2023 Housing Legislation Round-Up

| Justin A. Zucker
legislation

Like last year, 2023 was a stellar year for housing legislation in California. Last week, Governor Gavin Newsom signed into law more than forty-five bills related to housing and housing production. Below is a brief overview of thirteen housing bills signed by the Governor becoming effective January 1, 2024, relating to the State Density Bonus Law, housing policies, and parking.

Density Bonus Law Updates

  • AB 1287 (Alvarez) Additional Density Bonus Layer. This bill adds another density bonus layer option to the State Density Bonus Law. If additional very low income or moderate income units are provided, a project is eligible to receive up to an additional 20% to 50% density bonus on top of the base density bonus, provided no more than 50% of the total units would be restricted as affordable. In addition, this bill alters the definition of “maximum allowable residential density” to mean the greatest number of units allowed under the zoning ordinance, specific plan, or land use element of the general plan, or, if a range of density is permitted, the greatest number of units allowed by the range. This bill clarifies that a local government is not prohibited from requiring reasonable documentation to establish eligibility for a requested density bonus and parking ratios. This bill also authorizes up to four incentives or concessions for projects that include at least 16% of the units for very low income households or at least 45% of the units for moderate income households in for sale projects.
  • SB 713 (Padilla) Development Standard Definition Adjustment. This bill amends the definition of “development standard” to include regulations adopted by a local government or enacted by the local government’s electorate. SB 713 codifies a recent technical assistance memorandum from the Department of Housing and Community Development (“HCD”) that explicitly re-states existing law, that local governments cannot impose standards that stop state density bonus projects from moving forward.

California Environmental Quality Act (“CEQA”)

  • SB 423 (Wiener) SB 35 Extension and Expansion. This bill extends SB 35 (2017, Wiener), which is currently set to expire January 1, 2026, and expands its applicably, including into the coastal zone. A more robust overview of SB 423 can be found here.
  • AB 1449 (Alvarez) 100% Affordable Housing Exemption. This bill, until January 1, 2033, exempts 100% affordable housing projects from CEQA. While there are other tools available to make 100% affordable housing projects ministerial and not subject to CEQA, e.g., SB 35 (2017, Wiener), there are no workforce standards tethered to AB 1449.
  • AB 1633 (Ting) Housing Accountability Act Protection Extended to CEQA Review. This bill would expand the Housing Accountability Act’s definition of “disapprove the housing development project” to include any instance when a local agency fails to issue an exemption, fails to adopt a negative declaration or addendum for the project, or certify an environmental impact report or another comparable environmental document. This bill also clarifies “that attorney’s fees and costs shall rarely, if ever, be awarded if a local agency, acting in good faith, approved a housing development project.” The bill’s provisions sunset January 1, 2031.

Accessory Dwelling Units (“ADUs”)

  • AB 976 (Ting) No Owner-Occupancy Requirement. This bill makes permanent an existing prohibition to imposing an owner-occupancy requirement on an ADU that sunsets January 1, 2025.
  • AB 1033 (Ting) ADU Condominiumization. This bill allows a local jurisdiction to permit condominiumization and sale of ADUs separate from the primary residence.
  • AB 1332 (Carillo) Pre-Approved ADU Plan Sets. This bill requires jurisdictions, by January 1, 2025, to develop a program for the preapproval of ADU plans. This bill also requires local governments to approve a detached ADU project utilizing preapproved plans within thirty days.

Housing Policies

  • SB 439 (Skinner) Priority Housing Development Projects. This bill would allow a party to bring a motion to strike any part of a pleading in a lawsuit challenging approval of a priority housing development project within sixty days of service of the complaint or administrative record. A “priority housing development” is defined as a 100% low income affordable project.
  • AB 1218 (Lowenthal) SB 330 Amendments. This bill tweaks SB 330 (2019, Skinner) extending the protected unit demolition and replacement controls, which currently only apply to housing development projects, to projects that are not considered housing developments. This bill would also place the restrictions on demolition of protected units and replacement requirements into separate provisions (Government Code Sections 66300.5 and 66300.6) that will apply permanently. Those controls would otherwise become inoperative on January 1, 2030.
  • AB 1485 (Haney) State Intervention in Actions Involving Violations of Housing Laws. This bill grants the Attorney General and HCD an unconditional right to intervene in any lawsuit filed over a potential violation of an enumerated list of state housing laws, including, among others, the Housing Accountability Act, Housing Crisis Act of 2019, and the Density Bonus Law.
  • AB 572 (Haney) HOA Assessment Limits for Affordable Units. This bill places a cap on assessment increases a condominium homeowners association (“HOA”) could impose on a deed-restricted affordable unit, subject to certain exceptions. A more robust overview of AB 572 can be found here.

