SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: AB 1279 Hearing Date: 8/6/2020

SUBJECT: Planning and zoning: housing development: high-opportunity areas

DIGEST: This bill requires specified housing developments to be a use by right in any high-opportunity area, as determined by the California Department of Housing and Community Development (HCD), if the development is located in any portion of the high-opportunity area, as specified.

ANALYSIS:

Existing law:

1. Provides for owner-occupied housing, that “affordable housing cost” may not exceed the following:
2. For extremely low-income households, the product of 30% times 30% of the area median income (AMI) adjusted for family size appropriate for the unit;
3. For very low-income households, the product of 30% times 50% of the AMI adjusted for family size appropriate for the unit;
4. For lower income households whose gross incomes exceed the maximum income for very low-income households, and do not exceed 70% of the AMI adjusted for family size, the product of 30% times 70% of the AMI adjusted for family size appropriate for the unit; and
5. For moderate-income households, not less than 28% of the gross income of the household, nor exceed the product of 35% times 110% of AMI adjusted for family size appropriate for the unit.
6. Defines "affirmatively furthering fair housing" (AFFH) as taking meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics. Specifically, AFFH means taking meaningful actions that together address segregated living patterns with truly integrated and balanced living patterns, transforming racially and ethnically concentrated areas of poverty into areas of opportunity, and fostering and maintaining compliance with civil rights and fair housing laws. The duty to AFFH extends to all of a public agency's activities and programs relating to housing and community development.
7. Defines “use by right” as a local government’s review of a residential development may not require a conditional use permit, planned unit development permit, or other discretionary local government review or approval that would constitute a “project” for the purposes of the California Environmental Quality Act (CEQA).
8. Requires a local planning agency, annually by April 1, to submit a report (also known as the annual progress report) to the legislative body, the Office of Planning and Research, and the Department of Housing and Community (HCD) development that includes data points and updates on housing plans and approvals.

This bill:

1. Defines “high-opportunity area” as an area designated by HCD pursuant to the process identified below in (4).
2. Defines “infill site” as a site in which at least 75% of the perimeter of the site adjoins parcels that are developed with urban uses. Parcels that are only separated by a street or highway shall be considered to be adjoined.
3. Defines “residential development” as a multifamily development project that includes two or more, but not more than 120 residential dwelling units. A residential development project may include nonresidential uses as long as 2/3 of the total square footage of the project is devoted to residential uses.

“High-Opportunity” Area Designations

1. Requires HCD, no later than January 1, 2021 and every 5 years thereafter, to designate high-opportunity areas. HCD shall collaborate with academic experts and shall solicit input from the public and ensure participation from all economic segments of the community, as well as protected classes. HCD shall consider areas designated as “high resource” or “highest resource” on the most recent “Opportunity Maps” adopted by the California Tax Credit Allocation Committee (TCAC) as a potential high-opportunity area.
2. Precludes HCD from designating a potential high-opportunity area as high-opportunity if either of the following conditions apply:
3. The area is at risk of displacement of lower income households and households of color, or has seen significant displacement of lower income households or households of color within the prior 10 years.
4. Low wage workers in the potential high-opportunity area do not have significantly longer commutes to work than other low wage workers within the region.
5. Requires HCD to update its designations of high-opportunity areas within 6 months of the adoption of the new Opportunity Maps by TCAC.
6. Authorizes a city or county that includes a high-opportunity area within its boundaries to appeal to HCD to remove the designation at any point during the five-year period by submitting an appeal in a form and manner prescribed by HCD.
7. Authorizes HCD to remove the designation of a city or county that submits an appeal if it finds, based on substantial evidence, that the locality has adopted policies after the area was designated a high-opportunity area that meet the following requirements:
   1. The policies allow development of higher density in the high-opportunity area in a manner substantially similar to the “Streamlined Housing Approvals” section below than were allowed under the localities’ policies in effect at the time that area was designated as a high-opportunity area.
   2. The policies are sufficient to accommodate a similar number of housing units within the area and at a similar level of affordability, as would be allowed under the “Streamlined Housing Approvals” section below.
   3. The policies are consistent with the localities’ obligation to AFFH.
8. Requires HCD to issue a decision within 90 days of receiving the appeal. The decision shall be final.

Streamlined Housing Approvals

1. Requires a housing development to be a use by right in any high-opportunity area if the development is located in any portion of the high-opportunity area where residential use is an allowable use and:
   1. The development contains no more than 50 units.
   2. Has a height of no more than 40 feet.
   3. The development project is on a site that is ¼ acre or greater.
   4. The site is adjacent to an arterial road or located within a central business district.
   5. The development meets or exceeds the density standards contained within housing element law.
   6. If the development contains 10 or fewer units, either of the following apply:

The initial sale price or initial rent for units in the development project does not exceed affordable housing cost or affordable rent to households with a household income equal to or less than 100% of the AMI.

If the initial sales price or initial rent exceeds (i), the developer agrees to pay a fee, as specified, which shall be deposited into a fund reserved for the construction or preservation of affordable housing, as specified.

• 1. If the development contains more than 10 units, the following shall apply:
     1. If the development includes a density increase of up to 50%, the development includes at least 5% of the units for extremely low-income (ELI) households, and either 6% for very low-income (VLI) households or 9% for lower income (LI) households.
     2. If the development includes a density increase between 51% and 80%, the development includes at least 5% for ELI households, and either 9% for VLI households or 12% for LI households.
     3. If the development includes a density increase greater than 81%, the development project includes at least 5% for ELI households, and either 12% for VLI households or 17% for LI households.
     4. If the local government requires housing developments to contain a specified percentage of units affordable to, and occupied by, moderate income, LI, VLI, or ELI households, the following shall apply:
        1. The residential development project shall include the total percentage of affordable units required under this bill or the local requirement, whichever is higher;
        2. The residential development project shall meet the deepest income targeting in either policy, including at least 5% of units affordable to ELI households and at least the minimum percentage of units affordable to VLI households by the local government, if any.
        3. If the total percentage of affordable units required by the local government is higher than that required in this bill, and the local policy does not require ELI units, then the 5% of units affordable to ELI households shall be subtracted from the units required by local government at the highest affordability level.
        4. The residential development shall comply with all other provisions of the local government intended to promote comparability between affordable units and others and achieve fair housing goals.
  2. The development project complies with all objective design review standards of the city or county, as specified.
  3. The development project shall be eligible for the applicable parking ratios as specified in density bonus law.

