Existing law, commonly referred to as the Density Bonus Law, requires a city or county to provide a developer that proposes a housing development, as defined, within the city or county with a density bonus, other incentives or concessions, and waivers or reductions of development standards, as specified, if the developer agrees to construct, among other options, specified units and meets other requirements.

This bill would prohibit land improved with an operating hotel or motel from being valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers, as specified, unless those density increases are entitled and vested as of the valuation date, as provided. The bill would also prohibit its provisions from being construed to alter the requirements for obtaining a density bonus, as specified.

Existing law, commonly referred to as the Density Bonus Law, requires a city or county to provide a developer that proposes a housing development, as defined, within the city or county with a density bonus, other incentives or concessions, and waivers or reductions of development standards, as specified, if the developer agrees to construct, among other options, specified units and meets other requirements.

This bill would prohibit land improved with an operating hotel or motel from being valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers, as specified, unless those density increases are entitled and vested as of the valuation date, as provided. The bill would also prohibit its provisions from being construed to alter the requirements for obtaining a density bonus, as specified.

Existing law, commonly referred to as the Density Bonus Law, requires a city or county to provide a developer that proposes a housing development, as defined, within the city or county with a density bonus, other incentives or concessions, and waivers or reductions of development standards, as specified, if the developer agrees to construct, among other options, specified units and meets other requirements.

This bill would prohibit land improved with an operating hotel or motel from being valued by the landowner, valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on residential density or density bonuses, concessions or incentives, or waivers, as specified, unless those density increases are entitled and vested as of the valuation date, as provided. The bill would also prohibit its provisions from being construed to alter the existing requirements for obtaining a density bonus. bonus, as specified.

The California Constitution establishes the Public Utilities Commission, which consists of 5 members appointed by the Governor and approved by the Senate. Existing law vests the commission with regulatory authority over public utilities.

This bill would require the Governor, in appointing members of the commission, to ensure a diverse composition of commissioners by considering geographic diversity and other factors.

Date of Hearing: August 27, 2026

ASSEMBLY COMMITTEE ON HOUSING AND COMMUNITY DEVELOPMENT

Matt Haney, Chair

ABPCA Bill Id:AB 2181 (

Author:Zbur) – As Amended Ver:August 21, 2026

SUBJECT: Housing development: density bonuses: rent

SUMMARY: This bill provides that notwithstanding the requirements of Density Bonus Law (DBL), land improved with an operating hotel or motel shall not be valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers pursuant to DBL, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits. This bill further clarifies that it shall not be construed to alter the requirements for obtaining a density bonus pursuant to DBL.

EXISTING LAW:

1. Requires local governments to grant a density bonus when an applicant for a housing development, defined as a development containing “five or more residential units, including mixed-use developments,” seeks and agrees to construct a project that will contain at least one of the following:
   1. 10% of the total units of a housing development for lower-income households;
   2. 5% of the total units of a housing development for very low-income households;
   3. A senior citizen housing development or mobile home park;
   4. 10% of the units in a common interest development (CID) for moderate-income households;
   5. 10% of the total units for transitional foster youth, veterans, or persons experiencing homelessness;
   6. 20% of the total units for lower-income students in a student housing development; or
   7. 100% of the units of a housing development for lower-income households, except that 20% of units may be for moderate-income households. (GOV 65915)
2. Requires local governments to grant a density bonus ranging from 20% to 50% for rental developments that include a minimum percentage of units affordable to very low-, low-, or moderate-income households, with the bonus increasing on a sliding scale based on the level of affordability provided. For 100% affordable rental developments, the law provides a bonus of up to 80%, along with additional incentives such as increased height limits, reduced parking requirements, and modified development standards if the project is located within ½ mile of a major transit stop or in a low vehicle miles traveled (VMT) area. In certain cases, 100% affordable projects in qualifying areas may be allowed unlimited density. (GOV 65915)

FISCAL EFFECT: None.

COMMENTS:

Density Bonus Law: California's DBL, originally enacted in 1979, is a state policy tool aimed at addressing the financial challenges of building affordable housing. Given the state's elevated land and construction costs, the private market struggles to deliver housing that is affordable to low- and moderate-income households without public subsidy. DBL seeks to close some of the financial gaps associated with building affordable housing by allowing developers to build more units than local zoning laws typically permit, known as a "density bonus," in exchange for reserving a certain percentage of the housing units as affordable. This increased density enables the fixed costs of development to be spread across more units, thereby helping to offset the lower returns from the affordable units and reducing the need for direct public subsidy. Under current law, any housing development proposing five or more units, including mixed-income developments, can take advantage of the provisions of DBL.

Under DBL, when a mixed-income housing development includes a minimum percentage of affordable units, such as 5% very low-income or 10% lower-income, it becomes eligible for a density bonus for additional market-rate units starting at 20%, with the potential to increase up to 50%, depending on the proportion of affordable units provided. Fully affordable projects can qualify for up to an 80% density bonus, or unlimited density if located within ½ mile of a major transit stop, or in a very low vehicle travel area. Furthermore, DBL provides an additional density bonus on top of the typical density bonus for proposed developments that provides very-low or moderate-income units, if certain affordability thresholds are met.

In addition to the density bonus, eligible projects are entitled to receive between one and five regulatory incentives or concessions, depending on the share of affordable housing units provided. These may include modifications to development standards such as reduced setbacks, increased building height, higher floor area ratios (FAR), or reduced parking requirements, when those changes result in actual and identifiable cost savings that help support the affordable units. Because DBL applies to mixed-use developments, a project may also receive incentives or concessions for increased intensity or expanded nonresidential uses if doing so would reduce the overall cost of development. Projects can also request other zoning or regulatory modifications that reduce development costs, and local governments must grant those incentives, unless they can make specific findings to deny them as narrowly defined in state law. Developers maintain that these incentives and concessions are critical for making affordable housing projects financially feasible.

In practice, DBL plays a critical role in the state's housing strategy, both by reducing development costs and by increasing the overall supply of housing at all income levels, particularly in communities that might otherwise see little affordable housing development. By leveraging regulatory flexibility instead of direct public funding, DBL offers a cost-effective mechanism to stimulate the production of both mixed-income and 100% affordable housing projects throughout California. According to Annual Progress Report (APR) data, published by HCD and analyzed by Circulate Planning & Policy, since 2021, DBL has been used to approve over 140,000 homes, including more than 69,000 deed-restricted affordable homes.^[1]

Hotel and Motel Leases: Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the bill sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the bill sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it’s not clear that this is happening elsewhere, replication of this practice could be problematic for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

Narrow Fix: This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. The bill allows for DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases specifically for hotels and motels reflect realistic land values, rather than speculative potential and protect businesses with ground leases from artificially inflated lease reset values.

Gutted: This bill was gut and amended in the Senate on June 11^th from a bill pertaining the Public Utilities Commission.

Author’s Statement: According to the Author, “California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”

Arguments in Support: UNITE HERE International Union, one of the bill’s co-sponsors, writes in support: “AB 2181 helps preserve the integrity of that important housing production tool by clarifying that hypothetical density bonuses that have not been entitled and vested cannot be used to establish, adjust, or reset ground lease values for operating hotels and motels.