Parking Controls

  • AB 1308 (Quirk-Silva) Parking Requirements for Single-Family Homes. This bill prohibits a local jurisdiction’s ability to increase the applicable minimum parking requirements that applies to a single-family residence as a condition of approval of a project to remodel, renovate, or add to a single-family residence, provided it does not cause the single-family residence to exceed any maximum size limit imposed by the applicable zoning regulations, including, but not limited to, height, lot coverage, and floor-to-area ratio. This bill complements AB 916 (2022, Salas), which prohibits cities from requiring a public hearing as a condition of reconfiguring space to increase bedroom count within an existing dwelling unit.
  • AB 1317 (Carrillo) Unbundled Parking for Residential Property. This bill requires landlords to “unbundle” parking costs from rent for leases or rental agreements for residential property in Alameda, Fresno, Los Angeles, Riverside, Sacramento, San Bernardino, San Joaquin, Santa Clara, Shasta, and Ventura counties, commencing or renewed on or after January 1, 2025.

 

Authored by Reuben, Junius & Rose, LLP Attorney Justin A. Zucker.

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.

2023 California Legislation – Summer Recess Update

| Justin A. Zucker
bills

The California legislature reconvened yesterday, after taking a summer recess. As previously reported, this year’s legislative session is packed full of pending bills with far reaching changes to land use controls and local controls of such. In this update, I provide the status of bills introduced related to the California Environmental Quality Act (CEQA), the State Density Bonus Law, accessory dwelling units (ADUs), parking, and housing policies. Bills previously reported in 2023 Legislation at a Glance – Part 1 or Part 2 and not discussed below failed to leave their house of origin and advance to their second house.

CEQA:

Many of the previously reported CEQA bills have failed to advance out of their house of origin. There are, however, some CEQA bills advancing through their second house to note, including:

  • AB 1307 (Wicks and Luz Rivas) Residents’ Noise Not A Significant Effect. This bill, which appears to be in response to the University of Berkeley People’s Park project hang up, would amend CEQA to clarify that for residential projects, noise generated by the unamplified voices of residents is not a significant effect on the environment. A mirror bill, AB 1700(Hoover) failed to advance.
  • AB 1449 (Alvarez) 100% Affordable Housing Exemption. This bill would, until January 1, 2033, exempt 100% affordable housing projects from CEQA. While there are other tools available to make 100% affordable housing projects ministerial and not subject to CEQA, e.g., SB 35 (2017, Weiner), there are no workforce standards tethered to AB 1449.
  • AB 356 (Mathis) Aesthetics Not a Significant Effect. This bill would extend the current regulation, set to sunset January 1, 2024, that aesthetic impacts are not considered significant effects on the environment for housing projects involving the refurbishment, conversion, repurposing, or replacement of an existing building.
  • SB 393 (Glazer) CEQA Litigation Underwriting Disclosures. This bill would require, upon request, a petitioner of an action attacking a project’s CEQA compliance to identify every person or entity that contributes in excess of $10,000 to the costs of the action.

State Density Bonus Law:

AB 1287 (Alvarez) Additional Density Bonus. This bill would allow up to an additional 50% density bonus for projects that (1) maximize the very low income, low income, or moderate-income units permitted under the current State Density Bonus Law and (2) provide up to 15% additional moderate-income units. A bonus up to 38.75% can be obtained by providing 10% very low-income units. 100% affordable projects would be eligible to receive five incentives or concessions. Previously, this bill was to modify the State Density Bonus Law to supersede the California Coastal Act of 1976 and up to six incentives or concessions for certain projects, but those provisions were removed.

AB 323 (Holden) Restricting Use of For-Sale Units as Rentals. This bill has progressed intact; it would prohibit a developer from offering a for-sale unit constructed pursuant to a local inclusionary zoning ordinance to a purchaser that intends to rent the unit to families of extremely low, very low, low-, and moderate-income families, unless the developer can prove that none of the applicants for owner-occupancy can qualify for the unit. Any violation would be subject to a civil penalty of not more than $15,000.

ADUs:

All but one of the bills previously reported on pertaining to ADUs (AB 1661) have left their house of origin and are advancing through their respective second house. The bills that advanced include:

  • AB 1033 (Ting) ADU Condominiumization. This bill would allow a local jurisdiction to permit condominiumization and sale of ADUs separate from the primary residence.
  • AB 1332 (Carillo) Pre-Approved ADU Plan Sets. This bill would require jurisdictions, by January 1, 2025, to develop a program for the preapproval of ADUs plans. Initially six sets of preapproved plans were to be prepared, but as amended, no amount to be published is set.
  • AB 976 (Ting) No Owner-Occupancy Requirement. This bill would make permanent an existing prohibition to imposing an owner-occupancy requirement on an ADU that sunsets January 1, 2025.
  • SB 477 (Committee on Housing) ADU Chapter. This bill would create a new Government Code chapter to house state ADU regulations. It has been amended to take effect immediately as an urgency statute.

