While the 2020-2021 California Legislative Session was dominated by the ongoing COVID-19 health crisis and the ultimately unsuccessful Gubernatorial recall election, there were significant efforts made to change statewide housing policy. Last week, the Governor began signing some of those new housing bills into law—including the widely discussed SB 9, which is regarded as the end to California single-family zoning law.

The Legislative Session included over a dozen housing bills, building on legislative efforts in recent years to tackle California’s housing crisis. Notably, Senate leadership focused on its 2021 Housing Production Package, referred to as “Building Opportunities for All,” which included eleven Senate bills aimed at increasing housing supply. Nine of the eleven bills successfully passed both houses and were sent to the Governor for signature, as summarized below. Two additional bills failed to move forward: SB 5 (Affordable Housing Bond Act, which would have placed a $6.5 billion bond on the November 2022 ballot to fund affordable housing) and SB 6 (authorizing residential development on existing qualifying office and retail sites). The state Assembly also sponsored a number of important housing bills.

Key housing-related bills that have been signed or are on the Governor’s desk for signature include the following. The Governor has until October 10 to either sign or veto the remaining bills. Going forward, we will follow up with more in-depth coverage on the potential impacts of legislation signed by the Governor on housing production and regulation.

Signed Legislation

SB 7 (Atkins) [CEQA Streamlining Extension for Environmental Leadership Projects] – Senate Bill 7, signed by the Governor on May 20, 2021, extended California Environmental Quality Act (CEQA) streamlining for qualifying environmental leadership development projects approved through 2025, thereby reinstating and expanding the former AB 900 streamlining process—albeit with new substantive requirements. Read our prior coverage of SB 7 here.

SB 8 (Skinner) [SB 330 Housing Crisis Act Extension] – Senate Bill 8 extends the provisions of SB 330, the Housing Crisis Act of 2019, from 2025 until 2030. It allows applicants who submit qualifying preliminary applications for housing developments prior to January 1, 2030 to utilize the protections of the Housing Crisis Act through January 1, 2034, with those applications subject only to the ordinances and policies in effect when the preliminary application is deemed complete, with limited exceptions. Among other changes, SB 8 clarifies that for purposes of the Housing Crisis Act, a “housing development project” may involve discretionary and/or ministerial approvals, or construction of a single dwelling unit, and adds demolition, relocation and return rights.

SB 9 (Atkins) [Duplex and Lot Split Zoning] – Senate Bill 9, referred to as the duplex zoning law, would require, for qualifying parcels, ministerial approval of two-unit housing developments in single-family zoning districts, and would allow single-family parcels to be subdivided into two lots. Taken together, these provisions could allow for development of up to four housing units on lots where only one unit is permitted today. SB 9 requires applicants for lot splits under this law to confirm that they intend to occupy one of the housing units as their principal residence for a minimum of three years, unless the applicant is a community land trust or qualified nonprofit corporation. Under SB 9, a local agency retains discretion to deny a proposed housing project if it finds that the project would have an adverse health and safety or environmental impact that cannot be feasibly mitigated or avoided. Local agencies are also required to prohibit use of the units for short-term rentals of 30 days or less. Read our prior related coverage of SB 9 here, which highlighted national, state and local efforts to shift away from traditional single-family zoning.

SB 10 (Wiener) [CEQA Streamlining for Upzoning] – Under current state law, local agencies must conduct environmental review under CEQA prior to adopting zoning changes that could have the potential to cause a direct or indirect impact on the environment, with limited exceptions. SB 10 allows, but does not require, local agencies to avoid this CEQA review when upzoning parcels to allow up to 10 units per parcel, at a height specified by local ordinance, if the parcel is located in a qualifying transit-rich area or an urban infill site. SB 10 does not provide new CEQA exemptions or streamlining for the projects that would be constructed on these upzoned parcels but, under existing law, certain CEQA exemptions or streamlining may be available on a case-by-case basis depending on project size, site conditions and other factors. However, for larger residential or mixed-use projects with more than 10 units developed on one or more parcels upzoned pursuant to SB 10, the bill prohibits those projects from being approved ministerially or by right, or from being exempt from CEQA, with limited exceptions. Taken together, SB 10 could be a useful tool for encouraging development of smaller residential projects of 10 or less units in jurisdictions who choose to take advantage of the CEQA streamlining provided. However, projects larger than 10 units proposed in an SB 10 zoning district, such projects that utilize the state density bonus or include multiple parcels, may face a more challenging entitlement process given the limitations on CEQA exemptions and use of any ministerial approval process. If a local agency chooses to adopt an upzoning ordinance under SB 10, it must do so by January 1, 2029. Read our prior related coverage of SB 10 here.

