SENATE COMMITTEE ON HOUSING

Senator Scott Wiener, Chair

2019 - 2020 Regular

Bill No: AB 3107 Hearing Date: 8/6/2020

SUBJECT: Planning and zoning: commercial zoning: housing development

DIGEST: This bill makes specified housing developments an authorized use on commercially-zoned land.

ANALYSIS:

Existing law:

1. Requires a local jurisdiction to give public notice of a hearing whenever a person applies for a zoning variance, special use permit, conditional use permit, zoning ordinance amendment, or general or specific plan amendment.

Requires the board of zoning adjustment or zoning administrator to hear and decide applications for conditional uses or other permits when the zoning ordinance provides therefor and establishes criteria for determining those matters, and applications for variances from the terms of the zoning ordinance.

1. Requires cities and counties, to prepare and adopt a general plan, including a housing element, to guide the future growth of a community.
2. Requires that cities and counties produce, and HCD certify, a housing element to help fulfill the state’s housing goals. In metropolitan areas, these housing elements are required every eight years. Each housing element must contain.
   1. An assessment of housing needs and an inventory of resources and constraints relevant to meeting those needs;
   2. A statement of the community’s goals, quantified objectives, and policies relative to the maintenance, preservation, improvement, and development of housing;
   3. An implementation plan that identifies any particular programs or strategies being undertaken to meet their goals and objectives, including their RHNA target; and
   4. 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.
3. Requires a local government to determine whether each site in the site inventory can accommodate some portion of the jurisdiction’s share of the RHNA by income category during the housing element planning period. A community either must use the “default zoning densities” or “Mullin densities” to determine whether a site is adequately zoned for lower income housing or must provide an alternative analysis. Current Mullin Densities:
   1. 15 units/acre—cities within non-metropolitan counties; nonmetropolitan counties with metropolitan areas
   2. 10 units/acre—unincorporated areas in all non-metropolitan counties not included in the 15 units/acre category
   3. 20 units/acre—suburban jurisdictions
   4. 30 units/acre—jurisdictions in metropolitan counties

This bill:

1. Provides that, notwithstanding any inconsistent provision of a city or county’s general plan, specific plan, zoning ordinance, or regulation, a housing development shall be an authorized use on a site designated in any local agency’s zoning code for commercial uses if all the following apply:
   1. The housing development is subject to a recorded deed restriction requiring that at least 20% of the units have an affordable housing cost or affordable rent for lower-income households.
   2. The site satisfies both of the following:
      1. The site is not adjacent to any site that is an industrial use. “Industrial use” includes, but it not limited to, utilities, manufacturing, wholesale trade transportation, and warehousing.
      2. At least 75% of the perimeter of the sites adjoin parcels that are developed with urban uses.
2. Requires a city or county to apply the following development standards to a housing development that meets the criteria in (1) above, unless existing applicable zoning standards are less restrictive:
   1. The height limit shall be the greatest of the following:
      1. The highest allowed height for the site of the housing development. “Highest allowed height” means the tallest height, including any height that requires conditional approval, allowable under local zoning.
      2. The highest allowed height for a commercial or residential use within ½ mile of the site.
      3. 36 feet.
   2. The maximum allowable floor area ratio of the housing development shall be not less .6 times the number of stories that complies with the height limit under (2)(a).
   3. The density limit applicable to the housing development shall be the greater of the following:
      1. The greatest allowed density for mixed use or residential use within ½ a mile of the site.
      2. Mullin densities (see #5 in the “Existing Law” section)
3. Requires the housing development to comply with any applicable design standards of the city or county to the extent those standards do not prohibit the maximum height limit, density, or floor area ratio allowed under this bill.
4. Provides that a housing development shall be deemed consistent, compliant, and in conformity with local development standards, zoning codes, and the general plan if it meets the requirements of this bill.
5. Provides that a jurisdiction is only subject to this section until it has completed the rezoning required for the sixth housing element cycle. Provides that this bill shall sunset on January 1, 2030.

