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California Governor Signs Into Law 31 New Housing Bills

Brownstein Client Alert, December 2, 2021

California’s housing shortage is decades old and getting worse. Housing supply is limited and increasingly less affordable in the Golden State due to pressures such as population growth, high land costs, NIMBYism and significant regulation applicable to new development. California ranks among the three states with the highest rate of renters compared to owners, and over the past decade, housing development in California grew by only 5.2%, according to census data. By comparison, housing development grew by over 15% in Utah and Texas and nearly 10% in Florida, Nevada and Arizona.

Gov. Gavin Newsom signed 31 housing bills in this year’s legislative cycle, evidence of not only the extent of the crisis but also the multipronged approach that decisionmakers in Sacramento believe is critical to expand housing production, streamline permitting and increase housing density. The bills generally fall into one of the following categories: holding local governments accountable for producing housing, creating incentives for the production of new homes, breaking down barriers to build more affordable housing and addressing systemic bias in housing. This client alert outlines two of the bills that received the most attention, Senate Bill (SB) 9 and SB 10, and provides a summary table of all 31 housing bills. While SB 9 and SB 10 generated more headlines, many of these other bills create important requirements for local agencies, restrictions on discriminatory housing covenants, and financial and streamlining incentives for housing developers.

Senate Bill 9

Summary

SB 9, signed by Gov. Newsom on Sept. 16, allows lot splits and/or the development of duplexes on single-family-zoned parcels to be approved ministerially (i.e., without discretionary approval or hearings) if certain requirements are met. Consequently, such projects would bypass the California Environmental Quality Act (CEQA) process. Theoretically, this could allow for up to four residences where there was historically only one (if an applicant receives ministerial approval for both a lot split and the development of duplexes on each parcel). However, the impact of SB 9 in practice will vary significantly by region. In addition to permitting the development of new housing, this bill could create new homeownership opportunities in California, setting it apart from previous legislation that authorized the development of accessory dwelling units (ADUs) in single-family residential zones.

Requirements

To be eligible for a ministerially approved lot split under SB 9, a parcel or lot must:

not be located in a historic district, high fire zone area or rural area,
be a minimum of 2,400 square feet,
not result in a parcel that is smaller than 40% of the original parcel, and
not be subjected to demolition or alteration of affordable housing, rent-controlled housing, housing that was withdrawn from rent within the last 15 years or housing occupied by a tenant (market rate or affordable) in the past three years.

To be eligible for a ministerially approved duplex construction under SB 9, the project must not involve:

a property located in a historic district or urbanized area or urban cluster,
demolition of more than 25% of the existing exterior walls of an existing dwelling unless (a) the local agency chooses to allow otherwise, or (b) the site has not been occupied by a tenant in the last three years, and
demolition or alteration of affordable housing, rent-controlled housing, housing that was withdrawn from rent within the last 15 years or housing occupied by a tenant (market-rate or affordable) in the past three years.

Limitations

SB 9 includes measures to prevent displacement, including:

A lot split cannot require the demolition or alteration of a housing unit currently serving moderate-, low- or very low-income households or rent-controlled units.
A lot split cannot result in the demolition or alteration of housing that has been occupied by a tenant in the last three years or where an owner has used the Ellis Act to remove a rental from the market within the last 15 years.
For lot splits, local agencies must require owner-occupancy of one of the housing units for a minimum of three years.
Local agencies must require that any rental units created as a result of SB 9 must be for a term of 30 days or more (i.e., no vacation rentals).

The bill also ensures that lots created as a result of SB 9 cannot be further split and the same person cannot perform a lot split on adjacent lots.

Local Control Implications

As with many state housing laws, there is a tension with jurisdictions wishing to maintain local control. SB 9 allows local jurisdictions to impose objective zoning, subdivision and design review standards and require a setback of up to four feet. However, local jurisdictions may not impose standards that would preclude the construction of up to two units, or physically preclude either of the two units from being at least 800 square feet in floor area. Local jurisdictions may require up to one off-street parking space in certain scenarios. Finally, local agencies maintain the authority to prohibit ADUs on parcels that have been split and developed with two-unit development under SB 9.

Potential Impacts

An analysis of SB 9 conducted by the Terner Center at University of California, Berkeley found that the bill “could enable the creation of over 700,000 new homes that would otherwise not be market feasible” on 410,000 single-family parcels. The analysis found that only 110,000 of these parcels would be “newly feasible,” meaning that SB 9 would change the development feasibility of a relatively small number of parcels. The analysis also found that SB 9 is unlikely to lead to significant demolition of existing single-family homes and that duplexes would be the most dominant form of financially feasible development (i.e., it is unlikely that three- and four-units will come to dominate single-family-zoned neighborhoods). The impact of SB 9 and the development feasibility also varies widely by region. For example, while Santa Barbara County has 75,399 eligible lots under SB 9, this bill is only estimated to result in 10,000 new feasible units. Based on the Terner Center analysis, in the case of Santa Barbara, this discrepancy would be due largely to the challenge of recouping the investments with market-rate rentals or sales.

