State Density Bonus Laws / Inclusionary Zoning / Community Benefits — David Loya presentation
Arcata’s Director of Community Development David Loya has provided this video presentation of the various affordable housing programs. It is about 15-1/2 minutes long. It’s dated July 28, 2023. To go directly to the video, click here.
See also here on Arcata1.com:
Affordability and Home Ownership for housing in Arcata
Selected articles on Affordability and Home Ownership
Density Bonus Laws explained — David Loya to the Planning Commission
In his Staff Report for the March 14, 2023, Planning Commission meeting (and then repeated for the March 27, 2023, meeting), Community Development Director David Loya provided a concise explanation of California’s myriad Density Bonus housing laws.
Significant Information
- “And our design standards and Community Benefits programs are unlikely to be implemented due to waivers and concessions.”
Our design standards — the Gateway Form-Based Code — and the Gateway Community Benefits program are unlikely to be implemented. This is a significant view.
At ~14:00 on the video. Highlighting added.
- The State Density Bonus for moderate-income housing, at 10%, is for home ownership only — and specifically not for rental units. In all previous conversations on Inclusionary Zoning in the Gateway Code, the notion that this moderate-income housing figure would only apply to home ownership — and not to rental units — was not brought up by Mr. Loya. It makes a world of difference.
As explained previously, if moderate income applied to rentals: “Moderate Income” is defined as 120% of the area median income — currently $67,450 for one person. The rent for a single person in that moderate-income studio apartment could be set at $1600 per month — that is, by law, 30% of what would be 120% of our area median income of $67,450. Currently (June 2023) a studio apartment in Arcata is about $1,000 per month (often including utilities). If this were the case, the so-called “Inclusionary Zoning” that is proposed would allow a premium of 60% above current rental prices — and still be called Inclusionary Zoning.
But now, from what David Loya says in this video, the moderate income level for the Inclusionary Zoning in the Gateway Code only applies to homeownership situations, and does not apply for the rental market.
- By including 10% or 17% (or more) of Low-Income rental units, the developer can obtain one or two (or more) concessions from the City — and the developer chooses the concessions that are wanted.
At ~7:00 on the video. Highlighting added.
The Video Presentation
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Hello, I’m David Loya. I’m the Director of Community Development with the City of Arcata. And I would like to talk with you today about three programs that result in affordable housing in new development.
I’ll be covering the State Density Bonus law, the City’s Community Benefits program for the Gateway Code, and the Inclusionary Zoning program that’s proposed for the Gateway Code as well.
I’m going to talk a little bit about the features of each of these programs and how they interact and overlap, and the relative effectiveness of each one given that overlap.
00:40
We’re going to start with the Inclusionary Zoning program. Inclusionary Zoning is a regulatory requirement that provides income restricted units, and these could either be for sale or for rent. This program would apply in addition to all the other standards in our zoning code, so any other regulating standard that is required of the Gateway Code would still apply under the Inclusionary Zoning. The Community Benefits program would also apply given the Inclusionary Zoning.
Now, the Inclusionary Zoning would only trigger with projects that are posing 30 units or more. That threshold has been set by the Planning Commission to make it high enough so that smaller projects aren’t required to provide Inclusionary Zoning which would impact the revenue stream and make those projects potentially not feasible. We’ve seen that in Arcata before when the Inclusionary Zoning requirement was low. We had projects that could have been proposed but weren’t proposed unless the City was participating financially. And so 29 units is the most units you can build under the current proposal without having to provide affordable units.
The specifics of the Inclusionary Zoning program that are recommended by the Planning Commission, our 4% of the units would be provided for very-low income households, those are households earning less than 50% area median income, or it can be met by providing 9% of the units to low income households, those households earning less than 80% area median income. You can also meet this requirement once you get above 30 units by providing 9% of the units affordable to moderate income if it’s a For Sale project. So less than 120% area median income. Those are the key features of Inclusionary Zoning.
2:49
The Community Benefits program was also developed to provide affordable housing as one of the optional benefits that projects could select to meet the criteria for principally permitted approvals. So as you’re aware, the Gateway Code is structured such that if you provide high density housing, you meet the objective standards of the Code, and you provide Community Benefits, then you are ministerially approved, or principally permitted. Some of those Community Benefits are for affordable housing. And I’ll describe those to you now.