Our union has led the way on commonsense legislative fixes, including SB 838 (Durazo) last year, to ensure housing reforms are used to build affordable housing. As advocates for livable communities for our members, we believe density bonus incentives should be tied to actual housing development opportunities, not speculative assumptions regarding what may someday be built on a property. When unvested density bonuses are used to inflate land valuations, the policy is no longer serving its intended purpose of encouraging affordable housing production. Instead, it is being leveraged in a manner wholly unrelated to the creation of new homes.

AB 2181 provides a sensible and narrowly tailored solution. The measure does not alter Density Bonus Law, limit the availability of density bonuses, or restrict a property owner’s ability to pursue residential development. If a project secures the necessary approvals and vests its development rights, those entitlements may appropriately be reflected in the property’s value. Until then, appraisals should be based on existing realities rather than speculative possibilities.”

Arguments in Opposition: None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

Unite Here International Union, Afl-cio
Unite Here Local 11 (Co-Sponsor)
California Federation of Labor Unions, Afl-cio
California Hotel & Lodging Association
California Travel Association

Opposition

None on file.

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

1. Circulate Planning & Policy, Win-Win Bonus, How Bonus Law quietly transformed California's Housing Approvals, April 2026. ↑

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 2181

Author:(Zbur)

As Amended Ver:August 21, 2026

Majority vote

SUMMARY

Original Committee of Reference: U. & E.

This bill provides that notwithstanding the requirements of Density Bonus Law (DBL), land improved with an operating hotel or motel shall not be valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers pursuant to DBL, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits. This bill further clarifies that it shall not be construed to alter the requirements for obtaining a density bonus pursuant to DBL.

Senate Amendments

Current Committee Recommendation: Concur.

This bill was gut and amended in the Senate on June 11^th from a bill pertaining the Public Utilities Commission.

COMMENTS

Density Bonus Law: California's DBL, originally enacted in 1979, is a state policy tool aimed at addressing the financial challenges of building affordable housing. Given the state's elevated land and construction costs, the private market struggles to deliver housing that is affordable to low- and moderate-income households without public subsidy. DBL seeks to close some of the financial gaps associated with building affordable housing by allowing developers to build more units than local zoning laws typically permit, known as a "density bonus," in exchange for reserving a certain percentage of the housing units as affordable. This increased density enables the fixed costs of development to be spread across more units, thereby helping to offset the lower returns from the affordable units and reducing the need for direct public subsidy. Under current law, any housing development proposing five or more units, including mixed-income developments, can take advantage of the provisions of DBL.

Under DBL, when a mixed-income housing development includes a minimum percentage of affordable units, such as 5% very low-income or 10% lower-income, it becomes eligible for a density bonus for additional market-rate units starting at 20%, with the potential to increase up to 50%, depending on the proportion of affordable units provided. Fully affordable projects can qualify for up to an 80% density bonus, or unlimited density if located within ½ mile of a major transit stop, or in a very low vehicle travel area. Furthermore, DBL provides an additional density bonus on top of the typical density bonus for proposed developments that provides very-low or moderate-income units, if certain affordability thresholds are met.

In addition to the density bonus, eligible projects are entitled to receive between one and five regulatory incentives or concessions, depending on the share of affordable housing units provided. These may include modifications to development standards such as reduced setbacks, increased building height, higher floor area ratios (FAR), or reduced parking requirements, when those changes result in actual and identifiable cost savings that help support the affordable units. Because DBL applies to mixed-use developments, a project may also receive incentives or concessions for increased intensity or expanded nonresidential uses if doing so would reduce the overall cost of development. Projects can also request other zoning or regulatory modifications that reduce development costs, and local governments must grant those incentives, unless they can make specific findings to deny them as narrowly defined in state law. Developers maintain that these incentives and concessions are critical for making affordable housing projects financially feasible.

In practice, DBL plays a critical role in the state's housing strategy, both by reducing development costs and by increasing the overall supply of housing at all income levels, particularly in communities that might otherwise see little affordable housing development. By leveraging regulatory flexibility instead of direct public funding, DBL offers a cost-effective mechanism to stimulate the production of both mixed-income and 100% affordable housing projects throughout California. According to Annual Progress Report (APR) data, published by HCD and analyzed by Circulate Planning & Policy, since 2021, DBL has been used to approve over 140,000 homes, including more than 69,000 deed-restricted affordable homes.^[1]

Hotel and Motel Leases: Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the bill sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the bill sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it’s not clear that this is happening elsewhere, replication of this practice could be problematic for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

Narrow Fix: This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. The bill allows for DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases specifically for hotels and motels reflect realistic land values, rather than speculative potential and protect businesses with ground leases from artificially inflated lease reset values.

Gutted: This bill was gut and amended in the Senate on June 11^th from a bill pertaining the Public Utilities Commission.

According to the Author

California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”

Arguments in Support

UNITE HERE International Union, one of the bill’s co-sponsors, writes in support: “AB 2181 helps preserve the integrity of that important housing production tool by clarifying that hypothetical density bonuses that have not been entitled and vested cannot be used to establish, adjust, or reset ground lease values for operating hotels and motels.

Our union has led the way on commonsense legislative fixes, including SB 838 (Durazo) last year, to ensure housing reforms are used to build affordable housing. As advocates for livable communities for our members, we believe density bonus incentives should be tied to actual housing development opportunities, not speculative assumptions regarding what may someday be built on a property. When unvested density bonuses are used to inflate land valuations, the policy is no longer serving its intended purpose of encouraging affordable housing production. Instead, it is being leveraged in a manner wholly unrelated to the creation of new homes.

AB 2181 provides a sensible and narrowly tailored solution. The measure does not alter Density Bonus Law, limit the availability of density bonuses, or restrict a property owner’s ability to pursue residential development. If a project secures the necessary approvals and vests its development rights, those entitlements may appropriately be reflected in the property’s value. Until then, appraisals should be based on existing realities rather than speculative possibilities.”

Arguments in Opposition

None on file.

FISCAL COMMENTS

None.

