Legislature Poised to Adopt Bill Legalizing Housing on Commercial Property

Assembly Bill No. 3107 (Bloom) and Senate Bill No. 1385 (Caballero) recently cleared their respective houses with the same objective—legalizing residential uses on land designated for commercial uses. Since both houses passed bills with the same goal, it is likely that a bill reflecting the shared goal will be presented to the Governor. The two bills take very different approaches, and it remains to be seen how the two houses will reconcile them.

Assembly Bill No. 3107. AB 3107 would make housing developments “authorized uses” on sites “designated . . . for commercial use” provided that certain criteria are met. The site must be substantially surrounded by urban uses and not be adjacent to an industrial use. Unlike Senate Bill 1385, it is temporary, only applying until a jurisdiction has completed the “rezoning required by” the Housing Element Law for the sixth housing element cycle, the last of which is due in 2024.

AB 3107 projects would be subject to the following standards:

1. Height limit: The greatest of (a) 36 feet, (b) the “highest allowed height” on the site, or (c) the “highest allowed height” for a commercial or residential use within one-half mile of the site.
2. Floor area ratio: 60% of the number of stories that would comply with the applicable height limit.
3. Density: The maximum density is the “greatest allowed” for residential or mixed use within one-half mile of the site or that is deemed appropriate for lower income households under the Housing Element Law (which is 30 units per acre in much of the state). AB 3107 does not appear to establish a minimum density.
4. Local design standards. The project must comply with local design standards that do not prohibit development at the FAR, height, and density allowed by the bill.
5. Affordability. 20% of the units in an AB 3107 project must be affordable to lower income households.

Senate Bill No. 1385. SB 1385 applies to sites that are “zoned for office or retail commercial use under a local agency’s zoning code or general plan.” SB 1385 projects must meet specified minimum residential densities, based on the densities required of the jurisdiction under the Housing Element Law for lower income projects (which is 30 units per acre in much of the state).

SB 1385 incorporates the standards in the local jurisdiction’s “zoning, parking, design, and other ordinances” applicable to housing development in a zone that would allow the minimum density. We presume that the maximum density for SB 1385 projects would be that established by such ordinances. Furthermore, projects must comply with local design review and other local procedures that would otherwise apply to housing projects within the applied zoning. Projects must also comply with all applicable requirements in the underlying commercial zone.

SB 1385 would expand streamlining under Senate Bill 35 to include sites “zoned for office or retail commercial use” if 50% of the site was vacant during the previous 3 years. (Please click here for more information about SB 35 creating a streamlined ministerial approval process for multifamily housing developments.)

Impact on Housing. Both AB 3107 and SB 1385 have the potential to significantly increase residential development in communities throughout the state, particularly if the COVID-19 pandemic leads to retail bankruptcies that may make additional sites available for residential development. Alone or in combination with California’s Density Bonus Law and Housing Accountability Act, these bills could force jurisdictions to approve high density residential projects in areas where housing was never anticipated and without the environmental review that would normally accompany a rezoning undertaken by a municipality.