California bill to remove coastal exception for housing density bonus passes Assembly

AB 2560: Density Bonus Law: California Coastal Act of 1976.

 

Overall Summary

AB 2560, introduced by Assemblymember David Alvarez, proposes changes to California's Density Bonus Law as it relates to the California Coastal Act. The bill would allow density bonuses, incentives, and reduced development standards granted under the Density Bonus Law to apply in the coastal zone, notwithstanding the Coastal Act, as long as the development is not located on certain specified sensitive sites.

Key points:

1. The Density Bonus Law grants developers increased density and other incentives in exchange for including affordable housing units in their projects.

2. Currently, the Density Bonus Law does not supersede the Coastal Act, limiting its application in coastal areas.

3. AB 2560 would change this, allowing density bonuses to apply in the coastal zone with some exceptions for sensitive sites.

4. Proponents argue this will encourage more affordable housing in expensive coastal areas, increasing access for low and middle-income households.

5. Critics worry it could hinder the Coastal Commission's ability to protect coastal resources and that existing law already allows density bonuses consistent with the Coastal Act.

6. The Coastal Act historically included some provisions to encourage affordable housing, but many were repealed in the 1980s.

7. An alternative approach is proposed to amend the law to only allow denial of density bonuses in the coastal zone if they create a significant conflict with Chapter 3 of the Coastal Act.

The bill passed the Assembly and will next be considered in the State Senate. It represents an effort to balance affordable housing needs with coastal protection, but there is debate over the right approach.

digitaldemocracy.calmatters.org

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Existing law, referred to as the Density Bonus Law, requires a city or county to provide a developer that proposes a housing development within the city or county with a density bonus and other incentives or concessions, as specified, if the developer agrees to construct specified percentages of units for lower income households or very low income households, and meets other requirements. Existing law, the California Coastal Act of 1976 (act), regulates development, as defined, in the coastal zone, as defined, and requires a new development to comply with specified requirements. The Density Bonus Law provides that its provisions do not supersede or in any way alter or lessen the effect or application of the act, and requires that any density bonus, concessions, incentives, waivers or reductions of development standards, and parking ratios to which an applicant is entitled under the Density Bonus Law be permitted in a manner consistent with the act.

This bill would provide that any density bonus, concessions, incentives, waivers or reductions of development standards, and parking ratios to which an applicant is entitled under the Density Bonus Law be permitted notwithstanding the act. act if the development is not located on any of specified sites.

Bill Summary

The California State Assembly, AB 2560, proposes amendments to the state's Density Bonus Law (Section 65915 of the Government Code).

Key points of the bill:

1. It clarifies that density bonuses, concessions, incentives, waivers, reductions of development standards, and parking ratios that an applicant is entitled to under the Density Bonus Law shall be permitted despite the California Coastal Act of 1976, as long as the development is not located on certain specified sites within the coastal zone.
2. These sites include 
1. areas subject to specific sections of the Public Resources Code, 
2. areas not covered by a certified local coastal program, 
3. areas vulnerable to 5 feet of sea level rise, 
4. parcels not zoned for multifamily housing, 
5. parcels within 100 feet of a wetland or on prime agricultural land.
3. The bill is authored by Assembly Member David Alvarez with several coauthors. It is in the amended stage as of April 24, 2024.
4. The bill aims to further incentivize the construction of very low, low, and moderate-income housing units by modifying the Density Bonus Law while balancing additional developer benefits with public benefits in the form of affordable housing.
5. It reaffirms the legislative intent behind the Density Bonus Law to allow reducing or eliminating subsidies for projects by permitting more total units than zoning would allow, in exchange for the inclusion of affordable units. 