So the Community Benefits affordable housing program is an elective incentive. It allows the developer to both meet the Community Benefits requirement and also provide affordable housing. And it applies in addition to all other standards in the Code. And obviously the Community Benefits program also applies here. So you’re actually selecting a Community Benefit by providing this affordable housing. It applies to any project regardless of the number of units. So even if the Inclusionary Zoning program isn’t triggered — your project is less than 30 units — you could still select the Community Benefits program to provide affordable housing. And to accomplish that — to get those points for that community benefit — you either need to provide 10% above the Inclusionary Zoning requirement. Which if you’re less than 30 units, the Inclusionary Zoning requirement is zero, and so you would be required to provide 10%. If you’re above the Inclusionary Zoning threshold of 30 units, you would be providing a minimum of 14%. Or if you had a 100% affordable project, where all of the units were reserved for lower income households, you would be able to meet that Community Benefits program threshold.
So those are the key features of the Community Benefits program as they relate to affordable housing.
4:49
Next let’s take a look at the State Density Bonus program. And this program is a lot more complex, so I’m going to spend a little bit more time on it. Density Bonus has been around for decades, but recent improvements to the program in 2019, 2021, and 2022 have really incentivized the use for developers to tap into the State Density Bonus. Again, this is not a regulatory program. It’s optional. It’s a Statewide incentive program. The standards regulating development may be waived at the project proponent’s request, and we’ll look at that in a little more detail in a moment. And Community Benefits program could also be waived at the proponent’s discretion as a concession or an incentive as defined under State Density Bonus.
State Density Bonus can apply to any project size, so it doesn’t have to cross the 30 unit threshold. In fact, it doesn’t even have to cross the maximum density in a given zone. But generally, that’s what happens — Is that a developer would provide as much housing as it could provide under the City’s density laws, and then it would create more density go above that density or go above that building height using Density Bonus.
The way that you obtain the Density Bonus is that, at a minimum, you provide 5% of the units restricted to very-low income households, or 10% of the units to low income households. This is for a rental project or an ownership project. Or you can meet it by creating 10% of the units for moderate income households. [Note: This is 10% moderate income restricted to For Sale units, likely.]
6:30
Now you’re starting to see a parity between the Inclusionary Zoning program and the Density Bonus program. And you can see where there might be some overlap there, because those numbers and the income levels are similar. We’ll take a look at that in a minute.
But right now, I want to focus on these two features, which are unique to the State Density Bonus program. With State Density Bonus, the developer can achieve concessions or incentives, a total of one through four, depending on the income level that they are providing in the project, and total percentage of those units that are restricted at that income level. So you can see that a developer can obtain one concession for providing 5% very-low income housing, or 10% low income housing, or 10% moderate income and this is restricted for For Sale units. Now the City is required to grant the concessions if a developer provides 10% very-low income, then they are entitled to two concessions. And the developer gets to pick which those concessions are. The City is required to grant those concessions — unless certain circumstances apply. And sort of the two that I want to focus on here are that the City can prove that it doesn’t result in a cost reduction, or that creates a health and safety hazard.
Now, you can imagine, the “does not create a cost reduction” is a pretty high threshold for the City to prove. If a developer wants to use State Density Bonus and wants to reduce or eliminate the recreation fee for new construction — the funds that we collect to support parks and develop and maintenance — and that total comes out to $100,000, and they say “I don’t want to pay that $100,000 as my concession,” it would be very difficult for the City to prove that it’s not a cost reduction to eliminate $100,000 from the cost of the project. So you can see that the developers have a lot of latitude in the way that they apply these incentives and concessions. And the Housing Community Development Department for the State has really supported developers being able to use these concessions broadly.
8:48
Now concessions range. They can include impact fees; reduction or elimination of dedication requirements; modification of design requirements — the list can go on. Anything that costs the developer money can be looked at as a concession.
Okay, let’s focus on waivers for a moment. These are pretty broad. The developer again gets to choose which standards to waive. And they can be any objective standard that’s in the code or any standards that’s in the code: Building height; setbacks; we’ve been talking about having upper floor step-backs — they could waive those. Site coverage, design, the list goes on. There’s no limit to the total number of waivers that they can request.
