BILL ANALYSIS Ó AB 2556 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2556 (Nazarian) As Amended June 14, 2016 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 76-0 | (May 19, |SENATE: | 37-0 |(August 11, | | | |2016) | | |2016) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: H. & C.D. SUMMARY: Requires, in cases where a proposed development is replacing affordable housing units, a jurisdiction to apply a rebuttable presumption regarding the number and type of affordable housing units necessary for density bonus eligibility. Specifically, 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 these units in the same proportion of lower-income renter households to all renter households within the jurisdiction, as determined by the most recently available data from the United States (U.S.) Department of Housing and Urban Development's (HUD) Comprehensive Housing Affordability Strategy database. 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 occupants at AB 2556 Page 2 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 HUD'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 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 existing law. b) Require that units be replaced in compliance with the jurisdiction's rent- or price-control ordinance, provided that each affordable rental unit, including those that were vacated or demolished in the five years leading to the application, is replaced. 4)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. AB 2556 Page 3 The Senate amendments: 1)Require, if a unit must be replaced and the income of the occupant is not known, it to be rebuttably presumed that lower-income renter households occupied these units in the same proportion of lower-income renter households to all renter households within the jurisdiction, as determined by the most recently available data from HUD's Comprehensive Housing Affordability Strategy database. 2)Require, 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 occupants 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 HUD's Comprehensive Housing Affordability Strategy database. 3)Make technical, clarifying changes. FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs. 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. AB 2556 Page 4 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. 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, and Senate amendments require that local governments use a rebuttable presumption based on the most recently available data from HUD's Comprehensive Housing Affordability Strategy database. According to HUD, "Each year, HUD receives custom tabulations of American Community Survey (ACS) data from the U.S. Census Bureau. These data, known as the "CHAS" data, demonstrate the extent of housing problems and housing needs, particularly for low income households. The CHAS data are used by local governments to plan how to spend HUD funds, and may also be used by HUD to distribute grant funds." 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 AB 2556 Page 5 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 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." Analysis Prepared by: Rebecca Rabovsky / H. & C.D. / (916) 319-2085 FN: 0004114