New State Condo Law Allows Reduced HOA Assessments for Designated Affordable Units

| Jay Drake

We are following up on a previous update where we discussed Assembly Bill 572.  After undergoing a few amendments in the State legislature, the Bill passed and became effective January 1, 2024.  AB 572 amended Section 5605 of the California Civil Code, which is part of the Davis-Stirling Common Interest Development Act. The amended law, with certain exceptions, prohibits a homeowners association (HOA) that records its original declaration (CC&Rs) on or after January 1, 2025, from imposing an increase of a regular assessment on the owner of a deed-restricted affordable housing unit that is more than 5% plus the percentage change in the cost of living, not to exceed 10% greater than the preceding regular assessment for the HOA’s preceding fiscal year. In a significant break from previous State law and regulations, a qualifying HOA may impose an assessment against an owner of a deed-restricted affordable housing unit that is lower than the assessment imposed against other unit owners according to the proportional ownership of total subdivision interests subject to assessments.  This change would appear to allow an HOA to require market-rate unit owners to subsidize affordable unit owners with respect to payment of certain HOA assessments. The new law is not all encompassing.  As stated above, it only applies to new common interest developments that record their original CC&Rs on or after January 1, 2025.  It also does not apply to any of the following: A development of 20 units or fewer. A development where the percentage of the units that are deed-restricted affordable housing units exceeds the percentage required by an applicable zoning ordinance in effect at the time the development received final approval. A development that is located within a city, county, or city and county that does not have an applicable zoning ordinance requiring a percentage of deed-restricted affordable housing units and meets either of the following conditions: The percentage of the units that are deed-restricted affordable housing exceeds 10 percent of the total number of units in the development at the time the development received final approval. For certain other developments that were approved for streamlined processing pursuant to Section 65912.124 of the Government Code, the percentage of the units that are deed-restricted affordable housing exceeds 15 percent of the total number of units in the development at the time the development received final approval. The well-intentioned law is designed to protect owners of designated affordable housing units from large increases in HOA assessments.  Owners of affordable housing units are typically low or moderate income and large increases in HOA assessments can be a financial burden, and can jeopardize their ability to afford the HOA assessments along with the monthly mortgage and other costs of home ownership. Critics of the new law argue that it could lead to disproportionate financial burdens on homeowners who cannot afford to subsidize others as well as create inequities and divisions within the community by identification of a class of affordable housing or low-income owners, which could lead to resentment among other owners. Critics also point out that the law may undermine the ability of HOAs to raise the necessary funds to maintain the community by limiting assessment increases for all owners in the HOAs effort to avoid unequal assessments, resulting in artificially low budgets, and/or deferred maintenance and repair obligations.  Artificially low assessments could eventually require multiple special assessments to fund HOA budget shortfalls. Authored by Reuben, Junius & Rose, LLP Attorney Jay Drake. 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.