Density Bonus Law

from "Guide to the California Density Bonus Law" pdf BY Jon Goetz and Tom Sakai

Savvy housing developers are taking advantage of California’s Density Bonus Law, a mechanism which allows them to obtain more favorable local development requirements in exchange for offering to build or donate land for affordable or senior units. The Density Bonus Law (found in California Government Code Sections 65915 – 65918) provides developers with powerful tools to encourage the development of affordable and senior housing, including up to a 50% increase in project densities for most projects, depending on the amount of affordable housing provided, and an 80% increase in density for projects which are completely affordable. The Density Bonus Law is about more than the density bonus itself, however. It is actually a larger package of incentives intended to help make the development of affordable and senior housing economically feasible. Other tools include reduced parking requirements, and incentives and concessions such as reduced setback and minimum square footage requirements. Often these other tools are even more helpful to project economics than the density bonus itself, particularly the special parking benefits. Sometimes these incentives are sufficient to make the project pencil out, but for other projects financial assistance is necessary to make the project feasible.

In determining whether a development project would benefit from becoming a density bonus project, developers also need to be aware that:

•         The Density Bonus is a state mandate. A developer who meets the requirements of the state law is entitled to receive the density bonus and other benefits as a matter of right. As with any state mandate, some local governments will resist complying with the state requirement. But many local governments favor the density bonus as a helpful tool to cut through their own land use requirements and local political issues.

1. Use of a density bonus may be particularly helpful in those jurisdictions that impose inclusionary housing requirements for new developments.
2. Special development bonuses are available for developers of commercial projects who partner with affordable housing developers to provide onsite or offsite affordable housing. Special bonuses are also available for condominium conversion projects and projects that include childcare facilities.
3. The Legislature has recently added density bonuses for housing developments for foster youth, disabled veterans, homeless persons and college students

 

Under California's Density Bonus Law, developers can receive certain benefits in exchange for including affordable housing units in their projects. These benefits include:

1. Density Bonus: A density increase over the maximum allowable residential density under current zoning. The amount of bonus depends on the proportion of affordable units and their affordability level.
2. Concessions and Incentives: Developers may receive concessions or incentives based on the proportion of affordable units. These can include reduced site development standards, modified zoning requirements, or other regulatory incentives that result in cost reductions.
3. Waivers and Reductions of Development Standards: If any development standard physically precludes the construction of a project with the permitted density bonus and incentives, the developer may request a waiver or reduction of that standard.
4. Parking Ratios: Upon request, developers may receive reduced parking ratios depending on the project's location and affordability. For example, 0.5 spaces per unit for certain projects near major transit stops.

Here are some specifics from the bill text:

• Density bonuses are calculated based on the percentage of units designated for low-income, very low-income, or moderate-income households.
• The number of concessions or incentives ranges from 1-4 based on the percentage of affordable units.
• Parking ratios generally range from 0-2.5 spaces per unit based on criteria like number of bedrooms, affordability, and proximity to transit.
• Upon meeting higher affordability thresholds, projects can receive additional density bonuses and waivers of maximum controls on density.

The law aims to incentivize affordable housing development by allowing increased density and reduced costs in exchange for including below market-rate units.

Consequences (Expected and Unexpected)

The Density Bonus Law aims to incentivize the inclusion of affordable housing in new developments, but it can have various consequences, both intended and unintended. Here are some potential expected and unexpected outcomes:

Expected intended Consequences:

1. Increased affordable housing production: By offering density bonuses and other incentives, the law encourages developers to include more affordable units, increasing the overall supply of below-market-rate housing.
2. More diverse housing options: The inclusion of affordable units in market-rate projects can lead to more mixed-income communities and a greater variety of housing choices.
3. Reduced costs for affordable housing development: Concessions, incentives, and waivers can help reduce the costs associated with building affordable units, making such projects more financially feasible.

