Update: Governor Newsom signed SB 79 into law on October 10, 2025

California Legislature Passes New Bill to Encourage More Homes Near Transit

Capping off a session that achieved major CEQA reforms for housing development, the California Legislature has sent new transit-oriented housing legislation to the Governor’s desk, which is expected to be signed by the October 12 deadline. Senate Bill 79, the “Abundant and Affordable Homes Near Transit Act” (Wiener), effectively upzones sites near high-quality transit to create more housing opportunities. Below we summarize SB 79 and its eligibility requirements.

Key Points

• The bill affects cities in eight urbanized counties that are well-served by transit.
• In these areas, the bill allows building height limits of 55 to 95 feet and density of at least 30 units per acre, depending on proximity to and quality of transit.
• Projects over 10 units must meet basic inclusionary housing requirements.
• No specific labor requirements apply unless the building is over 85 feet in height.
• The bill expands eligibility for CEQA-exempt streamlining under SB 423, and lowers the inclusionary housing requirement.
• Local jurisdictions have options to exempt certain sites from the bill, or adopt an alternative plan that achieves the same development capacity.

What projects qualify for SB 79?

SB 79 applies to projects in proximity to a “transit-oriented development” (TOD) stop, which is:

• A “major transit stop” (as defined in Public Resources Code Section 21064.3); and
• In an “urban transit county,” defined as a county with more than 15 passenger rail stations. In the Bay Area, this means San Francisco, Alameda, San Mateo, and Santa Clara Counties – with Contra Costa County notably omitted – as well as Sacramento, Los Angeles, Orange, and San Diego Counties.

Once signed, SB 79 will become effective on July 1, 2026, unless a local jurisdiction adopts an HCD- approved ordinance or local transit-oriented development alternative plan before then.

What are the requirements for a “transit-oriented housing development”?

• The project must be a “housing development project” as defined in the Housing Accountability Act (HAA).
• The site must be zoned residential, mixed or commercial, and be within at least ½ mile of a transit-oriented development stop.
• The project must include:
  • At least five dwelling units;
  • Density of either 30 dwelling units per acre, or the minimum density required under local zoning; and
  • Average total floor space per unit cannot exceed 1,750 square feet.
• Projects with more than 10 units must include housing affordable to households at the following levels based on Area Median Incomes, unless the local ordinance mandates a higher percentage:
  • 7% of units: extremely low income households;
  • 10% of units: very low income households; or
  • 13% of units: lower income households.
• The project cannot be located on a site that has had more than two rent-controlled units within the past seven years.
• The project must comply with height, noise, and safety standards of adopted airport land use plan or zone, and fire safety standards.
• Projects are also able to take advantage of density bonus concessions, depending on the minimum density achieved for a given project.
• Finally, no labor requirements apply to buildings 85 feet in height or less. For any building over 85 feet in height, the project must comply with prevailing wage requirements and must use a skilled and trained workforce.

SB 79 also allows local transit agencies to develop on land owned by the agency, subject to specific requirements, including paying prevailing wages and using a skilled and trained workforce.

What development standards apply to projects under SB 79?

SB 79 limits a local agency’s ability to restrict certain development standards for transit-oriented housing developments. It also distinguishes between types of TOD stops based on the type of transit that serves the stop.

• Tier 1 TOD stops are served by heavy rail transit or very high-frequency commuter rail (such as BART and Caltrain).
• Tier 2 TOD stops are those that are not Tier 1, and are served by light rail transit, high-frequency commuter rail, or major bus service (such as San Francisco Muni; not including Amtrak or the California High-Speed Rail).

Under SB 79, local agencies cannot set limits below the following standards depending on the project’s proximity to the TOD stop:

Are projects under SB 79 eligible for streamlined approval?

