Consortium
          City of Los Angeles
          East Bay Developmental Disabilities Legislative Coalition
          East Bay Rental Housing Associations
          Leading Age California
          The Arc and United Cerebral Palsy California Collaboration

          OPPOSITION:

          California State Association of Counties (prior version)
          City of Encinitas (prior version)
          City of Fontana (prior version)
          City of Fountain Valley (prior version)
          City of Highland (prior version)
          City of Lakeport (prior version)
          City of Sacramento (prior version)
          City of San Carlos (prior version)
          City of San Luis Obispo (prior version)
          City of Tiburon (prior version)
          City of Torrence (prior version)
          City of West Covina (prior version)
          League of California Cities
          Rural County Representatives of California (prior version)
                                                           San Francisco Council of Community Housing Organizations
          South Bay Cities Council of Governments (prior version)
          Ventura Council of Governments (prior version)

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