1. Requires a housing development to be a use by right in any high-opportunity area if the development is located in any portion of the high-opportunity area where residential or commercial uses are an allowable use and:
   1. The development contains no more than 120 units.
   2. The development has a height of no more than 55 feet.
   3. The development project is on a site that is ½ acre or greater.
   4. The site is adjacent to an arterial road or located within a central business district.
   5. If the residential development is on a site that does not allow residential uses, any rezoning required shall not require any discretionary review or approval by the local government that would constitute a “project” under CEQA.
   6. At least 25% have an affordable rent to LI households and at least 25% have an affordable rent to VLI households.
   7. The development project complies with all objective design review standard of the city or county, as specified.
   8. The development meets or exceeds the density standards in housing element law.
   9. The development shall be eligible for a density bonus, concessions, waivers, or reductions of standards and parking ratios under density bonus law.
2. Requires affordable units to be affordable for 45 years for units that are owner-occupied and 55 years for units that are rented.
3. Prohibits a development project from being eligible for approval as a use by right if any of the following apply:
   1. The development would require the demolition of rental housing that is currently occupied by tenants or has been occupied by tenants within the past 10 years.
   2. The development project is proposed to be located on a site that is any of the following: a coastal zone, prime farmland or farmland of statewide importance, wetlands, within a very high fire severity zone, a hazardous waste site, within a delineated earthquake fault zone, within a special flood hazard area, within a regulatory floodway, lands identified for conservation in an adopted natural community conservation plan, habitat for protected species, lands under conservation easement, or lands that have been zoned and actively used for industrial or light industrial in any year within the last 10 years.
   3. The development project is proposed on a site that is not an infill site.
   4. The development project would require the demolition of a structure that was listed on a national, state, or local historic register before the submittal of the application.
4. Requires an approval for a development project to expire after two years, except that a project may receive a one-time, one-year extension if the development proponent provides documentation that there has been significant progress towards getting the development construction ready, including but not limited to, filing a building permit application.
5. Requires a local government subject to this bill to exercise due diligence in reviewing a use by-right proposal, and any related application submitted pursuant this section.
6. Sunsets the provisions of this bill on or after January 1, 2031.

COMMENTS

1. Author’s Statement. According to the author, “Removing land use barriers to equitable housing development in high-resource areas of the state—places with good schools, jobs, etc.— is an essential part of addressing California’s housing crisis and increasing choice and opportunity for low-income families. It’s also crucial to meeting our climate goals by ensuring that low-wage workers have an opportunity to live close to where they work in all areas of the state. High-resource areas may or may not be near existing high-quality transit, but they can support green infill development, which is crucial to supporting future transit expansion. If we are serious about addressing the state’s housing needs and reducing auto dependence, we need to increase density and expand infill development in more parts of the state. Two years ago we passed AB 1771, which reformed the RHNA allocation process. Under AB 1771, high-resource areas of the state that lack housing opportunities for their lower-wage workforce will be receiving a larger share of the RHNA than they have in the past. AB 1279 helps ensure that these increased RHNA allocations translate into actual housing units.”
2. Exclusionary zoning practices. California’s high — and rising — land costs necessitate dense housing construction for a project to be financially viable and for the housing to ultimately be affordable to lower-income households. Yet, recent trends in California show that new housing has not commensurately increased in density. In a 2016 analysis, the Legislative Analyst’s Office (LAO) found that the housing density of a typical neighborhood in California’s coastal metropolitan areas increased only by four percent during the 2000s. In addition, the pattern of development in California has changed in ways that limit new housing opportunities. A 2016 analysis by BuildZoom found that new development has shifted from moderate but widespread density to pockets of high-density housing near downtown cores surrounded by vast swaths of low-density single-family housing. Specifically, construction of moderately-dense housing (2 to 49 units) in California peaked in the 1960s and 1970s and has slowed in recent decades.

Stricter land use controls are also associated with greater displacement and segregation along both income and racial lines. Past practices such as redlining, which led to the racial and economic segregation of communities in the 1930s, have shown the negative effects that these practices can have on communities. The federal National Housing Act of 1934 was enacted to make housing and mortgages more affordable and to stop bank foreclosures during the Great Depression. These loans were distributed in a manner to purposefully exclude “high risk” neighborhoods composed of minority groups. This practice led to underdevelopment and lack of progress in these segregated communities while neighborhoods surrounding them flourished due to increased development and investment. People living in these “redlined” communities had unequal access to quality, crucial resources such as health and schools. These redlined communities experience higher minority and poverty rates today and are experiencing gentrification and displacement at a higher rate than other neighborhoods. Today, exclusionary zoning can lead to “unintended” segregation of low-income and minority groups, which creates unequal opportunities for Californians of color. Both the LAO and an analysis by the Institute of Governmental Studies (IGS) at the University of California, Berkeley indicate that building new housing would reduce the likelihood that residents would be displaced in future decades.

The UC Berkeley Terner Center conducted a residential land use survey in California from August 2017 to October 2018. The survey found that most jurisdictions devote the majority of their land to single-family zoning and in two-thirds of jurisdictions, multifamily housing is allowed on less than 25% of land. Some jurisdictions in the US have taken steps to increase density in single-family zones. For example, Minneapolis will become the first major U.S. city to end single-family home zoning; in December, the City Council passed a comprehensive plan to permit three-family homes in the city’s residential neighborhoods, abolish parking minimums for all new construction, and allow high-density buildings along transit corridors. According to the 2016 McKinsey Report, California has the capacity to build between 341,000 and 793,000 new units by adding units to existing single-family homes.

1. Facilitating access to housing in high-opportunity areas. Multiple studies have shown that life outcomes improve for those living in “high-opportunity areas,” i.e., neighborhoods with high quality public schools, proximity to well-paying jobs, and a clean and safe environment. Such studies have also shown that living in such communities can have a particularly beneficial outcome for low-income people in terms of health, employment, and educational attainment. However, low-income people historically have been excluded from high-opportunity areas, as noted in Comment 2. The rapidly rising cost of housing in California has only exacerbated these historic trends. A 2019 study by UC Berkeley’s Urban Displacement Project showed that rising housing prices in the Bay Area have led to “new concentrations of poverty and racial segregation in the region and the perpetuation of racial disparities in access to high-resource neighborhoods.”

To address these historic disparities, the state has prioritized allocation of its tax credits into “high-opportunity areas.” The defining and mapping of these areas has been undertaken by TCAC and HCD. TCAC and HCD convened a group of independent organizations and researchers called the California Fair Housing Taskforce (Taskforce). The Taskforce released a detailed opportunity mapping methodology document that identifies specific policy goals and purposes, as well as detailed indicators to identify areas that further the policy goals and purposes.

This bill would allow specified housing development projects in high-opportunity areas on infill sites to be approved by right, as follows:

• 1. In areas zoned for residential use that are at least one-quarter acre in size and located on a major street and/or the central business district, the development project could consist of up to 50 residential units with a height of up to 40 feet. Projects with 10 or fewer units would need be affordable to a household income equal or less than 100% of the area median income. Projects of more than 10 units would need to include a specified percentage of units affordable to ELI and VLI or LI households, depending on a density increase. These projects are eligible for reduced parking under density bonus law.
  2. In areas zoned residential or commercial on parcels exceeding one-half acre, a project that had at least 25% of its units dedicated to low-income households and 25% to very-low income households would be allowed to have up to 120 residential units with a height of up to 55 feet. These projects are eligible for a density bonus and other benefits under density bonus law.
  3. No qualifying project can require the demolition of housing that is currently occupied by tenants or has been in the past ten years, be located in an environmentally unsafe or sensitive area, or require the demolition of a structure that was listed on a national, state, or local historic register.

High-opportunity areas would be designated by HCD in consultation with academic experts and input from members of the public, and consider those areas designated “highest resource” or “high resource” by TCAC. Local jurisdictions may appeal a designation if they disagree with it.