Projects under SB 79 may be eligible for streamlined ministerial approval under SB 35/423, which provides a streamlined ministerial approval process for developments in localities that have not made sufficient progress toward housing targets, with certain significant changes that will make that process attractive for more projects. For eligible projects, SB 35/423 mandates a very fast process (approximately 90 to 180 days, depending on project size) and one that is exempt from CEQA. However, in most jurisdictions, projects are required to include 50% low income units to qualify for SB 35/423, and as a result, it has primarily been used by 100% affordable projects.

SB 79 makes two significant changes to this framework. First, eligibility does not depend on whether the jurisdiction has met its housing allocation targets, meaning that it can be used in every jurisdiction where SB 79 applies, regardless of the jurisdiction’s Regional Housing Needs Assessment compliance. Second, the affordability level for all projects is 10% very low income (rental projects) or 10% low income (for-sale projects). While SB 35/SB 423 contains a number of other site criteria, most urban infill sites will qualify.

If a project does not seek streamlined approval, it will be reviewed under the jurisdiction’s standard development review process and the HAA.

How does HAA compliance work under SB 79?

A proposed housing development project that is consistent with the requirements of SB 79 and applicable “objective” standards as defined under the HAA is “deemed consistent” under the HAA.

Starting on January 1, 2027, a local agency that denies a housing development project in a high resource area will be presumed to be in violation of the HAA.

Can local agencies exempt areas within their jurisdiction from SB 79?

SB 79 also provides avenues for local agencies to exempt certain areas from SB 79. Local agencies can:

• Exclude certain sites from SB 79 eligibility, including if there is no walking path of less than a mile connecting to the TOD stop.
• Exempt an area as an “industrial employment hub,” as defined in the statute, therefore excluding housing as a permitted use on the site.
• Adopt a “transit-oriented development alternative plan,” as defined in the statute, that generally retains the same development capacity that would be available under SB 79.

Like other recent legislation intended to expand housing development opportunities in California, SB 79 is complex and there will undoubtedly be bumps along the way in its implementation. Please reach out to the Coblentz real estate team with any questions about this important new legislation.

 

As discussed in our last update on the November 2022 Proposition M, Empty Homes Tax Ordinance (the “Empty Homes Tax”), the San Francisco Apartment Association, the Small Property Owners of San Francisco Institute, the San Francisco Association of Realtors, and four individual landlords (“Challengers”) filed a lawsuit in San Francisco Superior Court challenging the constitutionality of the Empty Homes Tax. On October 31, 2024, the Superior Court ruled in favor of the Challengers’ Motion for Summary Judgment, finding that the Empty Homes Tax is unenforceable. Accordingly, the Empty Homes Tax is not currently effective, although the City of San Francisco may appeal the decision.

In May of 2024, the Challengers filed a Motion for Summary Judgment, seeking summary judgment, and asking that the Court enter a permanent injunction prohibiting the enforcement of the Empty Homes Tax. The Challengers argued that the Empty Homes Tax violates the Takings and Due Process Clauses of the Constitution, reasoning that a property owner’s right to keep their property vacant—to exclude others—is an essential element of the property rights protected by the Takings Clause. The Challengers also argued that the Empty Homes Tax violates the Ellis Act, which provides that the government may not compel the owner of any residential real property to offer or continue to offer accommodations in the property for rent or lease, with certain exceptions. The Court’s ruling provided that the Challengers shifted their burden as to all causes of action in their lawsuit, and that the City of San Francisco failed to create any triable issues of fact with competent admissible evidence. The Court tasked the Challengers with preparing an order, which order has not yet been published in the Court’s register of actions.

We will continue to provide further updates on the Empty Homes Tax, the status of the Court’s decision, and a published Court order as such updates become available.

With support from nearly 70% of voters in the November 2024 election, Proposition M will substantially modify the San Francisco Business and Tax Regulations Code (the “SF Tax Code”), which imposes a number of taxes on entities engaging in business in the City.

The following is a summary of key existing provisions in the SF Tax Code and the changes outlined in Proposition M:

Gross Receipts Tax

Existing Law: The Gross Receipts Tax is a tax on the gross receipts of a business for all taxable business activities attributable to the City. The rates vary, depending on the category of business activity and amount of gross receipts. There are 14 categories of business activities, and the rates range from 0.053% to 1.008%. Most small businesses with gross receipts of up to $2.2 million are exempt from paying the Gross Receipts Tax.

