BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2556


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          Date of Hearing:  April 13, 2016


               ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT


                                  David Chiu, Chair


          AB 2556  
          (Nazarian) - As Amended April 5, 2016


          SUBJECT:  Density bonuses


          SUMMARY:  Requires a jurisdiction, in cases where a proposed  
          development is replacing existing affordable housing units, to  
          adopt a rebuttable presumption regarding the number and type of  
          affordable housing units necessary for density bonus  
          eligibility.  Specifically, this bill: 


          1)Requires a jurisdiction, if the income of the household that  
            occupies the unit is not known, to adopt a rebuttable  
            presumption that lower income households occupied the units in  
            the same proportion of lower income households to all  
            households within the census tract, in which the development  
            is located, as determined by the last decennial census.  


          2)Requires a jurisdiction, in cases where all dwelling units  
            have been vacated or demolished within the five-year period  
            preceding the density bonus application and the incomes of the  
            persons and families in occupancy at the highpoint of the  
            affordable units is not known, to adopt a rebuttable  
            presumption that lower income households occupied these units  
            in the same proportion of lower income households to all  
            households within the census tract in which the development is  








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            located, as determined from the last decennial census.


          3)Authorizes a jurisdiction, if the existing property has been  
            subject to a form of rent or price control and has been  
            occupied by a person or family with an income above lower  
            income, to do the following:


               a.     Require the replacement unit to be made available at  
                 affordable rent or affordable housing cost to, and  
                 occupied by, a low income person or family. If the  
                 replacement unit is required to be made available at  
                 affordable rent, the unit shall be subject to a recorded  
                 affordability restriction for at least 55 years.


               b.     Require the replacement unit to be replaced in  
                 compliance with the rent or price control ordinance of  
                 the city, county, or city and county. 


          4)Requires the jurisdiction to ensure the initial occupant for  
            all qualifying units are very low, low, or moderate income, as  
            specified.


          EXISTING LAW:  


          1)Defines "density bonus" as a density increase over the  
            otherwise maximum allowable residential density as of the date  
            of application by the applicant to the local government.  


          2)Requires all cities and counties to adopt an ordinance that  
            specifies how they will implement state density bonus law.










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          3)Provides that the density bonus for low-, very low-, and  
            moderate-income units increase incrementally according to a  
            set formula.


          4)Prohibits an applicant from receiving a density bonus or any  
            other incentives or concessions if a proposed housing  
            development or condominium project is located on any property  
            that includes a parcel on which dwelling units have, at any  
            time in the five-year period preceding the application, been:


               a.     Occupied by lower- or very low-income households;
               b.     Subject to a recorded covenant, ordinance, or law  
                 that restricts rents to levels affordable to persons and  
                 families of lower- or very low-income; or


               c.     Subject to any other form of rent or price control  
                 through a public entity's valid exercise of its police  
                 power.


          5)Provides that a developer may overcome the above prohibition  
            if the proposed housing development would replace the existing  
            affordable units with at least the same number and type of  
            affordable units and either of the following applies:
               a.     The proposed housing development, inclusive of the  
                 replacement units, contains affordable units at the  
                 percentages set forth in density bonus law.
               b.     Each unit in the development, exclusive of a  
                 manager's unit or units, is affordable to, and occupied  
                 by, either a lower or very low income household.


          6)Defines "replace" to mean either:
               a.     If any affordable housing units in the existing  
                 development are occupied on the date of application, the  
                 proposed housing development must provide at least the  








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                 same number of units of equivalent size or type, or both,  
                 to be made available at affordable rent or affordable  
                 housing cost to, and occupied by, persons and families in  
                 the same or lower income category as those households in  
                 occupancy.
               b.     If all affordable housing units in the existing  
                 development have been vacated or demolished within the  
                 five-year period preceding the application, the proposed  
                 housing development must provide at least the same number  
                 of units of equivalent size or type, or both, as existed  
                 at the highpoint of those units in the five-year period  
                 preceding the application to be made available at  
                 affordable rent or affordable housing cost to, and  
                 occupied by, persons and families in the same or lower  
                 income category as those persons and families in  
                 occupancy at that time, if known.