1. Expanding the applicability of the bill.  Given the severity of the housing crisis in California, the committee is concerned that this bill as drafted may be too narrowly focused.  While this bill will not and is not intended to solve the housing crisis on its own -- and should be viewed as a part of an overall package of solutions, both this year and beyond -- the committee may wish to consider amending this bill to apply more broadly, as follows:
   
   1. Clarify the definition of arterial.  This bill requires housing projects, both the larger and smaller, to be on sites adjacent to an arterial road.  This could potentially limit the number of parcels eligible for the development benefits under this bill, or allow local governments to determine they do not have any eligible parcels, depending on what a local government considers an arterial. The committee may wish to consider clarifying the definition of arterials. 
   2. Clarify the definition of central business districts.  This bill requires housing projects, both larger and smaller, to be on a site located within a central business district. Because this is not defined in the bill, a local government could potentially determine they do not have any such sites. The committee may wish to consider clarifying the definition of central business districts.  
   3. Reduce the minimum size requirements for parcels.  This bill requires larger projects to be on parcels that are at least ½ acre in size, and for smaller projects to be on parcels that are at least ¼ acre in size.  To maximize site eligibility, the committee may wish to consider asking the author to reduce those parcel sizes.
   4. Align benefits with density bonus law for all AB 1279 housing projects.  Larger projects are eligible for both concessions and incentives and reduced parking ratios as applicable under density bonus law, while smaller projects are only eligible for reduced parking ratios.  In order to facilitate the construction of smaller projects and to align with density bonus law, the committee may wish to allow smaller projects to also receive concessions and incentives as applicable under density bonus law.
      
2. More data please!  Local jurisdictions are required to submit an annual report to HCD with various housing data points, such as projects approved under SB 35 (Wiener, Chapter 366, Statutes of 2017) and accessory dwelling units.  The committee may wish to consider amending the bill to require that local governments report in the annual report on the number of approved projects under this bill.
   
3. Alignment with the Senate Housing Package. The Senate Housing package contains several housing streamlining bills which exempted similar environmentally sensitive areas as this bill. Those bills, unlike this one, do not exempt sites in the Coastal zone. In order to align this bill with the Senate Housing Package, the committee may wish to consider removing that exemption from this bill.
4. Opposition. The California State Association of Counties (CSAC), the Urban Counties of California (UCC), and the Rural County Representatives of California (RCRC) are opposed to the delegation to the executive branch the requirement to develop definitions as to where this bill will apply, and would prefer the definition in statute. They are also concerned that the appeals process for where this bill applies is too prescriptive. The League of California Cities also asks for the definition of “high-opportunity areas” to be in statute; requests fixed timelines for maps to be updated; and allowing locals to create their own community production plan consistent with this bill. Others in opposition are concerned about the loss of local control, changing the character of high-opportunity areas, and impacts to cities.

On the other hand, California YIMBY, Abundant Housing LA, and SPUR oppose the bill unless amended because they do not feel it goes far enough to produce housing. They ask for several amendments including: expanding the location of applicable parcels, reducing restriction on the types of parcels eligible, authorizing applicability to commercial zones, reducing the inclusionary requirements, tracking projects using this bill in an annual report, reducing parking requirements, and changing the method of determining high-opportunity areas.

1. Triple referral. Due to the COVID-19 Pandemic and the unprecedented nature of the 2020 Legislative Session, all Senate Policy Committees are working under a compressed timeline. This timeline does not allow this bill to be referred and heard by more than one committee as a typical timeline would allow. In order to fully vet the contents of this measure for the benefit of Senators and the public, this analysis includes information from the other committees included in the original referral. The Senate Governance and Finance Committee continues to monitor this bill.

According to the Senate Environmental Quality Committee:

“Public participation and transparency in a local government’s approval of a project is a cornerstone of CEQA; the act does not care what decision is made as long as it is an informed one. If a residential development project is deemed a use by right in high-opportunity areas, it removes the ability of local governments to be fully informed of the development’s potential environmental consequences. AB 1279 does not contain any project size restrictions, allowing for potentially large projects with densities well above what is otherwise permitted by the jurisdiction’s land use policies. The larger a project site, the greater likelihood of causing significant environmental impacts that were not previously contemplated by a local jurisdiction in its approved land use policies and none of which will be considered or mitigated. Although constrained to infill sites, is it prudent to create a use by right for projects of potentially unlimited size? Additionally, AB 1279 would exempt from CEQA any rezoning required for the approval of a project with up to 120 residential units. Is it appropriate for the public to live with the consequences of local government decisions that may not be fully vetted and whose environmental impacts are not mitigated or alternatives considered?”

Related Legislation:

AB 686 (Santiago, Chapter 958, Statutes of 2018) — required a public agency to administer its programs and activities relating to housing and community development in a manner to affirmatively further fair housing.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

POSITIONS: (Communicated to the committee before noon on Friday,

July 24, 2020.)

SUPPORT:

California Rural Legal Assistance Foundation (Co-Sponsor)
Public Advocates (Co-Sponsor)
Western Center on Law & Poverty (Co-Sponsor)
California Alliance for Retired Americans
California Housing Partnership Corporation
City of Oakland
East Bay Housing Organizations
Los Angeles Homeless Services Authority
Non-profit Housing Association of Northern California

OPPOSITION:

Abundant Housing LA
Brentwood Housing and Environmental Coalition
California State Association of Counties
California YIMBY
Cities Association of Santa Clara County
City of Laguna Niguel
City of Long Beach
City of Monterey Park
City of Murrieta
City of Pleasanton
City of Redondo Beach
City of San Mateo
City of Thousand Oaks
Comstock Hills Homeowners Association
Franklin Corridor Coalition
Friends of Sunset Park
Grayburn Avenue Block Club
Homeowners Of Encino
League of California Cities
Livable California
Livable Riverside & Moreno Valley
Los Angeles County Division, League of California Cities
Orange County Council of Governments
Protecting Our Foothill Community
Rural County Representatives of California
San Francisco Bay Area Planning and Urban Research Association
Shadow Hills Property Owners Association
Southeast Torrance Homeowners' Association
Sustainable Tamalmonte
Tamalpais Design Review Board
United Neighborhoods for Los Angeles (UN4LA)
Urban Counties Caucus

56 Individuals

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 1279

Author:(Bloom)

As Introduced Ver:February 21, 2019

Majority vote

SUMMARY:

Requires certain development sites in high resource areas to allow for more density and height and makes these sites subject to "use by-right" approval.

