SENATE COMMITTEE ON APPROPRIATIONS

Senator Anthony Portantino, Chair

2019 - 2020 Regular Session

AB 3040 (Chiu) - Local planning: regional housing need assessment

Bill Summary:

AB 3040 would authorize cities and counties to receive a specified credit towards meeting their regional housing needs allocation (RHNA) for moderate- and above moderate-income housing if they identify sites in the housing element that contain a single family dwelling unit but allow four units as a use by right.

Fiscal Impact:

• The Department of Housing and Community Development (HCD) estimates it would incur costs of approximately $158,000 in the first year and $150,000 annually thereafter for 0.75 PY of staff time to update its website and guidance on the Housing Element Law, provide technical assistance and outreach to local governments, and for additional workload in the housing element review process. (General Fund)

Background:

The Planning and Zoning Law requires every city and county to adopt a general plan with seven specified elements, including a housing element. The housing element must identify adequate sites for housing at all income levels—very low, low, moderate, and above moderate income. Each local jurisdiction must also ensure that its housing element makes enough sites available to accommodate its share of the regional housing need assessment (RHNA), which is an estimate for various regions in the state that is developed by the Department of Finance and HCD and further allocated amongst individual local jurisdictions. The housing element of a general plan must generally be updated every eight years, and the local government must identify an adequate number of sites throughout its entire planning period. If a city or county does not have enough sites within its existing inventory of residentially zoned land to accommodate its share of the regional housing needs, it must adopt a program to rezone land within the first three years of the planning period. Every city and county must submit a report to HCD and the Governor’s Office of Planning and Research annually on its implementation and progress towards meeting its RHNA amount and removing governmental obstacles to housing development.

As part of the housing element, existing law requires cities and counties to provide an analysis to demonstrate how the adopted densities of sites identified in their inventory accommodate the need for lower income housing. These sites must be zoned for a density of at least 30 units per acre in metropolitan jurisdictions, and 20 units per acre in suburban jurisdictions. There is no current minimum density for moderate-income and above moderate-income housing sites.

Existing law establishes, within the Davis-Stirling Common Interest Development (CID) Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Governing documents of a CID, as well as any amendments, must be adopted through HOA elections in accordance with specified procedures. Existing law deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts installation of: a solar energy system; a video or television antenna; low-water using plants, artificial turf, and other synthetic surface that resembles grass; an electric vehicle charging station within the owner’s unit or designated parking space; or the display of religious items on a dwelling’s door frame. CC&Rs that prohibit or restrict construction of or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs are also void and unenforceable.

Proposed Law:

AB 3040 would provide a specified RHNA credit for local governments that provide for four units on a single-family parcel on sites identified in the housing element to accommodate moderate- and above moderate-income housing. Specifically, this bill would:

• Authorize a city or county to include in its inventory of sites suitable for residential development, a site that contains an existing single-family dwelling unit but that the city or county has permitted, or is proposing to permit, to contain four dwelling units, if the site meets all of the following criteria:
  • The site allows the new residential dwellings as a use by right.
  • The development standards applicable to the site would not impede the development of four dwelling units.
  • The site has an existing dwelling unit that received its first certificate of occupancy at least 15 years prior to being included in the site inventory.
  • The site is identified in the inventory to satisfy either the moderate- or above moderate-income RHNA level.
• Prohibit zoning capacity authorized under SB 1120 (Atkins, 2020) from being considered as enabling a development of four dwelling units, as specified.
• Require HCD to provide, at minimum, a credit of one unit toward the city’s or county’s RHNA allocation for every 10 sites included in the inventory. Any fraction of a unit shall be rounded to the nearest whole unit.
• Specify that the cumulative credit that a city or county may receive is 50% of the units needed to meet its moderate-income RHNA allocation, and 10% of the units needed to meets its above moderate-income RHNA allocation.
• Require a city or county including sites in its inventory pursuant to this bill to include in its housing element a description of the development standards that enable the identified sites to be redeveloped at a higher density, as specified, and a description of the policies, programs, and incentives that will be used to facilitate the development.
• Require a city or county to follow specified deadlines for rezoning an inventory that does not identify adequate sites to accommodate RHNA if it proposes to identify sites that contain an existing single-family dwelling and allow four dwelling units, as specified in the bill.
• Authorize a city or county, in lieu of listing sites individually in its inventory, to include a summary of the credit received pursuant to this bill, if the housing element includes a separate list of sites including specified information and a description of how the sites meet the bill’s requirements.
• Require a city or county to include in its annual progress report a summary of the units developed on sites identified pursuant to this bill.
• Deem void and unenforceable any CC&R contained in any deed, contract, security instrument, other instrument affecting the transfer or sale of any interest in a planned CID, and any provision of a CID governing document, that effectively prohibits or unreasonably restricts the construction or use of up to four primary dwelling units on a lot zoned for at least four dwelling units. Provisions that impose reasonable restrictions on dwelling units would be exempted from this prohibition, as specified.