Proposition M: Proposition M reduces the number of business activity classifications from 14 to 7. The rates of tax on gross receipts are modified for each category, with a new range of 0.1% to 3.716%. For tax years beginning on or after January 1, 2025, the small business gross receipts exemption threshold is increased to $5 million.

The changes to the Gross Receipts Tax will likely have the greatest impact on small businesses that will fall under the new $5 million threshold to qualify for the small business exemption. On the other hand, businesses that do not qualify for any exemption will face slightly higher rates of tax, with scheduled increases to rates through 2028.

Homelessness Gross Receipts Tax

Existing Law: The Homelessness Gross Receipts Tax imposes an annual tax on each person engaged in business in the City that receives or is a member of a combined group that receives more than $50 million in total taxable gross receipts. The tax is imposed at varying rates, based on seven different business categories, and ranging from 0.175% to 0.69%.

Proposition M: Proposition M lowers the threshold for a person or combined group’s taxable gross receipts to $25 million, with rates of tax ranging from 0.164% to 0.492%.

The changes to the Homelessness Gross Receipts Tax will primarily impact businesses with gross receipts in the City in excess of $25 million that were not previously subject to the tax. For businesses already subject to the Homelessness Gross Receipts Tax, the changes result in slightly lower rates of tax across business categories.

Overpaid Executive Gross Receipts Tax

Existing Law: The Overpaid Executive Gross Receipts Tax (“OEGRT”) imposes an additional gross receipts tax on a person or combined group’s taxable gross receipts in which the highest-paid managerial employee, within or outside of the City, earns more than 100 times the median compensation of employees based in the City, with rates ranging from 0.1% to 0.6%.

Proposition M: Proposition M modifies the method of calculating the OEGRT for tax years beginning on or after January 1, 2025, with rates ranging from 0.02% to 0.129%.

The changes to the OEGRT will impact the small number of businesses subject to the tax under the existing rules. The changes to the method of calculating the OEGRT make it less likely that the tax will apply. For those businesses to which it does apply, the rates will be lower.

Relationship to Proposition L

The November 2024 ballot included two propositions relating to business taxes: Proposition M, which modifies a number of provisions among various existing business tax ordinances in the City; and Proposition L, which would have created a new gross receipts tax on transportation network companies and autonomous vehicle businesses. Both measures required a simple majority to pass. While both measures achieved the required votes to pass, Proposition M contained a provision that would essentially negate Proposition L if both measures passed. Therefore, Proposition M is the only one of the two City business tax measures that will become effective.

UPDATE: As of September 30, 2024, Governor Newsom signed all but one of the bills we wrote about in our original post of September 16, 2024. We have updated that post to identify the bills that have been signed into law and to reflect the veto of AB 3068.

During the 2024 California Legislative Session, which closed on August 31, the State Legislature again passed many bills seeking to ease the state’s housing crisis. This post focuses on key housing-related bills that are, at the time of this publication, either signed or awaiting the Governor’s signature. He has until September 30 to either sign or veto the remaining bills on his desk. This summary addresses legislation in the following categories: Housing Accountability Act compliance, entitlement streamlining and extensions, development impact fees, infrastructure finance, and Housing Element compliance.

Housing Accountability Act Compliance

AB 1893 (Wicks) [Modernizing the Builder’s Remedy] – SIGNED

The so-called builder’s remedy has sometimes been referred to by supporters as a “zoning holiday” for developers or, by opponents, as a “nuclear option” to avoid compliance with land use controls. It refers to a provision of the Housing Accountability Act (HAA) that generally prohibits a local government from denying a housing project that meets certain affordability standards if the jurisdiction has not adopted a Housing Element that substantially complies with law, even if the project is not consistent with the general plan or zoning. While it has been part of the HAA for decades, the builder’s remedy has gained recent attention as local governments throughout the state have tried, and in many cases struggled, to adopt 6^th Cycle Housing Elements that pass muster with the state Department of Housing and Community Development (HCD).