VOTES

ASM UTILITIES AND ENERGY: 18-0-0

YES: Petrie-Norris, Patterson, Boerner, Calderon, Chen, Davies, Mark González, Harabedian, Hart, Irwin, Kalra, Papan, Rogers, Schiavo, Schultz, Ta, Wallis, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Bauer-Kahan, Calderon, Caloza, Ellis, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

ASSEMBLY FLOOR: 68-0-12

YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gallagher, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Irwin, Jackson, Johnson, Kalra, Krell, Lee, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Zbur, Rivas

ABS, ABST OR NV: Arambula, Chen, Gabriel, Garcia, Hoover, Lackey, Lowenthal, Ramos, Celeste Rodriguez, Schultz, Wicks, Wilson

SENATE FLOOR: 40-0-0

YES: Allen, Alvarado-Gil, Archuleta, Arreguín, Ashby, Becker, Blakespear, Cabaldon, Caballero, Cervantes, Choi, Cortese, Dahle, Durazo, Gonzalez, Grayson, Grove, Hurtado, Jones, Laird, Limón, McGuire, McNerney, Menjivar, Niello, Ochoa Bogh, Padilla, Pérez, Reyes, Richardson, Rubio, Seyarto, Smallwood-Cuevas, Stern, Strickland, Umberg, Valladares, Wahab, Weber Pierson, Wiener

ASM HOUSING AND COMMUNITY DEVELOPMENT: 12-0-0

YES: Haney, Patterson, Ávila Farías, Caloza, Garcia, Kalra, Lee, Quirk-Silva, Ta, Tangipa, Wicks, Wilson

UPDATED

VERSION: August 21, 2026

CONSULTANT: Dori Ganetsos / H. & C.D. / (916) 319-2085 FN: 0004390

1. Circulate Planning & Policy, Win-Win Bonus, How Bonus Law quietly transformed California's Housing Approvals, April 2026. ↑

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2181

Author:(Zbur)

As Amended Ver:August 21, 2026

Majority vote

SUMMARY

This bill provides that notwithstanding the requirements of Density Bonus Law (DBL), land improved with an operating hotel or motel shall not be valued, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers pursuant to DBL, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits. This bill further clarifies that it shall not be construed to alter the requirements for obtaining a density bonus pursuant to DBL.

Senate Amendments

This bill was gut and amended in the Senate on June 11^th from a bill pertaining the Public Utilities Commission.

COMMENTS

Density Bonus Law: California′s DBL, originally enacted in 1979, is a state policy tool aimed at addressing the financial challenges of building affordable housing. Given the state′s elevated land and construction costs, the private market struggles to deliver housing that is affordable to low- and moderate-income households without public subsidy. DBL seeks to close some of the financial gaps associated with building affordable housing by allowing developers to build more units than local zoning laws typically permit, known as a ″density bonus,″ in exchange for reserving a certain percentage of the housing units as affordable. This increased density enables the fixed costs of development to be spread across more units, thereby helping to offset the lower returns from the affordable units and reducing the need for direct public subsidy. Under current law, any housing development proposing five or more units, including mixed-income developments, can take advantage of the provisions of DBL.

Under DBL, when a mixed-income housing development includes a minimum percentage of affordable units, such as 5% very low-income or 10% lower-income, it becomes eligible for a density bonus for additional market-rate units starting at 20%, with the potential to increase up to 50%, depending on the proportion of affordable units provided. Fully affordable projects can qualify for up to an 80% density bonus, or unlimited density if located within ½ mile of a major transit stop, or in a very low vehicle travel area. Furthermore, DBL provides an additional density bonus on top of the typical density bonus for proposed developments that provides very-low or moderate-income units, if certain affordability thresholds are met.

In addition to the density bonus, eligible projects are entitled to receive between one and five regulatory incentives or concessions, depending on the share of affordable housing units provided. These may include modifications to development standards such as reduced setbacks, increased building height, higher floor area ratios (FAR), or reduced parking requirements, when those changes result in actual and identifiable cost savings that help support the affordable units. Because DBL applies to mixed-use developments, a project may also receive incentives or concessions for increased intensity or expanded nonresidential uses if doing so would reduce the overall cost of development. Projects can also request other zoning or regulatory modifications that reduce development costs, and local governments must grant those incentives, unless they can make specific findings to deny them as narrowly defined in state law. Developers maintain that these incentives and concessions are critical for making affordable housing projects financially feasible.

In practice, DBL plays a critical role in the state′s housing strategy, both by reducing development costs and by increasing the overall supply of housing at all income levels, particularly in communities that might otherwise see little affordable housing development. By leveraging regulatory flexibility instead of direct public funding, DBL offers a cost-effective mechanism to stimulate the production of both mixed-income and 100% affordable housing projects throughout California. According to Annual Progress Report (APR) data, published by HCD and analyzed by Circulate Planning & Policy, since 2021, DBL has been used to approve over 140,000 homes, including more than 69,000 deed-restricted affordable homes.^[1]

Hotel and Motel Leases: Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the bill sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the bill sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it′s not clear that this is happening elsewhere, replication of this practice could be problematic for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

Narrow Fix: This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. The bill allows for DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases specifically for hotels and motels reflect realistic land values, rather than speculative potential and protect businesses with ground leases from artificially inflated lease reset values.

Gutted: This bill was gut and amended in the Senate on June 11^th from a bill pertaining the Public Utilities Commission.

According to the Author

California′s hospitality industry is one of the state′s largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California′s density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California′s density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.″

Arguments in Support

UNITE HERE International Union, one of the bill′s co-sponsors, writes in support: ″AB 2181 helps preserve the integrity of that important housing production tool by clarifying that hypothetical density bonuses that have not been entitled and vested cannot be used to establish, adjust, or reset ground lease values for operating hotels and motels.

Our union has led the way on commonsense legislative fixes, including SB 838 (Durazo) last year, to ensure housing reforms are used to build affordable housing. As advocates for livable communities for our members, we believe density bonus incentives should be tied to actual housing development opportunities, not speculative assumptions regarding what may someday be built on a property. When unvested density bonuses are used to inflate land valuations, the policy is no longer serving its intended purpose of encouraging affordable housing production. Instead, it is being leveraged in a manner wholly unrelated to the creation of new homes.

AB 2181 provides a sensible and narrowly tailored solution. The measure does not alter Density Bonus Law, limit the availability of density bonuses, or restrict a property owner′s ability to pursue residential development. If a project secures the necessary approvals and vests its development rights, those entitlements may appropriately be reflected in the property′s value. Until then, appraisals should be based on existing realities rather than speculative possibilities.″

Arguments in Opposition

None on file.

FISCAL COMMENTS

None.

VOTES:

ASM UTILITIES AND ENERGY: 18-0-0

YES: Petrie-Norris, Patterson, Boerner, Calderon, Chen, Davies, Mark González, Harabedian, Hart, Irwin, Kalra, Papan, Rogers, Schiavo, Schultz, Ta, Wallis, Zbur

ASM APPROPRIATIONS: 15-0-0

YES: Wicks, Hoover, Bauer-Kahan, Calderon, Caloza, Ellis, Fong, Mark González, Krell, Pacheco, Pellerin, Sharp-Collins, Solache, Ta, Tangipa

ASSEMBLY FLOOR: 68-0-12

YES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gallagher, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Irwin, Jackson, Johnson, Kalra, Krell, Lee, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Zbur, Rivas

ABS, ABST OR NV: Arambula, Chen, Gabriel, Garcia, Hoover, Lackey, Lowenthal, Ramos, Celeste Rodriguez, Schultz, Wicks, Wilson

UPDATED

VERSION: August 21, 2026

CONSULTANT: Dori Ganetsos / H. & C.D. / (916) 319-2085 FN: 0004288

1. Circulate Planning & Policy, Win-Win Bonus, How Bonus Law quietly transformed California′s Housing Approvals, April 2026. ↑

 THIRD READING  

Bill No: AB 2181

Author: Zbur (D), et al.