Related Legislation:

SB 1120 (Atkins), which is currently pending in the Assembly Local Government Committee, would require cities and counties to provide for the ministerial consideration of a proposed housing development containing two residential units (a duplex), and ministerial approval of a parcel map dividing a lot into two equal parts for residential use (an urban lot split), as specified.

AB 725 (Wicks), which is currently pending in this Committee, would place minimum density requirements on a portion of sites identified by a metropolitan jurisdiction in its housing element to accommodate its share of the regional housing need for moderate- and above moderate-income housing, as specified.

Staff Comments:

This bill would require HCD to develop technical assistance to implement the bill, update guidance documents related to housing elements and site inventories, update its website, respond to questions from local governments, and would also increase the workload associated with housing element reviews. HCD’s estimated costs for these duties are approximately $150,000 annually for ¾ PY of staff time.

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SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: AB 3040 Hearing Date: 8/6/2020

SUBJECT: Local planning: regional housing need assessment

DIGEST: This bill allows cities and counties to receive a specified credit toward meeting their regional housing needs allocation (RHNA) for rezoning single-family sites to allow four units per parcel.

ANALYSIS:

Existing law:

1. Requires every city and county to prepare and adopt a general plan, including a housing element, to guide the future growth of a community. The housing element must identify and analyze existing and projected housing needs, identify adequate sites with appropriate zoning to meet the housing needs of all income segments of the community, and ensure that regulatory systems provide opportunities for, and do not unduly constrain, housing development.
2. Requires the housing element to identify adequate sites for housing and to make adequate provision for the existing and projected needs of all economic segments of the community.
3. Requires each jurisdiction to submit an annual progress report to HCD regarding its progress in meeting its RHNA allocation.
4. Establishes, within the Davis-Stirling Common Interest Development (CID) Act, rules and regulations governing the operation of a CID and the respective rights and duties of a homeowners association (HOA) and its members. Requires the governing documents of a CID, and any amendments to the governing documents, to be adopted through HOA elections in accordance with specified procedures
5. Deems void and unenforceable any covenant, condition, or restriction (CC&R) contained in any deed, contract, security instrument, or other instrument affecting the transfer of, or any interest in, real property, and any provision of the CID governing documents, that effectively prohibits or restricts:
   1. Installation of a solar energy system.
   2. Installation or use of a video or television antenna.
   3. Installation of low-water using plants, artificial turf, and other synthetic surface that resembles grass.
   4. Installation or use of an electric vehicle charging station within the owner’s unit or designated parking space.
   5. Display or affixation of one or more religious items on any entry door frame to a dwelling.
   6. Construction or use of an accessory dwelling unit (ADU) or junior accessory dwelling unit (JADU) on a lot zoned for single-family residential use that meets the requirements of existing law regarding ADUs and JADUs.

This bill:

1. Authorizes a city or county to include in its inventory of sites suitable for residential development, a site that contains an existing single-family dwelling unit but that the city or county has permitted, or is proposing to permit, to contain four dwelling units, if the site meets all of the following criteria:
   1. The site allows the new residential dwellings as a use by right.
   2. The development standards applicable to the site would not impede the development of four dwelling units.
   3. The site has an existing dwelling unit that received its first certificate of occupancy at least 15 years prior to being included in the site inventory.
   4. The site is identified in the inventory to satisfy either the moderate- or above moderate-income RHNA level.
2. Prohibits, if SB 1120 (Atkins, 2020) is enacted, the zoning capacity authorized under SB 1120 from being considered as enabling a development of four dwelling units.
3. Requires HCD, for every 10 sites included in the inventory, to provide, at minimum, a credit of one unit toward the city’s or county’s RHNA allocation. Any fraction of a unit shall be rounded to the nearest whole unit.
4. Requires a city or county including sites in its inventory under this bill to include in its housing element both of the following:
   1. A description of the development standards that enable the identified sites to be redeveloped at a higher density, including but not limited to height limits, parking requirements, setback requirements, and historic resource designation.
   2. A description of the policies, programs, and incentives that will be used to facilitate the development.
5. Requires a city or county that proposes to permit a site that contains an existing single-family dwelling, to contain four dwelling units pursuant to this bill, to do so in accordance with the deadline to rezone an inventory that does not identify adequate sites.
6. Provides that the cumulative credit received by a city or county from the sites identified pursuant to this bill shall not exceed either of the following:
   1. 50% of the units needed to meet its moderate-income RHNA allocation.
   2. 10% of the units needed to meet its above moderate-income RHNA allocation.
7. Authorizes a city or county, in lieu of listing sites individually in its inventory, to include a summary of the credit received pursuant to this bill, if the housing element includes a separate list of sites including the following information:
   1. A listing of properties by assessor parcel number.
   2. The general plan designation.
   3. The zoning of each property.
   4. A description of how the sites meet the requirements of this bill.
8. Requires a city or county to include in its annual progress report a summary of the units developed on sites identified pursuant to this bill.
9. Deems void and unenforceable any CC&R contained in any deed, contract, security instrument, other instrument affecting the transfer or sale of any interest in a planned CID, and any provision of a CID governing document, that effectively prohibits or unreasonably restricts the construction or use of up to four primary dwelling units on a lot zoned for at least four dwelling units. Exempts from this prohibition, provisions that impose reasonable restrictions on dwelling units, as specified.

