Tag: Density Bonus Law

COURT HOLDS DENSITY BONUS LAW PROHIBITS CITIES AND COUNTIES FROM REQUIRING PROOF THAT PROJECTS WILL BE “ECONOMICALLY” INFEASIBLE WITHOUT REQUESTED CONCESSIONS AND WAIVERS

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The density bonus law (Gov. Code, § 65915) requires cities and counties to allow increased building density, and development incentives and waivers of permit requirements, in exchange for the applicant’s agreement to dedicate a specified number of dwelling units to low or very-low income households. In Schreiber v. City of Los Angeles (2021) 69 Cal.App.5th 549, the Second District Court of Appeal held that the City of Los Angeles’ municipal code is preempted by the state density bonus law to the extent that the city’s code requires an applicant to prove that the concessions it requests under the density bonus law are needed to make the affordable-housing component of the project financially feasible.

The case involves a mixed-use development in the City of Los Angeles, with retail uses on the ground floor and residential units above. Absent concessions and waivers, the city’s zoning code would limit the site’s development to three stories, a height of 45 feet, and a maximum of 40 units. Under the density bonus law, however, the applicant proposed to develop a seven-story building, with 54 units, including five very-low income units and five moderate income units.

Prior to the city planning commission’s first hearing on the project, the California Legislature passed Assembly Bill No. 2501 (AB 2501), which amended the density bonus law to prohibit local governments from conditioning their review or approval of an application under the density bonus law “on the preparation of an additional report or study that is not otherwise required by law.” (Gov. Code, § 65915, subd. (a)(2).) AB 2501 clarified, however, that local agencies are not prohibited from “requiring an applicant to provide reasonable documentation to establish eligibility for a requested density bonus, incentives, or concessions.” (Ibid.) It also clarified that the term “study” does not include “reasonable documentation to establish eligibility for the concession or incentive or to demonstrate that the incentive or concession meets the definitions” set forth in the density bonus law. (Gov. Code, § 65915, subd. (k).)

Based on AB 2501, the city’s planning department advised that financial pro formas and third-party reviews can no longer be required. Although the applicant had provided financial information regarding the project, in response to city staff’s interpretation of AB 2501, the applicant stated that he would not be providing a pro forma for the project.

Following a hearing, the city planning commission approved the project, including the requested density bonus. The planning commission also approved two “off menu” incentives (increased floor area and maximum height) and two waivers (transitional height and rear yard set back requirements).

The plaintiffs, residents of a nearby single-family home, filed a petition for writ of mandate alleging that the city misinterpreted the density bonus law. In particular, the plaintiffs argued that the city erred in granting the off-menu incentives because the applicant had not submitted financial information showing that the incentives were needed to make the project economically feasible—information that, the plaintiffs observed, was required under the city’s municipal code. The trial court denied the petition and the court of appeal affirmed.

The appellate court explained that under AB 2501’s amendments to the density bonus law, a local government cannot condition its approval of incentives on the preparation of a report that is not otherwise required by law. The city’s municipal code, however, provided that a request for an off-menu incentive must include a pro forma or other documentation showing that the incentive is needed to make the affordable-housing component of the project economically feasible. The court held that the city may not require information that an incentive is necessary to make the project economically feasible because that information is not needed to show that the project is eligible for the incentive. Rather, the “economically feasible” language in the city’s municipal code was based on a prior version of the statute, which required applicants to show that an incentive was necessary to render the affordable units economically feasible. That requirement, however, had been removed from the statute in 2008. Because the city code conflicted with state density bonus law, the court held that the city code is preempted to the extent that it requires an applicant to demonstrate that a requested incentive is needed to make the project economically feasible.

The case provides helpful guidance regarding the documentation that local agencies may require in processing a request for incentives and waivers under the density bonus law. The case clarifies that an agency may not require an applicant to prove that the requested incentives and waivers are necessary to make the affordable-housing component of a project economically feasible. The court’s reasoning in the case is consistent with the requirement that the density bonus law be “interpreted liberally in favor of producing the maximum number of total housing units.” (Gov. Code, § 65915, subd. (r).)

First District Court of Appeal Strikes Portion of Local Ordinance for Conflict with State Density Bonus Law

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On July 11, 2013, in Latinos Unidos Del Valle De Napa Y Solano v. County of Napa (2013) __Cal.App.4th__ (Case No. A135094), the First District Court of Appeal issued a partially published opinion addressing the County of Napa’s local density bonus ordinance. The appellate court determined that a provision of the County’s local ordinance conflicted with the State Density Bonus Law and was invalid.

The state Density Bonus Law (Cal. Gov. Code, § 65915) provides incentives to encourage development of low, very-low income, and senior citizen housing developments. These incentives are generally granted in the form of density bonuses for qualifying projects. To ensure compliance, local governments are required to adopt ordinances establishing procedures for implementing the statute.

Napa County amended its density bonus zoning ordinance in 2010. The amended ordinance indicated that density bonuses described in Section 65915 would be granted at the request of the applicant if the applicant also met the local ordinance’s new “inclusionary requirement.” This new ordinance required up to 20 percent of new dwellings within a residential development project be made available at prices affordable to moderate-income households.

Plaintiffs argued this new local ordinance required developers to include a higher percentage of affordable units than section 65915 requires to obtain a density bonus. The ordinance did so by excluding from the target units necessary to qualify for the density bonus those units necessary to satisfy the county’s inclusionary requirement. Thus, for example, under the wording of the county’s ordinance, a developer would only qualify for a density bonus if it restricted 22% of the project units to lower-income households. Under the state law, a density bonus is available if a developer agrees to restrict at least 10% of the project’s units to lower-income households. The court agreed that the county ordinance impermissibly placed a greater burden on developers than is permissible under the state law.

The court cited Friends of Lagoon Valley v. City of Vacaville (2007) 154 Cal.App.4th 807, where the court had previously determined that Section 65915 sets forth the maximum density bonus a city is required to provide (35 percent), but not the maximum amount a developer can ever obtain. The court noted in Friends of Lagoon Valley that because the aim of Section 65915 is to provide incentives to developers to construct low income housing, a local government could exercise its discretion to award density bonuses greater than those described in Section 65915. In this case, however, the requirements of the county’s ordinance represented the opposite situation. The county argued that the language of Section 65915 implied the county had discretion to set the (higher) minimum requirements to quality for a density bonus. The court disagreed and found that neither the language of the statute nor its legislative history supported such an interpretation. The court found that allowing local governments to increase the minimum number of affordable units required for a density bonus would directly conflict with Section 65915, subdivision (f), which bases the amount of density bonus on the percentage of affordable housing units in the project. The appellate court concluded that the provision in the county’s ordinance stating that units satisfying the inclusionary requirement do not count towards the number of units necessary to qualify for the density bonus was invalid due to this conflict with state law. The court directed that a writ of mandate be issued striking down this requirement in the ordinance.