Ninth Circuit Overturns Natural Gas Ban

| Alex Klein

Can cities and states really ban natural gas hookups? On January 2, 2024, the Ninth Circuit handed down a decision in California Restaurant Association v. City of Berkeley finding that Berkeley’s natural gas ban was preempted by federal legislation and struck the ordinance down. In 2019, the City of Berkeley adopted first-of-its-kind legislation amending the city’s building code to prohibit the use of natural gas in virtually all newly constructed buildings, with some limited exceptions. Berkeley’s ordinance was originally enacted with the goal of curbing greenhouse gas emissions and encouraging all-electric infrastructure in the city. Soon after its enactment, however, the California Restaurant Association sued, arguing that the ordinance was preempted by the federal Energy Policy and Conservation Act (EPCA). The EPCA, enacted by Congress in 1975, provides a comprehensive scheme for federal energy regulation. For the purposes of this lawsuit, however, the statute also governs federal regulation of consumer goods using natural gas. Under the EPCA, these consumer goods are referred to as “covered products.” Under the EPCA, once a federal energy conservation standard is adopted for a covered product, state and local governments are prohibited from further regulating the product with some minor exceptions. The district court, which first heard the case back in 2019, was largely favorable to Berkeley’s arguments that the ordinance was not preempted by federal law. After rejecting the city’s motion to dismiss the California Restaurant Association’s suit, the district court interpreted the EPCA narrowly so that the Act would not “sweep into areas that are historically the province of state and local regulation.” [i] The district court concluded that the EPCA was not preempted because the ordinance did not explicitly regulate or mandate the installation of any particular product or appliance, and because the ordinance’s effect on consumer products was “at best indirect.” [ii] The majority for the Ninth Circuit disagreed with the lower court, explicitly abandoning the district court’s limited reading of the EPCA’s preemption statue. As the majority at the Ninth Circuit observed, following the plain language of the EPCA, once the federal government adopts an energy conservation standard for consumer products covered by the EPCA, state and local governments are limited in their ability to further regulate those products. At the appeals court, Berkeley had argued that the EPCA’s concern with covered products should be understood narrowly to exclude the distribution of natural gas. But the court was unpersuaded. An inherent aspect of regulating covered consumer products under the EPCA, the majority observed, is whether those products can access natural gas at all. Therefore, the EPCA must preempt local and state regulations like Berkeley’s natural gas ban affecting natural gas supply to those covered products. But, as the court opined, the EPCA’s scope is not infinite and the statute may not preempt state or local regulation of a utility’s distribution of natural gas. At the appeals court, Berkely had also argued that a finding that the city’s natural gas ban was preempted by the EPCA would necessarily repeal the Natural Gas Act, a comprehensive ban and federal regulatory scheme for the sale of natural gas. The Court, however, did not find any implied preemption because the Natural Gas Act only restricts the Federal Energy Regulatory Commission’s ability to regulate local distribution of natural gas, and therefore did not implicate the EPCA. This ruling leaves other California jurisdictions with similar natural gas bans, such as San Francisco, San Jose, and Los Angeles, in an awkward position and will likely temper efforts by other jurisdictions to adopt similar bans. The case, though, is widely expected to be appealed to the Supreme Court, which may address the extent of the EPCA’s preemption of local gas regulation in the years to come. [i] Cal. Rest. Ass’n v. City of Berkeley, 547 F. Supp. 3d 878,891 (N.D. Cal. 2021). [ii] Id.

