BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 2556|
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                                      CONSENT 


          Bill No:  AB 2556
          Author:   Nazarian (D) 
          Amended:  6/14/16 in Senate
          Vote:     21 

           SENATE TRANS. & HOUSING COMMITTEE:  11-0, 6/21/16
           AYES:  Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva,  
            McGuire, Mendoza, Roth, Wieckowski

          SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

           ASSEMBLY FLOOR:  76-0, 5/19/16 (Consent) - See last page for  
            vote

           SUBJECT:   Density bonuses


          SOURCE:    California Rural Legal Assistance Foundation
                     Western Center on Law and Poverty


          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.  









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          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
             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. 








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             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  
            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 (HUD) 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  








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               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,  
               is 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  
            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 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  








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            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  
                 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  
                 Common Interest Development 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  








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            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.  

          1)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,  
            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.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  








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          Com.:YesLocal:   Yes


          SUPPORT:   (Verified8/1/16)


          California Rural Legal Assistance Foundation (co-source)
          Western Center on Law and Poverty (co-source)
          American Planning Association, California Chapter


          OPPOSITION:   (Verified8/1/16)


          None received

          ASSEMBLY FLOOR:  76-0, 5/19/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mayes, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Wood, Rendon
          NO VOTE RECORDED:  Chang, Mathis, McCarty, Williams


          Prepared by:Alison Dinmore / T. & H. / (916) 651-4121
          8/3/16 18:40:31


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