Amended: 8/21/26 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 10-0, 6/24/26

AYES: Arreguín, Seyarto, Cabaldon, Caballero, Cortese, Durazo, Gonzalez, Grayson, Ochoa Bogh, Padilla

SENATE LOCAL GOVERNMENT COMMITTEE: 7-0, 7/1/26

AYES: Durazo, Choi, Arreguín, Ashby, Cervantes, Laird, Seyarto

ASSEMBLY FLOOR: 68-0, 5/21/26 (Consent) - See last page for vote

SUBJECT: Housing development: density bonuses: rent

SOURCE: Unite Here International Union, Afl-cio

Unite Here Local 11

DIGEST:

This bill prohibits land improved with an operating hotel or motel from being valued for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers under density bonus law (DBL), unless those density bonuses are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.

Senate Floor Amendments of 8/21/26 move this bill to a new section within the Density Bonuses and Other Incentives Chapter and make other clarifying changes.

ANALYSIS:

Existing law:

1. Requires each city and county to adopt an ordinance that specifies how it will implement state density bonus law (DBL). Requires cities and counties to grant a density bonus when an applicant for a housing development — defined as “five or more units” including mixed-use developments — seeks and agrees to construct a project that will contain at least one of the following:
   1. 10% of the total units of a housing development for lower-income households;
   2. 5% of the total units of a housing development for very low-income households;
   3. A senior citizen housing development or mobile home park;
   4. 10% of the units in a common interest development (CID) for moderate-income households;
   5. 10% of the total units for transitional foster youth, veterans, or persons experiencing homelessness;
   6. 20% of the total units for lower-income students in a student housing development; or
   7. 100% of the units of a housing development for lower-income households, except that 20% of units may be for moderate-income households.
2. Requires a city or county to allow an increase in density on a sliding scale from 20% to 80%, depending on the percentage of units affordable to low- and very low-income households, over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the general plan. Requires the increase in density on a sliding scale for moderate-income for-sale developments from 5% to 50% over the otherwise allowable residential density.

This bill:

1. Prohibits, notwithstanding DBL, land improved with an operating hotel or motel shall not be valued by the landowner, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on density bonuses, concessions or incentives, or waivers pursuant to DBL, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.
2. Provides that this bill shall not be construed to alter the requirements for obtaining a density bonus under DBL.

Background

DBL. Given California’s high land and construction costs for housing, it is extremely difficult for the private market to provide housing units that are affordable to low- and even moderate-income households. Public subsidy is often required to fill the financial gap on affordable units. DBL allows public entities to reduce or even eliminate subsidies for a particular project by allowing a developer to include more total units in a project than would otherwise be allowed by the local zoning ordinance, in exchange for affordable units. Allowing more total units permits the developer to spread the cost of the affordable units more broadly over the market-rate units. The idea of DBL is to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional subsidy.

Under existing law, if a developer proposes to construct a housing development with a specified percentage of affordable units, the city or county must provide all of the following benefits: a density bonus; incentives or concessions (hereafter referred to as incentives); waiver of any development standards that prevent the developer from utilizing the density bonus or incentives; and reduced parking standards. To qualify for benefits under DBL, a proposed housing development must contain a minimum percentage of affordable housing. If one of these options is met, a developer is entitled to a base increase in density for the project as a whole (referred to as a density bonus) and one regulatory incentive. Under DBL, a developer is entitled to a sliding scale of density bonuses, up to a maximum of 50% of the maximum zoning density and up to four incentives, as specified, depending on the percentage of affordable housing included in the project. At the low end, a developer receives 20% additional density for 5% very low-income units or 20% density for 10% low-income units. The maximum additional density permitted is 50%, in exchange for 15% very low-income units or 24% low-income units. Additionally, specified 100% affordable housing projects may receive up to an 80% density bonus. The developer also negotiates additional incentives, reduced parking, and design standard waivers, with the local government. This helps developers reduce costs while enabling a local government to determine what changes make the most sense for that site and community.

Comments

Author’s statement. “California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”

Hotel and motel leases. Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it’s not clear that this is happening elsewhere, replication of this practice could be devastating for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

Curb your enthusiasm. This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. This bill allows DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases for hotels and motels reflect realistic land values, rather than speculative potential, specifically related to the benefits afforded under DBL, with ground leases from artificially inflated lease reset values.

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

SUPPORT: (Verified 8/20/26)

Unite Here International Union, Afl-cio (co-source)
Unite Here Local 11 (co-source)
California Federation of Labor Unions, Afl-cio

California Travel Association (CALTRAVEL)

OPPOSITION: (Verified 8/20/26)

None received

ASSEMBLY FLOOR: 68-0, 5/21/26

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gallagher, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Irwin, Jackson, Johnson, Kalra, Krell, Lee, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Zbur, Rivas

NO VOTE RECORDED: Arambula, Chen, Gabriel, Garcia, Hoover, Lackey, Lowenthal, Ramos, Celeste Rodriguez, Schultz, Wicks, Wilson

Prepared by: Alison Hughes / HOUSING / (916) 651-4124

8/24/26 12:00:42

**** END ****

 THIRD READING  

Bill No: AB 2181

Author: Zbur (D), et al.

Amended: 6/11/26 in Senate

Vote: 21

SENATE HOUSING COMMITTEE: 10-0, 6/24/26

AYES: Arreguín, Seyarto, Cabaldon, Caballero, Cortese, Durazo, Gonzalez, Grayson, Ochoa Bogh, Padilla

SENATE LOCAL GOVERNMENT COMMITTEE: 7-0, 7/1/26

AYES: Durazo, Choi, Arreguín, Ashby, Cervantes, Laird, Seyarto

ASSEMBLY FLOOR: 68-0, 5/21/26 (Consent) - See last page for vote

SUBJECT: Housing development: density bonuses: rent

SOURCE: Unite Here International Union, Afl-cio

Unite Here Local 11

DIGEST:

This bill prohibits land improved with an operating hotel or motel from being valued for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on residential density or density bonuses, unless those density bonuses are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.

ANALYSIS:

Existing law:

1. Requires each city and county to adopt an ordinance that specifies how it will implement state density bonus law (DBL). Requires cities and counties to grant a density bonus when an applicant for a housing development — defined as “five or more units” including mixed-use developments — seeks and agrees to construct a project that will contain at least one of the following:
   1. 10% of the total units of a housing development for lower-income households;
   2. 5% of the total units of a housing development for very low-income households;
   3. A senior citizen housing development or mobile home park;
   4. 10% of the units in a common interest development (CID) for moderate-income households;
   5. 10% of the total units for transitional foster youth, veterans, or persons experiencing homelessness;
   6. 20% of the total units for lower-income students in a student housing development; or
   7. 100% of the units of a housing development for lower-income households, except that 20% of units may be for moderate-income households.
2. Requires a city or county to allow an increase in density on a sliding scale from 20% to 80%, depending on the percentage of units affordable to low- and very low-income households, over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the general plan. Requires the increase in density on a sliding scale for moderate-income for-sale developments from 5% to 50% over the otherwise allowable residential density.