Expected Unintended Consequences:

1. Increased density in unexpected areas: The density bonus may lead to higher-density development in areas where it was not originally anticipated or planned for, potentially altering the character of some neighborhoods.
2. Strain on local infrastructure and services: Higher density development could place additional burdens on local infrastructure (e.g., roads, utilities) and public services (e.g., schools, parks) that may not have the capacity to accommodate the increased population.
3. Abuse of the law: Some developers might try to exploit loopholes or manipulate the law to gain the benefits without truly providing the intended affordable housing.
4. Unintended design impacts: The drive to maximize density bonuses could lead to projects that focus more on density than on good design, potentially leading to lower-quality or less attractive developments.
5. 5. Gentrification and displacement: If not carefully managed, the inclusion of market-rate units in previously low-income areas could contribute to gentrification and the displacement of existing residents.
6. 6. Reduced effectiveness over time: As market conditions change, the incentives provided by the law may become less effective at stimulating affordable housing production.

These potential consequences underscore the need for careful implementation, oversight, and regular evaluation of the Density Bonus Law to ensure it achieves its intended goals while minimizing unintended negative impacts. The law may also need to be adjusted over time to remain responsive to changing housing needs and market conditions.

Affordable Units

Affordable units under California's Density Bonus Law are those that are restricted to be affordable for and occupied by households with incomes classified as very low, low, or moderate.

Per the bill text, these are defined as:

1. Very Low Income: Units for households earning 50% or less of the area median income (AMI).
2. Lower Income: Units for households earning 80% or less of the AMI.
3. Moderate Income: Units for sale to households earning between 80% and 120% of the AMI.

Some additional details:

• Rents for very low and lower income units are restricted to "affordable rent" levels as defined in the Health and Safety Code.
• Moderate-income for-sale units must be sold at an "affordable housing cost" per the Health and Safety Code.
• Units must be kept affordable for at least 55 years for rental units or 45 years for owner-occupied units through recorded affordability restrictions.
• If the affordable units are not occupied by income-eligible households, they may be provided to a qualified non-profit that will restrict them accordingly.

The exact income limits that define each category vary by county and are updated annually based on the area median income determined by the U.S. Department of Housing and Urban Development. But in general, units are considered "affordable" under this law if they are dedicated to these income-restricted households.

California bill to remove coastal exception for housing density bonus passes Assembly

fox5sandiego.com

Danielle Dawson

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SAN DIEGO (FOX 5/KUSI) — A new bill that aims to better housing accessibility in California’s coastal neighborhoods passed through the State Assembly last week.

Assembly Bill 2560, introduced by Assemblymember David Alvarez (D-San Diego), would remove an exemption for these areas from the state’s “density bonus law,” allowing for developers to increase density in exchange for adding a certain number of affordable units.

The original law, however, could not be applied to coastal zones due to a provision that prevented it from overriding the California Coastal Act of 1976, which enabled the then-recently-formed Coastal Commission to make decisions about land use and development in those areas.

AB 2560 would roll back that broad authority given to the state’s Coastal Commission to oversee approval of housing projects in those areas, allowing local governments the ability to create more mixed-income units in some of the state’s most expensive neighborhoods.

Under the bill, planning groups can approve housing development projects in coastal zones with upwards of 50% more units than would otherwise be allowed if a share of them are reserved for income-based affordable housing.

“Wealthier areas along California’s coast need to do their part in building more housing,” Alvarez said in a statement after the vote on Tuesday. “This change in the highly successful ‘Density Bonus Law’ will make sure that communities along the coast also build housing for low and middle-income Californians.”

Density bonus projects in these areas have long been considered difficult undertakings for developers due to what they view as incompatibilities with the state’s Coastal Act.

A state appeals court affirmed local officials’ ability to reject these proposals in 2016 after a developer sued the city of Los Angeles over its halting of a density bonus residential project in Venice that would have included spaces for very low-income households.

In its ruling, the court held the project violated the “visual and scenic elements requirement of the California Coastal Act,” which lawmakers intended to take “precedence over statutes awarding density and height increase bonuses for proposed residential developments that include affordable housing units.”

The appeals judge did also note that density statutes in coastal zones can still be applied to approve projects that do not violate the Coastal Act.

Yet developers say it has still largely deterred affordable housing construction in these areas, as they view determinations about what is not a breach of the law as “subjective” and “discretionary.”

Meanwhile, median housing prices in these areas have skyrocketed to prices that are considered among the most expensive in the country, pushing it out of reach for one in four households.