COMMENTS

1. Author’s statement. According to the author, “Californians are facing a housing affordability crisis, with the most significant impact on lower-income renters. 2.2 million extremely low-income and very low-income renter households are competing for 664,000 affordable rental units. To solve the shortage, the California Housing Partnership estimates that the state needs an additional 1.4 million homes that are affordable to lower-income Californians. AB 3107 is crucial to addressing the shortage by increasing the supply of available sites for housing developments and allowing critically needed housing in commercial corridors, near transit and job centers.”
2. Housing needs and approvals generally. 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. Seven elements are mandated by state law: land use, circulation, 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, which is completed through the regional housing needs allocation (RHNA) process. To do so, each community establishes an inventory of sites designated for new housing that is sufficient to accommodate its fair share. Each jurisdiction then has three years to complete any rezoning necessary to accommodate the units identified in their housing element and in the site inventory than identifies where potential development would occur. Communities also identify regulatory barriers to housing development and propose strategies to address those barriers. State law requires cities and counties to update their housing elements every eight years.
3. Zoning ordinances generally. Cities and counties enact zoning ordinances to implement their general plans. Zoning determines the type of housing that can be built. In addition, before building new housing, housing developers must obtain one or more permits from local planning departments and must also obtain approval from local planning commissions, city councils, or county board of supervisors. A zoning ordinance may be subject to CEQA if it will have a significant impact upon the environment. The adoption of ADU ordinances, however, are explicitly exempt from CEQA. There are also some several statutory exemptions that provide limited environmental review for projects that are consistent with a previously adopted general plan, community plan, specific plan, or zoning ordinance.
4. Need for more residential zoning. The concept of the “fiscalization of land use” is familiar to many. Ever since the passage of Proposition 13 in 1978, property taxes have constituted a diminishing source of revenue for governments. This situation was exacerbated in the early 1990s when the state effectively commandeered local property tax revenues to meets its obligation to the public schools through the Education Revenue Augmentation Fund (ERAF). In many cases, the additional revenues a local government now earns from each new housing unit are insufficient to cover the added expense of providing services to the new residents of that home. Some of the fixed costs of infrastructure can be recouped through fees, but the on-going service costs remain at issue. Thus, a city council deciding the fate of a new housing development faces the unenviable dilemma of denying needed housing or reducing services to existing constituents. As one might expect, new housing developments tend to be the loser.

At the same time, when a city council considers an alternate proposal to develop a parcel of land as a retail center, the fiscal incentives strongly support approval. Local governments receive a large portion of all sales tax revenue generated within their borders. The additional revenue received from a large retail facility—such as a big-box retailer, online distribution center, or a car dealer—easily outweighs the costs of providing services to the facility. Local government can use these surplus revenues to enhance services to its constituents. As a result, housing is subject to a double whammy. Not only can it be difficult to get approval for a new housing development on residentially-zoned land, but more land is zoned commercial in the hope that retail establishments can be attracted. The only real fiscal incentive local governments have to approve housing is to ensure there are enough residents to support the retailers.

1. Authorizing residential in commercial zones. This bill would help facilitate the production of more housing by increasing the sites available to be developed for residential uses to include those currently zoned or otherwise designated in a city or county’s general plan only for commercial uses. In order to discourage sprawl and limit the applicability of this bill, residential development may only occur on infill sites that are not adjacent to industrial uses. Any development resulting from this bill must also designate 20% of the units as affordable to low-income households. This bill includes specified parameters for residential building and development standards that might otherwise be absent on a site not zoned for housing, including limits on buildings height, overall mass, and density of dwelling units. The city or county may apply any other design standard provided the standards do not reduce the development capacity or density established by the bill. Finally, this authorization would only be applicable to a city or county until it has completed the rezoning required for the 6th revision of its housing element and sunsets in 2030.
2. AB 3107 (Bloom) v. SB 1385 (Caballero). Earlier this year, this committee heard a similar bill that authorizes residential development in commercial zones. SB 1385 was included in the Senate Housing Package and AB 3107 was included in a package of bills identified by the Assembly as housing production bills. Below is a breakdown of the major differences between the two:

1. Opposition. Those writing in opposition are generally concerned about the loss of local control by allowing residential development on commercially land. The opposition states that local governments have a housing element process to analyze and identify the most suitable locations for housing to meet their RHNA targets. Some are concerned about the lack of infrastructure needed to support increased populations and some are concerned specifically about the state inserting specified density, height requirements and floor-area-ratios for housing developments on these sites. There is also a concern that this may take away sales tax revenue potential. Others are concerned that this will allow apartment buildings to be developed “near homes.”
2. Double 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 Senate Governance and Finance. The Senate Governance and Finance Committee continues to monitor this bill.

