BILL ANALYSIS                                                                                                                                                                                                    Ó



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          Date of Hearing:  April 13, 2016


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                           Susan Talamantes Eggman, Chair


          AB 2502  
          (Mullin and Chiu) - As Amended March 30, 2016


          SUBJECT:  Land use: zoning regulations.


          SUMMARY:  Authorizes the legislative body of a city or county to  
          establish inclusionary housing requirements as a condition of  
          development.  Specifically, this bill:  


          1)Authorizes the legislative body of a city or county to  
            establish, as a condition of development, inclusionary housing  
            requirements, which may require the provision of residential  
            units affordable to and occupied by moderate income,  
            lower-income, very low-income, or extremely low-income  
            households, as specified.



          2)States the Legislature's intent to supersede any holding or  
            dicta in Palmer/Sixth Street Properties, L.P. v. City of Los  
            Angeles (2009) 175 Cal.App.4th 1396, to the extent that the  
            opinion in that case conflicts with the authority of local  
            governments to adopt inclusionary housing requirements, and  
            specifies that the bill does not otherwise enlarge or diminish  
            the authority of a jurisdiction beyond those powers that  
            existed as of July 21, 2009.









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          3)States that the Legislature finds and declares all of the  
            following:



             a)   Inclusionary housing ordinances have provided quality  
               affordable housing to over 80,000 Californians, including  
               the production of an estimated 30,000 units of affordable  
               housing in the last decade alone;



             b)   Since the 1970's, over 170 jurisdictions have enacted  
               inclusionary housing ordinances to meet their affordable  
               housing needs;



             c)   While many of these local programs have been in place  
               for decades, the recent decision in Palmer/Sixth Street  
               Properties v. City of Los Angeles, has created uncertainty  
               and confusion for local governments regarding the future  
               viability of this important local land use tool; and,



             d)   It is the intent of the Legislature to reaffirm the  
               authority of local jurisdictions to enact and enforce these  
               ordinances.
          EXISTING LAW:


          1)Grants cities and counties the power to make and enforce  
            within their limits all local, police, sanitary, and other  
            ordinances and regulations not in conflict with general laws.










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          2)Declares the Legislature's intent to provide only a minimum of  
            limitation with respect to zoning in order that counties and  
            cities may exercise the maximum degree of control over local  
            zoning matters.



          3)Specifically authorizes the legislative body of any county or  
            city to adopt ordinances that do any of the following:



             a)   Regulate the use of buildings, structures, and land as  
               between industry, business, residences, open space,  
               agriculture, recreation, enjoyment of scenic beauty, use of  
               natural resources, and other purposes;



             b)   Regulate signs and billboards;



             c)   Regulate all of the following:



               i)     The location, height, bulk, number of stories, and  
                 size of buildings and structures;



               ii)    The size and use of lots, yards, courts, and other  
                 open spaces;



               iii)   The percentage of a lot that may be occupied by a  








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                 building or structure; and,



               iv)    The intensity of land use.



             d)   Establish requirements for offstreet parking and  
               loading;



             e)   Establish and maintain building setback lines; and,



             f)   Create civic districts around civic centers, public  
               parks, public buildings, or public grounds, and establish  
               regulations for those civic districts.



          4)Limits, pursuant to the Costa-Hawkins Rental Housing Act, the  
            permissible scope of local rent control ordinances and  
            generally gives the owner of residential real property the  
            right to establish the initial rental rate for a dwelling or  
            unit.
          FISCAL EFFECT:  None


          COMMENTS:  


          1)Bill Summary.  This bill authorizes the legislative body of  
            any city or county to adopt ordinances to establish, as a  
            condition of development, inclusionary housing requirements  
            and makes a number of legislative findings and declarations to  
            supersede any holding or dicta in Palmer/Sixth Street  








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            Properties, L.P. v. City of Los Angeles (2009).


            This bill is sponsored by the author.


          2)Author's Statement.  According to the author, "AB 2502  
            restores local governments' ability to enact inclusionary  
            housing policies by clarifying that the Costa-Hawkins rent  
            control law does not apply to inclusionary housing policies.   
            This bill amends the state's Planning and Zoning law to  
            indicate that inclusionary zoning is an allowable land use  
            power.  Article XI, Section 7 of the California Constitution  
            grants counties and cities the exercise of police power, which  
            allows them 'to make and enforce within its limits all local,  
            police, sanitary, and other ordinances and regulations not in  
            conflict with general laws.'  Many cities and counties have  
            implemented inclusionary housing ordinances as a land use  
            regulation under their police power.  Inclusionary housing  
            ordinances require that developers allocate a certain  
            percentage of housing units in a new development to be  
            affordable to low- and moderate-income households.


            "Nearly 170 cities and counties in California have implemented  
            inclusionary housing policies to address the shortage of  
            affordable housing across the state.  These ordinances vary in  
            the inclusionary housing unit requirements, depth of  
            affordability, and alternative methods of compliance for  
            developers.  Since 2003, inclusionary programs have produced  
            more than 30,000 affordable housing units to working  
            households, seniors, and special needs populations.  AB 2502  
            restores local governments' ability to enact inclusionary  
            housing policies by clarifying that the Costa-Hawkins rent  
            control law does not apply to inclusionary housing policies.


