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