This bill:

1. Prohibits land improved with an operating hotel or motel shall not be valued by the landowner, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on residential density or density bonuses, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.
2. Provides that this bill shall not be construed to alter the requirements for obtaining a density bonus under DBL.

Background

DBL. Given California’s high land and construction costs for housing, it is extremely difficult for the private market to provide housing units that are affordable to low- and even moderate-income households. Public subsidy is often required to fill the financial gap on affordable units. DBL allows public entities to reduce or even eliminate subsidies for a particular project by allowing a developer to include more total units in a project than would otherwise be allowed by the local zoning ordinance, in exchange for affordable units. Allowing more total units permits the developer to spread the cost of the affordable units more broadly over the market-rate units. The idea of DBL is to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional subsidy.

Under existing law, if a developer proposes to construct a housing development with a specified percentage of affordable units, the city or county must provide all of the following benefits: a density bonus; incentives or concessions (hereafter referred to as incentives); waiver of any development standards that prevent the developer from utilizing the density bonus or incentives; and reduced parking standards. To qualify for benefits under DBL, a proposed housing development must contain a minimum percentage of affordable housing. If one of these options is met, a developer is entitled to a base increase in density for the project as a whole (referred to as a density bonus) and one regulatory incentive. Under DBL, a developer is entitled to a sliding scale of density bonuses, up to a maximum of 50% of the maximum zoning density and up to four incentives, as specified, depending on the percentage of affordable housing included in the project. At the low end, a developer receives 20% additional density for 5% very low-income units or 20% density for 10% low-income units. The maximum additional density permitted is 50%, in exchange for 15% very low-income units or 24% low-income units. Additionally, specified 100% affordable housing projects may receive up to an 80% density bonus. The developer also negotiates additional incentives, reduced parking, and design standard waivers, with the local government. This helps developers reduce costs while enabling a local government to determine what changes make the most sense for that site and community.

Comments

Author’s statement. “California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”

Hotel and motel leases. Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it’s not clear that this is happening elsewhere, replication of this practice could be devastating for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

Curb your enthusiasm. This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. This bill allows DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases specifically for hotels and motels reflect realistic land values, rather than speculative potential and protect businesses with ground leases from artificially inflated lease reset values.

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

SUPPORT: (Verified 7/15/26)

Unite Here International Union, Afl-cio (co-source)
Unite Here Local 11 (co-source)
California Federation of Labor Unions, Afl-cio

OPPOSITION: (Verified 7/15/26)

None received

ASSEMBLY FLOOR: 68-0, 5/21/26

AYES: Addis, Aguiar-Curry, Ahrens, Alanis, Alvarez, Ávila Farías, Bains, Bauer-Kahan, Bennett, Berman, Boerner, Bonta, Bryan, Calderon, Caloza, Carrillo, Castillo, Connolly, Davies, DeMaio, Dixon, Elhawary, Ellis, Flora, Fong, Gallagher, Gipson, Jeff Gonzalez, Mark González, Hadwick, Haney, Harabedian, Hart, Irwin, Jackson, Johnson, Kalra, Krell, Lee, Macedo, McKinnor, Muratsuchi, Nguyen, Ortega, Pacheco, Papan, Patel, Patterson, Pellerin, Petrie-Norris, Quirk-Silva, Ransom, Michelle Rodriguez, Rogers, Blanca Rubio, Sanchez, Schiavo, Sharp-Collins, Solache, Soria, Stefani, Ta, Tangipa, Valencia, Wallis, Ward, Zbur, Rivas

NO VOTE RECORDED: Arambula, Chen, Gabriel, Garcia, Hoover, Lackey, Lowenthal, Ramos, Celeste Rodriguez, Schultz, Wicks, Wilson

Prepared by: Alison Hughes / HOUSING / (916) 651-4124

8/3/26 17:24:33

**** END ****

SENATE COMMITTEE ON LOCAL GOVERNMENT

Senator María Elena Durazo, Chair

2025 - 2026 Regular

Housing development: density bonuses: rent

Prohibits land improved with an operating hotel or motel from being valued for purposes of setting ground rent under an existing lease based on residential density or density bonuses.

Background

Real estate appraisals. A real estate appraisal is the best estimate of market value of a property. Appraisals generally value property as though it were being put to its most profitable use, given probable legal, physical, and financial constraints, known as the “highest and best use.” The Board of Equalization, which standardizes procedures for county assessors, specifies that the use must be:

• Legally permissible. The highest and best use must be a use that is allowed by government. The property tax appraiser must consider the effect that any enforceable government restrictions, such as zoning regulations, have on the value of property;
• Physically possible. The highest and best use depends on physical factors. The proposed or existing use must fit the size, shape, topography, and other specific characteristics associated with the parcel or location;
• Financially feasible. The highest and best use must not be too speculative. There must be a demand for the use in the market that will generate and sustain sufficient income to cover the costs of construction, to have enough money for maintenance during the economic life of the property, and to provide both a return of and a return on the investment. This can include costs to maintain or improve the remaining economic life. All uses that produce a positive return are regarded as financially feasible; and
• Maximally productive. The highest and best use must be the most productive use. Of all the financially feasible uses, the one that produces the highest residual land value (yields the highest net return to the investor) is the highest and best use. For example, if it is physically possible, legally permissible, and financially feasible to construct an apartment complex, an office building, and a restaurant on a particular parcel, but the office building would yield the highest value to the real property, then the office building is considered the maximally productive use.

In general, the proposed use that an appraiser determines would yield the highest and best use from a particular real property must pass all four criteria, or the proposed use (either the current use or an alternate use) cannot be considered the highest and best use of the real property.

Appraisal standards. In 1989, Congress adopted the Federal Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), which required states to license and certify real estate appraisers who appraise property for federally-related transactions, as a result of the savings and loan disaster in the 1980s. The FIRREA, and rules promulgated pursuant to that act, required that real estate appraisals be performed in accordance with the generally accepted uniform standards as promulgated by the Appraisal Standards Board (ASB) of the Appraisal Foundation.

In response to the federal mandate, the California Legislature enacted the Real Estate Appraisers Licensing and Certification Law in 1990, which established the Office of Real Estate Appraisers, which today is the Bureau of Real Estate Appraisers (Bureau) under the jurisdiction of the Department of Consumer Affairs (AB 527, Hannigan). The Bureau licenses appraisers as education and standards are determined at the federal level. The Bureau is required to implement real property appraiser licensing and certification requirements that are no less stringent than those issued by the ASB. The ASB established Uniform Standards of Professional Appraisal Practice (USPAP), which was adopted by Congress in 1989 as a method to ensure a high level of integrity and public trust in federally-related appraisal practices.

The USPAP contains standards for all types of appraisal services, including real estate, personal property, business and mass appraisals. The USPAP is updated every two years. State law requires licensed appraisers in California to abide by USPAP standards, regardless of whether they are federally-related or not.

Ground leases. When a property owner wants to derive value from their property without constructing or owning improvements themselves, they can enter into a ground lease where they rent out the land (“ground”) to another entity who will construct, own, and operate the improvements on that property. Ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and business operators often renegotiate the terms and rents in the leases periodically. As part of the renegotiations, the landowner and business operator may use appraisers to value the property, and those valuations can inform the creation or increases in rents.

