2022 Housing Legislation Round-Up

| Justin A. Zucker and Daniel J. Turner
bills

This year was a blockbuster year for housing legislation coming from Sacramento. Last week, Governor Gavin Newsom signed into law more than three dozen bills related to housing and housing production. Below please find a brief overview of twelve housing bills signed by the Governor that become effective next year.

AB 682. Density Bonus for “Shared Housing” Buildings

AB 682 amends the State Density Bonus Law to create a density bonus for “Shared Housing” developments. Shared housing, or group housing as it is commonly known, is characterized by single-room units with shared access to common kitchen and dining facilities. Each unit is typically intended for one or two occupants and features a small kitchenette. This new density bonus will allow shared housing developments to build at greater densities in exchange for dedicating a percentage of units to affordable housing, with the same affordability requirements and bonus amounts as is currently available to standard-unit developments. Notably, shared housing developments can provide up to 25% of their floor area as standard-unit housing and still qualify for a density bonus.

AB 916. No Public Hearing to Increase Bedroom Count

AB 916 prohibits cities from requiring a public hearing for a permit to add up to two bedrooms by reconfiguring existing space within an existing dwelling unit.

AB 1551. Commercial Development Bonuses for Providing Affordable Housing

AB 1551 creates a density bonus for commercial developers who partner with housing developers and support the provision of affordable housing through land donation, cash payment, or by directly building units. A commercial developer is eligible for up to a 20% density bonus. To qualify, the housing development supported by the commercial developer must provide either 30% of units as affordable for low income (<80% AMI) or 15% of units as affordable for very-low income (<50% AMI).

AB 2011. Affordable Housing and High Road Jobs Act

AB 2011 provides streamlined, ministerial approval of multifamily housing developments that contain affordable housing units located in commercial zones. Two tiers of development are available, depending on the amount of affordable housing provided. A project dedicating 100% of units as affordable for lower income households can be developed by right on most parcels zoned for retail, office, or parking uses. A project with market-rate units that provides a specific percentage of rental or ownership units as affordable for either lower income or very-low income households can be developed by right on parcels zoned for retail, office, or parking if the site has at least 50 feet of frontage on a commercial corridor (a street between 70 and 150 feet wide). AB 2011 projects are also subject to certain prevailing wage and skilled workforce requirements. We have discussed AB 2011 in greater detail in previous updates on August 24, 2022, and September 1, 2022.

SB 6. Middle Class Housing Act

SB 6 is intended to increase the development potential for middle-income housing by principally permitting housing developments that meet specific criteria in areas zoned for office, retail, or parking uses. Eligible developments are required to meet or exceed certain density thresholds established in the state’s Housing Element law, such as 30 units per acre in metropolitan settings or 20 units per acre in suburban settings. SB 6 projects must also meet certain prevailing wage and skilled and trained workforce requirements, although a development can be exempted from these in certain circumstances.

AB 2334. Density Bonus in Very Low Vehicle Travel Area

AB 2334 expands the available density bonus for 100% affordable housing developments in very low vehicle travel areas. A “very low vehicle travel area” is a transit analysis zone where existing residential development generates 85% or fewer vehicle miles traveled per capita than the regional area in which it is located. Qualifying density bonus projects are not subject to maximum density controls, are entitled to up to 4 development incentives, and may receive an additional three-stories of height. This additional density bonus is only available in the counties of the Bay Area, Sacramento, the Southern Coast, and Inland Empire. AB 2334 also clears up the grey area for application of the state density bonus in a form-based zoning district, requiring calculation of an “average unit size” multiplied by the density bonus amount to determine increase in floor area allowed.

AB 2653. Housing Element Reporting

AB 2653 alters some of the requirements for annual housing element reports cities must submit to the state. Cities must include greater detail, including the numbers of all new and demolished housing units in the jurisdiction, as well as data on all approved density bonus projects. AB 2653 also provides a mechanism for the state to request corrections and make referrals for enforcement.