Major Provisions

1. Requires the Department of Housing and Community Development (HCD) to designate areas in this state as "high-resource areas," as defined as an area of high opportunity and low residential density that is not currently experiencing gentrification and displacement, and that is not at a high risk of future gentrification and displacement;
2. Requires that a housing development project must be a use by right in any high-resource area if the development satisfies the following criteria:
3. In areas zoned only for single-family residential development, the development project consists of up to four residential units with a height of up to 20 feet. The units would have to be either affordable to households making 100% of the area median income (AMI), or sold or rented at a higher AMI if the developer pays 10% of the difference to the local jurisdiction for construction of units for households at 50% AMI or less;
4. In areas zoned for residential use that are at least one-quarter acre in size and located on a major street and/or the central business district, the development project consists of up to 40 residential units with a height of up to 30 feet. Projects with 10 or fewer units would need to meet the same affordability parameters as the projects in single-family zones discussed above. Projects of more than 10 units would need to dedicate at least 10% of the units to households with low incomes (typically 50%-80% AMI) and 5% to very low incomes (typically under 50% AMI);
5. If the parcel exceeded one-half acre in these prime locations, a project that had at least 25% of its units dedicated to low-income households and 25% to very-low income households would be allowed to have up to 100 residential units with a height of up to 55 feet. Such a project could receive a density bonus if it were to include additional affordable units; and,
6. No qualifying project must require the demolition of housing that is currently for rent or has been in the past ten years, or be located in an environmentally unsafe or sensitive area.

COMMENTS:

The cost of housing in California is the highest of any state in the nation. According to the Legislative Analyst's Office, the foremost reason for this is that far less housing has been built in California's coastal areas than people demand. Facilitating the necessary growth will require building at higher densities than are currently allowed in much of the state.

Additionally, multiple studies have shown that life outcomes improve for those living in "high-resource areas," i.e., neighborhoods with high quality public schools, proximity to well-paying jobs, and a clean and safe environment. Such studies have also shown that living in such communities can have a particularly beneficial outcome for low-income people in terms of health, employment, and educational attainment. However, historically low-income people have been excluded from high-resource areas through a number of means that have only been exacerbated by the rapidly rising cost of housing in California.

The bill is intended to help alleviate the housing crisis and reduce exclusionary practices by making housing a use by right in high resource areas when certain criteria are met, allowing increased densities and heights that are tailored to proximity to arterial streets and central business districts. The bill would establish minimum amounts of affordable housing, and create additional incentives for projects that are at least 50 percent affordable. The bill would preclude the use of this provision for projects that would result in demolition of housing that is currently for rent or has been in the past ten years, or be located in an environmentally unsafe or sensitive area. To facilitate the implementation of these requirements, the bill requires HCD to undergo a process, with defined stakeholders, to define "high-resource areas" as areas that are not experiencing nor at risk of gentrification and displacement.

According to the Author:

According to the author, "California's housing shortage is well-documented, and it is primarily a shortage of units affordable to households at the lower end of the income spectrum. Facilitating the production of affordable housing units requires increasing allowable residential densities in many communities and creating more opportunities for multifamily development. Allowing these types of projects to be developed by right in the most exclusionary places is crucial to ensuring that they are able to proceed."

Arguments in Support:

Supporters argue that this bill addresses exclusionary zoning practices in high-resource areas, which exacerbate racial and economic segregation and reduce opportunities for lower-wage workers to live close to where they work, and will facilitate mixed-income and affordable housing in high-resource, lower-density communities.

Arguments in Opposition:

According to the City of La Palma, "this bill would usurp cities' authority to protect and preserve the quality of residential areas and quality of life by allowing housing developments that meet minimum standards, including affordability requirements, by-right".

FISCAL COMMENTS:

According to the Assembly Committee on Appropriations:

1. Estimated one-time costs to HCD of $100,000 (GF) in the first year for a mapping consultant contract and $225,000 (GF) for HCD staff to coordinate with stakeholders and the mapping consultant.
2. Estimated ongoing costs of $207,000 (GF) annually to HCD for program staff to support the program.
3. Unknown ongoing administrative costs to support the program

VOTES:

ASM RULES: 12-0-0

YES: Cooley, Cunningham, Carrillo, Flora, Grayson, Kamlager-Dove, Maienschein, Mathis, Quirk-Silva, Ramos, Robert Rivas, Wicks

ASM HOUSING AND COMMUNITY DEVELOPMENT: 6-1-1

YES: Chiu, Gabriel, Gloria, Kiley, Maienschein, Quirk-Silva

NO: Diep

ABS, ABST OR NV: Limón

ASM LOCAL GOVERNMENT: 5-2-1

YES: Aguiar-Curry, Bloom, Ramos, Luz Rivas, Robert Rivas

NO: Lackey, Voepel

ABS, ABST OR NV: Boerner Horvath

ASM APPROPRIATIONS: 12-6-0

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Maienschein, Quirk, Robert Rivas

NO: Bigelow, Brough, Diep, Fong, Obernolte, Petrie-Norris

UPDATED:

VERSION: February 21, 2019

CONSULTANT: Steve Wertheim / H. & C.D. / (916) 319-2085 FN: 0000743

Date of Hearing: May 8, 2019

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 1279

Author:(Bloom) – As Introduced Ver:February 21, 2019

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill requires “by-right” approval of certain housing developments in high-resource areas. Specifically, this bill:

1. Defines “high resource area” to mean an area of high opportunity and low residential density neither, currently experiencing gentrification and displacement nor at high risk of experiencing them.
2. Requires the Department of Housing and Community Development (HCD), by January 1, 2021, and every five years thereafter, to designate high-resource areas in the state based on consultation with stakeholders.
3. Specifies an appeals process for jurisdictions that disagree with designations within their borders.
4. Specifies a qualifying project cannot require demolition of housing currently for rent or for rent in the past ten years or be located in an environmentally unsafe or sensitive area.

FISCAL EFFECT:

1. Estimated one-time costs to HCD of $100,000 (GF) in the first year for a mapping consultant contract and $225,000 (GF) for HCD staff to coordinate with stakeholders and the mapping consultant.
2. Estimated ongoing costs of $207,000 (GF) annually to HCD for program staff to support the program.
3. Unknown ongoing administrative costs to support the program.

COMMENTS:

1. Purpose. According to the author:

This bill would facilitate mixed-income and affordable housing development in high-resource, lower-density communities through local zoning overrides and other land use incentives. The bill is aimed at addressing the housing shortage in a way that also addresses exclusionary zoning practices that exacerbate racial and economic segregation and that provide few opportunities for lower-wage workers to live close to where they work in many areas of the state.

1. Background. The cost of housing in California is among the highest in the nation. Only 28% of households can buy the median priced home. Over half of renters and 80% of low-income renters are rent-burdened, meaning they pay over 30% of their income towards rent.

A study by UC Berkeley’s Urban Displacement Project shows that rising housing prices in the Bay Area have led to “new concentrations of poverty and racial segregation in the region and the perpetuation of racial disparities in access to high-resource neighborhoods.”

In response, the state has prioritized allocation of its tax credits into “high opportunity areas.” The California Tax Credit Allocation Committee (TCAC) in the State Treasurer’s Office and HCD have undertaken defining and mapping these areas in conjunction with the California Fair Housing Taskforce (Taskforce). The Taskforce released a detailed opportunity mapping methodology document identifying specific policy goals and purposes, as well as detailed indicators to identify areas that further the policy goals and purposes.

1. Related Legislation: SB 50 (Wiener), of this legislative session, requires a local government to grant increased development capacity in transit-rich and high-resource areas when a developer meets specified requirements. It is pending hearing in the Senate Appropriations Committee.
2. Prior Legislation. AB 686 (Santiago), Chapter 958, Statutes of 2018, requires a public agency to administer its programs and activities relating to housing and community development in a manner to affirmatively further fair housing.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 24, 2019

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 1279 (

Author:Bloom) – As Introduced Ver:February 21, 2019

SUBJECT: Planning and zoning: housing development: high-resource areas.