“The Coastal Act’s original intent was to protect coastal access for all Californians. But over the past 50 years, the coast has become the most exclusive and segregated part of California,” William Moore, policy counsel with Circulate SD, said in a statement.

“Density Bonus Law only applies where there is already multifamily zoning. That makes it a win-win for creating coastal housing access for ordinary Californians while still protecting our sensitive coastal wetlands,” he continued.

AB 2560 passed the Assembly on Tuesday with a vote of 55 to 6. It will now move to the State Senate’s Rules Committee where it will be heard in the coming weeks.

Legislation to Expand Coastal Housing Access in California and Eliminate Barriers to Build More Housing Passes the Assembly | Official Website

a80.asmdc.org

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For immediate release:

• Vincenzo Caporale
• Press Contact
• 916-319-2080
• vincenzo.caporale@asm.ca.gov

(Sacramento) Yesterday, the State Assembly approved Assembly Bill 2560 and Assembly Bill 1886, authored by Assemblymember David Alvarez (D-San Diego). AB 2560 would eliminate the exemption of the Coastal Zone from the state's Housing Density Bonus Law and AB 1886 would provide certainty and clarification to the builder’s remedy by clarifying when housing projects become eligible for the builder’s remedy.

“Wealthier areas along California’s coast need to do their part in building more housing,” said Assemblymember David Alvarez. “This change in the highly successful ‘Density Bonus Law’ will make sure that communities along the coast also build housing for low and middle-income Californians. The current law prevents housing along with denying access to California’s coast to the average citizen.”

 AB 2560 eliminates the provision that currently prevents the application of the Density Bonus Law within the Coastal Zone. This aims to enable areas already zoned for housing to construct additional units in exchange for reserving a percentage for moderate, low, and very-low income households. According to the National Association of Home Builders, in the third quarter of 2019, eight out of ten least-affordable major metropolitan areas in the nation were in California, seven of which were along the coast, making median-priced homes unaffordable to fewer than one in four households.

"The Coastal Act's original intent was to protect coastal access for all Californians. But over the past 50 years, the coast has become the most exclusive and segregated part of California. Density Bonus Law only applies where there is already multifamily zoning. That makes it a win-win for creating coastal housing access for ordinary Californians while still protecting our sensitive coastal wetlands," William Moore, Policy Counsel, Circulate SD.

In 1990, the Builder's Remedy was added to the Housing Accountability Act. It aimed to discourage cities from failing to build and meet the housing needs of their residents. However, for thirty years, use of the Builder's Remedy has been infrequent. The Builder’s Remedy allows homebuilders to move their housing projects with less red tape such as discretionary actions by local governments. These housing projects must include 20% of affordable housing units. There are various cities who are refusing to process the builder’s remedy applications due to the lack of clarity in the law that have led to legal battles.

“Despite the current Builder's Remedy law, the lack of clarity in the law has stopped projects in cities that refuse to plan or build housing,” said Assemblymember David Alvarez. “This bill is written to provide certainty and clear up ambiguity. With AB 1886, it will be clear that the builder’s remedy can and should be used as intended to build more housing, including requiring 20% of affordable housing in cities that are not doing their part in solving the state’s housing crisis.”
 

Summary of Coastal Commission Response

The linked pdf documents contain additional correspondence regarding agenda item W6c (Legislative Report) for the California Coastal Commission's April 10, 2024 meeting, specifically focusing on AB 2560 (Alvarez).

The first document is a letter from several environmental organizations urging the Coastal Commission to oppose AB 2560. They argue that:

1. The Coastal Act protects critical coastal resources and an exemption for density bonus projects would hinder the Commission's ability to mitigate impacts.
2. Existing law already requires the Density Bonus Law to be accommodated in a manner consistent with the Coastal Act.
3. The Coastal Act has provisions to encourage affordable housing in the coastal zone.
4. The legislature should restore original Coastal Act policies that allowed the Commission to authorize affordable housing construction rather than weakening the Act.