            "In 2009, a state appellate court ruling in the Palmer v. City  
            of Los Angeles case indicated that the state's Costa-Hawkins  








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            Rental Housing Act prohibits local governments from creating  
            affordable rental housing through local inclusionary programs.


            "AB 2502 is identical to AB 1229 (Atkins), which Governor  
            Brown vetoed in 2013.  In his veto message, the Governor  
            indicated that prior to making a legislative change regarding  
            inclusionary housing, he wanted to wait for the California  
            Supreme Court to issue its decision on the California Building  
            Industry Association (CBIA) v. City of San Jose case.  


            In this case, CBIA argued that San Jose's 15% inclusionary  
            housing ordinance is unconstitutional on the basis of the  
            Fifth Amendment, which indicates that private property should  
            not be taken for public use without just compensation.  In  
            June 2015, the Supreme Court unanimously upheld San Jose's  
            inclusionary housing ordinance and ruled that the ordinance is  
            an exercise of the city's police power."
          3)Background. Article XI, Section 7 of the California  
            Constitution grants each city and county the power "to make  
            and enforce within its limits all local, police, sanitary, and  
            other ordinances and regulations not in conflict with general  
            laws." This is generally referred to as the police power of  
            local governments.  The Planning and Zoning Law is a general  
            law that sets forth minimum standards for cities and counties  
            to follow in land use regulation, but the law also establishes  
            the Legislature's intent to "provide only a minimum of  
            limitation in order that counties and cities may exercise the  
            maximum degree of control over local zoning matters."


            Using this police power, many cities and counties have adopted  
            ordinances, commonly called "inclusionary zoning" or  
            "inclusionary housing" ordinances, that require developers to  
            ensure that a certain percentage of housing units in a new  
            development be affordable to lower-income households.  These  
            ordinances vary widely in the percentage of affordable units  
            required, the depth of affordability required, and the options  








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            through which a developer may choose to comply.  Most, if not  
            all, of such ordinances apply to both rental and ownership  
            housing.


            In 2009, in the case of Palmer v. City of Los Angeles, the  
            Second District California Court of Appeal opined that the  
            city's affordable housing requirements associated with a  
            particular specific plan (which was similar to an inclusionary  
            zoning ordinance), as it applied to rental housing, conflicted  
            with and was preempted by a state law known as the  
            Costa-Hawkins Rental Housing Act.  The Costa-Hawkins Act  
            limits the permissible scope of local rent control ordinances.  
             Among its various provisions is the right for a rental  
            housing owner generally to set the initial rent level at the  
            start of a tenancy, even if the local rent control ordinance  
            would otherwise limit rent levels across tenancies.  This  
            provision is known as vacancy decontrol because the rent level  
            is temporarily decontrolled after a voluntary vacancy.  The  
            act also gives rental housing owners the right to set the  
            initial and all subsequent rental rates for a unit built after  
            February 1, 1995.  The court opined that "forcing Palmer to  
            provide affordable housing units at regulated rents in order  
            to obtain project approval is clearly hostile to the right  
            afforded under the Costa-Hawkins Act to establish the initial  
            rental rate for a dwelling or unit."


            The Legislature enacted the Costa-Hawkins Rental Housing Act  
            in 1995 with the passage of AB 1164 (Hawkins), Chapter 331.   
            The various analyses for this bill exclusively discuss rent  
            control ordinances and do not once mention inclusionary zoning  
            ordinances, of which approximately 64 existed in the state at  
            that time.  The Assembly concurrence analysis of 


            AB 1164, which is very similar to the other analyses, states  
            that the bill "establishes a comprehensive scheme to regulate  
            local residential rent control."  The analysis includes a  








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            table of jurisdictions that would be affected by the bill, and  
            the table exclusively includes cities with rent control  
            ordinances and does not include any cities that had  
            inclusionary zoning ordinances affecting rental housing.  The  
            analysis also states, "Proponents view this bill as a moderate  
            approach to overturn extreme vacancy control ordinances which  
            unduly and unfairly interfere into the free market."  The  
            analysis further describes strict rent control ordinances as  
            those that impose vacancy control and states, "Proponents  
            contend that a statewide new construction exemption is  
            necessary to encourage construction of much needed housing  
            units, which is discouraged by strict local rent controls."   
            This legislative history provides no indication that the  
            Legislature intended to affect inclusionary zoning with the  
            passage of AB 1164.  
          4)Prior Legislation.  AB 1229 (Atkins, 2013) would have  
            expressly authorized cities and counties to establish  
            inclusionary housing requirements as a condition of  
            development.  The bill further declares the intent of the  
            Legislature to supersede any holding or dicta in Palmer v.  
            City of Los Angeles that conflicts with this authority.  AB  
            1229 was vetoed with the message that "This bill would  
            supersede the holding of Palmer v. City of Los Angeles and  
            allow local governments to require inclusionary housing in new  
            residential development projects.  As Mayor of Oakland, I saw  
            how difficult it can be to attract development to low and  
            middle income communities.  Requiring developers to include  
            below-market units in their projects can exacerbate these  
            challenges, even while not meaningfully increasing the amount  
            of affordable housing in a given community. The California  
            Supreme Court is currently considering when a city may insist  
            on inclusionary housing in new developments. I would like the  
            benefit of the Supreme Court's thinking before we make  
            legislative adjustments in this area."