rezoning

Palo Alto Adopts Bold Upzoning

| Alex Klein

Palo Alto recently reached a new housing milestone. On November 13, Palo Alto’s City Council adopted a legislative package implementing rezonings originally proposed in the City’s still uncertified sixth cycle Housing Element. In addition to increasing density and height limits on specific parcels across Palo Alto, this rezoning effort will unlock multi-family residential development on certain properties zoned for industrial or commercial uses. The City Council’s action comes after a year marked by Palo Alto’s inability to adopt a compliant Housing Element. After missing its state mandated January 2023 deadline, Palo Alto adopted a Housing Element in March. But HCD, the state agency tasked with ensuring local compliance with Housing Element Law, rejected the City’s March Housing Element forcing City planners to go back to the drawing board. A second round of Housing Element legislation passed in May but to little avail. During its review process, HCD again refused to certify Palo Alto’s Housing Element. In a letter sent to the City’s Planning Department in early August, HCD requested Palo Alto make various modifications before it would certify the City’s Housing Element, citing concerns that the City’s site inventory was insufficient. Consequently, as of the time of this publication, Palo Alto’s Housing Element is out of compliance with state law and the City may be vulnerable to further Builder’s Remedy projects. With the adoption of this legislative package, the Palo Alto City Council seeks to appease HCD in the hope that the agency will finally certify the City’s Housing Element. In addition to modest upzoning across the city, the enacted legislation focuses on rezoning parcels identified as housing opportunity sites in the City’s Housing Element. These identified opportunity sites are primarily clustered around a handful of the City’s major transit corridors, including properties along the west side of El Camino Real between Page Mill and Matadero Avenue (the “El Camino Real Focus Area”), commercial and industrial properties near San Antonio Road and Fabian Way (the “GM/ROLM Focus Area”), and certain sites owned by Stanford University along El Camino Real and Pasteur Drive. These changes come as affected property owners and lessees along El Camino Real have expressed increasing interest in redeveloping their properties to accommodate new housing. Under the adopted rezoning package, opportunity sites identified in the City’s Housing Element will be rezoned to allow multi-family housing as a permitted use and will enjoy higher density and height limits compared to base zoning. The upshot is that industrially zoned properties located in the GM/ROLM Focus Area will allow multi-family housing as a permitted use, maximum height increases, and FAR maximum increases from 0.5 to 2.5 within the focus area and 1.5 on other opportunity sites. Because these densities would represent the “base” density, developers could leverage the rezoning and use the State Density Bonus Law to construct even taller and denser buildings. Properties located in the GM/ROLM Focus Area will also enjoy modified development standards, including a relaxed landscape coverage standard, reduced parking requirements, and taller height limits further easing constraints on development and leading to more housing in Palo Alto. Sites identified as part of the City’s El Camino Real Focus Area will also enjoy higher densities, height limits, and lot coverage maximums. But, in response to local concerns, these projects will also face new headwinds. Residential development on these properties will be subject to architectural review to meet either objective design standards or context-based design criteria and would be required to provide 20% below-market rate housing at 80% AMI, an increase from the City’s typical requirement of 15%. Finally, responding to demands from Stanford University, Palo Alto’s City Council also adopted higher density zoning regulations for university owned properties along El Camino Real and Sand Hill Road. Even though Palo Alto will count housing built on Stanford campus toward its RHNA, the university intends to develop these parcels with subsidized housing for graduate students, faculty, and other Stanford employees. Beyond the focus areas identified as part of the Housing Element update, however, the rezoning also relaxes design and development standards for certain exclusively residential projects intended to accommodate lower income households across the City. Palo Alto’s recent rezoning legislation presents opportunities across Palo Alto to develop more residential housing in one of the most expensive communities in the Bay Area.   Authored by Reuben, Junius & Rose, LLP Attorney 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.