Parking Controls:

All three bills relaxing parking controls previously reported on have advanced to their second house:

  • AB 1317 (Carrillo) Unbundled Parking for Residential Property. This bill would require landlords to “unbundle” parking costs from rent for leases or rental agreements for residential property in Alameda, Fresno, Los Angeles, Riverside, Sacramento, San Bernardino, San Joaquin, Santa Clara, Shasta, and Ventura counties, commencing or renewed on or after January 1, 2025.
  • AB 1308 (Quirk-Silva) Parking Requirements for Single-Family Homes. This bill would prohibit a local jurisdiction’s ability to increase the applicable minimum parking requirements of a single-family residence as a condition of approval to remodel, renovate, or add to a single-family residence.
  • AB 894 (Friedman) Shared Parking. This bill would provide a pathway to activate underutilized parking (as defined) as shared parking spaces with other users, which would count toward meeting any automobile parking requirement.

Housing Policies:

While several previously reported housing bills have failed to advance, several have made it on to their second house, including:

AB 1485 (Haney) State Intervention in Actions Involving Violations of Housing Laws. This bill would grant the Attorney General an unconditional right to intervene in any lawsuit filed over a potential violation of an enumerated list of state housing laws, including, among others, the Housing Accountability Act, Housing Crisis Act of 2019, and the Density Bonus Law. This bill was amended to allow both the Attorney General and the Department of Housing and Community Development to intervene.

AB 1633 (Ting) Housing Accountability Act Protection Extended to CEQA Review. This bill would expand the Housing Accountability Act’s definition of “disapprove the housing development project” to include any instance when a local agency fails to issue an exemption, fails to adopt a negative declaration or addendum for the project, or certify an environmental impact report or another comparable environmental document. This bill was amended to include a sunset date of January 1, 2031.

SB 423 (Weiner) SB 35 Extension and Expansion. This bill would extend SB 35 (2017, Weiner), which is currently set to expire January 1, 2026, and expand its applicably as previously discussed. While the bill has remained intact, SB 423 has been amended with significant additions as follows:

  • Limited Duration. Initially, SB 423’s extension was to be permanent but has since been limited to sunset January 1, 2036.
  • Labor Standards. Skilled and trained workforce provisions are required for projects having habitable space above 85 feet in height.
  • Local Enforcement. The bill would allow localities to take administrative action or sue a construction contractor for failure to comply with the ordinance’s workforce standards.
  • Community Engagement. In areas designated as either a moderate resource area, low resource area, or an area of high segregation, a public meeting must be held before application submittal to provide an opportunity for the public and local government to comment on the project.

AB 1218 (Lowenthal) SB 330 Amendments. This bill would tweak SB 330 (2019, Skinner) by extending the protected unit demolition and replacement controls, which currently only apply to housing development projects, also to projects that are not considered housing developments. This bill would also place the restrictions on demolition of protected units and replacement requirements into a separate provision that will apply permanently, which otherwise would become inoperative on January 1, 2030.

We will continue to track these import pieces of legislation. September 14, 2023, is the last day for each house to pass bills. October 14, 2023, is the last day for Governor Newson to sign or veto bills timely passed by the legislature. Please stay tuned later this fall for a repeat of last year’s 2022 Housing Legislation Round-Up with a summary of relevant 2023 legislation signed into law. If you have any questions regarding any of the pieces of proposed legislation, please reach out to me.

 

Authored by Reuben, Junius & Rose, LLP Attorney Justin A. Zucker.

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.

2023 Legislation at a Glance – Part 1

| Justin A. Zucker and Sabrina Eshaghi
CEQA

As we’ve previously reported, 2022 was a blockbuster year for housing legislation and it appears this legislative session is gearing up to be just as consequential. But, with approximately a quarter of the legislative body in their freshman year, it’ll be difficult to determine how the session will play out. In this two-part update, we will be providing a brief overview of some of the most significant bills introduced thus far impacting the California Environmental Quality Act (CEQA), State Density Bonus Law, housing, parking requirements, accessory dwelling units (ADUs), and other land use-related policies.

CEQA Reform

A substantial number of CEQA-related bills have been introduced this legislative session. Most significantly, meaningful CEQA reform appears to be a priority with multiple bills aiming to creatively address CEQA misuse.

AB 978 (Patterson) Bond Requirements for CEQA Challenges to Housing Projects. This bill would require any person bringing a CEQA lawsuit against a housing project to post a bond of $500,000 to cover the costs and damages to the housing project incurred by the project sponsor or lead agency. The court would be permitted to waive or adjust the bond requirement if there is good cause to believe the requirement does not further the interest of justice.

AB 340 (Fong) Written Comments Must be Submitted Ahead of Hearing. This bill would require project opponents to make any written comments challenging the project’s compliance with CEQA at least ten days before the public hearing on the project. Any written comments submitted after that time could not be used in a CEQA lawsuit against the project. Note that this would not restrict opponents’ ability to present oral comments at the hearing.