SUMMARY: Requires by right approval of certain housing development projects in high-resource areas. Specifically, this bill:

1. Defines the following terms:
   1. “Department” to mean the Department of Housing and Community Development (HCD);
   2. “High-resource area” to mean an area of high opportunity and low residential density that is not currently experiencing gentrification and displacement, and that is not at a high risk for future gentrification and displacement, designated by HCD;
   3. “Infill site” to mean a site in which at least 75% of the perimeter of the site adjoins parcels that are developed with urban uses, including parcels that are only separated by a street or highway; and,
   4. “Use by right” to mean that the local government’s review of the development project may not require a conditional use permit, planned unit development permit, or other discretionary local government review or approval that would constitute a “project” for purposes of the California Environmental Quality Act (CEQA). Provides that any subdivision of sites shall be subject to all laws, including, but not limited to, the local government ordinance implementing the Subdivision Map Act. Declares that design review shall not constitute a “project” for purposes of CEQA.
2. Requires, no later than January 1, 2021, and every five years thereafter, HCD to designate areas as high-resource areas, in collaboration with the California Fair Housing Task Force (Task Force), convened by HCD, and the California Tax Credit Allocation Committee. Requires HCD to solicit input from members of the public and ensure participation from all economic segments of the community as well as members of protected classes, as specified.
3. Provides that the designation of an area as a high-resource area shall remain valid for five years. Allows a city or county with an area designated as a high-resource area to appeal to HCD to remove that designation at any point during the five-year period by submitting an appeal in a form and manner prescribed by HCD.
4. Allows HCD to remove the designation of a city or county, if it finds, based on substantial evidence, that the city or county has adopted policies after the area was designated as a high-resource area that meet specified requirements. Requires HCD to consult with the Task Force and issue a decision within 90 days.
5. Provides that, upon the request of a developer, a housing development project shall be a use by right in any high-resource area, in spite of any inconsistent provision of a city or county’s general plan, specific plan, zoning ordinance, or regulation, if the development satisfies the following criteria:
   1. If the development project is located in any portion of the high-resource area where allowable uses are limited to single-family residential development:
      1. The development project consists of no more than four residential units and has a height of no more than 20 feet;
      2. Either of the following apply:
         1. The initial sales price or initial rent for units in the development project does not exceed the amount of affordable housing cost or affordable rent, as specified, to households with a household income equal to or less than 100% of the area median income (AMI); or,
         2. If the initial sales price or initial rent exceeds the limit in (1), above, the developer agrees to pay a fee to the county or city equal to 10% of the difference between the actual initial sales price or initial rent and the sales price or rent that would be affordable to households making up to 100% of the AMI. Requires the city or county to deposit the fee into a separate fund reserved for the construction or preservation of housing with an affordable housing cost or affordable rent, as specified, to households with a household income less than 50% of the AMI;
      3. The development project complies with all objective design standards of the city or county. Prohibits the city or county from requiring the development project to comply with an objective design standard that would preclude the development from including up to four units or impose a maximum height limitation of less than 20 feet;
   2. If the development project is located in any portion of the high-resource area where residential use is an allowable use:
      1. The development project consists of no more than 40 residential units and has a height of no more than 30 feet;
      2. The development project is located on a site that is one-quarter acre in size or greater and is either adjacent to an arterial road or located within a central business district;
      3. For development projects consisting of 10 or fewer units, see 5)a)ii);
      4. For development projects consisting of more than 10 units, at least 10% of the units in the development project have an affordable housing cost or affordable rent, as specified, to lower income households and at least 5% have an affordable housing cost or affordable rent to very low income households. Provides that if the city or county requires that the project include a greater percentage of units that are affordable to lower income and very low income households, the development project shall comply with that greater requirement;
      5. The development project complies with all objective design standards of the city or county. Prohibits the city or county from requiring the project to comply with a standard that would preclude development from including up to 40 units or impose a maximum height limitation of less than 30 feet;
   3. If the development project is located in any portion of the high-resource area where residential or commercial uses are an allowable use:
      1. The development project consists of no more than 100 residential units and has a height of no more than 55 feet;
      2. The development project is located on a site that in one-half acre is size or greater and is either adjacent to an arterial road or located within a central business district;
      3. At least 25% of the units in the development project have an affordable housing cost or affordable rent, as specified, to lower income households and at least 25% have an affordable housing cost or affordable rent to very low income households; and,
      4. The development project complies with all objective design standards of the city or county. Prohibits a city or county from requiring the development project to comply with a standard that would preclude the development from including up to 100 units or impose a maximum height limitation of less than 55 feet.
6. Allows a development project that is a use by right pursuant to 5c), above, to be eligible
   for a density bonus or other incentives or concessions if it includes units with an affordable housing cost, or affordable rent, as specified to lower income and very low income households in excess of the minimum amount.
7. Requires an applicant for a development project that is a use by right, pursuant to the bill’s provisions to agree to, and the city or county to ensure that the continued affordability of units is included in the project for at least 55 years for units that are rented, and 45 years for units that are owner-occupied.
8. Prohibits a development project from being eligible as a use by right if any of the following apply:
   1. The development project would require the demolition of rental housing, as specified;
   2. The development project is proposed to be located on a site that is any of the following: a coastal zone; prime farmland or farmland of statewide importance; wetlands; within a very high or high fire hazard severity zone; a hazardous waste site; within a delineated earthquake fault zone; within a special flood hazard area, as specified; within a regulatory floodway; lands identified for conservation in an adopted natural community conservation plan; habitat for protected species, as specified; or lands under conservation easement; or,
   3. The development project is proposed to be located on a site that is not an infill site.
9. Applies the bill’s provisions to all cities, including charter cities.
10. States that no reimbursement is necessary 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.

FISCAL EFFECT: This bill is keyed fiscal and contains a state-mandated local program.

COMMENTS:

1. Bill Summary. This bill would streamline mixed-income and affordable housing in high-resource areas that are not experiencing nor at risk of gentrification and displacement.
   The bill would make certain kinds of housing development a use by-right in these areas,
   as follows:
   1. In areas zoned only for single-family residential development, the development project could consist of up to four residential units with a height of up to 20 feet. The units would have to be either affordable to households making 100% of the area median income (AMI), or sold or rented at a higher AMI if the developer pays 10% of the difference to the local jurisdiction, who would be required to use it to build deed-restricted units for households at 50% AMI or less;
   2. In areas zoned for residential use that are in more prime development locations (i.e., at least one-quarter acre in size and located on a major street and/or the central business district), the development project could consist of up to 40 residential units with a height of up to 30 feet. Projects with 10 or fewer units would need to meet the same affordability parameters as the projects in single-family zones discussed above. Projects of more than 10 units would need to dedicate at least 10% of the units to households with low incomes (typically 50%-80% AMI) and 5% to very low incomes (typically under 50% AMI); and,
   3. If the parcel exceeded one-half acre in these prime locations, the development would have an extra incentive to have higher affordability requirements. A project that had at least 25% of its units dedicated to low-income households and 25% to very-low income households would be allowed to have up to 100 residential units with a height of up
      to 55 feet. Such a project could receive a density bonus if it were to include additional affordable units.