COMMENTS

1. Author’s statement. “AB 3040 is an important tool to address California’s housing crisis in a manner that is contextual, expedient, and meaningful. AB 3040 will spur desperately needed housing production by giving local governments additional RHNA credits when they up-zone single-family parcels to allow four housing units per parcel. By specifying up front the amount of credit received, it avoids the uncertainty that cities otherwise experience when adding zoning capacity to areas with existing housing.”
2. Background: housing elements and RHNA. Every city and county in California is required to develop a general plan that outlines the community’s vision of future development through a series of policy statements and goals. A community’s general plan lays the foundation for all future land use decisions, as these decisions must be consistent with the plan. General plans are comprised of several elements that address various land use topics. State law mandates seven elements: land use, circulation (e.g. traffic), housing, conservation, open-space, noise, and safety.

Each community’s general plan must include a housing element, which outlines a long-term plan for meeting the community’s existing and projected housing needs. The housing element demonstrates how the community plans to accommodate its “fair share” of its region’s housing needs. Following a staggered schedule, cities and counties located within the territory of a metropolitan planning organization (MPO) must revise their housing elements every eight years, and cities and counties in rural non-MPO regions must revise their housing elements every five years. These five- and eight-year periods are known as the housing element planning period.

Before each revision, each community is assigned its fair share of the region’s housing need for four separate income categories (very low-, low-, moderate-, and above-moderate income households) through a two-step process known as the RHNA. In the first step, the Department of Housing and Community Development (HCD) determines the aggregate housing need for the region during the planning period the housing element will cover. In the second step, the council of governments (COG) for the region allocates the regional housing need to each city and county within the region.

In general, a housing element must identify and analyze existing and projected housing needs, identify adequate sites with appropriate zoning to meet its share of the RHNA, and ensure that regulatory systems provide opportunities for, and do not unduly constrain, housing development. Among other things, the element specifically must include an analysis of existing subsidized housing developments that are eligible to convert to market-rate rental housing upon the expiration of affordability restrictions, and identify all public resources.

As part of the process to identify adequate sites, a city or county first prepares an inventory of existing sites zoned for housing. When the inventory of existing sites is insufficient to accommodate the need for one or more income categories, the housing element must contain a program to rezone sites within the first three years of the planning period.

1. Most of the state is zoned for single-family. 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.

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.

A 2019 Zillow report found that even modest densification, such as duplexes and fourplexes could result in millions more homes. Across 17 metro areas analyzed nationwide, allowing 10% of single-family lots to house two units instead of one could yield almost 3.3 million additional housing units to the existing housing stock. In the L.A. region, if one in five single-family lots were re-zoned to hold two homes, the local housing stock could be boosted by 775,000 homes. Allowing four homes instead of two on those same 20% of single-family lots could yield a housing stock increase of more than 2.3 million homes, or a 53.4% boost over the current stock when combined with homes already expected to be built.

1. Incentive to upzone. This bill aims to incentivize local governments to upzone single-family sites by allowing them to count toward their moderate- and above-moderate RHNA obligation, a site with an existing single-family dwelling that has been zoned for four dwelling units. The site must be zoned by-right for new dwelling units; must not be subject to development standards that would impede additional units being developed on it; must have an existing unit that is at least 15 years old; and must be identified as meeting either the moderate- or above moderate-income RHNA obligation. This bill helps provide certainty to cities and counties, since they would otherwise need to provide ample evidence to HCD that such development on non-vacant sites would occur. To ensure that this new authority is not abused, this bill provides that a locality can only use this upzoning to account for 50% of its moderate income RHNA or 10% of its above moderate income RHNA. It also requires cities and counties to provide annual updates to HCD on the status of development on these sites.
2. Interaction with SB 1120. SB 1120 (Atkins, 2020) requires cities and counties to ministerially permit a housing development of up to two units (a duplex), the subdivision of a parcel into two equal parcels (urban lot split), or both, under specified conditions. SB 1120 is intended to help increase the number of units that can be permitted in residential areas.

This bill authorizes a city or county to include in its housing element inventory of sites suitable for residential development, a site that contains an existing single-family dwelling but that the city or county has permitted, or is proposing to permit, to contain four dwelling units, if the site meets specified criteria. To address concerns that a locality might simply point to the ministerial approval provisions of SB 1120 rather than actively permitting a parcel for up to four units, the author recently amended this bill to prohibit zoning capacity under SB 1120 from being considered as enabling a development of four units.

1. CIDs. A CID is a form of real estate in which each homeowner has an exclusive interest in a unit or lot and a shared or undivided interest in common-area property. Condominiums, planned unit developments, stock cooperatives, community apartments, and many resident-owned mobilehome parks all fall under the umbrella of CIDs. There are more than 50,000 CIDs in California comprising over 4.8 million housing units, or approximately one-quarter of the state’s housing stock. CIDs are governed by HOAs. The Davis-Stirling Common Interest Development Act provides the legal framework under which CIDs are established and operate. In addition to the requirements of the Act, each CID is governed according to the recorded declarations, bylaws, and operating rules of the association, collectively referred to as the governing documents.