AB 2668. SB 35 Streamlining Updates

AB 2668 amends SB 35 clarifying streamlined SB 35 projects are not subject to any non-legislative discretionary approval and that density bonus units are not considered when calculating whether a project satisfies SB 35’s affordability requirements. Further, the bill prohibits cities from denying an application for missing materials if there is enough information to allow a reasonable person to conclude the development is consistent with the applicable objective standards. AB 2668 also brings important change to how the Cortese List affects SB 35 eligibility. Placement on the Cortese List, which is the aggregate of the state’s decentralized hazardous waste sites databases, disqualifies a site from SB 35, until it is cleared for residential use by the authority having jurisdiction. However, longstanding confusion over the mechanism of clearing a site meant that once a site was listed, it was effectively barred from SB 35 permanently, even if it had undergone extensive remediation. AB 2668 establishes specific criteria, documentation, and agency determinations that allow a “listed” site to qualify for SB 35.

AB 2221 & SB 897. ADU Law Updates

AB 2221 and SB 897 make a number of changes to existing ADU law to provide for greater development flexibility and ensure consistent and efficient project review. Under these bills, a city that denies an ADU application will be required to provide a full set of written comments that includes a list of all deficient items and details how the application can be remedied. These comments must be provided within the existing 60-day review period. Additionally, a city will be prohibited from denying an ADU application based on nonconforming zoning conditions, building code violations, or unpermitted structures that are not affected by the ADU construction and do not pose a threat to safety.

The bills also increase ADU development potential by restricting setbacks that prevent ADUs below a minimum floor area, increasing the minimum height limit for ADUs located near transit stops or attached to primary dwellings, and prohibiting owner-occupancy requirements until January 1, 2025.  Importantly, the addition of an ADU will no longer constitute a change of R occupancy under the building code such as from an R3 (single-family or duplex) to an R2 (multi-family), and will not trigger a requirement for fire sprinklers if not previously required.

AB 2234. Post-Entitlement Permit Processing

AB 2234 focuses on post-entitlement non-discretionary building permit processes after the planning process has concluded and environmental review is complete. AB 2234 requires local agencies to compile a list of information need to approve or deny a post-entitlement permit, a checklist and post an example of a completed, approved application. AB 2234 also sets timelines for review of post-entitlement applications for housing projects: (a) for projects with 25 units or fewer, a local agency shall complete first review and comment within 30 days of an application completion; and (b) for projects with 26 or more units, a local agency shall complete first review and comment within 60 days of an application completion. These time limits are tolled if a local agency requires review of an application by an outside third-party reviewer. Failure to meet these timelines is a violation of the Housing Accountability Act.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Daniel J. Turner.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

AB 2011 & SB 6: Pro-Growth or Slow Growth for Construction Workforce

| Daniel Frattin and Daniel J. Turner
SB 6

AB 2011, along with SB 6 (Cabellero, Eggman and Rubio), were passed by the California Legislature this week with large majorities in both houses. The two bills will create 10-year housing programs with similar aims: increasing housing production and increasing the skill level, wages, and number of residential construction workers. However, the bills differ in important ways—their approach to density, allowances for ministerial approvals, and the degree of deference to local zoning rules. They also take markedly different approaches to growing, training, and better compensating the residential construction workforce. The bills were the product of a political compromise between the State Building & Construction Trades Council and the Carpenters Union. They effectively set up an experiment to test the relative efficacy of the SB 6 labor rules favored by the State Building & Construction Trades Council—basically requiring union labor on any SB 6 project and the rules preferred by the Carpenters Union – requiring payment of prevailing wages and benefits to all workers on an AB 2011 project.