SB 239 (Dahle) Limits on CEQA Litigation. First, this bill would only allow the Attorney General to bring CEQA lawsuits challenging certified Environmental Impact Reports (EIRs), Negative Declarations, or Mitigated Negative Declarations, meaning members of the public and community organizations would no longer have standing in cases involving these types of CEQA documents. Notably, it excludes other types of CEQA documents like exemptions. Challenges brought for non-environmental purposes would be subject to dismissal and award of attorney’s fees. Second, courts would be prohibited from stopping construction or operation of a project due to CEQA litigation, unless the project (1) presents an imminent threat to public health and safety or (2) contains unforeseen important Native American artifacts or unforeseen important historical, archaeological, or ecological value that would be materially, permanently, and adversely affected. Even in that case, the court can only stop specific activities related to those impacts. Third, for housing projects, the bill would limit subsequent CEQA actions challenging an agency’s remedial revisions to CEQA documents in response to a court’s ruling by prohibiting the court from considering new issues that were not raised in the original proceeding. Lastly, until January 1, 2030, lawsuits challenging certified EIRs for commercial, industrial, housing, or public works projects that meet certain standards and address longstanding critical needs in the project area must be resolved within 365 days, unless the court makes certain findings.

These bills may indicate that the long-awaited first step toward CEQA reform is on the horizon. In addition, a couple of other CEQA-related bills have been introduced that would be helpful in limiting review:

  • Two bills appear to be a response to the First District Court of Appeal ruling last month involving the UC Berkeley project that proposes to turn the People’s Park into student and homeless housing. In that case, the court held that the EIR failed to analyze potential noise impacts from loud student parties, among other inadequacies.
    • AB 1307 (Wicks and Luz Rivas) would amend CEQA to clarify that for residential projects, noise generated by the unamplified voices of residents is not an impact on the environment.
    • AB 1700 (Hoover) would clarify that for housing projects, in addition to noise impacts, population growth is also not an impact on the environment.
  • Currently, aesthetic impacts are not considered significant effects on the environment for housing projects involving the refurbishment, conversion, repurposing, or replacement of an existing building. This existing law is set to expire January 1, 2024. AB 356 (Mathis) would make this provision permanent.

State Density Bonus Updates

Similar to last year, a number of bills proposing updates and tweaks to the current State Density Bonus Law have been introduced.

AB 1287 (Alvarez) Additional Density Bonus. This bill would modify the State Density Bonus Law to supersede the California Coastal Act of 1976. This bill would also allow up to an additional 50% density bonus for projects that (1) maximize the very low income, low income, or moderate-income units permitted under the current State Density Bonus Law and (2) provide up to 15% additional moderate-income units. Projects that utilize this additional moderate-income bonus would also receive up to six incentives or concessions.

AB 1630 (Garcia) Ministerial Student Housing. Dubbed the Student Housing Crisis Act of 2023, AB 1630 would require student and faculty and staff housing (with limitations) on property within 1,000 feet of a university campus to be ministerially approved if a minimum of 20% of the units are affordable to lower income households. In exchange, a local agency could not impose or enforce a minimum parking requirement, floor-to-area ratio requirement, rear or side setback requirements greater than four feet, or height limit below forty feet. This bill would require a range of wage and training standards, including paying prevailing wage, providing workers with health benefits, and giving graduates of state-approved apprenticeship programs first access to these jobs (similar to AB 2011, which is taking effect July 1, 2023).

AB 323 (Holden) Restricting Use of For-Sale Units as Rentals. This bill would prohibit a developer from offering a for-sale unit constructed pursuant to a local inclusionary zoning ordinance to a purchaser that intends to rent the unit to families of extremely low, very low, low-, and moderate-income families, unless the developer can prove that none of the applicants for owner-occupancy can qualify for the unit. Any violation would be subject to a civil penalty of not more than $15,000.

AB 637 (Low) Undermining Local Inclusionary Ordinance Not Allowed. This bill would create an exception from the requirement to grant an incentive, concession, waiver, or reduction if it would alter the requirements of a local inclusionary affordable housing ordinance. The initial draft of this bill would have created an exception from the requirement that a jurisdiction grant an incentive, concession, waiver, or reduction if the project would have an adverse impact on a policy that affirmatively furthers fair housing.

Only in San Francisco

As previously reported last month, AB 1114 (Haney) would bar jurisdictions (San Francisco is the only one affected) from allowing building-permit appeals after a qualifying residential project has received an entitlement.

Stay tuned next week for an overview of proposed legislation related to housing, parking, ADUs, and other land use-related policy bills.

 

Authored by Reuben, Junius & Rose, LLP Attorneys Justin A. Zucker and Sabrina Eshaghi.

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.

CEQA Litigation Win

| Sabrina Eshaghi
EIR

RJR Attorneys Successfully Defend 180-Unit Housing Development

Earlier this month, the First District Court of Appeals handed down a win for our client in a CEQA lawsuit challenging the approval of a 180-unit residential project in Petaluma (Project). (Save North Petaluma River and Wetlands v. City of Petaluma (Nov. 14, 2022, A163192) [nonpub. opn.].) Matthew Visick and Sabrina Eshaghi of our office represented the developer during entitlements and litigation.

The Court confirmed:

  • The “baseline” conditions against which biological impacts are measured can be drawn from site visits, studies, and habitat evaluations that were undertaken both before and after the Notice of Preparation (NOP) for the Environmental Impact Report (EIR) is issued; and
  • The EIR need not contain a standalone analysis of evacuation impacts, despite expert testimony to the contrary, where substantial evidence indicates large-scale evacuations would not be necessary.

