Slate of New Housing Bills Take Effect January 1, 2018

by Wendel, Rosen, Black & Dean LLP
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Wendel, Rosen, Black & Dean LLP

Governor Brown signed into law a slate of 15 new housing bills last fall. Three of those bills that related to funding sources for housing went into effect immediately, while the other 12 took effect on January 1, 2018. These bills attempt to address a range of issues related to California’s housing crisis, including streamlining land use approvals, limiting a local agency’s discretionary authority over certain housing projects, and punishing jurisdictions that fail to adequately plan for and approve housing projects. Here is a summary of the 15 bills and their legislative goals.

Funding

SB 2: New Funding Source for Housing

SB 2, entitled the “Building Homes and Jobs Act,” provides a permanent source of funding for affordable housing by imposing a $75 fee on recorded documents. The fee (which is capped at $225 per transaction per parcel) will be levied on certain real estate transactions, such as mortgage refinancing. Documents exempt from the fee include home sales and commercial real estate transactions. 

Funds generated will be provided to local government and the California Department of Housing and Community Development (HCD) in two phases.  During the first phase, which runs from January 2018-December 2018, 50 percent of the funds generated will be available to local government to streamline housing production by undertaking updates and revisions to general plans, specific plans and sustainable communities’ strategies. The remaining 50 percent will be available to combat homelessness by funding navigation centers and the maintenance or construction of transitional housing.

In the second phase beginning in January 2019, 70 percent of the funds generated will be dedicated to local government to support affordable housing, homeownership opportunities and financial incentives to local agencies that approve new affordable housing. The fees collected pursuant to the law is anticipated to generate roughly $225 million per year.

SB 3: Veterans and Affordable Housing Bond

SB 3 will place a $4 billion bond measure on the November 2018 ballot that, if approved, would authorize funding for existing state affordable housing programs and infill infrastructure financing ($3 billion) and for the veterans’ farm home and mobile home assistance programs ($1 billion).

Enforcement

SB 35: Streamlined Approval for Specified Housing Projects

SB 35, sponsored by Senator Scott Wiener of San Francisco, has been widely touted as streamlining local government approval for housing projects meeting certain specified criteria. The bill has been codified as Government Code Section 65913.4 and applies to both general law and charter cities and counties if: i) HCD has determined that the local agency has failed to issue enough building permits to satisfy its regional housing need allocation (RHNA) by income category; or ii) a local agency has not submitted its required annual report to HCD for at least two consecutive years. 

A project can demonstrate eligibility for ministerial, streamlined approval, if it satisfies several prerequisites.  A project must: i) be located in an urban area; ii) comply with objective general plan and zoning regulations allowing for residential or mixed-use development; and iii) meet “objective” zoning and design review standards at the time of project application submittal. Neither height nor unit count can be altered during the design review process and all minimum parking requirements will be waived.

A project must also meet affordable housing requirements (from 10 to 50 percent for low-income households) depending on the jurisdiction’s RHNA shortfall. Projects with 10 or more units must commit to pay prevailing wage on the project and use a “skilled and trained workforce” if those projects meet certain locational criteria. Exempt from SB 35 are projects consisting of only a single home and projects that involve the demolition of existing rent-controlled housing. Projects that exceed 200 feet in height are also exempt from the streamlining benefits. 

Given all of the caveats, it is questionable whether projects proposed in many Bay Area cities would qualify for the streamlining afforded by the law, especially since projects in dense urban areas may need to rely upon increases in floor area ratios (which translate to taller projects) to make a project financially viable. 

SB 167/AB 678/AB 1515: Amendments to the Housing Accountability Act

Three bills addressed amendments to the Housing Accountability Act (HAA), found at Government Code Section 65589.5. As amended, the HAA now provides additional protections for housing development projects  — whether affordable or not — by prohibiting a local agency from denying a project, or reducing its density, if the project conforms with all “objective” general plan, specific plan, zoning and subdivision standards unless the local agency finds the project would have a “specific adverse impact” on public health and safety. For affordable projects (either 20 percent of units for low-income households or 100 percent of units for moderate-income households), the local agency would have to make additional findings in order to the deny the project, reduce the density or add a condition of approval making the project infeasible.

The following summarize the significant changes to the HAA:

1. Expands the definition of “housing development project” to include any mixed-use project where at least two-thirds of the square footage of the project is designated for residential use.

2. Local agencies must inform applicants of any inconsistencies with any “applicable plan, program, policy, ordinance, standard, requirement or similar provision” after the application has been deemed complete. Local agencies must so inform applicants within 30 days of an application for 150 units or less and within 60 days for projects with more than 150 units. Failure to so notify the applicant will result in the project being deemed “consistent” with such standards.

3. While the HAA itself does not include a definition of “objective,” SB 35 defines an objective standard in a manner favorable to developers and housing advocates. A project will be considered “consistent” with objective standards as long as there is substantial evidence that would allow a reasonable person to conclude the project is consistent. Examples of “objective standard” would include density, setbacks, height, and permitted uses in specific plans and overlay zones. An “objective standard” would likely exclude adherence to general plan goals or aspirational guidelines as a basis for denying a project or reducing its density.

4. The objective consistency standard noted above provides less deference to local agencies in finding project inconsistency. Further, any findings to deny a project must be supported by a preponderance of the evidence, which is a much more rigorous standard of judicial review than the current substantial evidence standard.

5. The amendments increase the availability of attorney’s fees when a local agency rejects a housing project and increases fines and judicial authority to order projects to be approved if a local agency fails to carry out a court’s order within 60 days. 

