BILL ANALYSIS �
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2222|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 2222
Author: Nazarian (D)
Amended: 6/26/14 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 11-0, 6/24/14
AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,
Lara, Liu, Pavley, Roth, Wyland
ASSEMBLY FLOOR : 72-0, 5/23/14 - See last page for vote
SUBJECT : Density bonus laws
SOURCE : Author
DIGEST : This bill makes an applicant ineligible for a density
bonus if the proposed housing development will displace units
that are affordable to, or occupied by, lower income households.
ANALYSIS : 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
(referred to below as the traditional density bonus) 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
CONTINUED
AB 2222
Page
2
units more thinly 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:
1. A density bonus.
2. Incentives or concessions (hereafter referred to as
incentives).
3. Waiver of any development standards that prevent the
developer from utilizing the density bonus or incentives.
4. Reduced parking standards.
To qualify for the benefits of this provision, a proposed
housing development must meet one of the following criteria:
(1) include at least 5% of the units affordable to very
low-income households, (2) include at least 10% of the units
affordable to low-income households, (3) include at least 10% of
the units in a for-sale common-interest development affordable
to moderate-income households, or (4) be a senior housing
development. Units affordable to lower income households must
remain affordable for 30 years, and for-sale units affordable to
moderate-income households must be subject to an equity sharing
agreement that returns a proportionate share of appreciation to
the local governments upon resale of the home. If one of these
four options is met, a developer is entitled to a base increase
in density for the project as a whole (referred to as a density
bonus) and one regulatory incentive. At higher levels of
affordability, the developer is entitled to a sliding scale of
density bonuses, up to a maximum of 35% of the maximum zoning
density and up to three incentives.
While a local government is not required to provide financial
assistance or fee waivers, the incentives a local government
must grant include any of the following:
1. A reduction in site development standards.
CONTINUED
AB 2222
Page
3
2. A modification of zoning code requirements (including a
reduction in setbacks, square footage requirements, or
parking spaces, or architectural design requirements that
exceed the minimum building standards).
3. 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 non-residential uses are compatible with the project.
4. Other regulatory incentives or concessions that result in
identifiable, financially sufficient, and actual cost
reductions.
A local government may not apply development standards that
preclude the density bonus or incentives from being used unless
waiving such standards will have a significant, adverse impact
upon public health, public safety, or the environment.
In addition, parking requirements are capped for density bonus
developments. A city or county may not require more than one
parking space per studio or one-bedroom unit, two parking spaces
per two- or three-bedroom unit, or two and one-half parking
spaces per four-bedroom or larger unit. In addition, a
developer may meet these standards with uncovered spaces or
tandem parking. These parking caps are automatic. A developer
may request further parking reductions by using one of the
incentives to which the development is entitled.
A similar section of law (referred to here as the conversion
density bonus) requires a local government to grant a developer
a density bonus of 25% or other incentives of equivalent
financial value if the developer is converting apartments to
condominiums and agrees to make at least 33% of the units
affordable to low- or moderate-income households or 15% of the
units affordable to low-income households.
This bill, with respect to both the traditional density bonus
and the conversion density bonus statutes, makes an applicant
ineligible for a density bonus or the incentives described above
if the proposed housing development is located on a parcel from
which dwelling units have, at any time in the previous five
years, been occupied by low-income households, been subject to a
CONTINUED
AB 2222
Page
4
recorded covenant or law that restricts rents to levels
affordable to low-income households, or been subject to any
local rent-control ordinance, unless the proposed housing
development replaces these units.
At a minimum, the replacement units must be of equivalent size
or type and affordable for 55 years to the same or lower income
category as the units to be replaced. The replacement units do
not count towards the qualifying percentages for the density
bonus (i.e., the density bonus units are in addition to the
replacement units), unless the proposed project will already be
100% affordable to low-income households. The number of units
the developer must replace is calculated as follows:
1. For developments occupied on the date of application, the
developer must replace all units occupied by lower-income
households at the same or lower level of affordability.
Unoccupied units within the development are replaced in the
same proportion as the occupied units.
2. For developments vacated or demolished within the five-year
period preceding the application, the developer must provide
a number of units at the same or lower level of affordability
that is equivalent to the highest number of units affordable
to or occupied by low-income households as existed in that
five-year period. If the incomes of the former residents
were unknown, then one-half of the replacement units must be
affordable to very low-income households and one-half to
low-income households.
This bill further provides that all affordable ownership units
that qualify a development for a density bonus shall be subject
to an equity sharing agreement, as opposed to a resale
restriction. Lastly, this bill clarifies that, other than
through the incentive or concession provisions described above,
the granting of a density bonus does not require the waiver of a
local ordinance or provisions of a local ordinance unrelated to
development standards.
Background
Equity sharing for homeownership units . Existing law provides
that lower-income homeownership units in a density bonus project
must remain affordable to and occupied by lower income
CONTINUED
AB 2222
Page
5
households for 30 years. As a result, a homebuyer who later
seeks to resell is limited in whom he/she may sell to and in the
price he/she may ask. This creates complicated sales and often
results in the homebuyer seeing little to no price appreciation,
except for whoever owns the property at year 30 and may sell the
home at full market value for a windfall profit. Moreover,
local governments rarely monitor these requirements, and many
cases exist of the homeowner simply receiving a windfall profit
at sale prior to year 30.
Moderate-income density bonus units, on the other hand, are
subject to an equity sharing agreement, whereby the homeowner
may later sell the home at any price to any buyer, but must
repay to the local government the initial price break he/she
received as well as a proportionate share of appreciation.
While the original unit is no longer affordable, the city must
reuse these proceeds to assist another homeowner buy a home. As
a result, the equity sharing model is administratively simpler
and ensures perpetual affordability, as opposed to 30-year
affordability. This bill places all density bonus homeownership
units under the equity sharing model.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local:
No
SUPPORT : (Verified 6/26/14)
Alliance for Community Transit - Los Angeles
California Rural Legal Assistance Foundation
City of Los Angeles
Coalition of Economic Survival
Councilmember Mike Bonin, City of Los Angeles
Public Counsel
Studio City Neighborhood Council
Western Center on Law and Poverty
Women Organizing Resources, Knowledge, and Services
ARGUMENTS IN SUPPORT : According to the author, "The overall
purpose of the density bonus law was to encourage developers to
build affordable housing by requiring local municipalities to
provide developers incentives to do so. However, developers are
not required to begin the new project with the same number of
affordable units. Specifically, developers are not required to
preserve affordable units. As a result, a new project may
CONTINUED
AB 2222
Page
6
result in less affordable units than previously existed on the
property.
"Adequate and affordable housing is an issue of statewide
concern. Yet, the density bonus law has had the reverse effect
and has resulted in fewer affordable units.
"AB 2222 corrects this issue by requiring proposed housing
projects to preserve affordable units and requires any other
price or rent control requirements to be met.
"Additionally, the change in affordability for rental units will
ensure these units remain affordable for a longer period of
time. AB 2222 will preserve and promote the supply of
affordable units for years to come."
ASSEMBLY FLOOR : 72-0, 5/23/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Ch�vez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Holden, Jones, Jones-Sawyer, Levine,
Linder, Logue, Lowenthal, Maienschein, Medina, Melendez,
Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson,
Perea, John A. P�rez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Bonilla, Daly, Harkey, Roger Hern�ndez,
Mansoor, V. Manuel P�rez, Waldron, Vacancy
JA:d 6/27/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED