BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2556


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          Date of Hearing:  April 20, 2016


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                           Susan Talamantes Eggman, Chair


          AB 2556  
          (Nazarian) - As Amended April 14, 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)Allows the city or county, in cases where a proposed  
            development is replacing existing affordable housing units,  
            for any dwelling unit 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 of  
            families above lower income, to do either of the following:


             a)   Require that the replacement units 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.  Requires, if the proposed development is  
               for-sale units, the units replaced shall be subject to  
               existing law; or,


             b)   Require that units be replaced in compliance with the  
               jurisdiction's rent or price control ordinance.  


          4)Makes other minor, non-substantive changes.


          5)States that no reimbursement is required because a local  
            agency has the authority to levy service charges, fees, or  
            assessments sufficient to pay for the program or level of  
            service mandated by this act.


          EXISTING LAW:  


          1)Defines "density bonus" as a density increase over the  
            otherwise maximum allowable residential density as of the date  








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            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.



          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  








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               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 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:  This bill is keyed fiscal.








          COMMENTS:  


          1)Background and Previous Legislation.  To help address  








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            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 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.


          2)Bill Summary.  This bill makes several changes to AB 2222  
            (Nazarian), Chapter 682, Statutes of 2014.  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.  









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


            This bill is sponsored by the Western Center on Law and  
            Poverty and the California Rural Legal Assistance Foundation.


          3)Author's Statement.  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."
          4)Arguments in Support.  According to the sponsors, Western  
            Center on Law and Poverty and the California Rural Legal  
            Assistance Foundation: "In implementing the provisions of AB  
            2222, cities, housing advocates, and developers have  
            discovered several places where the law needs clarification.  








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            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."





          5)Arguments in Opposition.  None on file.


          6)Double-Referral.  This bill was heard in the Housing and  
            Community Development Committee on April 13, 2016, where it  
            passed with a 6-0 vote.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          California Rural Legal Assistance Foundation [SPONSOR]


          Western Center on Law and Poverty [SPONSOR]


          American Planning Association, California Chapter












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          Opposition


          None on file




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