Senate Bill 10

Summary

SB 10, also signed by the governor on Sept. 16, allows but does not require jurisdictions to develop and adopt an ordinance that increases the density of parcels in transit-rich areas or on urban infill sites to up to 10 residential units per parcel. Such an ordinance would be exempt from CEQA and must be adopted between Jan. 1, 2021, and Jan. 1, 2029.

Requirements

SB 10 requires that any ordinance adopted under its authority:

clearly identify the areas that are subject to the ordinance,
be consistent with the jurisdiction’s obligation to further fair housing,
be adopted by a two-thirds vote if the ordinance supersedes any zoning restrictions established through a local initiative, and
not reduce the currently zoned density of any parcel subject to the ordinance.

Limitations

While the rezoning of parcels under SB 10 is not subject to CEQA, any projects that result from the ordinance may still be subject to CEQA unless the local ordinance provides for ministerial processing or the project is exempted by another law or local ordinance. This may limit the impact of SB 10 and its ability to streamline the permitting of projects. Moreover, if an applicant seeks to build more than 10 units on a parcel after an SB 10 rezoning, the bill prohibits the project from qualifying for any other CEQA exemption, ministerial or by-right process. Finally, parcels in very high fire severity zones or on open space/recreational lands approved by the voters are not eligible for increased density under SB 10.

The below table provides a brief summary of all 31 new housing laws aimed at further boosting housing production in California. They are organized based on four key focus areas: local government accountability, incentives for housing production, incentives for affordable housing production and addressing systematic bias in housing.

