2023 Legislation at a Glance – Part 1

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.

California Increases Density Bonus to 50%

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.

SB 1085 Emerges from Crucial Committee Vote

Affordable Housing

SB 1085 Clarifies that Affordable Housing Fees Do Not Apply to Affordable or Density Bonus Units

When Senator Nancy Skinner introduced Senate Bill 1085 (SB 1085) in February, the bill proposed numerous revisions to the state Density Bonus Law. Many were geared toward incentivizing the development of moderate-income rental housing, including a 35% density bonus for projects that provide at least 20% of the units affordable to moderate-income families, concessions, and reduced parking requirements. The bill also limited cities’ ability to deny requested concessions, limited parking ratios for certain senior housing projects, and allowed concessions for student housing projects. Of particular interest to developers with projects in San Francisco, SB 1085 clarified that “[a]ffordable housing impact fees, including inclusionary zoning fees, in-lieu fees, and public benefit fees, shall not be imposed on a housing development’s affordable units or bonus units.”

SB 1085 was passed by the full Senate in late June, after which it moved to the Assembly.

On July 30, the Assembly Committee on Housing and Community Development approved SB 1085 conditioned on Senator Skinner amending the bill to remove the incentives for development of moderate-income rental units. These amendments were encouraged by affordable housing advocacy groups that argued the incentives would cause a reduction in the supply of low-income and very-low income units. The prohibition on imposing Affordable Housing fees on affordable or Density Bonus units remains in the bill.

The City of San Francisco imposes an Affordable Housing Fee on Density Bonus units. Many practitioners believe that the imposition of these fees on Density Bonus units is fundamentally incompatible with the Density Bonus Law. In April 2019, Attorney General Xavier Becerra issued an Opinion that bolstered this view, concluding that the imposition of a “public benefit fee” on Density Bonus units reduced the benefits that the Density Bonus Law is intended to promote, and was therefore invalid. While the Attorney General’s Opinion addressed fees imposed only on the Density Bonus units, most practitioners understood its reasoning would also preclude generally-applicable Affordable Housing fees that were being applied to Density Bonus units. SB 1085 would make it explicit that Affordable Housing fees cannot be applied to Density Bonus or affordable units.

The Committee’s approval of SB 1085 with the language limiting fees could be interpreted as a promising sign, given that Assembly Member David Chiu, a former San Francisco Supervisor, chairs the Committee. The bill must be approved by the full Assembly and the full Senate by August 31 to make it to the Governor’s desk in 2020. The San Francisco Board of Supervisors remains opposed to the bill.

 

Authored by Reuben, Junius & Rose, LLP Attorney Matthew D. Visick.

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.