sale

Local Governments Given Broad Power to Authorize ADU Sales

| Michael Corbett

As recently as last month, existing state law prohibited the sale of accessory dwelling units (“ADU”) from being sold or conveyed separately from the primary residence, except under specific circumstances where the ADU was built or developed by a qualified nonprofit corporation and held pursuant to a recorded tenancy-in-common agreement meeting certain requirements. Thanks to new state legislation – and depending on the city – the right of property owners to sell ADUs separate from primary residences has been considerably broadened. Drafted by Assemblyman Phil Ting (D-San Francisco) and signed into law on October 11, Assembly Bill 1033 provides a path forward for participating cities to adopt legislation authorizing the purchase and sale of ADUs as condominiums, regardless of whether the contractor was a qualified nonprofit or the manner in which the property is owned. The following summarizes the requirements of AB 1033 and provides guidance for homeowners in utilizing this change in law. With respect to the construction of ADUs, Government Code § 65852.2 allows local agencies, by ordinance, to provide for the creation of ADUs in areas zoned for single-family or multifamily dwelling residential use. Among other requirements, any such ordinance must (i) designate areas within the jurisdiction of the local agency where accessory dwelling units may be permitted, (ii) impose certain objective standards on ADUs (such as parking, height, setback, landscape, architectural review, and maximum size), (iii) provide that ADUs do not exceed the allowable density for the lot upon which the ADU is located, and (iv) require ADUs be for residential use consistent with the existing general plan and zoning designation for its lot. AB 1033 now allows cities to adopt ordinances that authorize the sale of ADUs – constructed in compliance with Gov. Code § 65852.2 – as condominiums, provided such ordinances meet the following requirements: (1) The condominiums are created pursuant to the Davis-Stirling Common Interest Development Act, the state’s statutory scheme governing residential condominiums. (2) The condominiums are created in conformance with all applicable objective requirements of the Subdivision Map Act, which governs subdivision mapping, and all objective requirements of applicable local subdivision ordinances. (3) Before recordation of the condominium plan, a safety inspection of the ADU must be conducted, evidenced either through (i) a certificate of occupancy from the local agency or (ii) a housing quality standards report from a building inspector certified by the United States Department of Housing and Urban Development. (4) Each lienholder of the applicable property must consent to the recording of a subdivision map and condominium plan before either of those documents may be recorded. With respect to lienholder consent, a lienholder may (i) refuse to give consent, or (ii) give consent provided that any terms and conditions required by the lienholder are satisfied. (5) Prior to recordation of the condominium plan (or any amendments thereto), written evidence of the lienholder’s consent must be provided to the county recorder along with the following signed statement from each lienholder: “(Name of lienholder) hereby consents to the recording of this condominium plan in their sole and absolute discretion and the borrower has or will satisfy any additional terms and conditions the lienholder may have.” (6) The lienholder’s consent must be included on the condominium plan or a separate form attached to the condominium plan (and include certain information required by statute), and must be recorded in the office of the applicable county recorder. (7) The local agency must also include a statutory notice to consumers on any ADU submittal checklist or public information issued describing requirements and permitting for accessory dwelling units.[1] (8) If an accessory dwelling unit is established as a condominium, the local government must require the homeowner to notify utility providers of the condominium creation and separate conveyance. (9) For owners of a property or a separate interest within an existing planned development with an existing association, as defined in Section 4080 of the Civil Code, such owners may not record a condominium plan without the written authorization by the association. Under AB 1033, an ADU may be sold or otherwise conveyed separate from the primary residence where the above conditions are satisfied. While this is certainly an encouraging development in the fight to overcome the state housing crisis, many questions remain. AB 1033 will only be as effective as the cities that choose to adopt the necessary legislation providing for the separate conveyance of ADUs as condominiums. As of this writing, the City of Santa Monica has passed a resolution directing staff to draft a conforming ordinance for consideration. No city has yet enacted an AB 1033-compliant ordinance. Beyond the issue of city participation, the appetite of lienholders to consent to the mapping and sale of ADUs as condominiums is unclear. If the condominiumization of ADUs were to reduce the value of the principal residences acting as a secured asset, lenders may decline consent or grant consent while imposing onerous conditions on property owners. Further, the market for the sale of ADUs as condominiums is an unknown quantity. It may prove difficult for property owners to sell ADUs as a condominium separate from a primary residence, and vice versa. Purchasing either interest would also subject owners to the rules and regulations applicable to homeowners’ associations, which can prove tricky for small, two-member associations, particularly when disputes arise. Homeowners looking to sell ADUs should contact their local city officials and request information regarding the prospects for local adoption of an ordinance now authorized pursuant to California Government Code § 65852.2. If you have any questions or would like to discuss the mechanics and implications of AB 1033, please contact Michael Corbett from Reuben, Junius & Rose, LLP, at 415.567.9000 or mcorbett@reubenlaw.com. [1] See Gov. Code § 65852.2(a)(1)(10)(E) for the required notice.   Authored by Reuben, Junius & Rose, LLP Attorney Michael Corbett. 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