Bill Number	Summary
Local Government Accountability
AB 68	Requires the California Department of Housing and Community Development to develop and publish on its website an annual report regarding grant programs administered by the department and land use oversight actions taken against local agencies related to housing.
AB 215	Revises the Planning and Zoning Law by placing additional procedural requirements on local agencies when adopting their housing elements and authorizing the attorney general to bring action against local agencies that fail to comply with the Housing Crisis Act of 2019 (streamlines housing project approval by restricting local governments’ ability to downzone and limits fee increases on housing applications).
AB 602	Places additional requirements on local agencies’ ability to impose housing fees including, but not limited to, (1) requiring a more robust procedure when conducting an impact fee nexus study, (2) requiring agencies that calculate fees proportional to the unit square footage have a valid method for balancing the fee charged and the burden posed, and (3) requiring local agencies to post written fee schedules on their websites.
AB 1304	Amends the procedural and substantive requirements set forth in the Planning and Zoning Law to ensure that housing elements are drafted and adopted in a manner to affirmatively further fair housing. Importantly, the law requires that local governments provide an analysis of the relationship of sites identified in the housing element’s inventory of land suitable for development to the jurisdiction’s duty to affirmatively further fair housing.
AB 1398	Amends the Planning and Zoning Law to provide more onerous conditions on local governments that fail to adopt a housing element within 120 of the statutory deadlines. Notably, the law reduces the time period that a local agency must rezone certain sites from three years and 120 days to one year.
Incentives for Housing Production
SB 8	Extends the provisions of the Housing Crisis Act of 2019 through 2030. The Housing Crisis Act, which was set to expire in 2025, streamlines housing project approval by restricting local governments’ ability to downzone and limits fee increases on housing applications.
SB 9	Authorizes a property owner to split a single-family lot into two lots and place up to two units on each new lot. Therefore, the bill permits up to four units on properties currently limited to single-family houses. SB 9 also mandates that local agencies approve development projects that meet specified size and design standards. As noted in Brownstein’s latest CEQA News You Can Use, SB 9 requires ministerial approval for duplexes and lot splits, bypassing the CEQA process.
SB 10	Establishes a process for local governments to increase the density of parcels in transit-rich areas or on urban infill sites to up to 10 residential units per parcel. Such an ordinance must be adopted between Jan. 1, 2021, and Jan. 1, 2029, and is exempt from CEQA.
AB 1174	Extends the existing streamlined approval process for housing development in jurisdictions that have not made sufficient progress toward their allocation of their regional housing needs.
AB 1297	The Bergeson-Peace Infrastructure and Economic Development Bank Act authorizes the California Infrastructure and Economic Development Bank to, among other things, make loans, issue bonds and provide other financial assistance for various types of projects that qualify as public development or economic development facilities. This law establishes that economic development facilities and public development facilities includes housing if it meets certain financing requirements and limits.
SB 478	Prohibits local governments from imposing certain floor area ratio (FAR) standards on housing projects of three to 10 units.
SB 791	Establishes the California Surplus Land Unit, a task force to identify surplus or empty lots and facilitate new housing developments. This bill would authorize the California Surplus Land Unit to, among other things, facilitate agreements between housing developers and local agencies, provide consultative and technical service to local agencies with surplus land and developers, and collaborate on obtaining grants, loans, tax credits, credit enhancements and other types of financing that facilitate the construction of housing on surplus land.
Incentives for Affordable Housing Production
AB 447	Expands the low-income housing tax credit program to allow more programs to qualify for governmental assistance.
AB 571	Prohibits affordable housing impact fees, including inclusionary zoning fees and in-lieu fees, from being imposed on a housing development’s affordable units.
AB 634	Permits local agencies to require an affordability period of longer than 55 years to qualify for the incentives provided for under State Density Bonus Law.
AB 787	Creates new incentives for cities to secure more “workforce housing” or deed-restricted affordable homes for working families by authorizing a planning agency to include in its annual report (for up to 25% of jurisdiction’s moderate-income regional housing need allocation or RHNA) the number of units in an existing multifamily building that were converted to deed-restricted rental housing for moderate-income households by the imposition of unit affordability covenants and restrictions. The bill authorizes the jurisdiction to reduce its share of regional housing need for the income category of the converted units on a unit-for-unit basis.
AB 1029	In light of the approximately 30,000 units under affordability covenants set to expire over the next decade, this bill aims to preserve the state’s supply of rental affordability agreements by offering credits to cities that negotiate extensions with property owners.
AB 1043	This law adds a definition of “Deeply Low-Income” households to state law to increase access to affordable housing and critical social programs for the state’s neediest families.
AB 1095	This law extends the incentives and programs provided under the Affordable Housing and Sustainable Communities Program to both rental and owner-occupied units.
SB 290	Creates more incentives for developers to build affordable housing for college students by amending provisions of the Density Bonus Law to apply to certain student housing projects and to allow for a moderate-income parking reduction.
SB 728	SB 728 expands existing density bonus grants to nonprofits buying or building affordable housing.
Addressing Systemic Bias in Housing
AB 345	Requires that the Natural Resources Agency create an environmental justice program and establish a grant-based reimbursement program to enable environmental justice and community groups to participate in rulemaking. The bill also requires that setbacks be established between oil and gas production activities and sensitive receptors.
AB 345	Imposes a state-mandated local program requiring that mixed-income multifamily structures provide the same access to entrances, common areas and amenities of the structure to occupants of the affordable housing units in the structure as is provided to occupants of the market-rate housing units. The bill would also prohibit a mixed-income multifamily structure from isolating the affordable housing units to a specific floor or area on a specific floor of the structure.
AB 721	Invalidates remnants of discrimination in housing covenants and provides property owners with a process to remove exclusionary language in housing deeds that will allow for more affordable and multifamily housing. This includes clarifying that density restrictions in private covenants cannot be used to curtail an affordable or supportive housing development that is otherwise consistent with local zoning and that a property owner who commits to building 100% affordable units for lower-income households may build as many units as allowed by the local zoning code and land use laws.
AB 948	AB 948 requires the Bureau of California Real Estate Appraisals to gather data on demographic information of buyers and sellers of real estate property and submit the collected demographic information on or before July 1, 2024. The bill also requires the bureau to take note of homeowners from protected classes who file complaints based on low appraisals. The law also establishes several educational requirements for real estate appraisers on cultural competency and implicit bias.
AB 1466	AB 1466 requires that the county recorder of each county establish a program to identify and redact unlawfully restrictive covenants from California real property records.
AB 1584	Provides for priority for descendants of people previously displaced by San Francisco urban renewal and other redevelopment projects in state affordable housing programs.
SB 263	SB 263 revises the real estate practice course for an applicant for a real estate broker or salesperson license to include a component on implicit bias and would revise the legal aspects of the real estate course for applicants to include a component on state and federal fair housing laws.
Miscellaneous Housing Issues
AB 838	Addresses occupancy of standard and substandard buildings, including requiring a city or county that receives a complaint of a substandard building or a lead hazard violation to inspect the building, document the lead hazard violations and identify any building, portion of a building or premises that are substandard, as applicable. The bill would require the city or county to advise the owner or operator of each violation and of each action that is required to be taken to remedy the violation and to schedule a reinspection to verify correction of the violations as well as provide free, certified copies of the inspection report and any citations issued.
SB 381	This law applies predominately to the City of South Pasadena. The law requires that if surplus residential property located in the City of South Pasadena is not sold to a former owner or present occupant, the property be offered at fair market value to present tenants who have occupied the property for five years or more. The law also slightly modifies the types of projects that require prevailing wages.
SB 591	Authorizes the establishment of intergenerational housing developments that include senior citizens, caregivers and transition-age youth under specific conditions.