The bill specifies that a qualifying project cannot require the demolition of housing that is currently for rent or has been in the past ten years, or be located in an environmentally unsafe or sensitive area.

To facilitate the implementation of these requirements, the bill requires HCD to undergo a process to define “high-resource areas,” based on consultation with stakeholders, and with an appeal process for jurisdictions that disagree with designations within their borders. This bill is sponsored by the California Rural Legal Assistance Foundation, Public Advocates, and Western Center on Law & Poverty.

1. Author’s Statement. According to the author, “California’s housing shortage is well-documented, and it is primarily a shortage of units affordable to households at the lower end of the income spectrum. Facilitating the production of affordable housing units requires increasing allowable residential densities in many communities and creating more opportunities for multifamily development. Allowing these types of projects to be developed by right in the most exclusionary places is crucial to ensuring that they are able to proceed.

“In addition to an overall shortage of housing, California remains highly segregated in many areas of the state, and low-income people and people of color continue to lack access to many high resource areas. It is particularly important for the state to encourage multifamily affordable development in these areas to address the historic and present barriers to entry and to allow more people to enjoy the resources that these communities offer.”

1. Policy Considerations. The California State Association of Counties and Urban Counties of California have a “concerns” position on the bill, stating that they “are concerned with the bill’s delegation of legislative prerogative to the executive branch to develop definitions that will dictate the communities or neighborhoods where AB 1279’s provisions overriding local zoning will apply….[we would] strongly prefer to develop a specific definition in statute.” They are also concerned with the appeals process in the bill, and suggest that instead of the prescriptive approach, that the bill require local plans to allow for similar number of units at similar levels of affordability as would be possible under AB 1279’s by-right provisions.
2. Arguments in Support. Supporters argue that this bill addresses exclusionary zoning practices in high-resource areas, which exacerbate racial and economic segregation and reduce opportunities for lower-wage workers to live close to where they work, and will facilitate mixed-income and affordable housing in high-resource, lower-density communities.
3. Arguments in Opposition. None on file.
4. Double-Referral. This bill was heard in the Housing and Community Development Committee on April 10, 2019, and passed with a 6-1 vote.

REGISTERED SUPPORT / OPPOSITION:

Support

California Rural Legal Assistance Foundation [SPONSOR]
Western Center On Law & Poverty, Inc. [SPONSOR]

Dan Kalb, City Councilmember, City of Oakland

Public Advocates Inc.
Techequity Collaborative

Concerns

California State Association of Counties

Urban Counties of California

Opposition

None on file

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

Date of Hearing: April 10, 2019

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 1279 (

Author:Bloom) – As Introduced Ver:February 21, 2019

SUBJECT: Planning and zoning: housing development: high-resource areas

SUMMARY: Requires certain development sites in high resource areas to allow for more density and height and makes these sites subject to “use by-right” approval. Specifically, this bill:

1. Requires the Department of Housing and Community Development (HCD) to designate areas in this state as “high-resource areas,” as follows:
   1. Specifies the definition of a “high-resource area” to mean an area of high opportunity and low residential density that is not currently experiencing gentrification and displacement, and that is not at a high risk of future gentrification and displacement;
   2. Requires HCD, in creating these designations, to collaborate with the California Fair Housing Task Force, convened by the department and the California Tax Credit Allocation Committee, and shall solicit input from members of the public and ensure participation from all economic segments of the community as well as members of protected classes;
   3. Requires that this designation must occur no later than January 1, 2021, and every five years thereafter;
   4. Requires the designation of an area as a high-resource area remains valid for five years, unless successfully appealed by a city or county. Specifies the appeal process as follows:
      1. A city or county that includes within its jurisdictional boundaries an area designated as a high-resource area may appeal to HCD to remove that designation at any point during the five-year period by submitting an appeal in a form and manner prescribed HCD.
      2. HCD may remove the designation of a city or county that submits an appeal if HCD finds, based on substantial evidence, that the city or county has adopted policies after the area was designated as a high-resource area that meet the following requirements:
2. The policies permit development of higher density housing in the high-resource area than were allowed under the city’s or county’s policies in effect at the time the area was designated as a high-resource area;
3. The policies are sufficient to accommodate a similar number of housing units within the area and at similar levels of affordability as would be required by being in a high-resource area; and,
4. The policies are consistent with the city’s or county’s obligation to affirmatively further fair housing pursuant.
   • 1. In considering an appeal of a city or county submitted, HCD shall consult with the California Fair Housing Task Force and shall issue a decision within 90 days of receiving the appeal; and,
     2. The decision of the HCD regarding an appeal pursuant to this paragraph shall be final.
5. Defines “Use by right” to mean that the local government’s review of the development project under this section may not require a conditional use permit, planned unit development permit, or other discretionary local government review or approval that would constitute a “project” under the California Environmental Quality Act (CEQA), and that any required design review may not trigger review under CEQA.
6. Requires that a housing development project must be a use by right in any high-resource area if the development satisfies the following criteria:
   1. If the development project is located in any portion of the high-resource area where allowable uses are limited to single-family residential development:
      1. The development project may consist of no more than four residential units and have a height of no more than 20 feet.
      2. Either of the following must apply:
         1. The initial sales price or initial rent for units in the development project does not exceed the amount of affordable housing cost or affordable rent to households with a household income equal to or less than 100 percent of the area median income; or
         2. The initial sales price or initial rent exceeds these limits, and the developer agrees to pay a fee to the county or city equal to 10 percent of the difference between the actual initial sales price or initial rent and the sales price or rent that would be affordable to households making up to 100 percent of the area median income. In such an instance, the city or county must deposit this fee into a separate fund reserved for the construction or preservation of housing with an affordable housing cost or affordable rent to households with a household income less than 50 percent of the area median income, with a term of affordability of at least 55 years for units that are rented and 45 years for units that are for sale.
      3. The development project must comply with all objective design standards of the city or county. However, the city or county may not require the development project to comply with an objective design standard that would preclude the development from including up to four units or impose a maximum height limitation of less than 20 feet.
   2. If the development project is located in any portion of the high-resource area where residential use is an allowable use, is located on a site that is at least one-quarter acre in size, and is either adjacent to an arterial road or located within a central business district:
      1. The development project may consist of no more than 40 residential units and has a height of no more than 30 feet;
      2. For development projects consisting of 10 or fewer units, either of the following must apply:
         1. The initial sales price or initial rent for units in the development project does not exceed the amount of affordable housing cost or affordable rent to households with a household income equal to or less than 100 percent of the area median income; or
         2. The initial sales price or initial rent exceeds these limits, and the developer agrees to pay a fee to the county or city equal to 10 percent of the difference between the actual initial sales price or initial rent and the sales price or rent that would be affordable to households making up to 100 percent of the area median income, as provided in this subparagraph. The city or county shall deposit any fee received pursuant to this subparagraph into a separate fund reserved for the construction or preservation of housing with an affordable housing cost or affordable rent to households with a household income less than 50 percent of the area median income, with a term of affordability of at least 55 years for units that are rented and 45 years for units that are for sale.
      3. For development projects consisting of more than 10 units, at least 10 percent of the units in the development project must have an affordable housing cost or affordable rent to lower income households and at least five percent must have an affordable housing cost or affordable rent to very low income households, with a term of affordability of at least 55 years for units that are rented and 45 years for units that are for sale. However, if the city or county requires that the development project include a greater percentage of units that are affordable to lower income and very low income households, the development project shall comply with that greater requirement; and
      4. The development project must comply with all objective design standards of the city or county. However, the city or county may not require the development project to comply with an objective design standard that would preclude the development from including up to 40 units or impose a maximum height limitation of less than 30 feet.
   3. If the development project is located in any portion of the high-resource area where residential or commercial uses are allowed use, is located on a site that is one-half acre in size or greater, and is either adjacent to an arterial road or located within a central business district:
      1. The development project may consist of no more than 100 residential units and has a height of no more than 55 feet, and would be eligible for a density bonus or other incentives or concessions if it includes more affordable units than described below;
      2. At least 25 percent of the units in the development project must have an affordable housing cost or affordable rent to lower income households and at least 25 percent have an affordable housing cost or affordable rent to very low income households, with a term of affordability of at least 55 years for units that are rented and 45 years for units that are for sale;
      3. The development project must comply with all objective design standards of the city or county. However, the city or county may not require the development project to comply with an objective design standard that would preclude the development from including up to 100 units or impose a maximum height limitation of less than 55 feet.
   4. None of the following circumstances apply:
      1. The development project would require the demolition of rental housing that is currently occupied by tenants or has been occupied by tenants within the past 10 years.
      2. The development project is proposed to be located on a site that is any of the following:
         1. A coastal zone;
         2. Either prime farmland, farmland of statewide importance, or land zoned or designated for agricultural protection or preservation by a local ballot measure that was approved by the voters of that jurisdiction;
         3. Wetlands;
         4. Within a high- or very high-fire hazard severity zone, unless the site has an adopted fire hazard mitigation measures pursuant to existing building standards or state fire mitigation measures applicable to the development;
         5. A hazardous waste site, unless the Department of Toxic Substances Control has cleared the site for residential use or residential mixed uses;
         6. Within a delineated earthquake fault zone, unless the development complies with applicable seismic protection building code standards adopted by the California Building Standards Commission and by any local building department;
         7. Within a special flood hazard area subject to inundation by the 1 percent annual chance flood (100-year flood), unless the site has been subject to a Letter of Map Revision prepared by the Federal Emergency Management Agency and issued to the local jurisdiction or the site meets Federal Emergency Management Agency requirements necessary to meet minimum flood plain management criteria of the National Flood Insurance Program;
         8. Within a regulatory floodway as determined by the Federal Emergency Management Agency in any official maps published by the Federal Emergency Management Agency, unless the development has received a no-rise certification;
         9. Lands identified for conservation in an adopted natural community conservation plan, habitat conservation plan, or other adopted natural resource protection plan;
         10. Habitat for protected species identified as candidate, sensitive, or species of special status by state or federal agencies, fully protected species, or species protected by the federal Endangered Species Act of 1973, the California Endangered Species Act, or the Native Plant Protection Act; or
         11. Lands under conservation easement.
      3. The development project is proposed to be located on a site that is not an infill site, defined to mean a site in which at least 75 percent of the perimeter of the site adjoins parcels that are developed with urban uses. For the purposes of this section, parcels that are only separated by a street or highway shall be considered to be adjoined.
7. Specifies that this law shall not be construed to prevent a developer from submitting an application for a development permit in a high-resource area under the county’s or city’s general plan, specific plan, zoning ordinance, or regulation for a project that does not meet the criteria specified herein;