All that the developer has to demonstrate is that the number of units they’re applying for through the State Density Bonus law — and the number can be considerable, the increase in the total development can be considerable –all they have to show is that that number of units can’t be built given the requirement. So if they can show that they’ve maxed out the building height that we’ve said is allowable under the Code, and that gets them their core density. And they would like to to provide more units, they’re allowed to exceed our building height. If the step-back, if they can show that that step-back, they’re not able to provide the units they’re proposing to provide, they say, “I’m not providing a step-back on this project.” And we say, “You’re right, you’re not — We’re going to apply the State Density Bonus here.” So we don’t have a lot of discretion there.
So those are really important tools that the State has given to developers if they provide affordable housing.
10:26
So let’s look at the overlap between these because the different projects, the different programs, were developed with different objectives in mind — different core purposes, different reasons. And so we want to look at how the overlap between these programs affects each of those programs.
But just in review, the Gateway Code Inclusionary Zoning has a threshold of 30, that triggers at 30. And you would be required to provide 4% very-low income housing or 9% low income housing, or if it’s an ownership project 9% are reserved for moderate income.
The Gateway Code Community Benefits program provides that you — and I’m going to focus just on the increase over Density Bonus program here, not the 100% Affordable program — but the 10% over the Inclusionary Zoning requirement would arrive at either 10 to 14% very-low income, depending on if the Inclusionary Zoning requirements were triggered. So at a minimum, it’s 10%; if Inclusionary Zoning is triggered that additional 4% is added to it. And this can be applied at the developer’s discretion, regardless of unit size. That can also be satisfied by providing 10 to 19% low income, similarly adding on the 10% up to the 9% included for Inclusionary Zoning, or 10 to 19% for moderate income if it’s a homeownership project.
Moving on to State Density Bonus, there is no threshold again, there’s no trigger. But you are able to apply it if you get 5% very-low income, 10% low income, or 10% in a moderate income ownership project. You can see at the using this table that there’s 100% overlap between the Gateway Code Community Benefits program and the State Density Bonus law. Once you elect to provide the Gateway Code Community Benefits, you’re at a minimum providing 10% very-low income, for example, which is above the 5% for State Density Bonus. Similarly 10% for low income is at the minimum for State Density Bonus for low income and moderate income projects. So there’s 100% overlap between those two.
If someone were to come in and say “I’m going to use your Gateway Code Community Benefits program. I’m going to provide 10% very-low income housing.” They would also say “I’m going to apply State Density Bonus law and take concessions and incentives.”
13:03
So how do those concessions, incentives, the waivers – how do those impact the work that we’ve been doing with the Gateway Code, where we’re requiring certain standards to be applied to these new projects or requiring Community Benefits to be applied to these projects — when the State Density Bonus law can simply remove those requirements? How much should we overlap our Inclusionary Zoning program. The Planning Commission made a recommendation to fall just short of the State Density Bonus law for Inclusionary Zoning, which is why you see these low numbers: 4%, 9%, 9%. As has been stated, some jurisdictions have much higher requirements for Inclusionary Zoning. If a project proponent is proposing a project where they are above the threshold for 30 units, and they’re required to provide 4% very-low income, for example, they would likely say “I’m going to provide one more percent” — which may not make a difference in the total number of units, but one more percent affordable units – “And I’m going to trigger the State Density Bonus law. And I’m going to take my waivers and concessions.”
14:12
And so project proponents will be driven by the Density Bonus provisions. And our design standards and Community Benefits programs are unlikely to be implemented due to waivers and concessions.
So again, the overlap between these programs ultimately under on undermines some of the program’s purposes. If we create too much overlap, then people are going to take the Density Bonus and they are going to not take our Community Benefits program. They’re going to take waivers from the standards that we’ve set up. And we are going to have little to say about it as a community.
So it’s important to think about this as we’re going in and designing these programs to decide whether we want to create 100% overlap are less, and realize the implications of creating that overlap.
I hope this video has been informative and helped you to better understand these three programs and the relationship between them. And I hope this furthers the discussion that we’ll be having in the near future on how to implement these programs in our new codes.
Thanks so much for watching, and appreciate seeing you at our [upcoming meetings.]