The Project went through an extensive environmental review process that resulted in the release of a Draft EIR in 2018. The City allowed for an extended public comment period on the Draft EIR and held two hearings to solicit additional comments before preparing the Final EIR. As intended under CEQA, the developer adjusted the project multiple times to respond to comments received during the hearings on the Draft and Final EIR. Despite the developer’s efforts to respond to community input, opponents of the Project submitted a letter from an attorney to the City on the day the City Council approved the Project asserting a broad range of alleged errors in the Project’s CEQA review. Soon after the City Council approved the Project, the opponents filed a lawsuit seeking to invalidate the approval.

At the Trial Court, in addition to challenging the adequacy of the EIR’s biological resources and emergency evacuation analysis, the opponents claimed the developer had deprived the public of its right to meaningfully participate in the CEQA process by making changes to the Project in response to public and City input after publication of the Final EIR, failed to analyze the impact of formaldehyde off gassing from composite building products, and failed to adequately analyze potential impacts related to flooding from the adjacent Petaluma River. The Trial Court rejected the opponents’ wide-ranging claims and upheld the EIR’s certification. The opponents promptly appealed.

The Court of Appeal affirmed the Trial Court’s decision as to the two issues raised on appeal: the “baseline” for measuring biological resources impacts and the adequacy of the Project’s emergency evacuation analysis.

First, the Court agreed that information and analysis conducted both before and after the NOP is issued can be the basis for establishing the “baseline” against which Project impacts are measured. The state CEQA Guidelines generally require existing baseline conditions to be based on the environmental conditions at the time the NOP issues. Here, the NOP was published in 2007, but a special status species report for the EIR’s biological resources analysis was drafted in 2004. The EIR indicated its analysis included updated database reviews and information gathered from site visits in the years following the NOP. The Court confirmed that the use of materials from before and after the NOP issued did not require additional justification because there was no indication that the conditions had changed. Instead, the Court determined that the “inclusion of the post-2007 information indicates that the EIR was prepared with an eye toward ‘completeness’ and ‘a good faith effort at full disclosure.’” The Court also rejected the opponents’ argument that the EIR must provide additional documentation from the biologist’s studies and site visits to allow the opponents to evaluate whether they support the analysis in the EIR, confirming that factual information in the EIR itself may constitute substantial evidence. The Court also noted that the opponents could have obtained this information if they had raised their comments during the public comment period rather than on the day the Project was approved.

Second, the Court agreed that where the City has substantial evidence that large scale evaluations will not be necessary, the EIR need not include a stand alone analysis of evacuation impacts. While the EIR did include an analysis of the Project’s impact on adopted emergency response and evacuation plans, the opponents argued that the EIR also needed to evaluate egress and evacuation safety due to neighborhood concerns regarding flooding and grass fires as well as a letter from a “national evacuation expert” opining on allegedly dangerous public safety impacts in the event of an evacuation. The Court reaffirmed that CEQA does not allow courts to reweigh conflicting evidence when reviewing an EIR and that case law allowed the City to rely on the expertise of its staff to determine that the Project will not have a significant impact. Here, City staff prepared a memo reiterating that the Project is outside the 100-year floodplain and is not within the high fire severity zone, and the Assistant Fire Chief confirmed the Fire Department did not have significant flood or fire access/egress concerns. Given the analysis in the EIR and the corroborating statements from City staff, the Court concluded that the opponents failed to prove any inadequacy of the public safety analysis in the EIR.

This opinion affirms the deferential review that the Courts will give to an EIR. So long as the EIR reasonably sets forth enough information to allow informed public participation and allows the City to make a reasoned decision whether to approve a project, the Courts will not second guess the City’s decision to approve a project.

 

Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi.

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.

Density Bonus Law & CEQA Tiering Upheld

| Mark Loper
DBL

This winter, two California Courts of Appeal issued decisions that reaffirm some of the positive aspects of state laws related to housing production, from both a CEQA perspective and via the State Density Bonus Law (“DBL”). In the first case, out of East Bay city Newark, the First District Court of Appeal upheld a tiered CEQA review for a 469-lot subdivision based on a program-level EIR prepared for a Specific Plan. About a week later, the Fourth Appellate District upheld San Diego’s approval of a 20-story residential tower, relying heavily on the protections afforded to mixed-income residential projects under the DBL. We discuss each below.

In Newark, the City approved a specific plan in 2010 for up to 1,260 units, as well as a golf course and related facilities, relying on an EIR. The EIR specifically noted that Newark would proceed under CEQA Guidelines Section 15168 for specific development proposals and “tier” off of the EIR to the extent applicable. In 2019, the applicants submitted a subdivision map proposing 469 residential lots, but no golf course. Other changes from the development analyzed in the EIR included filling and elevating only certain areas on the site (the project site is located next to the San Francisco Bay) and locating the filled and elevated areas directly next to wetlands, with riprap along the western banks. The City prepared an exemption checklist comparing the EIR to the subdivision’s impacts and conducted background technical studies, including an updated sea level rise analysis. The checklist found that the subdivision would be consistent with the specific plan, and that there were no changed circumstances or new information that might trigger the need for more CEQA review than what was done for the EIR. It was a classic example of CEQA “tiering.”