EXISTING LAW:

1. Provides for owner-occupied housing “affordable housing cost” may not exceed the following:
2. For extremely low income households the product of 30 percent times 30 percent of the area median income adjusted for family size appropriate for the unit;
3. For very low income households the product of 30 percent times 50 percent of the area median income adjusted for family size appropriate for the unit;
4. For lower income households whose gross incomes exceed the maximum income for very low income households and do not exceed 70 percent of the area median income

adjusted for family size, the product of 30 percent times 70 percent of the area median income adjusted for family size appropriate for the unit; and

1. For moderate-income households, affordable housing cost shall not be less than 28 percent of the gross income of the household, nor exceed the product of 35 percent times 110 percent of area median income adjusted for family size appropriate for the unit.
2. Defines "affirmatively furthering fair housing" as taking meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics. Specifically, AFFH means taking meaningful actions that together address segregated living patterns with truly integrated and balanced living patterns, transforming racially and ethnically concentrated areas of poverty into areas of opportunity, and fostering and maintaining compliance with civil rights and fair housing laws. The duty to AFFH extends to all of a public agency's activities and programs relating to housing and community development.

FISCAL EFFECT: Unknown

COMMENTS:

Purpose of the Bill: According to the author, “This bill would facilitate mixed-income and affordable housing development in high-resource, lower-density communities through local zoning overrides and other land use incentives. The bill is aimed at addressing the housing shortage in a way that also addresses exclusionary zoning practices that exacerbate racial and economic segregation and that provide few opportunities for lower-wage workers to live close to where they work in many areas of the state.”

Background: The cost of housing in California is the highest of any state in the nation. Additionally, the pace of change has far outstripped that in other parts of the county. Whereas in 1970 housing in California was 30% more expensive than the U.S. average, now it is 250% more expensive. While incomes have increased over that period, they have done so at a much slower pace. The result is that housing has become much more expensive. Only 28% of households can buy the median priced home. Over half of renters and 80% of low-income renters are rent-burdened, meaning they pay over 30% of their income towards rent. According to a 2016 McKinsey Global Institute, every year Californians pay $50 billion more for housing than they are able to afford.

Building Additional Housing: According to the Legislative Analyst’s Office, “a collection of factors drive California’s high cost of housing. First and foremost, far less housing has been built in California’s coastal areas than people demand. As a result, households bid up the cost of housing in coastal regions. In addition, some of the unmet demand to live in coastal areas spills over into inland California, driving up prices there too. Second, land in California’s coastal areas is expensive. Homebuilders typically respond to high land costs by building more housing units on each plot of land they develop, effectively spreading the high land costs among more units. In California’s coastal metros, however, this response has been limited, meaning higher land costs have translated more directly into higher housing costs. Finally, builders’ costs—for labor, required building materials, and government fees—are higher in California than in other states. While these higher building costs contribute to higher prices throughout the state, building costs appear to play a smaller role in explaining high housing costs in coastal areas.”

According to Up for Growth’s 2018 analysis, housing underproduction is rampant throughout the United States, but California’s underproduction is greater than the other 49 states combined. According to the 2016 McKinsey study, California’s housing deficit is over 2 million units, and that it would require production of 500,000 units a year (3.5 million units total) over a seven year period to normalize the state’s housing prices. According to HCD, there needs to be 180,000 units built per year to maintain housing costs. By contrast, housing production averaged less than 80,000 new homes annually over the last 10 years.