A good deal of attention has been given to improving the regulatory conditions for getting new housing approved, expanding access to sites, and requiring cities to upzone. However, less attention has been paid to the fact that—even if there were shovel-ready projects for the Governor’s declared goal of 3.5 million new homes over ten years—the current residential construction workforce could only build about a third of that number without significant increases in the number and productivity of workers, who currently build housing at a rate of one home per worker per year. By comparison, average productivity per worker was 1.4 units per year from 1990-2005. Put simply, the state cannot meet its housing targets without an increase in the number of workers and productivity.

However, attracting new workers has proven difficult. Median residential construction worker pay in California ranks 46th in the country when adjusted for the high cost of living. On average, residential construction workers income is 2/3 of their commercial counterparts and they get about 1/3 the amount of fringe benefits. Less than half have insurance through employers. This is a dramatic shift since the 1970s and 1980s, when average pay in both sectors was roughly equal.

AB 2011, which we discussed in greater detail last week, provides for time-limited ministerial approvals for properties on commercial corridors that meet certain criteria for affordable housing and overrides local zoning rules that conflict with its minimum standards for density and height. It also mandates payment of prevailing wage to all construction workers, or at least the prevailing apprentice wages for apprentices enrolled in state-approved apprentice programs. Family healthcare benefits are required for projects with qualified construction craft workers on projects with more than 50 units, while those without such workers can credit qualifying expenditures toward the prevailing wage requirements. Essentially, AB 2011 bets that rapid approvals under more liberal standards will entice employers to pay higher wages and create a strong, near-term incentive for developers to invest in apprenticeship programs to elevate worker productivity.

A final version of SB 6 has yet to be published, but takes a less aggressive approach than AB 2011 with lower minimum density requirements, greater deference to local zoning, and no mandatory ministerial approval process unless a project otherwise qualifies under SB 35. Thus, many SB 6 projects would be subject to lengthy CEQA reviews and modified discretionary approvals. It would require lower amounts of affordable housing subsidies by than AB 2011, but would effectively require the use of union labor if two qualified bids are received from union contractors. While SB 6 expands potential building sites, most projects would not realize the cost savings associated with quick ministerial approvals or the elimination of most entitlement/CEQA risk. Without these incentives in place, it may be years before the state sees its first SB 6 project, or additional demand for workers.

AB 2011 passed the Assembly 67-4 with 9 abstentions and the Senate 33-0 with 7 abstentions. While the 4 Noes in the Assembly were from rural and suburban districts leaning more conservative (3 Rs & 1 D), notably 7 of the 9 abstentions were from urban and suburban districts along the coast between Ventura and San Diego with a high number of Democratic representatives (6 Ds & 3 Rs). Conversely, SB 6 passed the Assembly 67-0 with 13 abstentions and the Senate 34-0 with 6 abstentions. Of the 4 Noes for AB 2011, 3 abstained in SB 6 and 1 voted yes (a democrat representative from District 29, encompassing Santa Cruz and the surrounding area). The Assembly abstentions followed a similar pattern as AB 2011, with those abstaining coming from both parties and primarily representing rural districts or coastal urban and suburban districts in Southern California. For both AB 2011 and SB 6, the Senate abstentions followed a similar geographic pattern as in the Assembly.

While union support was split between the two bills, with both construction and other unions on either side, pro-housing and business organizations tended to support both. Most affordable housing developers supported AB 2011 and opposed SB 6, presumably because the latter would tend to increase cost and time for approval without offsetting benefits. San Francisco’s Council of Community Housing Organizations, which frequently opposes market-rate development, was a notable outlier, supporting SB 6 and opposing AB 2011 in spite of its clear benefits to affordable housing developers.

Both bills still need to be signed by the governor and will not take effect until July 2023. Annual reports of projects approved under both bills are required from cities and the Department of Housing & Community Development is to provide two reports on the use of each during the ten year period prior to their sunset date.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Daniel Frattin and Daniel J. Turner.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.