Legislation last year (AB 670, Friedman) prohibited CIDs from banning construction of ADUs and JADUs. This bill prohibits CIDs from banning or unreasonably restricting, as specified, up to four primary dwelling units on a lot zoned for at least four dwelling units.

1. Opposition concerns. A number of homeowner associations and other neighborhood groups oppose this bill, primarily based on concerns about its impact on existing residential neighborhoods. In addition, Livable California states that this bill boosts market-rate housing without requiring any affordable housing, and will result in gentrification and displacement in middle-class and working-class neighborhoods, “particularly in highly diverse Southern California.”

Related Legislation:

SB 1120 (Atkins) — requires ministerial approval of duplexes and specified parcel maps. This bill is pending in the Assembly Local Government Committee.

AB 670 (Friedman, Chapter 178, Statutes of 2019) — prohibits CIDs from banning construction of an ADU or JADU but allows HOAs to imposed reasonable restrictions on constructions of ADUs or JADUs, as specified.

AB 1397 (Low, Chapter 375, Statutes of 2017) — strengthens state Housing Element Law by limiting the reliance of local governments on sites that do not have a realistic capacity for the development of housing.

FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: No

POSITIONS: (Communicated to the committee before noon on Friday, July 24, 2020.)

SUPPORT:

All Home
American Planning Association, California Chapter
Association of Bay Area Governments (ABAG)
Bay Area Housing Action Coalition
California Apartment Association
California State Association of Counties
California YIMBY
Council of Infill Builders
Facebook
Habitat for Humanity California
League of California Cities
Metropolitan Transportation Commission
Non-profit Housing Association of Northern California
Rural County Representatives of California
San Francisco Housing Action Coalition
Silicon Valley at Home
The Two Hundred
Urban Counties of California
Zillow Group

OPPOSITION:

City of Redondo Beach

Comstock Hills Homeowners Association
Franklin Corridor Coalition
Friends of Sunset Park
Grayburn Avenue Block Club
Livable California
Noe Neighborhood Council
Protecting Our Foothill Community
Shadow Hills Property Owners Association
Sherman Oaks Homeowners Association
Southeast Torrance Homeowners' Association
Tamalpais Design Review Board

United Neighborhoods for Los Angeles (UN4LA)
Western Quadrant of North Leimert Park

17 Individuals

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ASSEMBLY THIRD READING

ATR Bill Id:AB 3040

Author:(Chiu)

As Amended Ver:May 11, 2020

Majority vote

SUMMARY:

Allows cities and counties to receive a specified credit towards meeting their Regional Housing Needs Allocation (RHNA) for rezoning single-family neighborhoods to allow four units per parcel.

Major Provisions

1. Provides that the Department of Housing and Community Development (HCD) must provide a credit of 0.1 units per site for any site that a city or county includes in its inventory of land suitable for residential development if:
   1. The site contains an existing single-family dwelling unit that received its first certificate of occupancy at least 15 years before inclusion in the site inventory;
   2. The site is permitted to contain four dwelling units as a use by right;
   3. The site is identified in the city's or county's inventory as satisfying either the moderate or the above-moderate income regional housing need income level;
   4. The city or county does all of the following:
      1. Adopts a resolution or ordinance regarding these sites that meets all of the following requirements:
         1. Provides, at a minimum, that the units may be developed as a use by right, and provides a description of the land use provisions that enable the identified sites to be redeveloped at a higher density, including, but not limited to, height limits, parking requirements, setback requirements, and historic resource designation;
         2. Includes findings that those land use provisions do not impede the redevelopment of these sites at a higher density; and
         3. Adopts the resolution or ordinance within the two-year period immediately preceding the deadline for certification of the housing element.
      2. Does not identify the cumulative credit received from the identified sites as exceeding more than 25% of the total units needed to meet its regional housing needs allocation.
      3. Includes in the annual progress report required to be summited a summary of the units developed on sites identified pursuant to this paragraph.
2. Requires HCD to review and make findings regarding any resolution or ordinance adopted by a city or county in order to receive the 0.1 credit per eligible site.  
3. Allows HCD to provide additional credit, as well as credit for low-income units, if it determines that the city or county has adopted a plan or program that would further accelerate the production of units identified by this process.
4. Allows HCD to determine, based on the annual progress report, if a city or county is making inadequate progress toward meeting its RHNA on sites identified by this process. If such a determination is made, HCD may require that the city or county amend a plan or program, including identifying other adequate sites in the appropriate income category.

COMMENTS:

Background:

Housing Crisis: The cost of housing in California is twice the national average, and higher than any state except Hawai'i. 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. 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 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, 180,000 units need to be built per year to maintain housing costs. By contrast, housing production averaged less than 80,000 new homes annually over the last 10 years.