AB 72: HCD Review and Oversight

AB 72 provides greater review and enforcement authority to HCD over housing laws that require local agencies to adhere to housing law goals and standards. The law gives HCD specific authority to review any action or inaction by a local agency that HCD determines conflicts with the agency’s adopted housing element. It also gives HCD the power to revoke its certification of an agency’s housing element if it determines that the agency is out of compliance. In addition, HCD is authorized to notify the State Attorney General that a city or county is in violation of state housing laws if HCD makes findings of noncompliance.

SB 540: Workforce Housing Opportunity Zones

SB 540 provides streamlined environmental and planning review for qualifying housing projects located within a Workforce Housing Opportunity Zone (WHOZ) that a city or county can voluntarily create. To qualify, the project must meet affordable housing, prevailing wage and other requirements. To create a WHOZ, a city or county would prepare an EIR and adopt a specific plan. Once a WHOZ is created, a qualifying project would not require additional CEQA review and the local agency must take action to adopt or deny such project within 60 days of the project application being deemed complete.

AB 73: Housing Sustainability Districts

AB 73 provides incentives to local agencies to create housing in Housing Sustainability Districts (HSD), with oversight from HCD, on infill sites with access to public transit. The law sets forth a procedure for a local agency to follow to establish an HSD (which includes a requirement that at least 20 percent of the housing units built within the HSD be affordable) after preparation of an EIR. Ensuing projects could avoid an EIR and receive streamlined consideration if the project is considered within 10 years of the HSD EIR and pays prevailing wages.

Strengthening Housing Element Law Requirements

SB 166: No Net Loss Law

Under existing law, local agencies must identify adequate development sites to meet their RHNA requirements for a housing element planning period.  SB 166 strengthens the law to mandate that agencies maintain a current supply of sites for residents at all income levels for the entire period. An agency would be prohibited from reducing density on a site used to achieve housing element compliance unless it makes findings that other identified sites are adequate to meet the jurisdiction’s RHNA and the reduction is consistent with the general plan. In addition, the agency must make specific findings if it allows development on a site with fewer units by income category than identified in the housing element for that parcel, and it must identify additional adequate sites for affordable housing within a specified time.

AB 879: Housing Production Annual Reporting Requirements

AB 879 amends existing law to require additional analysis and annual reporting requirements by local agencies. Agencies, including charter cities, will have to report on the number of units applied for, approved and disapproved each year, as well as sites rezoned to accommodate the city’s RHNA. The new law will also require cities to examine how locally adopted ordinances impact the cost and supply of housing development, as well as the impact of processing timelines. Moreover, local agencies must analyze local efforts to remove nongovernmental constraints that result in a shortfall of an agency’s achievement of its RHNA requirements at all income levels.

AB 1397: Residential Development Inventory

AB 1397 ratchets up the existing housing element law by limiting local governments from relying on housing inventory sites that do not have a realistic capacity for housing development.  The new law changes the definition of land suitable for residential development in order to increase the number of multifamily sites.  Identified sites must be “available” and “suitable” for residential development and have a “realistic and demonstrated potential” for redevelopment during the planning period.  In addition, AB 1397 requires housing element inventory sites to have sufficient infrastructure, or to be included in a program to provide such infrastructure, to support and be accessible for housing development.  Further, the agency must specify the realistic unit count for each site and whether it can accommodate housing at various income levels.

Miscellaneous

AB 1505: Inclusionary Housing Requirements Authorized in Rental Projects

AB 1505 supersedes a 2009 California Court of Appeal decision (Palmer/Sixth Street Properties LP v. City of Los Angeles), which held that the Costa-Hawkins Rental Housing Act precluded local agencies from imposing inclusionary housing requirements on rental projects that did not receive government assistance. In Palmer, the City of Los Angeles adopted a policy that required certain housing projects to include affordable housing units that would be subject to a 30-year rent restriction requirement (or pay an in-lieu fee). The Costa Hawkins law allows rental housing owners the right to set the initial rent level at the start of any tenancy. 

Following approval of AB 1505, a city or county may now adopt an ordinance requiring that, as a condition of developing rental housing units, the housing project must contain a certain number of affordable rental units. Such inclusionary ordinances must include alternative means of compliance, including in-lieu fees, land dedication, the acquisition and rehabilitation of existing units and development of affordable units off site.

For those local agencies that adopted inclusionary ordinances after September 14, 2017, requiring more than 15 percent of the rental units to be affordable to low-income households, HCD may call for a review of the ordinance and, if certain conditions are met, require the local agency to prepare an economic feasibility study to establish that the ordinance does not unduly constrain the production of housing.  

AB 1521: Preservation Notice Law

AB 1521 bolsters the Preservation Notice Law by requiring additional notice of scheduled expirations of rental restrictions and requiring owners of expiring affordable rental properties to accept market-rate purchase offers from qualified preservation entities that will maintain the affordability restriction. HCD is charged with monitoring compliance, but tenants will have the right to enforce the law. The law applies to multifamily rental housing that receives governmental assistance from specified local or federal programs, including density bonus approvals. Projects where 25 percent or fewer of the units are under affordability restrictions are exempt from the requirement to accept a market-rate purchase offer from a preservation entity.

AB 571: Farmworker Housing Tax Credits

Approved as an urgency measure, AB 571 makes it easier to qualify for the Farmworker Housing Tax Credit in order to develop farmworker housing.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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