The Court of Appeal upheld the City’s use of the checklist. First, it rejected an argument that the project changes made tiering inappropriate. The Court helpfully pointed out that changes in and of themselves do not eliminate the ability to tier off an EIR; instead, the environmental consequences resulting from those changes must be new, greater, or substantially different than what was analyzed in the EIR. Here, they were not. The Court also rejected the appellant’s claim that the amount and rate of sea level rise was different enough to require a new EIR, finding that the EIR’s unambiguous finding of a significant impact due to sea level rise was adequate, as was some language in the EIR noting that the rate of sea level rise was uncertain and might be accelerating.

Finally, the Court determined that adaptive management plans for sea level rise do not improperly defer consideration of mitigation measures. Taking a refreshingly common-sense approach to climate change and CEQA, the Court would not fault Newark for acknowledging in the EIR that adaptive management would be required. “The City’s potential responses to environmental conditions between 50 and 80 years from now cannot be considered part of the project,” it concluded. “Because the City currently can only dimly guess what measures will be needed to respond to conditions several generations from now, the City was not required to analyze the impacts of the adaptive pathways” as part of the project.

The Court of Appeal’s opinion in San Diego generated more buzz, particularly among the pro-housing groups that have done yeoman’s work in recent years to strengthen California’s housing protections. The case was originally not certified for publication, in part because San Diego’s City Attorney was reluctant to have a published case that so clearly spelled out the limits of the City’s discretion to deny or downsize density bonus projects. Nevertheless, after receiving petitions to publish it, the Court did. It is helpful in several ways, reaffirming the City’s evidentiary burden to deny waivers or concessions; harmonizing General Plan consistency findings with the DBL; and applying the conclusion the First District Court of Appeal reached in Wollmer v. City of Berkeley that a density bonus project can be approved with residential amenities such as a courtyard.

The Project—a 20-story, 204-unit mixed use tower at 6th Avenue and Olive Street across from Balboa Park—faced pushback from neighbors, at least some of whom the Court implied would lose their view of the park. Somewhat surprisingly, instead of arguing that the project would have an unmitigable health and safety impact on the adjacent park, the neighbors argued administratively, at the trial court, and at the Court of Appeal that the project should be denied because it did not comply with several General Plan and Community Plan guidelines that call for contextual development and massing moderation of tall towers. They also argued that the City should not approve waivers that contradicted the guidelines, and that the City should have approved a shorter and squatter development that had the same number of units but a smaller courtyard.

The Court began its analysis by noting that the neighbors had “sidestepped” the implications of the DBL, not discussing it at all in its opening brief and then dismissively claiming the DBL is not a “free pass.” The Court identified the narrow grounds by which a City can shrink or deny a DBL project and pointed out that the neighbors simply failed to make any arguments about that point.

It then went on to explain that the developer specifically requested concessions under the DBL that were germane to each of the General Plan and Community Plan guidelines the neighbors claimed the project did not comply with. The City Council expressly made a finding that there was no evidence to support the denial of the requested incentive, which the Court found to be determinative—acknowledging that the burden on this issue has now shifted to cities if they attempt to deny a project, not the developer proposing an incentive. It also concluded that the project’s waivers were correctly layered on top of the project with requested concessions, meaning a project qualifies for waivers based on its form with both the density bonus and the concessions.

The Court finally rejected the neighbors’ claim that the project’s design was not dictated by the density bonus and concessions, but by a large courtyard. It pointed out that this precise argument was raised and rejected in the Wollmer v. City of Berkeley case from 2011, one of the first cases analyzing the modern DBL. The San Diego City Council could not demand the developer remove the courtyard or redesign its building to satisfy the neighbors’ subjective concerns. The Court stated: “a city cannot apply a development standard that would physically preclude construction of the project as designed, even if the building includes ‘amenities’ beyond the bare minimum of building components.” It remains to be seen what qualifies as an “amenity” that can be baked into a project other than a courtyard, as both Wollmer and the San Diego case related to open space and courtyard amenities. And the evidentiary burden and procedural posture here were also the same as Wollmer: a city defending a project approval with amenities instead of making a project shorter or smaller by eliminating them. This issue may be ripe for further litigation.

The Newark case—Citizens Committee to Complete the Refuge v. City of Newark et al. (2022) ___ Cal.App. ___ (A162045, Alameda County Superior Court No. RG19046938)—and the San Diego case—Bankers Hill 150 et al v. City of San Diego et al (2022) ___ Cal.App. ___ (D077963, Super. Ct. No. 37-2019- 00020725-CU-WM-CTL)—are reminders that well-crafted CEQA documents, entitlement applications, and approval motions can help ensure new state laws meant to protect and streamline housing projects are accurately applied to a project.