          5)California Building Industry Association (CBIA) v. City of San  
            Jose.  The City of San Jose's inclusionary housing ordinance  
            passed in 2010 and required all new residential development  








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            projects of 20 or more units to sell at least 15% of the  
            for-sale units at a price that is affordable to low- or  
            moderate-income households.  The ordinance allowed developers  
            to opt out of the 15% requirements by dedicating land  
            elsewhere or by paying "in-lieu" fees to the city.  Shortly  
            before the ordinance took effect, CBIA filed a lawsuit in  
            superior court, maintaining that the ordinance was invalid on  
            its face on the ground that the city, in enacting the  
            ordinance, failed to provide a sufficient evidentiary basis  
            "to demonstrate a reasonable relationship between any adverse  
            public impacts or needs for additional subsidized housing  
            units in the City ostensibly caused by or reasonably  
            attributed to the development of new residential developments  
            of 20 units or more and the new affordable housing exactions  
            and conditions imposed on residential development by the  
            Ordinance."  


            The superior court agreed with CBIA's contention and issued a  
            judgment enjoining the city from enforcing the challenged  
            ordinance.  The Court of Appeal then reversed the superior  
            court judgment, and concluded that the matter should be  
            remanded to the trial court.  CBIA then sought review of the  
            Court of Appeal decision in the Supreme Court which granted  
            review.


            The Supreme Court in June of 2015 concluded that the Court of  
            Appeal decision should be upheld, and that "contrary to CBIA's  
            contention, the conditions the San Jose ordinance imposes upon  
            future development do not impose 'exactions' upon the  
            developers' property so as to bring into play the  
            unconstitutional conditions doctrine under the takings clause  
            of the federal or state Constitution."  The ruling also noted  
            that enforcing these limits to address a growing housing  
            problem is "constitutionally legitimate" and cited the severe  
            scarcity of affordable housing in California in its decision.










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          6)Arguments in Support.  Supporters argue that the bill restores  
            the authority of local agencies to adopt effective  
            inclusionary policies, which have been effective at creating  
            affordable housing for the last 40 years, without fear of  
            litigation.  


          7)Arguments in Opposition.  Opponents argue that this bill makes  
            inclusionary zoning profoundly unfair and would seriously  
            discourage new multifamily development, and that the bill is  
            an overreaction to one lawsuit.


          8)Committee Amendment.  The Committee may wish to ask the  
            authors to accept an amendment that would clarify that any  
            city adopting a new inclusionary housing ordinance after the  
            effective date of the bill shall hold a public hearing and  
            require a public vote of the legislative body.


          9)Double-Referral.  This bill is double-referred to the Housing  
            and Community Development Committee.


          






















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          REGISTERED SUPPORT / OPPOSITION:




          Support


          Alliance for Community Transit - Los Angeles (ACT-LA)


          American Planning Association, California Chapter


          Asian Pacific Environmental Network


          Bay Area Regional Health Inequities Initiative


          Burbank Housing Development Corporation


          California Coalition for Rural Housing


          California Housing Consortium


          California Pan-Ethnic Health Network


          California Rural Legal Assistance Foundation


          California State Association of Counties


          Century Housing








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          Chinatown Community Development Center


          Cities of Belmont, Napa, Sunnyvale, and Walnut Creek


          City and County of San Francisco


          Counties of Contra Costa, Los Angeles, Marin, and Sonoma


          Community Housing Opportunities Corporation


          Community Housing Partnership


          Community Legal Services in East Palo Alto


          East Bay Housing Organizations


          East LA Community Corporation


          Every One Home


          Grounded Solutions Network


          HIP Housing


          Housing California








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          Koreatown Immigrant Workers Alliance (KIWA)


          Law Foundation of Silicon Valley


          League of Women Voters of California


          Little Tokyo Service Center


          MidPen Housing Corporation


          Multicultural Communities for Mobility


          National Association of Social Workers, California Chapter


          Non-Profit Housing Association of Northern California


          Northern California Community Loan Fund


          Peer Advocated SRHT


          Public Advocates, Inc.


          Strategic Actions for a Just Economy (SAJE)


          San Diego Housing Federation








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          San Francisco Council of Community Housing Organizations


          Southeast Asian Community Alliance


          St. Mary's Center


          Tenants Together


          Thai Community Development Center


          Western Center on Law and Poverty




          Opposition


          Apartment Association California Southern Cities


          Apartment Association of Greater Los Angeles


          Apartment Association of Orange County


          California Apartment Association


          California Association of Realtors









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          California Building Industry Association


          California Business Properties Association 


          California Chamber of Commerce


          East Bay Rental Housing Association


          GH Palmer Associates


          North Valley Property Owner Association


          Santa Barbara Rental Property Association


          San Diego County Apartment Association


          Southwest California Legislative Council




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
















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