BILL ANALYSIS Ó AB 2501 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2501 (Bloom and Low) As Amended August 19, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: |50-11 |(May 27, 2016) |SENATE: |34-3 |(August 25, | | | | | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: H. & C.D. SUMMARY: Makes changes to the 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 AB 2501 Page 2 the preparation of an additional report or study that is not otherwise described in density bonus law. 3)Allows a local government to require reasonable documentation to establish eligibility for a density bonus, incentives and concessions, waivers of development standards, and parking ratios. 4)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). 5)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 result in identifiable and actual cost reductions" to provide for affordable housing costs or rents for the targeted units rather than when it "is not required in order" to provide for the affordable housing costs. 6)Provides that a local government must bear the burden of proof for the denial of a requested concession or incentive. AB 2501 Page 3 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 of a project. 9)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. 10)Provides that the granting of a concession or incentive cannot, in and of itself, require a special study. 11)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. 12)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. 13)Provides that the density bonus law shall be interpreted liberally in favor of producing the maximum number of total housing units. AB 2501 Page 4 14)Provides that a request pursuant to this subdivision shall neither reduce nor increase the number of incentives or concessions to which the applicant is entitled. 15)Provides that no reimbursement is necessary because a local agency has the authority to levy service charges, fees, or an assessment sufficient to pay for the program or level of service mandated by this act. The Senate amendments: 1)Allow a local government to require reasonable documentation to establish eligibility for a density bonus, incentives and concessions, waivers of development standards and parking ratios. 2)Clarify that a city must grant a developer incentives and concessions as part of a request for a density increase if requested by the developer and if the request is consistent with state law. 3)Provide that a request for a parking reduction does not reduce or increase the number of incentives or concessions to which the applicant is entitled. 4)Delete the provision that provides that denial of a requested concession or incentive will be deemed to have exhausted the applicant's existing administrative remedies. 5)Delete the provision that 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 AB 2501 Page 5 facilities. 6)Delete the express prohibition on a developer requesting an increase in density as a concession or incentive. 7)Modify 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 result in identifiable and actual cost reductions" to provide for affordable housing costs or rents for the targeted units. 8)Make clear that incentives and concessions means regulatory incentives and concessions, reduction in site development standards, zoning, or architectural design standards that result in actual identifiable costs reductions to providing for affordable housing costs or for rents for the targeted affordable units. 9)Add conforming changes to avoid chaptering conflicts with AB 2442 (Holden) and AB 2556 (Nazarian), both of the legislative session. FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. 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 40 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 AB 2501 Page 6 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: 1)Ten percent of the total units for lower income households; 2)Five percent of the total units of a housing for very low income households; 3)A senior citizen housing development or mobilehome park; and, 4)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: 1)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 AB 2501 Page 7 moderate income households in a common interest development. 2)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. 3)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. This bill would require a local government to respond to a density bonus application as required under the Permit Streaming Act. Within 30 days of receiving the application, a local government would be required to notify an applicant in writing if the application is complete. If the determination is not made within 30 days then the density bonus application would be deemed complete. Electing to accept no density increase: 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 35%. 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. This bill 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. AB 2501 Page 8 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 is 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 SB 1818, "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 incentives and concessions "result in identifiable, financially sufficient and actual cost reductions". According to supporters of this bill, the intent of this language is 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. This bill deletes "financially sufficient" as the standard and requires the reduction in site development standards, modification of zoning requirements, or concession or incentive, to result in identifiable and actual cost reductions to provide for affordable housing costs or affordable rents. Analysis Prepared by: Lisa Engel / H. & C.D. / (916) 319-2085 FN: AB 2501 Page 9 0004967