Approved by the Governor and filed with the Secretary of State on September 29, 2017, Assembly Bill (AB) 1505 takes effect on January 1, 2018. One of many key housing bills to move through the California legislature this year, AB 1505 authorizes the legislative body of any county or city to adopt ordinances regulating zoning within its jurisdiction, as specified. AB 1505 will authorize cities and counties to adopt inclusionary housing requirements for rental units. Sponsors of the bill include Assembly Members Richard Bloom, David Chiu and Todd Gloria.

Background

In California, nearly 170 cities and counties in California have adopted inclusionary housing policies as a complement to other strategies to address the affordable housing shortage. However, the Second District Court of Appeal’s decision in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, 175 Cal. App. 4th 1396 (2009), created uncertainty for local governments regarding the viability of those zoning tools as Palmer removed their ability to apply them to rental housing. (See, https://scholar.google.com/scholar_case?case=13698126938858893450&q=Sixth+Street+Properties+L.P.+v.+City+of+Los+Angeles,&hl=en&as_sdt=2006&as_vis=1)

Assembly Bill 1505

AB 1505 clarifies state law and removes the arbitrary distinction between rental housing and for-sale housing. Specifically, AB 1505 amends § 65850 of the Government Code to include the following:

• . . .to authorize the legislative body of any county or city to adopt ordinances to require, as a condition of development of residential rental units, that the development include a certain percentage of residential rental units affordable to, and occupied by, moderate-income, lower income, very low income, or extremely low income households or by persons and families of low or moderate income, as specified, and would declare the intent of the Legislature in adding this provision.

AB 1505 adds § 65850.01 to the Government Code which authorizes the Department of Housing and Community Development, within ten years of the adoption or amendment of an ordinance by a county or city after September 15, 2017, that requires as a condition of the development of residential rental units that more than 15 percent of the total number of units rented in the development be affordable to, and occupied by, households at 80 percent or less of the area median income, to review that ordinance if the county or city meets specified conditions. Based on those findings, § 65850.01(b) authorizes the Department to request, and require that the county or city provide, evidence that the ordinance does not unduly constrain the production of housing by submitting an economic feasibility study that meets specified standards. If the department finds that economic feasibility study does not meet these standards, or if the county or city fails to submit the study within 180 days, the bill would require the county or city to limit any requirement to provide rental units in a development affordable to households at 80 percent or less of the area median income to no more than 15 percent of the total number of units in the development.

Conclusion and Implications

Mixed emotions remain. According to some developers, since it is mandated that a portion of a project is required to be affordable, then they will have to make the market rate units more expensive to cover costs. Arguably, many developers claim that AB 1505 puts California’s low-income housing problem on the backs of developers when instead the government should be seeking out a way to create incentive programs to solve this issue. On the other hand, others argue that AB 1505 is the missing piece that would restore the authority of local governments to apply affordable housing production targets to rental housing, fostering inclusive neighborhoods by requiring that some of the units in new market-rate residential developments are affordable to lower-income households at a below-market cost. The full text of AB 1505 is accessible online at: https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201720180AB1505

(P. Ebrahimzadeh Florez, Thomas Henry)