Related Legislation:

SB 1385 (Caballero, 2020) — enacts the Neighborhood Homes Act, which establishes housing as an allowable use on any parcel zoned for office or retail uses. This bill is pending in the Assembly Local Government Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

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

July 24, 2020.)

SUPPORT:

California Housing Consortium (Co-Sponsor)
Southern California Association of Nonprofit Housing (Co-Sponsor)
Bay Area Council
Bridge Housing Corporation
California Apartment Association
California Housing Partnership Corporation
California Rural Legal Assistance Foundation, INC.
California YIMBY
East Bay Housing Organizations
Facebook
LeadingAge California
Los Angeles Homeless Services Authority
Non-profit Housing Association of Northern California
Silicon Valley at Home
Silicon Valley Community Foundation
Terner Center for Housing Innovation At the University of California, Berkeley
Western Center on Law & Poverty

OPPOSITION:

City of La Palma
City of Laguna Niguel
City of Placentia
City of Rancho Santa Margarita
City of Redondo Beach
City of Torrance
Comstock Hills Homeowners Association
Federation of Hillside and Canyon Associations
Franklin Corridor Coalition
Friends of Sunset Park
Grayburn Avenue Block Club
Livable California
Protecting Our Foothill Community
Southeast Torrance Homeowners' Association
Tamalpais Design Review Board
United Neighborhoods for Los Angeles (UN4LA)
Western Quadrant of North Leimert Park

15 Individuals

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 3107

Author:(Bloom and Ting)

As Amended Ver:May 11, 2020

Majority vote

SUMMARY:

Makes housing an authorized use on commercially-zoned land.

Major Provisions

1. Makes a housing development an authorized use on a site designated in any element of the general plan for commercial uses, notwithstanding any inconsistent provision of a city's or county's general plan, specific plan, zoning ordinance, or regulation, if the following apply:
2. At least 20% of the units are subject to a deed restriction requiring them to be affordable to lower income households;
3. The site is not adjacent to any site that is an industrial use, including, but not limited to, utilities, manufacturing, wholesale trade, transportation, and warehousing; and
4. At least 75% of the perimeter of the site adjoins parcels that are developed with urban uses.
5. Requires a city or county to apply the following development standards to any housing development that meets the criteria above, unless the existing local zoning standards are less restrictive:
   1. The height limit must be equal to the higher of the following:
      1. The highest allowed height for the site;
      2. The highest allowed height for commercial use or residential use within a half-mile of the site; or
      3. Thirty-six feet.
   2. The maximum floor area ratio must be equal to 0.6 times the number of stories allowed by the height limit;
   3. The density must be equal to the greater of the following:
      1. The greatest allowed density for mixed use or residential use within a half-mile of the site; or
      2. The applicable density deemed appropriate to accommodate housing for lower income households contained in housing element law.
   4. The housing development must adhere to any applicable local design standards provided those standards do not prohibit the maximum height, density, and floor area ratio; and
   5. The housing development may also apply for a density bonus.
6. Provides that a jurisdiction is only subject to the requirements in this section until it has completed the rezone required by the 6th revision of its housing element.
7. Includes a sunset of January 1, 2030.
8. Finds and declares that ensuring the adequate production of affordable housing is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution, and therefore this provision would apply to all cities, including charter cities.
9. Provides that no reimbursement is required by this act because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act.

COMMENTS:

Background:

Housing Crisis: The cost of housing in California is twice the national average, and higher than any state excluding 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 two 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. According to the Legislative Analyst 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."