Density bonus law. The state’s density bonus law grants certain benefits to developers who build affordable units in order to encourage greater affordable housing production. Density bonus law requires cities and counties to grant a density bonus when an applicant for a housing development of five or more units seeks and agrees to construct a project that will contain at least one of the following:

• 10% of the total housing units reserved for lower income households;
• 5% of the total units for very low-income households;
• A senior citizen housing development or mobile home park;
• 10% of the total units in a common interest development for moderate-income households;
• 10% of the total units for transitional foster youth, disabled veterans, or homeless persons; or
• 20% of the total units for lower income students in a student housing development.

If a project meets one of these conditions, the city or county must allow an increase in density on a sliding scale from 20% to 50% over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the general plan, depending on the percentage of affordable units.

Incentives, concessions, waivers, and other benefits. Density bonus law also grants “incentives or concessions” that can be used to modify development policies that add costs or reduce the number of units that a developer can build on a site. Incentives and concessions can vary widely based on the individual projects, but examples can include waivers of zoning codes, reduced parking requirements, approval for mixed-use zoning, or other reductions of other regulatory requirements on development. The number of incentives or concessions a project may be eligible for is based on the percentage of affordable units contained in the project and other project characteristics, up to a maximum of five.

Density bonus law also allows “waivers” of any development standards that physically prevent the developer from constructing a project at the density allowed to the project, along with the incentives or concessions, under density bonus law. Finally, density bonus law reduces or eliminates the parking that can be required in connection with a project.

The Sandbourne hotel. The Sandbourne is a boutique hotel operated by Marriott in Santa Monica near the Santa Monica Pier. The land the Sandbourne sits on is subject to a ground lease with periodic resets based on the appraised fair market value of the land on a five-year cycle. The most recent rent reset occurred in 2020, where the valuation of the property included the potential for the property to be redeveloped using density bonus law, which led to increased lease payments. UNITE HERE Local 11, which represents the 100 workers at the hotel, indicates that the valuation for the land increased from about $35 million in 2015 to $62 million in 2020, after the potential for density bonus law was included in the appraisal, jeopardizing the operations of the hotel and the jobs of the workers employed there.

UNITE HERE International and UNITE HERE Local 11 want the Legislature to prohibit the use of residential density, including any benefits available under density bonus law, in the calculation of ground rent for hotels.

Proposed Law

Assembly Bill 2181 prohibits, notwithstanding any other provision of density bonus law, land improved with an operating hotel or motel from being valued by the landowner, for purposes of calculating a ground rent under an existing lease, based on residential density or density bonuses, unless those density increases are entitled and vested as of the valuation date. The bill provides that it doesn’t alter the requirements for obtaining a density bonus.

Comments

1. Purpose of the bill. According to the author, “California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”

2. Square peg, round hole. Appraisals have been grounded in the highest and best use of a property for decades. AB 2181 changes the rules for appraisals of properties with hotels such that they can’t include residential density or density bonus as part of the calculation of the value if an appraisal is going to be used for a ground lease. This is a significant departure from usual practice: it excludes one of the major uses of property—residential—which could depress a valuation subject to the bill below what the property is likely to receive on the open market. This could make the appraisal less accurate. AB 2181 makes this change by amending density bonus law rather than the usual channels for making changes to appraisals: the USPAP process, where the implications of the change could be weighed by professionals. To the extent that AB 2181 addresses a problem with the way appraisals are conducted, the Committee may wish to consider whether amending density bonus law is the appropriate way to make its changes.

3. Gut and amend. As introduced, AB 2181 required the Governor to ensure a diverse composition of commissioners for the Public Utilities Commission. The June 11^th amendments deleted the contents of the bill and inserted the current provisions related to appraisals.

4. Incoming! The Senate Rules Committee has ordered a double-referral of AB 2181: first to the Committee on Housing, which will hear the bill at its June 30^th hearing, and second to the Committee on Local Government.

Assembly Actions

Prior votes not relevant to the current version of the bill.

Support and Opposition

(6/26/26)

Support: Unite Here International Union, Afl-cio (Co-Sponsor)
Unite Here Local 11 (Co-Sponsor)
California Federation of Labor Unions, Afl-cio

Opposition: None Submitted

-- END --

SENATE COMMITTEE ON HOUSING

Senator Jesse Arreguín, Chair

2025 - 2026 Regular

Bill No: AB 2181 Hearing Date: 6/24/2026

SUBJECT: Housing development: density bonuses: rent

DIGEST: This bill prohibits land improved with an operating hotel or motel from being valued for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on residential density or density bonuses, unless those density bonuses are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.

ANALYSIS:

Existing law:

1. Requires each city and county to adopt an ordinance that specifies how it will implement state density bonus law (DBL). Requires cities and counties to grant a density bonus when an applicant for a housing development — defined as “five or more units” including mixed-use developments — seeks and agrees to construct a project that will contain at least one of the following:
   1. 10% of the total units of a housing development for lower-income households;
   2. 5% of the total units of a housing development for very low-income households;
   3. A senior citizen housing development or mobile home park;
   4. 10% of the units in a common interest development (CID) for moderate-income households;
   5. 10% of the total units for transitional foster youth, veterans, or persons experiencing homelessness;
   6. 20% of the total units for lower-income students in a student housing development; or
   7. 100% of the units of a housing development for lower-income households, except that 20% of units may be for moderate-income households.
2. Requires a city or county to allow an increase in density on a sliding scale from 20% to 80%, depending on the percentage of units affordable to low- and very low-income households, over the otherwise maximum allowable residential density under the applicable zoning ordinance and land use element of the general plan. Requires the increase in density on a sliding scale for moderate-income for-sale developments from 5% to 50% over the otherwise allowable residential density.

This bill:

1. Prohibits land improved with an operating hotel or motel shall not be valued by the landowner, for purposes of establishing, adjusting, or resetting ground rent under an existing lease, based on residential density or density bonuses, unless those density increases are entitled and vested as of the valuation date, including the issuance of all required discretionary land use approvals and permits.
2. Provides that this bill shall not be construed to alter the requirements for obtaining a density bonus under DBL.

Background

DBL. Given California’s high land and construction costs for housing, it is extremely difficult for the private market to provide housing units that are affordable to low- and even moderate-income households. Public subsidy is often required to fill the financial gap on affordable units. DBL allows public entities to reduce or even eliminate subsidies for a particular project by allowing a developer to include more total units in a project than would otherwise be allowed by the local zoning ordinance, in exchange for affordable units. Allowing more total units permits the developer to spread the cost of the affordable units more broadly over the market-rate units. The idea of DBL is to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional subsidy.