Increased State Density Bonus Available Next Year

| Sabrina Eshaghi

As we’ve previously covered, Governor Gavin Newsom signed a substantial amount of housing bills into law this year. Two of the most notable pieces of legislation will significantly increase the state density bonus permitted under state law and will make noteworthy changes to SB 35. Below is a more in-depth look at the amendments to the State Density Bonus Law as well as an overview of the potential impacts of the amendments to SB 35 in San Francisco. AB 1287 – State Density Bonus Law Beginning on January 1, 2024, AB 1287 will allow an additional 20% to 50% density bonus on top of the existing maximum bonus for projects that provide additional affordable housing units. Currently, the maximum density bonus allowed under the State Density Bonus Law is 50%, which can be accomplished by providing 15% very low income, 24% low income, or 44% moderate income units. The new amendments will allow projects that qualify for a 50% bonus under the current law to provide additional very low income or moderate income affordable housing units in exchange for an additional density bonus based on the sliding scale shown below. For example, a project that provides an additional 5% very low income units, for a total of 20% very low income units, would be subject to an additional 20% bonus, for a total bonus of 70%. The only limit placed on projects that utilize this additional density bonus is that no more than 50% of the total units can be restricted as affordable. The amendments also allow up to four concessions for projects that include a total of at least 16% of the units for very low-income households or at least 45% for moderate income households in for sale developments. The bill also makes some tweaks to the requirements for 100% affordable housing projects that are proposed under the State Density Bonus law. SB 35’s Future in San Francisco SB 35 is a state law that offers streamlined ministerial approval for projects in cities that haven’t met their Regional Housing Need Allocation (RHNA) goals in exchange for providing affordable housing and agreeing to certain labor requirements. SB 423, which will take effect on January 1, 2024, includes a number of amendments to SB 35, as discussed in detail here. San Francisco is currently falling short of meeting its RHNA goals for low income housing, but not above moderate income housing. So, in order to qualify for SB 35, a project in San Francisco must provide at least 50% of its units (not including units granted via a density bonus) to low-income households. However, due to the increase in the state’s housing production goals allocated to San Francisco for the current RHNA cycle (2023-2031), it is anticipated that the City will not meet its goals for above-moderate housing in the next reporting period. If the California Department of Housing and Community Development makes that determination next summer, then a rental project will qualify for SB 35 streamlining by providing 10% of its units as affordable to very low income households or 20% of its units to low income households. An ownership project can qualify by providing 10% of its units as affordable to low income households. SB 35 allows for ministerial approval, meaning it eliminates environmental review under CEQA and discretionary entitlements from the Planning Commission. It also imposes a maximum 6-month time frame for approval of planning entitlements. If San Francisco becomes a “10% jurisdiction,” it could unlock the ability to pursue projects that are otherwise cost-prohibitive due to long processing and approval timelines. Together, SB 35 and the new additional density bonus could significantly spur housing development in San Francisco next year.   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.  