Medium-Density Housing: One strategy to lower the cost of housing is to facilitate the construction of "missing-middle" housing types that accommodate more units per acre, but are not inherently expensive to build. This includes medium-density typologies such as duplexes and fourplexes. In addition to being land-efficient while being less expensive to build, these housing types have several other benefits, including that they:

1. Are contextually similar to existing single-family neighborhoods;
2. Provide sufficient density to support the shops, restaurants, and transit that are associated with walkable neighborhoods;
3. Help the pool of homebuilders, since the construction and building materials are comparatively less complicated than larger mid- and high-rise structures; and
4. Are naturally less expensive in the market because they are typically smaller than single-family homes, thereby helping increase access to opportunity and facilitate neighborhood equity and inclusion.

A major reason that insufficient units are being built is that they are not allowed under local zoning. A 2019 Terner Center survey revealed that in only seven percent of California cities and counties allowed multifamily housing on over half their land, and only 35% allowed it on more than a quarter of their land. The result is that two to four unit projects are infrequently built, compared to historic development patterns. Currently, 8% of units statewide are in buildings with two to four units. However, of units built in the last 30 years, only 3% of new units are in buildings with two to four units.

RHNA Process: Housing element law requires local jurisdictions to adequately plan to meet their existing and projected housing needs including their share of the regional housing need. The amount of housing required to be planned for is established by the RHNA process. For all but the state's most rural areas, this process occurs on an eight-year cycle, during which the state determines the anticipated population growth and then assigns a growth target to the state's regions, which then assign them to the jurisdictions therein. These growth targets are specified by income categories to support the development of a mix of housing types for all economic segments of the population. These income categories include very low-income (under 50%t of Area Median Income (AMI)), low-income (between 50-80%t of AMI), moderate income (80-120% of AMI), and above-moderate income (above 120% of AMI).

Upon receiving its RHNA, each jurisdiction must then demonstrate, through its housing element that the development capacity exists to accommodate, at a minimum, the allocation for each of the four income categories. Jurisdictions do so by creating an inventory of land suitable and available for residential development, including vacant sites and sites having realistic and demonstrated potential for redevelopment during the planning period. The housing element also must include a statement of the community's goals, quantified objectives, and policies relative to the maintenance, preservation, improvement, and development of housing. Each housing element must include an implementation plan that identifies any particular programs or strategies being undertaken to meet their goals and objectives, including their RHNA target.

When cities and counties include non-vacant sites in their housing inventory, they are required to provide an explanation of the methodology used to determine the development potential. Per Government Code Section 65583.2(g)(1), "The methodology shall consider factors including the extent to which existing uses may constitute an impediment to additional residential development, the city's or county's past experience with converting existing uses to higher density residential development, the current market demand for the existing use, an analysis of any existing leases or other contracts that would perpetuate the existing use or prevent redevelopment of the site for additional residential development, development trends, market conditions, and regulatory or other incentives or standards to encourage additional residential development on these sites." This methodology is typically submitted to HCD with the rest of their required materials as part of HCD's certification process. HCD then conveys to the city or county whether their methodology is acceptable and how many units will be credited in the site inventory from non-vacant sites.

The cities and counties in the major regions in the state are currently are currently or imminently working on their housing elements. The 6th cycle of housing elements must be certified by HCD for the San Diego region by April 2021, for the Sacramento region by May 2021, for Southern California region by October 2021, and for the Bay Area by November 2022.

Purpose of this bill: This bill makes it easier for cities and counties to receive credit towards their above moderate-income and moderate-income regional housing needs allocation when they upzone existing single-family housing to allow four units. By specifying the credit at 0.1 units per site, the bill provides certainty to cities and counties that would otherwise need to provide ample evidence to HCD that such development on non-vacant sites would occur. HCD could grant additional credit if it determines that the city or county has a plan or program that would further accelerate the production of these units.

The bill establishes multiple guardrails to ensure that sites truly have the potential to accommodate more units. Cities and counties seeking this credit are required to allow new units by right, and prove to the state that other land use provisions do not impede the redevelopment of these sites at a higher density. Applicable sites must have housing that is over 15 years old, recognizing that newer housing is less likely to be demolished or subdivided. Localities could not utilize this upzoning to account for more than 25% of their overall housing allocation, unless allowed by HCD. To ensure accountability, cities and counties provide annual updates on development on these sites. HCD may then ask localities to revisit this program if it is not meeting expectations, up to and including requiring a city or county to identify other adequate sites in the appropriate income category.

According to the Author:

AB 3040 is an important tool to address California's housing crisis in a manner that is contextual, expedient, and meaningful. AB 3040 will spur desperately needed housing production by giving local governments additional RHNA credits when they up-zone single-family parcels to allow four housing units per parcel. By specifying up front of the amount of credit received, it avoids the uncertainty that cities otherwise experience when adding zoning capacity to areas that already have existing housing.

Arguments in Support:

Arguments in support focus on the benefits of increased certainty for local governments and how that could result in increased development of smaller projects. According to the League of California Cities, "Your bill would provide a process whereby local governments would have greater certainty that they could accommodate portion of their RHNA by upzoning to allow small multifamily projects in existing neighborhoods with single-family units."

Arguments in Opposition:

The arguments in opposition state that this bill is creating state mandate. According to Livable California, "AB 3040 is yet another weakening of local government, that government which is closest to the people served."

