California Density Bonus Law – 2022 Update

California’s Density Bonus Law provides housing developers with tools to encourage the development of much needed affordable and senior housing. The California Legislature continues to refine the Density Bonus Law over the past year, with new legislation taking effect on January 1 of this year providing additional flexibility to developers in meeting requirements for a density bonus. In addition, a 2021 appellate court ruling changes the types of information that local governments can require from density bonus applications seeking an incentive or concession.

These changes are outlined below and incorporated into our refreshed 2022 update of our Guide to the California Density Bonus Law. If you have questions about the Density Bonus Law or information in the Guide, please contact the author and Meyers Nave attorney Jon Goetz, at 800.464.3559 or jgoetz@meyersnave.com. To download the Guide, please click here.

2022 CHANGES

Limits on Impact Fees. AB 571 prohibits local governments from charging affordable housing impact fees, including inclusionary zoning fees and in-lieu fees, against affordable units in density bonus housing developments.

Longer Affordability Periods. AB 634 allows a local government to adopt an ordinance requiring an affordability period of more than 55 years in density bonus housing projects. However, these local ordinances cannot impose affordability periods of more than 55 years in developments financed with low income housing tax credits.

Incentives & Concessions; Parking; Qualifying Units. SB 290 makes several changes to density bonus law, including:

• Provides one incentive or concession for density bonus projects that include at least 20% of the units for lower income students in a student housing development.
• Eliminates the ability of local governments to disapprove a developer’s request for an incentive or concession, or a waiver or modification of development standards, on the grounds that it would have a specific adverse impact on the physical environment.
• Provides parking standards of one-half space per bedroom for housing developments which include at least 40% moderate income units that are located within a half mile of a major transit stop.
• Eliminates the requirement that for-sale units for moderate income households must be in a “common interest development” in order to qualify for a density bonus.
• Clarifies that for purposes of qualifying for a density bonus, the “total units” in a housing development include affordable units that are designated to satisfy local inclusionary housing requirements.
• Clarifies that for purposes of qualifying for a density bonus, affordable units for very low or lower income households can be either rental or for-sale units. (Affordable units for moderate income households still must be for-sale units and may not be rental units)

Sale of Affordable Units to Nonprofit Corporations. SB 728 allows developers in for-sale density bonus housing developments to sell affordable units to nonprofit housing corporations instead of selling the units directly to a low or moderate income homebuyer. The nonprofit housing corporation must then sell each home to a lower income buyer subject to affordability requirements with a term of at least 45 years, an equity sharing agreement, and a repurchase option in favor of the nonprofit corporation. The nonprofit corporation may be permitted by the local agency to retain the initial subsidy and share of appreciation which is produced from the resale of the affordable unit, so long as the funds are used to promote homeownership for lower income households within the jurisdiction of the local agency.

Required Submission of Pro Formas. An appellate court ruled in 2021 that local agencies cannot require density bonus applicants to submit pro formas or other documentation required to prove that requested incentives and concessions are necessary to make the housing development financially feasible. The court found that a City of Los Angeles ordinance requiring density bonus applicants to submit information to show incentives and concessions are needed to make the project economically feasible was preempted by state density bonus law because the requirement was based on a former version of the law that has since been revised. However, local agencies can require applicants to show that requested incentives and concessions will result in cost reductions for the project. Schreiber v. City of Los Angeles, 69 Cal. App. 5th (2021).