public works dbi

Permit Process Improvements

| Gillian Allen

In recent months, City agencies have been working hard to improve review and issuance timelines for permits. This update focuses on the way that San Francisco Public Works (“Public Works”) will review releases for building permit applications (“BPAs”) filed after September 1, 2023 and upcoming changes from the San Francisco Department of Building Inspection (“DBI”) to improve process. Public Works Public Works has formally created a series of information sheets that help applicants include the necessary information to have the most streamlined review possible as well as obtain releases for building permits with scopes of work that qualify. We have summarized the changes below, but for the complete process, check out their “What’s New” page. Currently, when a BPA is routed by DBI to Public Works, the Public Works plan checker will determine which Public Works permits are required for construction or occupancy of the public right-of-way. The applicant for the BPA is notified of the corresponding Public Works permit(s) required as a result of the proposed construction or occupancy. At that time, the BPA is placed on hold by Public Works and a note detailing the permit requirements are added to the DBI’s Permit Tracking System (PTS) by the Public Works plan checker. The hold on the BPA will remain in place until the applicant submits the appropriate Public Works permit applications and the Public Works plan checker has performed a detailed engineering review of the application(s), which, due to current staffing, can often delay the issuance of the building permit. “Recognizing the importance of timely issuance of building permits, Public Works has evaluated and identified procedural reforms to allow for construction on private property, associated with BPAs, to commence while associated public right-of-way infrastructure, other construction and/or occupancy permit applications under the purview of Public Works are under review. It is vital that Public Works safeguard the public right-of-way, while at the same time establishing design review standards to allow for the timely release of BPAs that meet established minimum criteria. To accomplish this important goal, Public Works has created minimum submittal requirement tiers based on the BPA scope of work.” Projects that fall under Tiers I and II will be eligible for early BPA release. Tier II requires BPA plans show minimum information as required by Public Works, detailed in their “MINIMUM STANDARDS FOR DESIGN REVIEW FOR BPA RELEASE” and in “PLAN CHECKER VERIFICATION LIST FOR BPA RELEASE” which starts at page 11 of the Minimum Standards for design review for BPA release memo. A plan checker may request additional information to clarify specific items shown on BPA plans. If plans do not meet the minimum standards for review, the applicant shall resubmit revised plans to meet those standards prior to receiving a BPA release from Public Works. Public Works has worked hard to create clear guidelines to improve the release process for building permits and we have found it to be working well over the last few weeks that it has been in process. Sincere thanks to all the public servants who collaborated to make this happen. DBI DBI has been doing an excellent job of catching up on their intake project backlog and recently announced that starting January 1, 2024, all intake review permits will be electronically reviewed. Electronic Plan Review has proven to save time on project review and it also saves customers money. Learn more about how to submit plans using Bluebeam Electronic Plan Review here. Additional Electronic Plan Review information is located here, and specific information for how to use Bluebeam on a Mac is here. DBI is also developing a concierge plan review service for over-the-counter paper review that will focus on projects needing more than an hour of review but less than four hours of review. They are hoping to implement this service in early 2024 and we will update you on this exciting option as soon as it is available.   Authored by Reuben, Junius & Rose, LLP Manager, Post Entitlement Division Gillian Allen. 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 1033

AB 1033 – How to Implement New State ADU Condominium Law

| Casita Coalition

New! Casita Guidance for Establishing Local ADU Condo Ordinances As of January 1st, 2025, the ban on separate sale of ADUs will be lifted in state law. Cities and counties who want to opt in and allow these entry-level homeownership opportunities through separate sale of ADUs as condos will need to update their municipal codes. The Casita Coalition and Reuben, Junius, and Rose, LLP have developed this guidance to assist and encourage local agencies in establishing procedures and policies to re-enable Californians priced out of many of our communities to once again have a dream of buying a home, by enabling more naturally affordable condominiums for sale. Download Memo

exemption

Transfer Tax Waiver Proposed by Mayor

| Kaitlin Sheber

Last week, Mayor London Breed proposed a ballot measure aimed at encouraging conversion of office to residential use in San Francisco’s Downtown by eliminating transfer tax for certain converted residential space. The measure would complement the Commercial to Residential Adaptive Reuse Program, effective as of August this year, which we previously provided an overview of on April 19, 2023. Currently, the City’s Transfer Tax is as high as 6% for transactions over $25 million (Article 12-C, San Francisco Business and Tax Regulations Code (the “Transfer Tax”)). If approved by the voters, any deed, instrument, or writing that effects a first transfer of converted residential property, that would have been subject to the Transfer Tax, is exempt from the Transfer Tax. However, the exemption only applies up to the first 5,000,000 square feet of converted residential space. Above the 5,000,000 gross square feet limitation, the Transfer Tax would apply to the proportional value of or consideration for the property, based on the floor area over 5,000,000 square feet. Under the ballot measure, converted residential property is the property or portion of property that received a first certificate of occupancy after conversion from nonresidential property to residential property (“Converted Residential Property”), and meets the following requirements: Either (1) the first development application for conversion is approved or (2) the first site or building permit is issued, before January 1, 2030. Note, in cases where there is an appeal, the approval/issuance must be upheld before January 1, 2030; A certificate is requested from the Planning Department, before January 1, 2030, showing the square footage of the proposed conversion, to be within the 5,000,000 square foot limitation (“Qualifying Certificate”); A first construction document is received within three years after final approval of the conversion; and At the time of the transfer, the gross floor area of the improvements divided by the lot area is at least one. Those who seek to claim the proposed Transfer Tax exemption must take the following steps: Request, after final approval of the property conversion, a Qualifying Certificate; Request an exemption certificate from the Planning Department for each transfer for which an exemption will be claimed; and For each exemption claimed for each transfer, submit the exemption certificate to the recorder at the time the Transfer Tax Affidavit is submitted. According to the Mayor’s Office, 30 million square feet, or 34% of the office market, is currently vacant in the City. The proposed ballot measure aims to assist projects on the edge of financial feasibility through elimination of tax that would be due on the sale of a converted building. Voters will decide whether to approve this proposed ballot measure at the upcoming March 5, 2024 election.   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.