FISCAL COMMENTS:

According to the Assembly Committee on Appropriations, total annual costs of approximately $360,000 (General Fund (GF)) in the first year and $340,000 (GF) in the second year and ongoing to HCD for additional staff to develop and provide technical assistance to local governments, review housing elements for compliance, review local resolutions, determine appropriate additional credits, determine any plan changes for inadequate progress and post technical assistance and documents on the department's website.

VOTES:

ASM HOUSING AND COMMUNITY DEVELOPMENT: 7-0-1

YES: Chiu, Diep, Gloria, Kiley, Limón, Maienschein, Quirk-Silva

ABS, ABST OR NV: Gabriel

ASM APPROPRIATIONS: 18-0-0

YES: Gonzalez, Bigelow, Bauer-Kahan, Bloom, Bonta, Calderon, Carrillo, Chau, Megan Dahle, Diep, Eggman, Fong, Gabriel, Eduardo Garcia, Petrie-Norris, McCarty, Robert Rivas, Voepel

UPDATED:

VERSION: May 11, 2020

CONSULTANT: Steve Wertheim / H. & C.D. / (916) 319-2085 FN: 0002918

Date of Hearing: June 2, 2020

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 3040

Author:(Chiu) – As Amended Ver:May 11, 2020

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

SUMMARY:

This bill allows cities and counties to receive a specified credit towards meeting their Regional Housing Needs Allocation (RHNA) for rezoning single-family neighborhoods to allow four units per parcel. Among its provisions, this bill:

1. Requires the Department of Housing and Community Development (HCD) to provide a credit of 0.1 units per site for any site that a city or county includes in its inventory of land suitable for residential development if:
2. The site contains an existing single-family dwelling unit that is at least 15 years old, is permitted to contain four dwelling units as a use by right and is identified in the city’s or county’s inventory as satisfying either the moderate or the above-moderate income regional housing need income level.
3. The city or county adopts a resolution or ordinance containing specified findings, limits the total credit from the identified sites to not more than 25% of their overall housing allocation, and includes in its annual progress report a summary of the units developed on sites identified pursuant to this bill.
4. Requires HCD to review and make findings regarding any resolution or ordinance adopted by a city or county in order to receive the 0.1 credit per eligible site.  
5. Allows HCD to provide additional credit, as well as credit for low-income units, if it determines the city or county has adopted a plan or program that would further accelerate the production of units identified by this process.
6. Allows HCD to determine, based on the annual progress report, if a city or county is making inadequate progress toward meeting its RHNA on sites identified by this process. If such a determination is made, HCD may require that the city or county amend a plan or program, including identifying other adequate sites in the appropriate income category.

FISCAL EFFECT:

Total annual costs of approximately $360,000 (GF) in the first year and $340,000 (GF) in the second year and ongoing to HCD for additional staff to develop and provide technical assistance to local governments, review housing elements for compliance, review local resolutions, determine appropriate additional credits, determine any plan changes for inadequate progress and post technical assistance and documents on the department’s website.

COMMENTS:

1. Purpose. This bill seeks to spur medium-density housing production by giving local governments additional RHNA credits when they up-zone single-family parcels to allow four housing units per parcel.
2. Housing Need. The cost of housing in California is twice the national average, and higher than any state except Hawaii. 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 HCD, 180,000 units need to be built per year to maintain housing costs. By contrast, housing production averaged less than 80,000 new homes annually over the last 10 years.
3. Medium-density Housing. One strategy to lower the cost of housing is to facilitate the construction of “missing-middle” housing types that accommodate more units per acre, but are not inherently expensive to build. This includes medium-density housing such as duplexes and fourplexes. However, two to four unit projects are infrequently built because these types of units are typically not allowed under local zoning. Currently, 8% of units statewide are in buildings with two to four units. Of units built in the last 30 years, only 3% of new units are in buildings with two to four units.
4. RHNA Process. Housing element law requires local jurisdictions to adequately plan to meet their existing and projected housing needs including their share of the regional housing need. The amount of housing required to be planned for is established by the RHNA process. For all but the state’s most rural areas, this process occurs on an eight-year cycle, during which the state determines the anticipated population growth and then assigns a growth target to the state’s regions, which then assign them to their local jurisdictions. These growth targets are specified by income categories to support the development of a mix of housing types for all economic segments of the population.

Upon receiving its RHNA, each jurisdiction must then demonstrate, through its housing element that the development capacity exists to accommodate, at a minimum, the allocation for each of four income categories.

When a city or county includes non-vacant sites in its housing inventory, the city or county is required to provide an explanation of the methodology used to determine the development potential. This methodology is typically submitted to HCD with the rest of the city’s or county’s required materials as part of HCD’s certification process. HCD then conveys to the city or county whether its methodology is acceptable and how many units will be credited in the site inventory from non-vacant sites.

This bill encourages cities and counties to produce medium-density housing by providing additional RHNA credits if they amend their zoning ordinances to allow for higher densities on non-vacant single-family sites.