A major reason that insufficient units are being built is that they are not allowed under local zoning. A 2019 Terner Center survey of California cities and counties revealed that only 7% zoned over half their land for multi-family housing, and only 35% zoned even 25% of their land for multi-family housing.

Regional Housing Needs Allocation (RHNA) Process and Rezoning: 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.

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 housing in four income categories. The housing elements in the state's major metropolitan areas are all due for completion in 2021 or 2022 as part of the "6th revision" of housing elements. Each jurisdiction then has three years to complete any rezoning necessary to accommodate the units identified in their housing element and in the site inventory than identifies where potential development would occur.

In the period between the 5th and 6th revisions of the housing element, changes were made to the RHNA process to ensure that housing needs reflected not just current demand, but unmet demand as well. As such, throughout the state, many cities and counties have been required to plan for substantially more growth than before. Upon completion of this cycle of housing element revisions, the state is expected to have sufficiently zoned land to accommodate the housing deficit discussed above.

Purpose of this bill: This bill would help facilitate the production of more housing by increasing the sites available to be developed for residential uses to include those currently zoned or otherwise designated in a city or county's general plan only for commercial uses. Guardrails are included to ensure such residential development only occurs in appropriate locations; specifically, infill sites that are not adjacent to industrial uses. Any development resulting from this bill will result in a substantial public benefit by requiring that 20% of the units are affordable to low-income households.

This bill provides necessary parameters for residential building and development standards that might otherwise be absent on a site not zoned for housing, including limits on buildings height, overall mass, and density of dwelling units. The city or county may apply any other design standard as long as they do not reduce the development capacity of density established by the bill.

This bill would only be applicable to a city or county until it has completed the rezoning required for the 6th revision of its housing element. As discussed above, upon completion of this revision and accompanying rezonings, cities and counties are expected to have provided zoning to accommodate their share of the housing to address the state's backlog of units. By applying the provisions of this bill only until such rezonings are complete, the bill both serves as a motivation for cities to complete these rezonings, and recognizes that when they have done so, the city will have met the state's expectations regarding the provision of developable land.

According to the Author:

Californians are facing a housing affordability crisis, with the most significant impact on lower-income renters. Of 6 million renter households in the state, 1.7 million are paying more than 50% of their income toward rent. In the current market, 2.2 million extremely low-income and very low-income renter households are competing for 664,000 affordable rental units. To solve the shortage, the California Housing Partnership estimates that the state needs an additional 1.4 million homes that are affordable to lower-income Californians. AB 3107 will help increase the supply of available sites for housing developments by allowing critically needed housing in commercial corridors.

Arguments in Support:

Arguments in support focus on the need to address the state's housing crisis by making more land available for housing, while ensuring that a substantial amount of that is affordable to low-income households. According to the California Housing Consortium, "there are not enough sites zones for multifamily housing development and the entitlement process can take many years. Commercial corridors are often ideal areas to build affordable housing because they are close to amenities like grocery stores and near public transportation."

Arguments in Opposition:

Arguments in opposition express concern about the ramification of allowing multifamily housing in commercial areas. According to Livable California, "AB 3107 essentially rezones every commercial site in every city in California to allow residential use, without any consideration of the adverse consequences."

FISCAL COMMENTS:

According to the Assembly Appropriations Committee, estimated annual costs of $268,000 (General Fund (GF)) for the first year and $254,000 (GF) for the second year and ongoing to HCD to develop, amend and provide required technical assistance to local governments and developers, review housing elements to ensure compliance, respond to potential requests for enforcement, and post technical assistance information and documents on HCD's website.