Under existing law, if a developer proposes to construct a housing development with a specified percentage of affordable units, the city or county must provide all of the following benefits: a density bonus; incentives or concessions (hereafter referred to as incentives); waiver of any development standards that prevent the developer from utilizing the density bonus or incentives; and reduced parking standards. To qualify for benefits under DBL, a proposed housing development must contain a minimum percentage of affordable housing. If one of these options is met, a developer is entitled to a base increase in density for the project as a whole (referred to as a density bonus) and one regulatory incentive. Under DBL, a developer is entitled to a sliding scale of density bonuses, up to a maximum of 50% of the maximum zoning density and up to four incentives, as specified, depending on the percentage of affordable housing included in the project. At the low end, a developer receives 20% additional density for 5% very low-income units or 20% density for 10% low-income units. The maximum additional density permitted is 50%, in exchange for 15% very low-income units or 24% low-income units. Additionally, specified 100% affordable housing projects may receive up to an 80% density bonus. The developer also negotiates additional incentives, reduced parking, and design standard waivers, with the local government. This helps developers reduce costs while enabling a local government to determine what changes make the most sense for that site and community.

Comments

1. Author’s statement. “California’s hospitality industry is one of the state's largest employers, supporting good paying union jobs and contributing to our local communities. AB 2181 protects those jobs by addressing an unintended consequence of California's density bonus law, which was enacted to incentivize the development of more affordable housing. Current law creates uncertainty during ground lease appraisals by allowing property owners to utilize density bonuses that hypothetically may be available to a property to inflate the land value when ground lease rents are reset. This speculation can artificially inflate land valuations, dramatically inflate ground lease payments, and threaten the economic viability of existing hotels and dependent hospitality jobs. When operating costs increase because of speculative appraisals rather than real market conditions, hospitality workers whose livelihoods depend on these businesses are harmed. AB 2181 simply clarifies that hypothetical density bonuses cannot be used to value operating hotels for ground lease resets unless those development rights have actually been approved and vested. It preserves the intent of California's density bonus law, ensures fair and predictable property valuations, and helps protect California hotels and the thousands of hospitality jobs they support.”
2. Hotel and motel leases. Hotels and motels may be subject to ground lease arrangements with a landowner under a long-term agreement, that include options for construction or improvements to the property. According to the sponsors, ownership of the improvements reverts to the landowner at the end of the lease. Ground leases can last 50 to 99 years, with periodic rent reset adjustments, but the landowners and the hotel operators often renegotiate the terms and rents in the leases periodically (usually every five to seven years). During this time, the landowners and hotel operators may utilize appraisers to value the property, and those valuations inform the creation or increases in rents.

According to the sponsors, it unclear whether appraisers can consider the value of density bonuses and other benefits in their land valuations, even when the benefits are hypothetically available to the land owner. In other words, if the land is zoned to allow for multifamily developments and meets the threshold requirements for utilizing DBL, could the mere fact that the site is eligible for DBL benefits factor into a land valuation, even if the landowner has no plans to construct a housing project using DBL?

This issue arose with a hotel in Santa Monica; in that case, an appraisal accounted for potential density bonus benefits, which resulted in significantly higher lease reset rates for a hotel operator. The landowner, as part of their five-year rent reset in 2020, hired an appraiser to assess the fair market value of the land. The appraiser asserted that due to the potential for DBL to apply to the land, the fair market value of the land should be increased, which resulted in a 77% increase in the assessed rent from the prior five-year reset. The increased rental price continues to create ongoing risk to the viability of the hotel, putting 100 UNITE HERE Local 11 workers jobs at risk.

While it’s not clear that this is happening elsewhere, replication of this practice could be devastating for hotel operators that are locked into long-term ground leases and put hotels at risk of shuttering.

1. Curb your enthusiasm. This bill takes a targeted approach to specify that in instances in which a hotel or motel operator has a ground lease with a landowner, and the landowner is not actively seeking to construct a housing project utilizing the benefits conferred by DBL, an appraisal of the land for purposes of establishing or adjusting the rent may not take into account the potential benefits of DBL. The bill allows for DBL to be factored in, however, when a landowner has taken steps to develop a housing project; specifically, the landowner must have been issued the permits for the DBL project.

According to the author, this bill is intended to be a narrowly focused effort to ensure that appraisals of ground leases specifically for hotels and motels reflect realistic land values, rather than speculative potential and protect businesses with ground leases from artificially inflated lease reset values.

1. Gutted. This bill was gut and amended on June 11^th from a bill dealing with the Public Utilities Commission.
2. Double-referral. This bill was also referred to the Local Government Committee.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

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

June 17^th, 2026.)

SUPPORT:

Unite Here International Union, Afl-cio (Co-Sponsor)

Unite Here Local 11 (Co-Sponsor)

OPPOSITION:

None received.

-- END --

Date of Hearing: May 13, 2026

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Buffy Wicks, Chair

ABPCA Bill Id:AB 2181

Author:(Petrie-Norris) – As Introduced Ver:February 19, 2026

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

SUMMARY:

This bill states that, in appointing members of the California Public Utilities Commission (CPUC), the Governor is to ensure a diverse composition of commissioners by considering factors, including, but not limited to, geographic diversity, including rural and urban residents.

FISCAL EFFECT:

Negligible direct state costs.

COMMENTS:

The California Constitution establishes the CPUC as a five-member body, each member appointed by the Governor and approved by the Senate, a majority of the membership concurring, for staggered six-year terms. The constitution charges the CPUC to, among other things, fix rates, establish rules, examine records, issue subpoenas, administer oaths, take testimony, punish for contempt and prescribe a uniform system of accounts for all public utilities subject to its jurisdiction. Such public utilities are commonly referred to as IOUs.

Existing state law—Section 451 of the Public Resources Code—specifies the requirements of charges, such as rates, imposed by an IOU:

1. All charges demanded or received by any public utility, or by any two or more public utilities, for any product or commodity furnished or to be furnished or any service rendered or to be rendered shall be just and reasonable. Every unjust or unreasonable charge demanded or received for such product or commodity or service is unlawful.
2. Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment and facilities, including telephone facilities, as defined in Section 54.1 of the Civil Code, as are necessary to promote the safety, health, comfort and convenience of its patrons, employees and the public.
3. All rules made by a public utility affecting or pertaining to its charges or service to the public shall be just and reasonable.

It is the CPUC’s job to authorize an IOU to collect only those rates for service that are just and reasonable.

Neither the constitution nor state law directs the Governor, in selecting the members of the CPUC, to ensure a diverse composition of commissioners by considering factors such as geographic diversity.

Analysis Prepared by: Jay Dickenson / APPR. / (916) 319-2081

Date of Hearing: April 22, 2026

ASSEMBLY COMMITTEE ON UTILITIES AND ENERGY

Cottie Petrie-Norris, Chair

ABPCA Bill Id:AB 2181 (

Author:Petrie-Norris) – As Introduced Ver:February 19, 2026

SUBJECT: Public Utilities Commission

SUMMARY: Requires the Governor to ensure a diverse composition of commissioners to the California Public Utilities Commission (CPUC) by considering factors, including geographic diversity.