 

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.

SB 7 Renews Expedited CEQA Review for Leadership Projects

| Kaitlin Sheber
SB 7

Titled the “Jobs and Economic Improvement Through Environmental Leadership Act of 2021,” SB 7 reenacts and revises expedited CEQA administrative and judicial review procedures for certain Environmental Leadership Development Projects (“Leadership Projects”) established by AB 900. The bill was introduced by Senator Atkins as an urgency measure and went into effect on May 20, 2021. Since enactment, large projects are again eligible to be certified as Leadership Projects, and a new category of smaller housing projects may now be certified. Requirements for each type of project are discussed below.

Examples of projects certified by the Governor as Leadership Projects in the past include the Apple Campus 2 project in Cupertino, the Golden State Warriors Event Center and Mixed-Use Development project in San Francisco, the Downtown West Mixed-Use Plan in San Jose, the Potrero Power Station project in San Francisco, and the Hollywood Center project in Los Angeles. Once the Governor certifies a project, it must be approved by its lead agency within a certain period of time.

By requiring CEQA challenges to Leadership Projects to be resolved in under a year, SB 7 aims to expedite construction for housing projects and boost high-wage employment with the prevailing wage requirements that are a prerequisite for receiving the benefits of SB 7. However, given the increased costs prevailing wage requirements add to projects, developers of smaller housing projects that are unlikely to be challenged in court may not find Leadership Project certification economical. How many smaller residential projects choose to opt in to the program is yet to be seen.

Environmental Leadership Development Projects:

Only certain development projects qualify to be certified as Leadership Projects. These projects include:

  • Large residential, commercial, retail, sports, entertainment, cultural, or recreational use projects that:
    • Result in at least $100,000,000 in investment
    • Create high-wage and highly skilled jobs that pay prevailing and living wages, provide construction jobs and permanent jobs for Californians, help reduce unemployment, and promote apprenticeship training
    • Are 15% more transportation efficient than comparable projects, i.e. that generate fewer vehicle trips per employee, visitor, or customer
    • Are located on an infill site
    • Are consistent with any local sustainable communities strategy or alternative planning strategy and applicable policies where the California Air Resources Board has accepted the strategy achieves Greenhouse Gas reduction targets
    • Meet other environmental standards, including no net new greenhouse gas emissions with an emphasis on on-site emission reductions
    • Provide unbundled parking for multifamily residential projects
  • Housing development projects that:
    • Would result in an investment between $15,000,000 and $100,000,000
    • Create high-wage and highly skilled jobs that pay prevailing and living wages, provide construction jobs and permanent jobs for Californians, help reduce unemployment, and promote apprenticeship training
    • Are located on an infill site
    • Are consistent with any local sustainable communities strategy or alternative planning strategy and applicable policies where the California Air Resources Board has accepted the strategy achieves greenhouse gas reduction targets
    • Meet other environmental standards, including no net increase in greenhouse gas emissions
    • Dedicate at least 15% of the project to lower income households or dedicate the percentage required by local government, whichever is higher
    • Do not provide short term rentals
    • Do not include industrial or manufacturing uses
    • Dedicate at least 2/3 of the square footage to residential use
    • Provide unbundled parking for multifamily residential projects
  • Renewable clean energy projects that generate electricity through wind or solar only

Qualifying projects must go through a certification process to become Leadership Projects. First, the Governor must determine the project meets each condition as required above. Second, the Governor must submit that determination to the Joint Legislative Budget Committee, along with any supporting information, for review and concurrence or nonconcurrence within 30 days. If there is no concurrence or nonconcurrence from the Joint Legislative Budget Committee within those 30 days, the project will be deemed certified. Typically, the entire process takes 3 to 6 months.

Extension of time and new requirements:

The following timelines are in effect under SB 7:

  • Leadership Projects must be certified by the Governor before January 1, 2024.
  • Leadership Projects must be approved by the lead agency before January 1, 2025.
  • The provisions of the bill will expire January 1, 2026.

Projects certified by the Governor before January 1, 2020 and approved by a lead agency before January 1, 2022 are subject to the former AB 900 requirements in place on January 1, 2020.

SB 7 has added requirements that eligible projects use a “skilled and trained” workforce for all construction work and project applicants pay all trial court costs in addition to court of appeal costs associated with hearing and deciding any case. The bill has also authorized the Governor’s Office of Planning and Research (“OPR”) to charge a fee to applicants. Given the additional requirements SB 7 has introduced for Leadership Project certification, it is unclear how feasible or desirable it will be for development projects, especially smaller housing development projects, to obtain Leadership Project certification going forward.

 

Authored by Reuben, Junius & Rose, LLP Attorney Kaitlin Sheber.

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.

Pending State Bills Seek To Boost Housing

| Thomas P. Tunny
House

This week’s update focuses on five pending bills in the State Legislature, all of which are intended to encourage housing development. These bills, if passed into law, could have a significant impact on housing production and real estate development in San Francisco. A typical mechanism in these bills for expediting housing production is to make the particular approvals ministerial, and therefore not subject to CEQA review.