VOTES:

ASM HOUSING AND COMMUNITY DEVELOPMENT: 5-2-1

YES: Chiu, Gabriel, Kiley, Limón, Quirk-Silva

NO: Diep, Maienschein

ABS, ABST OR NV: Gloria

ASM APPROPRIATIONS: 12-4-2

YES: Gonzalez, Bloom, Bonta, Calderon, Carrillo, Chau, Eggman, Gabriel, Eduardo Garcia, Petrie-Norris, McCarty, Robert Rivas

NO: Bigelow, Bauer-Kahan, Diep, Voepel

ABS, ABST OR NV: Megan Dahle, Fong

UPDATED:

VERSION: May 11, 2020

CONSULTANT: Steve Wertheim / H. & C.D. / (916) 319-2085 FN: 0002982

Date of Hearing: June 2, 2020

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 3107

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

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

SUMMARY:

This bill, until January 1, 2030, requires cities and counties to allow housing as an authorized use on commercially-zoned land, under specified circumstances. Specifically, this bill:

1. Requires cities and counties, including charter cities and counties, to allow a housing development as an authorized use on a site designated in any element of the general plan for commercial uses, notwithstanding any inconsistent provision of a city’s or county’s general plan, specific plan, zoning ordinance or regulation, if the following apply:
2. At least 20% of the units are subject to a deed restriction requiring them to be affordable to lower-income households.
3. The site is not adjacent to any site that is an industrial use, including, but not limited to, utilities, manufacturing, wholesale trade, transportation and warehousing.
4. At least 75% of the perimeter of the site adjoins parcels developed with urban uses.
5. Requires a city or county to apply specific development standards regarding height limits, floor ratios and allowable densities to any housing development that meets the criteria above, unless the existing local zoning standards are less restrictive.
6. Specifies that a developer of a housing development under this bill may apply for a density bonus.
7. Provides that a jurisdiction is only subject to the requirements in this bill until it has completed the rezone required by the 6th revision of its housing element.

FISCAL EFFECT:

Estimated annual costs of $268,000 (GF) for the first year and $254,000 (GF) for the second year and ongoing to HCD to develop, amend and provide required technical assistance to local governments and developers, review housing elements to ensure compliance, respond to potential requests for enforcement, and post technical assistance information and documents on HCD’s website.

COMMENTS:

1. Purpose. This bill seeks to provide an incentive for cities and counties to rezone sufficient land to meet their housing needs in anticipation of their upcoming housing element revision, by allowing available housing sites to include parcels currently zoned only for commercial uses. This bill applies to a city or county only until it has completed the rezoning required for the 6th revision of its housing element.
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. A 2019 Terner Center survey of California cities and counties revealed that only 7% zoned over half their land for multi-family housing, and only 35% zoned even 25% of their land for multi-family housing.
3. Regional Housing Needs Allocation (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 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 assign them to their local jurisdictions.

Upon receiving its RHNA, each jurisdiction must then demonstrate, through its housing element, that it has the development capacity to accommodate, at a minimum, the allocation for each of four income categories. The housing elements in the state’s major metropolitan areas are due for completion in 2021 or 2022 as part of the “6^th revision” of housing elements. Each jurisdiction then has three years to complete any rezoning necessary to accommodate the units identified in its housing element and site inventory that identifies where potential development would occur.

In the period between the 5^th and 6^th revisions of the housing element, the state made changes to the RHNA process to ensure that housing needs reflected not just current demand, but unmet demand as well. Accordingly, many cities and counties have been required to plan for substantially more growth than previously. Upon completion of this cycle of housing element revisions and the accompanying rezoning, the state is expected to have sufficiently zoned land to accommodate its housing deficit.

1. Arguments in Support. According to the California Housing Consortium:

There are not enough sites zones for multifamily housing development and the entitlement process can take many years. Commercial corridors are often ideal areas to build affordable housing because they are close to amenities like grocery stores and near public transportation.

1. Arguments in Opposition. According to Livable California, “AB 3107 essentially rezones every commercial site in every city in California to allow residential use, without any consideration of the adverse consequences.”
2. Related Legislation.

SB 1385 (Caballero), of this legislative session, deems a housing development project, as defined, an authorized use on a neighborhood lot that is zoned for office or retail commercial use under a local agency’s zoning code or general plan. AB 1385 is pending hearing in the Senate Committee on Governance and Finance.

AB 2580 (Eggman), of this legislative session, creates a streamlined, ministerial approval process for the conversion of motels and hotels into multifamily residential buildings. AB 2580 is pending hearing in this committee.