The second document is an email from Christopher Pederson, who argues that while AB 2560 goes too far, the status quo allows LCPs to thwart density bonus projects even when they raise no significant Coastal Act concerns. Pederson suggests amending AB 2560 so that:

1. Density bonuses must be granted unless the local government or Commission finds they would create a significant conflict with Chapter 3 of the Coastal Act.
2. LCP provisions often restrict multifamily housing in ways that go beyond Coastal Act requirements and can have counterproductive effects.
3. Allowing exceptions to LCP provisions as long as development complies with Chapter 3 would protect resources while addressing housing and climate goals.

Pederson proposes specific amendments to the density bonus statute and Coastal Act to implement these changes. Pederson proposes amending two sections of California law:

1. Government Code Section 65915(m) (part of the Density Bonus Law):

• Current: States that the Density Bonus Law does not supersede the Coastal Act, and that any density bonus or related concessions must be permitted in a manner consistent with the Coastal Act.
• Proposed: Add language stating that when acting on a coastal development permit, the Coastal Commission or local government may only deny or modify a requested density bonus, concession, incentive, waiver, reduction of development standards, or parking ratio if it finds, based on a preponderance of evidence in the record, that the request creates a significant conflict with Chapter 3 of the Coastal Act.

2. Public Resources Code Section 30604(f) (part of the Coastal Act):

• Current: States that the Coastal Commission shall encourage low- and moderate-income housing opportunities and cannot require density reductions below what is permitted by local zoning and the Density Bonus Law unless the Commission finds, based on substantial evidence, that the density cannot feasibly be accommodated in conformity with the Coastal Act or certified Local Coastal Program.
• Proposed: Change the evidentiary standard from "substantial evidence" to a "preponderance of evidence," and replace the language about feasible accommodation with a prohibition on denying density unless the Commission finds it would create a "significant conflict" with Chapter 3 of the Coastal Act.

In essence, these amendments would make it more difficult for the Coastal Commission or local governments to deny or modify density bonus requests in the coastal zone, requiring them to find a significant conflict with the resource protection policies of the Coastal Act and to support that finding with a preponderance of evidence.

 Coastal Act Provisions for Affordable Housing

The California Coastal Act includes a few provisions that encourage or address affordable housing in the coastal zone:

1. Public Resources Code Section 30604(f) states:

"The commission shall encourage housing opportunities for persons of low and moderate income. In reviewing residential development applications for low- and moderate-income housing, as defined in paragraph (3) of subdivision (h) of Section 65589.5 of the Government Code, the issuing agency, or the commission on appeal, may not require measures that reduce residential densities below the density sought by an applicant if the density sought is within the permitted density or range of density established by local zoning plus the additional density permitted under Section 65915 of the Government Code, unless the issuing agency or the commission on appeal makes a finding, based on substantial evidence in the record, that the density sought by the applicant cannot feasibly be accommodated on the site in a manner that is in conformity with Chapter 3 (commencing with Section 30200) or the certified local coastal program."

This limits the ability of the Commission or local agencies to reduce the density of affordable housing projects.

2. Public Resources Code Section 30604(h) states:

"When acting on a coastal development permit, the issuing agency, or the commission on appeal, may consider environmental justice, or the equitable distribution of environmental benefits throughout the state."

This allows consideration of affordable housing as an environmental justice issue.

3. According to the letter, between 1976 and 1981, the Coastal Act included a policy that allowed the Commission to authorize construction of deed-restricted affordable units and prevent demolition of existing units. However, this provision was repealed in 1981.

4. The legislature created the problem. The Coastal Act used to allow the Commission to require affordable housing units in Coastal Development Permits, but the legislature amended the Act to preclude this (Government Code Section 65590).

So while the Act includes some language encouraging affordable housing, past provisions that gave the Commission more direct authority to require or protect affordable units have been removed. The organizations argue that restoring these old policies would be a better approach than exempting density bonus projects from Coastal Act review.