          FISCAL EFFECT:  Unknown


          COMMENTS:  To help address California's affordable housing  
          shortage, the Legislature enacted density bonus law to encourage  
          the development of more affordable units.  Under current law, a  
          city or county must grant a density bonus, concessions and  
          incentives, prescribed parking requirements, as well as waivers  
          of development standards upon a developer's request when the  
          developer includes a certain percentage of affordable housing in  
          a housing development project.  





          Density bonus law was originally enacted in 1979, but has been  
          changed numerous times since.  SB 1818 (Hollingsworth), Chapter  
          928, Statutes of 2004, made significant changes to the law,  
          including reducing the number of housing units required to be  
          provided at below market rate in order to qualify for a  density  








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          bonus.  





          AB 2222 (Nazarian), Chapter 682, Statutes of 2014 encouraged the  
          preservation of existing affordable units by prohibiting an  
          applicant from receiving a density bonus, incentive, or  
          concession if a proposed housing development or condominium  
          project is located on property where dwelling units have, at any  
          time in the five-year period preceding the application, been  
          occupied by very low- or lower-income households or subject to  
          rent control.  An applicant may overcome this prohibition by at  
          least replacing all of the existing affordable units with units  
          of equivalent affordability, size and/or type. 





          In implementing the provisions of AB 2222, cities, housing  
          advocates, and developers have discovered several places where  
          the law needs clarification. AB 2222 did not address how to  
          determine the number of units that have to be replaced when  
          resident income information is not known.  AB 2556 provides a  
          method for making this determination, basing it on income data  
          for the census tract in which the project is located.   
          Additionally, AB 2222 did not provide guidance on what the rent  
          level for the replacement unit should be in cases where the  
          current occupant of the rent-controlled unit is not  
          lower-income, for example due to wage increases.  AB 2556 allows  
          cities to require that these units be replaced either with a  
          deed-restricted unit affordable to low-income families or with  
          another rent-controlled unit.  Although a jurisdiction cannot  
          mandate that rent control apply to new developments, in this  
          case developers may voluntarily choose to comply and offer units  
          rent-controlled units if they are seeking a density bonus for  
          their project.  For developers, one benefit of rent-controlled  








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          units relative to affordable units is that the former generally  
          include an escalator for rent increases. 


                                   


           Purpose of the bill:   According to the author, "There is a need  
          to clarify language in AB 2222.  This bill maintains the intent  
          of AB 2222 in requiring developers to replace affordable units  
          while providing greater clarity for developers and local  
          governments in meeting replacement requirements.  AB 2556  
          recognizes that adequate affordable housing is an issue of  
          statewide concern.  This bill preserves and promotes the supply  
          of affordable units for years to come".





           Arguments in support:   According to the sponsors, Western Center  
          on Law and Poverty and the California Rural Legal Defense  
          Foundation: "In implementing the provisions of AB 2222, cities,  
          housing advocates, and developers have discovered several places  
          where the law needs clarification. AB 2222 required the  
          replacement of rent-controlled units, but did not provide  
          guidance on what the rent level for the replacement unit should  
          be in cases where the current occupant of the rent-controlled  
          unit is not lower-income. AB 2556 allows cities to require that  
          these units be replaced either with a deed-restricted unit  
          affordable to low-income families or with another  
          rent-controlled unit."






           Committee amendments:  








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          On page 6, delete lines 15 to 32 and replace with:





          "(C) Notwithstanding subparagraph (B), for any dwelling unit  
          described in subparagraph (A) that is or was subject to a form  
          of rent or price control through a local government's valid  
          exercise of its police power and that is or was occupied by  
          persons or families above lower income, the city, county, or  
          city and county may do either of the following:





          (i) Require that the replacement unit be made available at  
          affordable rent or affordable housing cost to, and occupied by,  
          low-income persons or families. If the replacement units will be  
          rental dwelling units, these units shall be subject to a  
          recorded affordability restriction for at least 55 years. If the  
          proposed development is for-sale units, the units replaced shall  
          be subject to paragraph (2).





          (ii) Require that the unit be replaced in compliance with the  
          jurisdiction's rent or price control ordinance."

           Double referred:   If AB 2556 passes this committee, the bill  
          will be referred to the Committee on Local Government.











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          REGISTERED SUPPORT / OPPOSITION:




          Support   


          California Rural Legal Assistance Foundation (co-sponsor)


          Western Center on Law & Poverty (co-sponsor)







          Opposition


          None on file




          Analysis Prepared by:Ken Spence / H. & C.D. / (916) 319-2085

















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