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 3107 (

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

SUBJECT: Planning and zoning: general plan: housing development

SUMMARY: Makes housing an authorized use on commercially-zoned land. Specifically, this bill:

1. Makes a housing development an authorized use on a site designated in any element of the general plan for commercial uses, notwithstanding any inconsistent provision of a city’s or county’s general plan, specific plan, zoning ordinance, or regulation, if the following apply:
2. At least 20 percent of the units are subject to a deed restriction requiring them to be affordable to lower income households;
3. The site is not adjacent to any site that is an industrial use, including, but not limited to, utilities, manufacturing, wholesale trade, transportation, and warehousing; and
4. At least 75 percent of the perimeter of the site adjoins parcels that are developed with urban uses.
5. Requires a city or county to apply the following development standards to any housing development that meets the criteria above, unless the existing local zoning standards are less restrictive:
   1. The height limit must be equal to the higher of the following:
      1. The highest allowed height for the site;
      2. The highest allowed height for commercial use or residential use within a half-mile of the site; or
      3. Thirty-six feet.
   2. The maximum floor area ratio must be equal to 0.6 times the number of stories allowed by the height limit;
   3. The density must be equal to the greater of the following:
      1. The greatest allowed density for mixed use or residential use within a half-mile of the site; or
      2. The applicable density deemed appropriate to accommodate housing for lower income households contained in housing element law.
   4. The housing development must adhere to any applicable local design standards provided those standards do not prohibit the maximum height, density, and floor area ratio; and
   5. The housing development may also apply for a density bonus.
6. Provides that a jurisdiction is only subject to the requirements in this section until it has completed the rezone required by the 6th revision of its housing element.
7. Includes a sunset of January 1, 2030.
8. Finds and declares that ensuring the adequate production of affordable housing is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution, and therefore this provision would apply to all cities, including charter cities.
9. Provides that no reimbursement is required by this act because a local agency or school district has the authority to levy service charges, fees, or assessments sufficient to pay for the program or level of service mandated by this act.

EXISTING LAW:

1. Establishes Planning and Zoning Law, which requires every city and county to adopt a general plan that sets out planned uses for all of the area covered by the plan, and requires the general plan to include seven mandatory elements, including a land use element, and requires major land use decisions by cities and counties, such as development permitting and subdivisions of land, to be consistent with their adopted general plans (Government Code Section 65000 through 66301).
2. Establishes Housing Element law (Government Code Section 65580 through 65589.11), which:
   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 that cities and counties produce, and HCD certify, a housing element to help fulfill the state’s housing goals. In metropolitan areas, these housing elements are required every eight years. Each housing element must contain:
      1. An assessment of housing needs and an inventory of resources and constraints relevant to meeting those needs;
      2. A statement of the community’s goals, quantified objectives, and policies relative to the maintenance, preservation, improvement, and development of housing;
      3. An implementation plan that identifies any particular programs or strategies being undertaken to meet their goals and objectives, including their RHNA target; and
      4. 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.

FISCAL EFFECT: Unknown

COMMENTS:

Author’s Statement: According to the author, “Californians are facing a housing affordability crisis, with the most significant impact on lower-income renters. Of 6 million renter households in the state, 1.7 million are paying more than 50% of their income toward rent. In the current market, 2.2 million extremely low-income and very low-income renter households are competing for 664,000 affordable rental units. To solve the shortage, the California Housing Partnership estimates that the state needs an additional 1.4 million homes that are affordable to lower-income Californians. AB 3107 will help increase the supply of available sites for housing developments by allowing critically needed housing in commercial corridors.”

Background:

Housing Crisis: The cost of housing in California is twice the national average, and higher than any state excluding 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 two 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. According to the Legislative Analyst 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.”

A major reason that insufficient units are being built is that they are not allowed under local zoning. A 2019 Terner Center survey of California cities and counties revealed that only seven percent zoned over half their land for multi-family housing, and only 35 percent zoned even 25 percent of their land for multi-family housing.

Regional Housing Needs Allocation (RHNA) Process and Rezoning: 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.