legislation

2023 Housing Legislation Round-Up

| Justin A. Zucker

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

planning

San Francisco Entitlement Streamlining Legislation Faces Legislative Hurdles

| Daniel J. Turner

As previously reported in August, San Francisco is currently considering a major overhaul of its Planning Code that would revise, relax, and simplify many of the city’s complex zoning and development controls. The legislation, aptly named the Housing Production – Constraints Reduction Ordinance, would affect over 30 sections of the Planning Code, ranging from reducing required setbacks to relaxing demolition controls and notice requirements. As part of the legislation process, the City’s Planning Commission reviewed the ordinance in late July and gave its approval 4-2-1 with a few minor modifications. It then came before the Board of Supervisors Land Use and Transportation Committee (LUTC) on September 18th to be reviewed, discussed, and amended, if necessary. This committee review is a necessary hurdle before the legislation can be presented to the full Board of Supervisors and voted on. Although some were hopeful of the ordinance passing in its current form, it met strong opposition from both supervisors and members of the public. The hearing began with Planning Department staff recommending a number of corrective amendments, including some that re-added various conditional use requirements that the legislation originally proposed to remove. During the over four hours of public comment, members of the public expressed concerns about reduced notice requirements, loss of rent-controlled housing, and a loss of neighborhood character from simplified development controls. The three supervisors on the committee echoed these sentiments, expressing great concern over many of the proposed changes. Notably, many members of the committee were not convinced that relaxing and making development standards more uniform, such as setbacks and height limits, would produce more housing, and felt that, instead, it would simply lead to a loss of neighborhood character. It was stated multiple times that zoning fixes should focus on large-scale projects, while many of the proposed changes were seen to mostly benefit one and two-unit developments. The supervisors were also critical of the changes to notice requirements and demolitions controls, citing worries over reduced public participation and the loss of rent-controlled housing, respectively. The hearing ended with Supervisor and LUTC President Melgar stating that she had been planning to introduce numerous amendments based on community feedback. The LUTC also agreed that there was a need to formalize the amendments proposed by Planning and the Mayor, and to incorporate many of the changes discussed during the meeting. The legislation was continued for two weeks, although it remains to be seen if the amendment language will be ready by then. If said amendments are considered substantive, the legislation would need to go back to the Planning Commission, then return to the LUTC before finally going before the full Board of Supervisors. The ordinance is open to further amendment at each step of the way, and it seems that many of the provisions intended to simplify the development process are now at risk of being weakened or removed. With Planning Commission’s blessing of the legislation and San Francisco’s looming RHNA requirement to build 82,000 new housing units over the next eights years, some were hopeful that the legislation would move quickly through the City’s legislative bodies; however, last week’s hearing proved there’s a long road ahead for the Housing Production – Constraints Reduction Ordinance.   Authored by Reuben, Junius & Rose, LLP Attorney 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.

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