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.

California Increases Density Bonus to 50%

| Mark Loper
density bonus

Starting in 2021, residential projects in California with on-site affordable housing can get a density bonus of up to 50%.  Currently, under Government Code Section 65915—commonly known as the Density Bonus Law—the maximum bonus is 35%.  It is available for projects that include 11% very low income below market rate (“BMR”) units, 20% low income BMRs, or 40% moderate income BMRs.  Under a new law that flew somewhat under the radar during the last legislative session in Sacramento, a 50% bonus is available with increased affordability.  Specifically, 15% very low income, 24% low income, or 44% moderate income allow the full 50% bonus.

The new state law, AB 2345, requires cities and counties to comply even if they have not yet updated local implementing ordinances.  This means starting January 1, 2021, all jurisdictions in California are required to process projects proposing up to 50% additional density as long as those projects provide the additional BMRs in the “base” portion of the project, unless the locality already allows a bonus above 35%.

AB 2345 also lowered the BMR thresholds for concessions and incentives for projects with low income BMRs.  For background, in addition to waivers from development controls that preclude a project from achieving the density bonus it is guaranteed (with some narrow exceptions) in exchange for on-site BMRs, the Density Bonus Law allows sponsors to ask for “concessions and incentives” from zoning and development regulations that would make the project more expensive to construct.  Starting in 2021, projects with 17% low income BMRs can qualify for two concessions or incentives, and projects with 24% low income BMRs can qualify for three.

Finally, density bonus projects within one-half mile of a major transit stop and with direct access to the stop may be able to avoid minimum parking requirements.

All-Electric New Construction in San Francisco Starting in June 2021

On Tuesday, the San Francisco Board of Supervisors passed a law mandating new construction projects be all-electric.  The building or project will need to use a permanent supply of electricity as the source of energy for all space conditioning including heating and cooling, water heating, pools and spas, cooking appliances, and clothes drying appliances.  Gas or propane piping systems are not permitted from the point of delivery at the gas meter.

The all-electric requirement takes effect on June 1, 2021.  Starting then, all new building or site permit applications will need to comply.  Sponsors should keep in mind there is currently a multi-month delay to file permits at the Department of Building Inspection (“DBI”), and should not wait until the last minute to get their building or site permits on file.

There are two minor exceptions.  If it would be physically or technically infeasible to construct an all-electric building, DBI can grant modifications, but only to those portions of the building where infeasibility can be demonstrated, and the alternative design provides equivalent health, safety, and fire protection.  Importantly, financial considerations cannot be used to show infeasibility.

Also, a restaurant is allowed to have gas facilities used exclusively for cooking equipment.  For permits filed through December 31, 2021, permits identifying a restaurant use will be allowed to have gas facilities.  After 2021, the exception is narrowed and DBI has to determine that the gas system is necessary for the specific restaurant using the space.  Identifying a specific restaurant tenant that early in the process will likely be a challenge for many new construction projects.

 

Authored by Reuben, Junius & Rose, LLP Attorney Mark Loper.

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.