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 housing in four income categories. The housing elements in the state’s major metropolitan areas are all due for completion in 2021 or 2022 as part of the “6^th revision” of housing elements. Each jurisdiction then has three years to complete any rezoning necessary to accommodate the units identified in their housing element and in the site inventory than identifies where potential development would occur.

In the period between the 5^th and 6^th revisions of the housing element, changes were made to the RHNA process to ensure that housing needs reflected not just current demand, but unmet demand as well. As such, throughout the state, many cities and counties have been required to plan for substantially more growth than before. Upon completion of this cycle of housing element revisions, the state is expected to have sufficiently zoned land to accommodate the housing deficit discussed above.

Purpose of this bill: This bill would help facilitate the production of more housing by increasing the sites available to be developed for residential uses to include those currently zoned or otherwise designated in a city or county’s general plan only for commercial uses. Guardrails are included to ensure such residential development only occurs in appropriate locations; specifically, infill sites that are not adjacent to industrial uses. Any development resulting from this bill will result in a substantial public benefit by requiring that 20 percent of the units are affordable to low-income households.

This bill provides necessary parameters for residential building and development standards that might otherwise be absent on a site not zoned for housing, including limits on buildings height, overall mass, and density of dwelling units. The city or county may apply any other design standard as long as they do not reduce the development capacity of density established by the bill.

This bill would only be applicable to a city or county until it has completed the rezoning required for the 6th revision of its housing element. As discussed above, upon completion of this revision and accompanying rezonings, cities and counties are expected to have provided zoning to accommodate their share of the housing to address the state’s backlog of units. By applying the provisions of this bill only until such rezonings are complete, the bill both serves as a motivation for cities to complete these rezonings, and recognizes that when they have done so, the city will have met the state’s expectations regarding the provision of developable land.

Arguments in Support: Arguments in support focus on the need to address the state’s housing crisis by making more land available for housing, while ensuring that a substantial amount of that is affordable to low-income households. According to the California Housing Consortium, “there are not enough sites zones for multifamily housing development and the entitlement process can take many years. Commercial corridors are often ideal areas to build affordable housing because they are close to amenities like grocery stores and near public transportation.”

Arguments in Opposition: Arguments in opposition express concern about the ramification of allowing multifamily housing in commercial areas. According to Livable California, “AB 3107 essentially rezones every commercial site in every city in California to allow residential use, without any consideration of the adverse consequences.”

Other arguments express the need to work through the details of this bill to ensure they are not punitive to cities. For example, according to the California State Association of Counties, “we request AB 3107 be amended to allow counties to count commercial sites where AB 3107 would apply toward their regional housing needs allocation planning requirement irrespective of whether the current zoning allows for residential uses. As an alternative, the bill could be amended to provide counties with the option of a streamlined process to rezone and count such sites toward their RHNA requirements without additional CEQA review.

Related Legislation:

SB 1385 (Caballero) (2020): This bill would deem a housing development project, as defined, an authorized use on a neighborhood lot that is zoned for office or retail commercial use under a local agency’s zoning code or general plan. This bill is pending hearing in the Senate Committee on Governance and Finance.

AB 2580 (Eggman) (2020): This bill would create a streamlined, ministerial approval process for the conversion of motels and hotels into multifamily residential buildings. This bill is pending hearing in this committee.

REGISTERED SUPPORT / OPPOSITION:

Support

California Housing Consortium (Co-Sponsor)
Southern California Association of Nonprofit Housing (Co-Sponsor

All Home
California Apartment Association

California Community Builders
California Housing Partnership Corporation
California YIMBY

Chan Zuckerberg Initiative
East Bay for Everyone

East Bay Housing Organization

Facebook

Los Angeles Business Council

Non-Profit Housing Association of Northern California

Orange County Business Council

PATH

San Francisco Foundation
SV@HOME
Silicon Valley Community Foundation

TODCO Group
8 Individuals

Support if Amended

AIDS Healthcare Foundation

American Planning Association, California Chapter

California Association of Realtors

TMG Partners

United Way of Greater Los Angeles

Opposition

New Livable California Dba Livable California

Concerns

California State Association of Counties
Rural County Representatives of California
Urban Counties of California

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