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

Date of Hearing: May 20, 2020

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

David Chiu, Chair

ABPCA Bill Id:AB 3040 (

Author:Chiu) – As Amended Ver:May 11, 2020

SUBJECT: Local planning: regional housing need assessment

SUMMARY: Allows cities and counties to receive a specified credit towards meeting their Regional Housing Needs Allocation (RHNA) for rezoning single-family neighborhoods to allow four units per parcel. Specifically, this bill:

1. Provides that the Department of Housing and Community Development (HCD) must provide a credit of 0.1 units per site for any site that a city or county includes in its inventory of land suitable for residential development if:
   1. The site contains an existing single-family dwelling unit that received its first certificate of occupancy at least 15 years before inclusion in the site inventory;
   2. The site is permitted to contain four dwelling units as a use by right;
   3. The site is identified in the city’s or county’s inventory as satisfying either the moderate or the above-moderate income regional housing need income level;
   4. The city or county does all of the following:
      1. Adopts a resolution or ordinance regarding these sites that meets all of the following requirements:
         1. Provides, at a minimum, that the units may be developed as a use by right, and provides a description of the land use provisions that enable the identified sites to be redeveloped at a higher density, including, but not limited to, height limits, parking requirements, setback requirements, and historic resource designation;
         2. Includes findings that those land use provisions do not impede the redevelopment of these sites at a higher density; and
         3. Adopts the resolution or ordinance within the two-year period immediately preceding the deadline for certification of the housing element.
      2. Does not identify the cumulative credit received from the identified sites as exceeding more than 25 percent of the total units needed to meet its regional housing needs allocation.
      3. Includes in the annual progress report required to be summited a summary of the units developed on sites identified pursuant to this paragraph.
2. Requires HCD to review and make findings regarding any resolution or ordinance adopted by a city or county in order to receive the 0.1 credit per eligible site.  
3. Allows HCD to provide additional credit, as well as credit for low-income units, if it determines that the city or county has adopted a plan or program that would further accelerate the production of units identified by this process.
4. Allows HCD to determine, based on the annual progress report, if a city or county is making inadequate progress toward meeting its RHNA on sites identified by this process. If such a determination is made, HCD may require that the city or county amend a plan or program, including identifying other adequate sites in the appropriate income category.

EXISTING LAW:

1. Establishes Housing Element law (Government Code Section 65580 through 65589.11). This law:
   1. Provides that each community’s fair share of housing to be determined through the regional housing needs allocation (RHNA) process, which is composed of three main stages: (a) the Department of Finance and the Department of Housing and Community Development (HCD) develop regional housing needs estimates; (b) councils of government (COGs) allocate housing within each region based on these estimates (where a COG does not exist, HCD makes the determinations); and (c) cities and counties incorporate their allocations into their housing elements.
   2. Requires the housing element to contain an assessment of housing needs and an inventory of resources and constraints relevant to meeting those needs.
   3. Requires a locality’s inventory of land suitable for residential development to be used to identify sites that can be developed for housing within the planning period and that are sufficient to provide for the locality’s share of the regional housing need for all income levels, including very low-, low-, moderate-, and above moderate-income.
   4. Requires the inventory to provide certain information on each site, such as the general plan designation and zoning of each site and available infrastructure;
   5. Requires the inventory of land to specify the additional development potential for each non-vacant site within the planning period and an explanation of the methodology used to determine the development potential; and
   6. Requires sites identified for very low- and low-income households to have a minimum allowable density of 30 units per acre for metropolitan jurisdictions and 20 units per acre for surburban jurisdictions.
2. Requires each city and county to provide, by April 1 of each year, an annual report to HCD that includes the status of their general plan and progress in its implementation, including the progress in meeting its share of regional housing needs (Government Code Section 65480).

FISCAL EFFECT: Unknown

COMMENTS:

Author’s Statement: According to the author, “AB 3040 is an important tool to address California’s housing crisis in a manner that is contextual, expedient, and meaningful. AB 3040 will spur desperately needed housing production by giving local governments additional RHNA credits when they up-zone single-family parcels to allow four housing units per parcel. By specifying up front of the amount of credit received, it avoids the uncertainty that cities otherwise experience when adding zoning capacity to areas that already have existing housing.”

Background:

Housing Crisis: The cost of housing in California is twice the national average, and higher than any state except Hawai’i. Only 28 percent of households can buy the median priced home. Over half of renters and 80 percent of low-income renters are rent-burdened, meaning they pay over 30 percent 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. 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 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, 180,000 units need to be built per year to maintain housing costs. By contrast, housing production averaged less than 80,000 new homes annually over the last 10 years.

Medium-Density Housing: One strategy to lower the cost of housing is to facilitate the construction of “missing-middle” housing types that accommodate more units per acre, but are not inherently expensive to build. This includes medium-density typologies such as duplexes and fourplexes. In addition to being land-efficient while being less expensive to build, these housing types have several other benefits, including that they:

• Are contextually similar to existing single-family neighborhoods;
• Provide sufficient density to support the shops, restaurants, and transit that are associated with walkable neighborhoods;
• Help the pool of homebuilders, since the construction and building materials are comparatively less complicated than larger mid- and high-rise structures; and
• Are naturally less expensive in the market because they are typically smaller than single-family homes, thereby helping increase access to opportunity and facilitate neighborhood equity and inclusion.