Bills Pending Governor’s Signature

SB 290 (Skinner) [Density Bonus Law Amendments] – Senate Bill 290 amends the state Density Bonus Law to clarify certain provisions and extend incentives to student housing projects. The bill allows one incentive or concession for projects that include at least 20% of the total units for certain “lower-income students” (as defined in SB 290) in a student housing development. Existing Density Bonus Law provides that a local agency cannot require a parking ratio above 0.5 spaces per unit if the development provides at least 20% low income units or 11% very low income units and is located within one-half mile of a major transit stop; this bill’s amendments would extend the parking ratio limit to developments with at least 40% moderate income units.

SB 478 (Wiener) [Minimum FAR Restrictions] – Senate Bill 478 is designed to spur the creation of “missing middle” housing, by prohibiting local governments from establishing a floor area ratio (“FAR”) that is less than 1.0 for projects of three to seven units, or less than 1.25 for projects consisting of eight to ten units. Those local governments also cannot deny a qualifying project solely based on the fact that the lot area does not satisfy the minimum lot size requirement. This applies to projects that are either entirely residential, mixed-use with at least two-thirds of the square footage designated for residential use, or transitional or supportive housing. Eligible projects must (1) provide at least 3 and up to 10 units and (2) be located in either a multi-family residential zone or mixed-use zone. This bill does not prohibit a local government from imposing other zoning or design standards, such as height and setback limits, except for a lot coverage requirement that would physically preclude a qualifying project from achieving the permitted FAR. This bill also limits private restrictions (e.g., from a homeowners’ association) that effectively prohibit or unreasonably restrict an eligible project from achieving the permitted FAR. The California Department of Housing and Community Development (“HCD”) is tasked with identifying violations and may notify the State’s Attorney General, which can bring a suit to enforce the law.

AB 215 (Chiu) [Expanded HCD Enforcement Authority] – Assembly Bill 215 provides HCD with additional enforcement authority for local agency violations of specified housing laws, and increases public review for housing elements, a required component of long-range General Plans. For example, AB 215 requires HCD to notify the Attorney General of violations of housing element law, including SB 35 (streamlined ministerial approval for specified housing projects). This bill also expands the Attorney General’s authority to initiate an enforcement action against a local jurisdiction for housing element noncompliance by eliminating requirements that HCD first provide two consultations and written findings to a noncompliant jurisdiction.

SB 477 (Wiener) [HCD Annual Progress Reports] – Senate Bill 447 establishes additional information and data that cities and counties must report annually to HCD and the Office of Planning and Research. Under existing law, the annual progress report (“APR”) must include information such as the total number of housing units approved, the number of SB 35 applications approved, and the number of density bonus applications submitted and approved. Beginning January 1, 2024, cities and counties must also include, among other requirements, the following information for each project in their APR: (1) whether the project was submitted pursuant to state and/or local ADU laws, (2) whether the project requested any bonus, concession, or waiver under Density Bonus Law and whether the request was approved, (3) whether the project was submitted pursuant to SB 35, (4) whether the project was submitted pursuant to Project Roomkey, (5) whether the project received streamlining or an exemption from CEQA, and (6) whether the project submitted a preliminary application pursuant to SB 330 and instances in which a preliminary application expired.

SB 791 (Cortese) [New Surplus Land Unit Within HCD] – Senate Bill 791 creates the California Surplus Land Unit within HCD to facilitate the development of housing on local qualifying surplus land. Under the existing Surplus Land Act, when local agencies seek to dispose of “surplus” public land, they first must send notice to various public agencies and qualified nonprofit groups to offer the land for affordable housing, parks and open space, school facilities, and infill opportunity zones or transit village plans, among other requirements. Under SB 791, the newly created Surplus Land Unit would facilitate agreements between housing developers and local agencies that are looking to dispose of surplus public property and collaborate with state financing agencies to assist with obtaining financing for housing projects. Creation of the Surplus Land Unit would require funding appropriation of approximately $2.5 million by the Legislature.

AB 1487 (Gabriel) [Homelessness Prevention Fund] – Assembly Bill 1487 establishes a Homeless Prevention Fund to be administered by the Legal Services Trust Fund Commission, under the State Bar of California, to fund eviction defense programs. The Commission would distribute the funds in the form of grants to legal aid organizations for eligible services. Such services are generally limited to households with incomes less than 80% of the area median income.

The Coblentz Real Estate team continues to track changes in state and local legislation impacting housing production. Please contact us for additional information and any questions related to the impact of these new bills on land use and real estate development.