Governor Brown recently signed AB 2222 into law, which amends key provisions of the State Density Bonus Law. AB 2222 requires developers to replace all pre-existing affordable units on a property in order to qualify for density bonuses, incentives and waivers provided by the State Density Bonus Law. AB 2222 also extends affordability restrictions established in connection with density bonuses from 30 years to 55 years.

The State Density Bonus Law

Government Code sections 65915 and 65915.5 require cities and counties to provide density bonuses, incentives, and waivers to new housing developments that include certain percentages of affordable units. Density bonuses benefit developers by authorizing construction of units that would otherwise exceed the maximum allowable density under the existing zoning and development standards. Incentives and waivers also benefit developers by providing site flexibility through reductions in setback, floor area, parking and other requirements.

Cities and counties must grant a number of density bonuses and incentives when a developer includes a certain percentage of affordable housing in a housing development project. The amount of the density bonus and the number of incentives allowed depends on the percentage of affordable units set aside in the new development. Thus, if current zoning and development standards allow construction of 60 units for a particular project, and the project development application allocates at least 10% of the total units for “low-income” households, the project would qualify for a density bonus of 20%, authorizing construction of 12 additional units, and one incentive or concession. Cities and counties have discretion to grant additional incentives to facilitate the provision of affordable housing under the State Density Bonus Law.

Key Provisions of AB 2222

AB 2222 was designed to prevent housing developers from obtaining density bonuses for new development of existing properties that result in the overall onsite reduction of affordable units. For example, if a developer acquired a 48-unit multifamily property in which 24 of those units were affordable, AB 2222 was designed to ensure that new development of that property would result in at least 24 onsite affordable units in order to qualify for the incentives provided by the State Density Bonus Law.

To address this concern, AB 2222 prevents a housing developer from seeking a density bonus and incentives unless the new development maintains the existing onsite number and proportion of housing units serving low and very-low income households. In addition to any recorded affordability covenants, any units that are actually occupied by low or very-low income households must be preserved in order to qualify for a density bonus. This requirement also applies to affordable dwelling units that have been vacated or demolished in the five-year period preceding the application for new development. Therefore, if an existing property contains 48 total units, and 36 units are actually occupied, or were formerly occupied and now abandoned, by low and very-low income households, a new development would require at least 36 units to be affordable to low and very-low income households in order to qualify for a density bonus and incentives.

AB 2222 also extends the affordability restrictions from 30 years or longer to 55 years or longer for all affordable rental units that qualify an applicant for a density bonus. Replacement rental units are also subject to affordability restriction for at least 55 years.

Changes under AB 2222, however, do not apply to any applications submitted before January 1, 2015.

Conclusion

AB 2222 ensures that residential units affordable to low and very-low income households are not lost to new projects that are developed under the State Density Bonus Law. By extending the affordability restrictions, however, AB 2222 may reduce the ability for developers to rely on the State Density Bonus Law if projects are no longer economically feasible under the current market conditions for affordable housing. If AB 2222 applies to your project, you should strongly consider submitting your development application prior to January 1, 2015.

For more information on this bill or other related matters, please contact Barbara A. Brenner.