AB 2011 Could Unlock Mixed-Income Housing

| Mark Loper, Daniel J. Turner and Alex Klein
AB 2011

East Bay state representative Buffy Wicks, along with other co-sponsors including Senator Scott Wiener, proposed a compelling bill that aims to bridge a long-sought gap between pro-housing advocates’ desire for streamlining code-compliant multi-family residential projects with on-site affordability (both mixed-income and 100% affordable), and construction labor unions’ desire to ensure fair wages and future training for its members.

Known as the High Road Jobs Act of 2022, AB 2011 would allow ministerial, by-right approval for certain multi-family affordable housing. A development project in a zoning district where office, retail, and parking are principally permitted would be subject to streamlined, ministerial review if it meets many of the requirements for SB 35 eligibility, as well as additional locational and affordability requirements. AB 2011 projects would not need to obtain discretionary entitlements and would not be subject to CEQA.

To qualify for AB 2011 streamlining, housing development projects must either provide 100% affordability, or provide on-site affordable units, aka BMRs, in a primarily market rate project. As amended in the Senate on August 11, the on-site BMR requirement is somewhat complicated for rental units, but essentially requires between 12-15% BMRs unless a local requirement is higher, in which case the local program applies and additional AMI restrictions could be required. For condos, 30% could be offered at moderate income or 15% at lower income, and the same caveat about higher local requirements applies.

These projects would be subject to objective development standards, and additional qualifying criteria. As of August 11, the criteria for mixed-income projects include, but are not limited to:

  • proposing a multi-family housing development project;
  • abutting a commercial corridor and having a frontage at least 50 feet in width, on a site 20 acres or less in size;
  • not demolishing rent controlled or deed-restricted affordable units, or listed historic resources;
  • replacing no more than four existing units;
  • located no closer than 500 feet from a freeway;
  • providing relocation assistance to certain commercial tenants; and
  • vacant properties that are not zoned for multifamily residential use cannot qualify for streamlined ministerial processing.

Once an AB 2011 development application is submitted, several streamlining provisions apply. The local government must determine whether the project complies with objective planning standards within 60-90 days depending on unit count. If a local government determines that a project does not comply with objective planning standards, it must provide a written explanation to the proponent within this timeframe. Further, any design review must be completed within 90-180 days. Projects using the streamlined approval process would also be eligible for density bonuses, incentives, concessions, waivers, reductions in development standards, and potentially reduced parking ratios, under California’s density bonus law.

AB 2011 projects would also be required to pay construction workers at least the prevailing rate of wages and certify their compliance with this provision with the local government. As part of the developer’s obligation to pay prevailing wages, developers building 50 or more units of housing must submit monthly compliance reports to the local government.

Importantly, projects utilizing AB 2011 would not be a project for the purposes of CEQA (i.e. no environmental review) and the approval procedures the municipality would be permitted to use would solely be ministerial in nature.

In May of 2022, AB 2011 passed out of the California State Assembly, and is currently with the Senate, where it was voted out of committee on August 11. The bill has received several key union endorsements, including from the California Conference of Carpenters and SEIU. However, other unions, such as the State Building and Construction Trades Council of California, the San Francisco Building and Construction Trades Council, and the California Labor Federation have opposed the bill claiming it would “eliminate[] the mandate that a skilled-and-trained workforce be a part of… [project] construction crews.” Unions such as the Building Trades Council oppose the bill because the bill would not require developers to use a “skilled and trained workforce,” which has the effect of eliminating the requirement that a certain percentage of workers on a project are unionized. The bill provides instead that for developments streamlined under AB 2011 that workers be paid a “prevailing wage” with some additional benefits such as healthcare coverage.

We will continue to track this potential game-changer of a bill as it makes its way through Sacramento.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Mark Loper and Daniel J. Turner, and Law Clerk Alex Klein.

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient.  Readers should consult with legal counsel before relying on any of the information contained herein.  Reuben, Junius & Rose, LLP is a full service real estate law firm.  We specialize in land use, development and entitlement law.  We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.