A major reason that insufficient units are being built is that they are not allowed under local zoning. A 2019 Terner Center survey revealed that in only seven percent of California cities and counties allowed multifamily housing on over half their land, and only 35 percent allowed it on more than a quarter of their land. The result is that two to four unit projects are infrequently built, compared to historic development patterns. Currently, eight percent of units statewide are in buildings with two to four units. However, of units built in the last 30 years, only three percent of new units are in buildings with two to four units.

RHNA Process: Housing element law requires local jurisdictions to adequately plan to meet their existing and projected housing needs including their share of the regional housing need. The amount of housing required to be planned for is established by the RHNA process. For all but the state’s most rural areas, this process occurs on an eight-year cycle, during which the state determines the anticipated population growth and then assigns a growth target to the state’s regions, which then assign them to the jurisdictions therein. These growth targets are specified by income categories to support the development of a mix of housing types for all economic segments of the population. These income categories include very low-income (under 50 percent of Area Median Income (AMI)), low-income (between 50-80 percent of AMI), moderate income (80-120 percent of AMI), and above-moderate income (above 120 percent of AMI).

Upon receiving its RHNA, each jurisdiction must then demonstrate, through its housing element that the development capacity exists to accommodate, at a minimum, the allocation for each of the four income categories. Jurisdictions do so by creating an inventory of land suitable and available for residential development, including vacant sites and sites having realistic and demonstrated potential for redevelopment during the planning period. The housing element also must include a statement of the community’s goals, quantified objectives, and policies relative to the maintenance, preservation, improvement, and development of housing. Each housing element must include an implementation plan that identifies any particular programs or strategies being undertaken to meet their goals and objectives, including their RHNA target.

When cities and counties include non-vacant sites in their housing inventory, they are required to provide an explanation of the methodology used to determine the development potential. Per Government Code Section 65583.2(g)(1), “The methodology shall consider factors including the extent to which existing uses may constitute an impediment to additional residential development, the city’s or county’s past experience with converting existing uses to higher density residential development, the current market demand for the existing use, an analysis of any existing leases or other contracts that would perpetuate the existing use or prevent redevelopment of the site for additional residential development, development trends, market conditions, and regulatory or other incentives or standards to encourage additional residential development on these sites.” This methodology is typically submitted to HCD with the rest of their required materials as part of HCD’s certification process. HCD then conveys to the city or county whether their methodology is acceptable and how many units will be credited in the site inventory from non-vacant sites.

The cities and counties in the major regions in the state are currently are currently or imminently working on their housing elements. The 6^th cycle of housing elements must be certified by HCD for the San Diego region by April 2021, for the Sacramento region by May 2021, for Southern California region by October 2021, and for the Bay Area by November 2022.

Purpose of this bill: This bill makes it easier for cities and counties to receive credit towards their above moderate-income and moderate-income regional housing needs allocation when they upzone existing single-family housing to allow four units. By specifying the credit at 0.1 units per site, the bill provides certainty to cities and counties that would otherwise need to provide ample evidence to HCD that such development on non-vacant sites would occur. HCD could grant additional credit if it determines that the city or county has a plan or program that would further accelerate the production of these units.

The bill establishes multiple guardrails to ensure that sites truly have the potential to accommodate more units. Cities and counties seeking this credit are required to allow new units by right, and prove to the state that other land use provisions do not impede the redevelopment of these sites at a higher density. Applicable sites must have housing that is over 15 years old, recognizing that newer housing is less likely to be demolished or subdivided. Localities could not utilize this upzoning to account for more than 25 percent of their overall housing allocation, unless allowed by HCD. To ensure accountability, cities and counties provide annual updates on development on these sites. HCD may then ask localities to revisit this program if it is not meeting expectations, up to and including requiring a city or county to identify other adequate sites in the appropriate income category.

Arguments in Support: Arguments in support focus on the benefits of increased certainty for local governments and how that could result in increased development of smaller projects. According to the League of California Cities, “Your bill would provide a process whereby local governments would have greater certainty that they could accommodate portion of their RHNA by upzoning to allow small multifamily projects in existing neighborhoods with single-family units.”

Arguments in Opposition: The arguments in opposition state that this bill is creating state mandate. According to Livable California, “AB 3040 is yet another weakening of local government, that government which is closest to the people served.”

Related Legislation:

AB 1397 (Low), Chapter 375, Statutes of 2017: This bill required, for nonvacant sites identified in the housing element’s inventory of land, the locality to specify the additional development potential for each site within the planning period and provide an explanation of the methodology used to determine the development potential.

REGISTERED SUPPORT / OPPOSITION:

Support

American Planning Association, California Chapter
California Apartment Association

Facebook
Habitat for Humanity California

Support In Concept

California State Association of Counties
League of California Cities
Rural County Representatives of California
Urban Counties Caucus

Support If Amended

East Bay for Everyone

Opposition

New Livable California Dba Livable California

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