BILL ANALYSIS Ó
SENATE COMMITTEE ON TRANSPORTATION AND HOUSING
Senator Jim Beall, Chair
2015 - 2016 Regular
Bill No: AB 2556 Hearing Date: 6/21/2016
-----------------------------------------------------------------
|Author: |Nazarian |
|----------+------------------------------------------------------|
|Version: |6/14/2016 |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Urgency: |No |Fiscal: |Yes |
-----------------------------------------------------------------
-----------------------------------------------------------------
|Consultant|Alison Dinmore |
|: | |
-----------------------------------------------------------------
SUBJECT: Density bonuses
DIGEST: This bill 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.
ANALYSIS:
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.
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:
AB 2556 (Nazarian) Page 2 of ?
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
c) Subject to any other form of rent or price control
through a public entity's valid exercise of 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 same
number of units of equivalent size or housing 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 faceted 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 high point 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 the
time, if known.
This bill:
1) Requires, if the income of the household that occupies the
unit is not known, it to be rebuttably presumed that lower
income renter households occupied the units in the same
AB 2556 (Nazarian) Page 3 of ?
proportion of lower income renter households to all households
within the census tract, in which the development is located,
as determined by the last decennial census.
2) Requires, 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 high point of the affordable
units is not known, that it be rebuttably presumed that
low-income and very low-income renter households occupied
these units in the same proportion of low-income and very
low-income renter households to all renter households within
the jurisdiction, as determined by the most recently available
data from the U.S. Department of Housing and Urban
Development's Comprehensive Housing Affordability Strategy
database.
3) Allows a city or county, in cases where a proposed
development is replacing existing affordable 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
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, 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.
b) Require that units be replaced in compliance with the
jurisdiction's rent- or price-control ordinance, provided
that each existing affordable rental unit that was vacated
or demolished in the five years leading to the application,
are replaced.
COMMENTS:
1) Purpose. According to the author, the City of Los Angeles
found that there is a need to clarify language in AB 2222
(Nazarian, Chapter 82, Statutes of 2014), which amended
density bonus law to require that a developer building a
density bonus project replace all existing affordable rental
units on the project site, as well as any affordable rental
AB 2556 (Nazarian) Page 4 of ?
units that were vacated or demolished on the site in the past
five years. The bill required the replacement of
deed-restricted affordable units, units occupied by low-income
households, and rent-controlled units. The purpose of the
bill was to ensure that a law designed to increase the supply
of affordable housing was not resulting in a net loss of
affordable units.
AB 2556 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. It also recognizes that adequate
affordable housing is an issue of statewide concern and
preserves and promotes the supply of affordable units for
years to come.
2) Density bonus law. 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 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
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: a density bonus, incentives, or concessions
(hereafter referred to as incentives); waiver of any
development standards that prevent the developer from
utilizing the density bonus or incentives; and reduced parking
standards.
To qualify for the benefits of this provision, a proposed
housing development must meet one of the following criteria:
a) Include at least 5% of the units affordable to very
AB 2556 (Nazarian) Page 5 of ?
low-income households
b) Include at least 10% of the units affordable to
low-income households
c) Include at least 10% of the units in a for-sale CID
affordable to moderate-income households
d) Be a senior housing development
Units affordable to lower income households must remain
affordable for 55 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, a local government must grant
certain incentives. 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.
3) Clarifying prior legislation. AB 2222 encouraged the
preservation of existing 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.
This bill provides a method for making this determination,
AB 2556 (Nazarian) Page 6 of ?
basing it on data from U.S. HUD's Comprehensive Housing
Affordability Strategy database.. 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. This bill 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
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 include an escalator for rent increases.
Related Legislation:
AB 1934 (Santiago) - creates a development bonus for commercial
developers that partner with an affordable housing developer to
construct a joint project or two separate projects encompassing
affordable housing. This bill is also being heard in the Senate
Transportation and Housing Committee.
AB 2442 (Holden) - requires local agencies to grant a density
bonus when an applicant for a housing development plans to
construct housing for transitional foster youth, disabled
veterans, or homeless persons. This bill is also being heard
today in the Senate Transportation and Housing Committee.
AB 2501 (Bloom) - makes changes to density bonus law regarding
the submission, review, or approval of an application for a
density bonus. This bill is also being heard in the Senate
Transportation and Housing Committee.
AB 2222 (Nazarian, Chapter 682, Statutes of 2014) - made 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.
Assembly Votes:
Floor: 76-0
Appr: 20-0
L. Gov.: 8-0
AB 2556 (Nazarian) Page 7 of ?
H&CD: 6-0
FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes
Local: Yes
POSITIONS: (Communicated to the committee before noon on
Wednesday,
June 8, 2016.)
SUPPORT:
California Rural Legal Assistance Foundation (co-sponsor)
Western Center on Law and Poverty (co-sponsor)
American Planning Association, California Chapter
OPPOSITION:
None received
-- END --