As previously reported, the Downtown Oakland Specific Plan (“DOSP”) is working its way to the City Council for adoption, currently anticipated in late 2022. The DOSP includes Zoning Amendments (which we’ve previously reported on) and a Zoning Incentive Program (“ZIP”). Initial details for the ZIP were released earlier this summer (which we’ve previously reported on). Below are additional details regarding the ZIP based on the economic analysis reports prepared by Hausrath Economics Group, dated August 2022 and September 16, 2022, in addition to recent community meetings on September 13 (presentation slides) and on September 19 (presentation slides).
The ZIP was developed in response to community concerns to allowing development downtown without obtaining community benefits. The ZIP allows developers to voluntarily elect to provide community benefits, in one of four forms, to increase allowed development capacity, either additional market-rate dwelling units or commercial space. The four on-site community benefits options include providing (1) affordable housing, (2) below market-rate ground floor commercial space, (3) public restrooms, or (4) streetscape, open space and flood control improvements exceeding basic city requirements. Alternatively, the ZIP includes the option to provide community benefits through payment of an in-lieu fee instead of providing on-site benefits, or some combination of on-site benefits and an in-lieu fee.
The ZIP is a voluntary program that creates additional value for a development project with the City capturing a portion of the value increase. The increase in value from the additional, higher-intensity development is calculated as the difference in value of development under the maximum intensity zoning compared to the base zoning. The value is expressed in dollars per building square foot of added development for commercial and dollars per dwelling unit added for residential.
As currently analyzed, the ZIP is structured so that a third of the additional value from the more intense development is captured in the form of a community benefit. The remaining two-thirds is split with one-third to the developer to incentivize development at increased intensity and a third to the owner to account for increased resulting land value, which in turn results in increased property taxes. During recent community meetings, there has been discussion of adjusting this formula to increase the City’s value capture share.
In creating the incentive, the ZIP considers the costs and economic variables specific to development types, i.e., change from Type III or V (mid-rise/low-rise) to the more costly Type I (high-rise) construction. Properties with large increases in density supporting high-rise development over mid-rise/low-rise projects can have lower value capture per additional dwelling unit or per additional building square foot due to higher costs involved. To account for this, the ZIP establishes three Zoning Incentive Areas that reflect similar market contexts, development patterns and potentials, parcel sizes, and existing land uses. There are three areas each for residential development (map) and commercial development (map), with R-A, R-B, and R-C zones for residential and C-A, C-B, and C-C for commercial development.
The ZIP incentive areas allow additional density ranging from 11% to 800% more density with 65% of cases more than doubling density. The large density bonus accounts for increased costs associated with change in construction typology to Type I for high-rise development.
Based on location, a commercial development could obtain an additional 100,000 sf of office space with the provision of below market ground floor commercial space totaling 6,828 sf (Zone C-A), 4,655 sf (Zone C-B), or 3,724 sf (Zone C-C).
The ZIP is available to a developer in lieu of or in addition to the State Density Bonus set forth in Government Code Section 65915, et. seq. Meaning, a project could layer the State Density Bonus on top of the ZIP to increase development intensity. In instances when the ZIP and State Density Bonus are used in tandem, the project’s ZIP development intensity is the base density not the underlying base zoning density.
The DOSP and ZIP are slated to return to the Zoning Update Committee (“ZUC”) before advancing to the Planning Commission and City Council. While previously schedule to return to the ZUC on September 29, that hearing has been cancelled to allow additional public meetings. The ZUC hearing has not yet been rescheduled. We will continue to track this significant rezoning and community planning effort as it moves forward.
Reuben, Junius, & Rose LLP has experience with entitlement projects and land use diligence throughout Oakland, and we are pleased to have worked on some of the largest housing projects approved in the city over the last several years.
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.