Facilitating the necessary growth will require building at higher densities than are currently allowed in much of the state. The UC Berkeley Terner Center conducted a residential land use survey in California from August 2017 to October 2018. The survey found that most jurisdictions devote the majority of their land to single family zoning and in two-thirds of jurisdictions, multifamily housing is allowed on less than 25% of land. The LAO’s 2016 analysis found that the housing density of a typical neighborhood in California’s coastal metropolitan areas increased only by four percent during the 2000s. The prevailing development pattern continues to be single-family sprawl, with increasing pockets of high density housing in or near the downtown of large cities.

Increasing housing density has the risk of demonstrably changing the character of a neighborhood, potentially for the worse. A strategy for building more densely in a way that can be more in character is through “missing middle” construction types. This includes duplexes, triplexes, fourplexes, townhomes, courtyard apartments, and bungalow courts. According to SACOG’s 2018 Housing Toolkit, this type of housing is cheaper to produce than larger apartment buildings, tends to become naturally affordable rental housing as it ages, provides sufficient density to support the shops, restaurants, and transit that are associated with walkable neighborhoods, and usually fits in with the look and feel of a single-family neighborhood.

Facilitating Access to Housing in High-Resource Areas: Multiple studies have shown that life outcomes improve for those living in “high-resource areas,” i.e., neighborhoods with high quality public schools, proximity to well-paying jobs, and a clean and safe environment. Such studies have also shown that living in such communities can have a particularly beneficial outcome for low-income people in terms of health, employment, and educational attainment.

However, historically low-income people have been excluded from high-resource areas through a number of means. According to a 2018 paper by Nancy Walsh, JD, “racially restrictive covenants were widespread tools of discrimination during the first half of the 20th century. By the time the Supreme Court ruled them to be unenforceable in 1948, it is estimated that more than half of all residential properties built in the intervening decades were constrained by racially restrictive covenants. This also includes the “redlining” practices that came into place after the adoption of the federal National Housing Act of 1934. This act made mortgages more affordable and stopped bank foreclosures during the Great Depression. However, these loans were distributed in a manner to purposefully exclude “high risk” neighborhoods composed of minority groups, and to limited access to these loans by minority groups. This practice led to underdevelopment and lack of progress in these segregated communities while neighborhoods surrounding them flourished due to increased development and investment.

The rapidly rising cost of housing in California has only exacerbated these historic trends. A 2019 study by UC Berkeley’s Urban Displacement Project showed that rising housing prices in the Bay Area has led to “new concentrations of poverty and racial segregation in the region and the perpetuation of racial disparities in access to high-resource neighborhoods.”

To address these historic disparities, the state has prioritizing allocation of its tax credits into “high opportunity areas.” The defining and mapping of these areas has been undertaken by the California Tax Credit Allocation Committee (TCAC) in the State Treasurer’s Office and HCD. TCAC and HCD convened a group of independent organizations and researchers called the California Fair Housing Taskforce (Taskforce). The Taskforce released a detailed opportunity mapping methodology document that identifies specific policy goals and purposes, as well as detailed indicators to identify areas that further the policy goals and purposes.

Increasing Development in High Resource Areas: As stated by the author, the bill would facilitate mixed-income and affordable housing in high-resource areas that are not experiencing nor at risk of gentrification and displacement. The bill would make certain kinds of housing development a use by-right in these areas, as follows:

• In areas zoned only for single-family residential development, the development project could consist of up to four residential units with a height of up to 20 feet. The units would have to be either affordable to households making 100% of the area median income (AMI), or sold or rented at a higher AMI if the developer pays 10% of the difference to the local jurisdiction, who would be required to use it to build deed-restricted units for households at 50% AMI or less;
• In areas zoned for residential use that are in more prime development locations (i.e., at least one-quarter acre in size and located on a major street and/or the central business district), the development project could consist of up to 40 residential units with a height of up to 30 feet. Projects with 10 or fewer units would need to meet the same affordability parameters as the projects in single-family zones discussed above. Projects of more than 10 units would need to dedicate at least 10% of the units to households with low incomes (typically 50%-80% AMI) and 5% to very low incomes (typically under 50% AMI);
• If the parcel exceeded one-half acre in these prime locations, the development would have an extra incentive to have higher affordability requirements. A project that had at least 25% of its units dedicated to low-income households and 25% to very-low income households would be allowed to have up to 100 residential units with a height of up to 55 feet. Such a project could receive a density bonus if it were to include additional affordable units; and,
• No qualifying project must require the demolition of housing that is currently for rent or has been in the past ten years, or be located in an environmentally unsafe or sensitive area.

To facilitate the implementation of these requirements, the bill requires HCD to undergo a process to define “high-resource areas,” based on consultation with a diversity of stakeholders, and with an appeal process for jurisdictions that disagree with designations within their borders.

Staff Comments: Were this bill to pass out of the committee, the author should consider several refinements to further clarify and fulfill the intent of the bill. Potential refinements include:

• For qualifying projects not limited to single-family zoning, the proposed unit cap does not account for the variations in parcel size and allowed height. As such, projects might under-develop relative to preferable densities in order to utilize the bill’s by-right approval process. Instead, the author may consider applying a density-based unit cap that is responsive to the parcel size and allowed height.
• For qualifying projects to be allowed up to 55 feet they must meet a 50% affordability target. Such a target requires that the project receive public funding and/or be subsidized by a large commercial development on the same site. This enticement of large commercial developments may be counterproductive to reducing the jobs/housing mismatch that has exacerbated our current housing crisis. To better meet the intent of increased affordable development and decreased upward pressure on rents, the author may consider increasing the affordability requirement for qualifying projects to 100%. By contrast, if the author would like to see more market rate development in these communities, and commensurately more affordable housing that could come from a market-based solution, the author may consider reducing the affordable housing requirement to the maximum amount that would still facilitate housing development that would not require subsidization.
• This bill makes a development eligible for a density bonus or other incentives or concessions if it includes affordable units “in excess” than otherwise required to be a qualified project. This would allow projects providing one additional unit of affordable housing to get the density bonus. If that is not the intent, the author might consider specifically defining how much “in excess” a project should be to qualify.
• The bill relies on the terms “arterial road” and “central business district.” The author should consider defining these terms to ensure clarity of application.

Related Legislation:

• SB 50 (Wiener) (2019): Would requires a local government to grant increased development capacity in transit-rich and high-resource areas when a development proponent meets specified requirements. This bill is pending hearing in Senate Governance and Finance Committee.
• AB 686 (Santiago. Chapter 958, Statutes of 2018): Requires a public agency to administer its programs and activities relating to housing and community development in a manner to affirmatively further fair housing. Status: Chapter 958, Statutes of 2018

Double referred: This bill was also referred to the Assembly Committee on Local Government where it will be heard should it pass out of this committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Rural Legal Assistance Foundation (co-sponsor)

Public Advocates (co-sponsor)

Western Center on Law and Poverty (co-sponsor)

Opposition

None on file.

Analysis Prepared by: Steve Wertheim / H. & C.D. / (916) 319-2085