Lawmakers were expected to return from summer recess on July 13th. Due to at least one Assembly member testing positive for coronavirus, the resumption of the summer session has been delayed until the end of this month. This year’s legislative session is slated to end on August 31, 2020.

AB 2580: Conversion of Motels and Hotels: Streamlining

California Assembly Bill 2580 would allow a ministerial, streamlined conversion of non-residential hotels and motels into multifamily housing. Among its provisions, this bill would establish a process for use by cities and counties, including charter cities and counties, for the complete conversion of a non-residential hotel or motel into multifamily housing units that is streamlined, ministerial and not subject to a conditional use authorization. Because conversion of non-residential hotels and motels into multifamily housing would be a ministerial approval, such conversions would not require CEQA review.

San Francisco has approximately 34,000 hotel rooms in more than 200 hotels. In the short-term, the conversion of hotel rooms to residential could bolster the stock of smaller, affordable units. However, as the economy recovers, the loss of hotel space could dilute or erode convention/tourist facilities in key locations near regional transit. Tenant protections may limit the ability to covert back to hotel to meet future needs.

AB 2345 (Gonzales and Chiu): Density Bonus Expansion

California Assembly Bill 2345 would amend the State Density Bonus Law to provide additional options to qualify for State Density Bonus. Currently, a project may receive one, two or three incentives or concessions, depending on the amount and levels of on-site affordable housing. Projects providing 100% affordable housing may receive four incentives or concessions, but are not eligible for waivers given that density limits are waived. This bill would provide an option to receive four or five incentives and concessions for projects in which greater percentages of the total units are provided for lower income households, very low income households, or for persons and families of moderate income in a common interest development. In addition, when providing the additional affordability specified above, the project is entitled up to a 50% bonus. The bill would also authorize an applicant to receive six incentives or concessions for projects in which 100% of the total units are for lower income units, as specified. The bill would also provide one incentive for Student Housing Projects that are 20% affordable.

Due to San Francisco’s high inclusionary requirements, projects that provide onsite inclusionary housing may qualify for a larger bonus than 35%. A typical rental project would qualify for a 37.5% bonus and if located in a carve out area (North of Market Residential Special Use District, the Mission Area Plan, or the SOMA Neighborhood Commercial Transit District) may receive a 50% bonus.

AB 3040 (Chiu): Allow Cities to Permit up to Four Units on Single-Family Home Parcels

California Assembly Bill 3040 would allow jurisdictions to rezone parcels currently occupied by single-family homes for ministerial approval of up to four housing units, and to count these sites toward up to 25% of the housing units the jurisdiction must accommodate for its share of the Regional Housing Needs Assessment (RHNA). Because projects on these parcels would be designated for ministerial approval, CEQA review would not be required. The projects would still be subject to design review; however, local development standards applicable to the site cannot impede the development of four dwelling units. Covenants or other private provisions that prohibit or restrict the number of units would also be void. Single-family home sites counted toward the RHNA site inventory as potential four-unit sites must have been certified for occupancy at least 15 years ago.

In San Francisco, over 40% of the city’s residential land is zoned for single-family homes (RH-1 zoning) and single-family homes occupy lots in additional areas of the city. Under this bill, San Francisco would choose where to allow four-unit buildings on single-family home parcels and likely would consider factors like access to transportation, neighborhood services, parks, and schools as well as historic status.

SB 1120 (Atkins, Caballero, Rubio, and Wiener): Subdivisions

California Senate Bill 1120 would authorize ministerial approvals of either or both (i) a housing development of two units and/or (ii) subdivision of a parcel into two equal parcels. To use this bill, the subject parcel would need to be zoned for residential uses and in a single-family zoning district. Certain hazardous, protected parcels or currently occupied parcels could not take advantage of this bill. Projects could not result in the demolition of 25% or more of existing exterior walls, a parcel smaller than 1,200 square feet, nor provide short-term rentals. CEQA would not be required. Objective requirements may be applied, provided the requirements do not prohibit the project.

In San Francisco, approval processes for subdivisions and for new housing are discretionary and as such, require CEQA review. By making these projects ministerial, CEQA would not be required and the projects would be approved upon meeting the objective requirements. This would speed the entitlement process and limit the Department’s ability to apply design guidelines.

SB 902 (Wiener, Atkins): Allow Cities to Permit up to 10 Units on Infill Sites in Transit-Rich or Job-Rich Areas

We have previously updated readers on Senator Weiner’s Senate Bill 902, or ‘SB 50 Lite’. This bill would facilitate the passage of local ordinances to allow multifamily buildings with up to 10 units on qualifying parcels. The bill would not require any changes to existing zoning but could allow for faster passage of ordinances by removing the need for potentially time-consuming and costly CEQA review. A large portion of the city’s parcels would likely qualify for rezonings under this bill should the city’s elected officials choose to pass them. SB 902 was passed out of the Senate in late June, and is now being considered in the Assembly.

We will continue to monitor these bills, and will update readers accordingly.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

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.