EXISTING LAW:

1. Establishes the CPUC and vests the agency with regulatory authority over public utilities, including telephone corporations. (Article 12 of the California Constitution)
2. Establishes the membership of the CPUC as five commissioners appointed by the Governor and approved by the Senate for staggered 6-year terms. Permits the Legislature to remove a commissioner for incompetence, neglect of duty, or corruption by a two-thirds vote in each house. (Article 12, § 1 of the California Constitution)
3. Provides that the membership of the CPUC, and the qualifications and tenure of its members, are as provided in Section 1 of Article 12 of the Constitution. (Public Utilities Code § 301)
4. Requires the Governor to designate a president of the CPUC from among the commissioners. Specifies that president directs all CPUC staff, except for the staff of the Public Advocate’s Office, and designates the president as the presiding officer for all CPUC meetings and sessions. (Public Utilities Code § 305)
5. Establishes the Public Utilities Act, which, in part, declares the finding of the Legislature that the public interest is best served by a CPUC that is appropriately funded and staffed, that can thoroughly examine the issues before it, and that can take timely and well-considered action on matters before it. (Public Utilities Code §§ 401-410)
6. Authorizes the CPUC to supervise and regulate every public utility in the state and do all things necessary and convenient in the exercise of such power and jurisdiction. (Public Utilities Code § 701)

FISCAL EFFECT: Unknown. This bill is keyed fiscal and will be referred to the Assembly Committee on Appropriations for its review.

BACKGROUND:

The CPUC – The CPUC traces its origins to the California Railroad Commission, established in the late 1870s in response to the expansion of the transcontinental railroad. Public backlash against railroad influence on state government – particularly that of the Southern Pacific – fueled Progressive Era reforms, leading to a reconstituted Railroad Commission in 1911 and the passage of the Public Utilities Act in 1912, which extended the agency's jurisdiction to for-profit transportation, water, electricity, gas, and telephone and telegraph services. The agency was renamed the California Public Utilities Commission in 1946. Today, the CPUC is the largest state utility regulator in the nation, overseeing privately owned electric, natural gas, water, and communications companies, as well as railroad safety, rail transit, and passenger-for-hire carriers, including ride-hailing companies such as Uber and Lyft. Its core mission is to ensure Californians have access to safe, reliable utility services at just and reasonable rates.

CPUC Commissioners – Section 1 of Article XII of the California Constitution establishes that the CPUC has five commissioners appointed by the Governor, and confirmed by the Senate, with each commissioner serving six-year staggered terms. No executive of a public utility may serve as a commissioner within two years of working for a utility. Commissioners meet at monthly (often semi-monthly) business meetings to vote on pending items at the agency. Commissioners serve full-time and receive a salary as civil executive officers. The Governor designates the president of the CPUC among the five commissioners.^[1] The president presides at meetings and sessions of the CPUC and directs the executive director, the attorney, and other staff of the CPUC. The president of the CPUC is also required to annually appear before the appropriate policy committees of the Senate and Assembly to present the annual report of the agency.^[2]

Qualifications for Other State Agency Appointments – Many state commissions or boards have education or experiential requirements as criteria for appointment, as well as attention to geographic representation.

1. California Energy Commission: The Governor and Senate must evaluate professional and educational experience as qualifying criteria for appointment.^[3]
2. California Air Resources Board: The Governor and Senate must assess specific education qualifications or career experience for six member appointments. Six appointments must be members of various regional air districts throughout the state. Two members are appointed by the Assembly Speaker and Senate President Pro Tem, respectively, to represent underserved and highly impacted communities in the state. The final two members are two Members of the Legislature appointed separately by the Senate Committee on Rules and the Speaker of the Assembly and are ex officio, non-voting members of the Board.^[4]
3. State Water Resources Control Board: The Governor and Senate must consider both professional background and experience of the five appointees, as well as ensure the board “to the extent possible, be composed of members from different regions of the state.”^[5]

COMMENTS:

1. Author’s Statement. According to the author, “The decisions made by the California Public Utilities Commission determine what families pay for electricity, whether small businesses can keep their lights on, and whether rural communities get the same reliable service as our urban centers. AB 2181 ensures that when commissioners are appointed to the CPUC, rural perspectives will also be represented.”
2. Purpose of Bill. The CPUC has broad authority over utility rates, service standards, and resource planning, with decisions that affect residential customers, businesses, and communities across the state. Current law does not specify geographic criteria for commissioner appointments. This bill would establish that the Governor must ensure a diverse composition of CPUC commissioners. Though the bill lacks specifics regarding the factors to determine a diverse CPUC body, the bill does specify that geographic diversity be a consideration, including considering both rural and urban appointees. This change is intended to ensure that the range of circumstances and interests across California's diverse service territories, including those of rural communities, are reflected in the CPUC’s deliberations and decision-making.
3. Benefits of Regional Diversity. This bill requires the Governor to consider diversity when selecting candidates for CPUC commissioner. Many other Governor-appointed board members and commissioners in the state are required to reflect geographic distribution across California, so this approach is not unprecedented (refer to Background section Qualifications for Other State Agency Appointments found above). In addition, there are distinct regional issues in energy, water, telecommunications, and transportation policy across the state, which support a need for representation. The CPUC’s SB 840 Report explored options for locating operations and staff outside of the CPUC headquarters in San Francisco.^[6] The report identified benefits from having staff reside in different parts of the state, contending that “there may well be considerable value in our staff being customers of the utilities, and being a part of the communities where the impacts of those utilities are felt.” This assertion can reasonably be extended to commissioners.
4. Related Legislation.

AB 13 (Ransom, 2025) would make changes to the CPUC, including requiring specified geographic representation of commissioners and specified reporting to the Legislature concerning utility rate-setting cases. Status: pending hearing in the Senate Committee on Appropriations.

AB 2289 (Boerner, 2026), among its many provisions, requires the Governor to consider certain diversity factors when making appointments to the CPUC. Status: pending hearing in the Assembly Committee on Appropriations.

ACA 9 (Boerner, 2025) amends Article XII of the Constitution related to the CPUC to 1) increase the size of the CPUC from 5 to 9 members, 2) remove telephone and telegraph corporations from being designated as a public utility under the Constitution, 3) repeal provisions of the Constitution related to the CPUC’s authority, and 4) mandates the CPUC consider the affordability of rates when setting rates. Status: set for hearing on April 22, 2026, in this committee.

1. Prior Legislation.

AB 1960 (Villapudua, 2022) stated regional qualifications the Governor and Senate should consider, beginning January 1, 2024, when selecting a person to serve as a commissioner on the CPUC. Largely similar to AB 1471 without the provisions to authorize the CPUC to consider moving its headquarters out of San Francisco. Status: Vetoed by the Governor.

AB 1471 (Villapudua, 2021) stated regional qualifications the Governor and Senate should consider when selecting a person to serve as a commissioner on the CPUC and authorized the CPUC to consider locating its headquarters in a city other than San Francisco. Status: Held under submission – Senate Appropriations.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Laura Shybut / U. & E. / (916) 319-2083

1. PU Code § 305 ↑

2. PU Code § 910 ↑

3. Public Resources Code § 25201. ↑

4. Health and Safety Code § 39510. ↑

5. Water Code § 175. ↑

6. “Budget Act of 2018”, Committee on Budget and Fiscal Review, Chapter 341, Statutes of 2016 ↑