Leveraging Recent State Legislation to Maximize Housing Production: A Study of AB 1287’s Technical Changes to State Density Bonus Law

Robin Baral, Hanson Bridgett LLP

As the Marin County Civil Grand Jury acknowledged two years ago, the “[l]ack of affordable housing is a problem throughout Marin County.” (1) Fast forward to this year, more than 50 housing-related bills intended to address California’s housing crisis have now become state law. The bills were designed to reduce barriers to housing production and incentivize the development of more affordable housing. One of those bills, AB 1287 (Alvarez), promotes housing production by amending State Density Bonus Law to enable developers to receive an additional density bonus that can double the allowable density increase on an eligible site.

State Density Bonus Law is a proven tool for facilitating greater certainty in the local approval process and entitling projects that are financially feasible to construct.

State Density Bonus Law is codified under Government Code section 65915. The law requires cities and counties to award a density bonus above a project’s maximum allowable residential density provided the developer agrees to build a certain percentage of low-income, very-low-income, senior citizen, moderate-income, or student housing units.

The bonus amount is based on the percentage of affordable units allocated for the housing project:

For very-low-income units, setting aside 5% of the allowed units results in a 20% density bonus, and setting aside 15% of the allowed units results in a 50% bonus.

For low-income units, the developer must set aside a higher number of units, starting with 10% of the allowed units for a 20% density bonus; or up to 24% of the allowed units for a 50% bonus.

For moderate-income units, the spread increases further: 10% of the allowed units results in a 5% density bonus; and if up to 44% of the allowed units are reserved for moderate-income households, a bonus of up to 50% must be awarded.

State Density Bonus Law applies to both multifamily sites and single-family subdivisions, and to rental and for-sale units, although the substantive requirements vary considerably based on the type of development proposed. Overall, State Density Bonus Law has established

(1) June 24, 2022, Affordable Housing: Time for Collaboration in Marin an extremely effective framework for providing greater certainty to developers during the entitlement process, particularly when coupled with the Housing Accountability Act (Gov. Code § 65589.5), as amended by SB 330, and the bevy of other recent amendments to state housing law.

Existing law provides a significant boost in project density, but the affordable housing set asides are still too high to be feasible in most jurisdictions.

Under previous law, if a project site could accommodate up to 20 units under existing zoning, that 20-unit total would have entailed the "maximum allowable residential density" (for purposes of calculating the required set-aside of affordable units and the allowable density increase). If 15% of those 20 units were allocated to very-low income households, the city or county reviewing the project would be required to award a 50% density increase – this would have ultimately allowed up to 30 units to be developed onsite (of which, three would need to be set aside for very-low income households). For moderate-income households, however, to receive the same density increase, the developer would have needed to set aside 44% of the 20 base units to receive a 50% density bonus resulting in 30 total units.

Affordable housing set asides under State Density Bonus Law must also be applied toward any applicable local inclusionary housing requirements. Cities and counties cannot require the affordable units provided under State Density Bonus Law in addition to local inclusionary requirements.

Despite these benefits, current headwinds on development due to rising costs of insurance, construction, developer fees, and labor have resulted in density bonus projects remaining infeasible in most jurisdictions. This is exasperated when the macroeconomic headwinds are combined with the impact on project financing and limited financial returns from setting aside significant portions of a project for affordable housing. obin R. Baral has more than a decade of xperience practicing land use, environental, and water law He applies his nvironmental knowledge to help clients evelop permitting strategies for new and merging technologies He is particularly illed at providing strategic counsel in gislative and regulatory mandates, ranging from housing policies to water management, waste disposal, and recycling requirements

AB 1287 amends the State Density Bonus Law to be even more favorable to developers.

As of January 1, 2024, AB 1287 amended State Density Bonus Law by requiring cities and counties to award an additional (or second) density bonus for projects that have already allocated the maximum amount of affordable housing for very-low-income, low-income or moderate-income units.

Now, if a project allocates at least 15% of the base units to very low-income units, 24% of the base units to lower-income households, or 44% of the base units to moderate-income households, the city or county must grant the developer an additional density bonus if additional set-asides are made for either verylow income or moderate-income households.

The second density bonus is also provided on a sliding scale, depending on the percentage of units allocated to the respective type of housing. However as shown in the table below, the ratios are more favorable to developers.

Going back to the 20-unit example, if a project first allocates 15% of the maximum allowable residential density for very-low-income households, that project will be eligible for a 50% increase in density. This would allow for a total of 30 units, with three units set aside for verylow-income households. If the same project also set aside 15% of the 20-unit base for moderateincome units, it would be eligible for an additional 50% bonus. This would allow for a total of 40 units (with three units set aside for very-low-income households, and three units set aside for moderate-income households). As a result, the developer would be awarded a total bonus of up to 100% over the maximum allowable residential density. Note, however, that AB 1287 caps the affordable set aside at 50%. For projects that allocate the maximum of moderateincome units (44%), they would only be eligible to set aside another 6% of very-low-income or moderate-income units to receive an additional bonus of 23.75% or 22.5%, respectively.

AB 1287 awards additional concessions and amends State Density Bonus Law to conform to recent judicial opinions.

In addition to facilitating greater project density, State Density Bonus Law requires cities and counties to award a specified number of "concessions or incentives" based on the amount of affordable housing provided by the project. Concessions are defined as "reductions in site development standards, the incorporation of mixed uses on the project site, or any other regulatory incentives proposed by the developer that result in identifiable and actual cost reductions to a project." Under AB 1287, the amount of concessions that may be awarded is increased to four concessions for projects that include at least 16% of the units for very-low-income households, and five concessions for projects that set aside 100% of the units for lower-income households.

Apart from providing additional concessions, AB 1287 amends the State Density Bonus Law to memorialize recent judicial opinions that limit the amount of information that local governments may require to determine whether concessions or waivers of development standards are in fact needed to achieve project cost savings or to physically accommodate the project at the higher density proposed by the developer. (See Schreiber v. City of Los Angeles (2021) 69 Cal.App.5th 549; Bankers Hill 150 v. City of San Diego (2022) 74 Cal.App.5th 755.)

It remains to be seen whether AB 1287 will help to alleviate California's housing crisis.

AB 1287 is intended to provide another tool to developers to encourage the production of both market-rate and affordable housing to address the state’s housing crisis. It remains to be seen, however, whether AB 1287 will facilitate more housing applications throughout Marin County and the state. Broader market forces such as higher interest rates, construction, and insurance costs continue to be a drag on housing entitlement applications. AB 1287, however, can effectively scale up a project to address those broader headwinds, in addition to the other pathways under State Density Bonus Law that may continue to be leveraged. Developers and local agencies with questions regarding the application of State Density Bonus Law are encouraged to contact the authors of this article and Hanson Bridgett’s Land Use Group.