BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2501| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 2501 Author: Bloom (D) and Low (D), et al. Amended: 8/1/16 in Senate Vote: 21 SENATE TRANS. & HOUSING COMMITTEE: 10-0, 6/28/16 AYES: Beall, Cannella, Allen, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski NO VOTE RECORDED: Bates SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 ASSEMBLY FLOOR: 50-11, 5/27/16 - See last page for vote SUBJECT: Housing: density bonuses SOURCE: California Rural Legal Assistance Foundation Western Center on Law and Poverty 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 AB 2501 Page 2 specifies how they will implement state density bonus law. 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 (CID) for moderate-income households 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. Requires 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. 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 AB 2501 Page 3 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 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 6) 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. AB 2501 Page 4 7) Allows a developer to request a waiver or reduction of development standards. 8) 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 to any ordinance, general plan element, specific plan, charter amendment, or other local condition, law, policy, resolution, or regulation. 9) 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%. 10)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 AB 2501 Page 5 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. This bill does 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. 3) Requires the local government, in order to provide for expeditious processing of a density bonus application, to do 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 "result[s] in identifiable and actual cost reductions" 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. AB 2501 Page 6 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) Provides that the granting of a concession, in and of itself, cannot require a special study. "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. 8) 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 requires the "identifiable" and actual cost reductions. 9) 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. 10)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. 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 AB 2501 Page 7 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 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 AB 2501 Page 8 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. A local government is not prohibited 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. Adding a timeline and clarifying the application requirements will provide greater certainty to developers and help inform their decisions regarding a development. 4) 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 explicitly states that a developer can elect to accept no increase in density. 5) Opposition. The author and sponsors worked to address the concerns raised by a number of organizations in opposition to the bill, including representatives of local governments, and took a number of amendments in the Senate Transportation and Housing Committee to address those concerns. Those amendments are now in the current version of the bill and all those listed in opposition were opposed to a prior version of the bill. AB 2501 Page 9 FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SUPPORT: (Verified8/9/16) California Rural Legal Assistance Foundation (co-source) Western Center on Law and Poverty (co-source) 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: (Verified8/18/16) City of Encinitas City of Fontana City of Fountain Valley City of Highland City of Lakeport City of Sacramento City of San Carlos City of San Luis Obispo City of San Marcos City of Santa Barbara City of Tiburon City of Torrance City of West Covina San Francisco Council of Community Housing Organizations South Bay Cities Council of Governments Ventura Council of Governments ASSEMBLY FLOOR: 50-11, 5/27/16 AB 2501 Page 10 AYES: Alejo, Travis Allen, Arambula, Atkins, Baker, Bloom, Bonilla, Bonta, Burke, Calderon, Campos, Chau, Chávez, Cooley, Cooper, Dababneh, Daly, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Holden, Jones-Sawyer, Lackey, Linder, Lopez, Low, Maienschein, McCarty, Medina, Nazarian, Olsen, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Weber, Wilk, Wood, Rendon NOES: Achadjian, Beth Gaines, Gallagher, Harper, Irwin, Kim, Levine, Mathis, Obernolte, Wagner, Waldron NO VOTE RECORDED: Bigelow, Brough, Brown, Chang, Chiu, Chu, Dahle, Dodd, Grove, Hadley, Roger Hernández, Jones, Mayes, Melendez, Mullin, O'Donnell, Patterson, Ting, Williams Prepared by:Alison Dinmore / T. & H. / (916) 651-4121 8/18/16 14:03:57 **** END ****