Update on Density Bonus: a Strong Development Tool Gets Stronger

On June 2, 2021, partners Amara Morrison and Todd Williams of the Wendel Rosen Land Use Practice Group went live to discuss legislative changes to the California Density Bonus Law in an hour-long virtual webinar. Click here to watch the full webinar.

Used as a potent tool to tackle today’s housing crisis, the Density Bonus Law serves as an incentive for developers to offer both market-rate and affordable housing which is critical in meeting the State’s severe housing unit shortfall.

What is the California Density Bonus Law, and Who Qualifies?

A density bonus is an incentive-based method that permits a developer to increase the maximum allowable residential density on a site in exchange for producing a requisite amount of affordable housing.

Prior to 2021, residential projects in California with on-site affordable housing could obtain a density bonus of up to 35% under Government Code section 65915 et seq., known as the Density Bonus Law. As a result of AB 2345 (effective January 1, 2021), all California jurisdictions must approve up to a 50% density bonus if a project meets increased affordability requirements as noted below. Housing projects must provide a specific percentage of affordable housing in the “base” portion of their project to obtain a density bonus.

Now that the basics are covered, who qualifies for a density bonus?

As stated above, obtaining a density bonus is most commonly done by including a certain percentage of affordable units in the base project (i.e., complying with maximum permitted density) of development. If there is a conflict between the density permitted by the General Plan and permitted by applicable zoning, the General Plan density prevails.  Meeting at least one of the following affordable housing criteria would automatically entitle a project to a density bonus:

• Five percent of units are affordable to very low-income households (incomes with 50% or less area medium income (AMI). This applies to both rental or for-sale projects.
• Ten percent of units are affordable to lower-income households (incomes with 80% or less of median AMI). This applies to rental or for-sale projects.
• Ten percent of units are affordable to moderate-income households (120% of AMI). This only applies if the project is a common interest for-sale development.

Qualifying projects for senior housing (35 units or greater) are entitled to a 20% density bonus.  Although rare, both land donations and the provision of a childcare facility can result in a density bonus. The donation must be large enough to accommodate 10% of market-rate units at a density suitable for very low-income housing. However, a childcare facility is only eligible if included in a project that already qualifies for a density bonus.

Due to recent changes in the law, there are also a few new ways to qualify for a density bonus:

• A 20% density bonus is afforded if 10% of units are for transitional youth, disabled veterans, or the homeless. A 35% percent bonus is given to those projects which set aside at least 20% of their units for low-income students.
• Finally, an 80 % density bonus is permitted if 100 percent of all units are used for lower-income households and located within ½ mile of a major transit stop.

A developer does have geographic liberty as to where the density bonus exists in relation to the affordable units on the property. As long as the density bonus exists on a contiguous site, it does not need to share the same parcel of land although many local agencies have specific regulations requiring the affordable units to be dispersed throughout the project.

What are the restrictions?

Restrictions within the Density Bonus Law reinforce equity as they protect against displacement of current occupants.  The Density Bonus Law also severely limits the ability of local agencies to deny a bonus as well as certain incentives and development standard waivers. Such regulations include the following:

• Affordable rental units must remain affordable for at least 55 years.
• Affordable ownership units must remain affordable to the initial occupants.
• The replacement of affordable housing is mandatory if the base project is demolished and the density bonus is ineffective until the affordable units are reestablished with equivalent size units.
• Local agencies have virtually no discretion to deny a density bonus as long as one meets the basic qualifications specified above.
• Applicants are not required to apply the entire bonus to their project.
• The granting of density bonus, concession or waiver (discussed below) do not require amendments to the general plan or zoning, or any other discretionary approval.

Concessions/Incentives

Under Government Code section 65915(d) and (k), qualifying density bonus projects are eligible for a limited number of “concessions and incentives” in order to reduce site development standards or zoning code, architectural design requirements (e.g., setbacks, parking requirements, and open space requirements). The number of incentives/concessions is dependent upon the amount of affordable housing provided.

Developers are eligible for incentives or concessions that result in “identifiable, and actual cost reductions, to provide for affordable housing.” For example, one concession may allow for the reduction in the amount of required open space for a project if that reduction will result in cost savings that will help provide for the affordable units in the project.

The Density Bonus law also permits applicants/developers to request a waiver of any development standard that would have the effect of “physically precluding the construction” of the qualifying density bonus project (e.g., a height restriction).  Applicants may submit unlimited requests for waivers of development standards, so long as they can demonstrate that such waivers are needed in order to construct the project.  Most importantly, if a court finds a local agency’s denial of a concession, incentive, or waiver is unjust, the plaintiff shall be awarded attorney’s fees and costs of the suit.

Finally, all density bonus projects qualify for reduced parking requirements. Recent amendments to the Density Bonus Law rewards those housing projects within close proximity of major transit stops by helping to reduce the high cost of providing parking in connection with housing projects.

• If the project has at least 20% low income, or 11% very low-income units, and is within ½ mile of a transit stop with unobstructed access to the project, the local agency shall not impose a parking standard greater than 0.5 spaces per unit;
• No parking requirements may be imposed if the housing project is 100% low-income and located within ½ mile of a major transit stop, or senior housing with paratransit or within ½ mile of bus route operating 8x per day; and
• No parking requirements may be imposed if the housing project is 100% low income and the development is a special needs housing development or supportive housing development with paratransit or within ½ mile of a bus route running 8x per day.

The Density Bonus Law is to be interpreted liberally in favor of producing the maximum number of total housing units. The latest legislative changes are targeted to reward applicants with up to a 50% bonus and to reduce or eliminate burdensome parking requirements for projects near transit. In a nutshell, as the number and depth of affordable units increase, so will the density bonus. These recent changes have made the Density Bonus Law and even stronger tool for developers who are willing and able to include affordable housing into their projects.