AB 1893 is intended, according to its author, to “moderniz[e] the builder’s remedy to make it clear, objective, and easily usable.” It does this primarily by:

• Specifying that a local government can impose objective, quantifiable, written development standards and policies on a project only to the extent that they would have applied to the project if it had been proposed on a site with general plan and zoning designations that would allow the project at its proposed density (or if no such designation exists, the applicant may identify any other standards that “facilitate” the project), and that would not render the project infeasible or preclude it from being constructed as proposed.
• Clarifying that the builder’s remedy is available if the local jurisdiction does not have a substantially compliant Housing Element on the date the development application is deemed complete.
• Updating the thresholds of affordability that qualify a project for the builder’s remedy (shown in the table below), and making more mixed-use developments eligible.
• Expanding the types of actions that constitute “disapproval” of a housing development project, to include final administrative actions and pursuing a “course of conduct undertaken for an improper purpose … that effectively disapproves” the project.

Minimum Percentage of Units Required to Qualify for Builder’s Remedy, by Income Level

	Existing Law	AB 1893
Moderate Income	100%	100%
Lower Income	20%	13% *
Very Low Income	N/A	10% *
Extremely Low Income	N/A	7% *
Below-market rate units for projects 10 units or fewer, on site smaller than 1 acre, with density at least 10 units/acre	N/A	0%

*Mixed-income housing developments may be required to dedicate more units, or at a deeper level of affordability, to comply with a local agency’s affordable housing requirement that was in effect as of January 1, 2024. However, the local agency may not require more than 20% of the units to be affordable, may not require dedication of those units at a level of affordability below lower income, and must make written findings that compliance with local requirements will not make the project infeasible.

Entitlement Streamlining and Extensions

AB 2243 (Wicks) [Affordable Housing and High Road Jobs Act of 2022 (AB 2011) – Clarification and Expansion] – SIGNED

The Affordable Housing and High Road Jobs Act (AB 2011, or the Act), also authored by Assemblymember Wicks, went into effect on July 1, 2023. AB 2011 provides for streamlined ministerial approval of qualifying affordable housing projects, and mixed-income projects located along commercial corridors, on land zoned for office, retail, and/or parking uses. AB 2243 is intended to clarify some of the Act’s provisions as follows.

Applicability and Requirements:

• AB 2243 amends the definition of a “use by right” to clarify that a project meeting the provisions of the Act is ministerial and streamlined, regardless of whether a local government’s zoning ordinance would otherwise require a project to obtain discretionary approvals or permits, such as a conditional use permit, or any review under CEQA.
• The Act does not apply to a housing development if it is located on a site or adjacent to a site where more than one third of the square footage is “dedicated to industrial use,” which includes vacant sites if the most recent use of the square footage was industrial. AB 2243 clarifies that the most recent use must have been within the last three years, and that a site designated as industrial in a pre-2022 general plan must prohibit residential uses for that site to be “dedicated to industrial use.”
• The Act requires qualifying projects to meet specified affordability criteria. AB 2243 clarifies that the affordability requirements apply only to the base units of the housing development project and not to units added by a density bonus and that a request for waivers or incentives pursuant to the State Density Bonus Law does not subject a qualifying project to discretionary review or to CEQA.
• The Act prohibits a housing development from being subject to the Act’s streamlined, ministerial approval process if it is located within 500 feet of a freeway. AB 2243 loosens this restriction by allowing such developments to be subject to the Act’s review process if the building meets specified criteria, including that it will have a centralized heating, ventilation, and air conditioning system.

• The Act also limits a mixed-income housing development subject to the streamlined, ministerial review process to sites of 20 acres or less, or 100 acres or less for regional mall sites.

Processing and Approval Timeframes:

• AB 2243 specifies that when a development proposal is resubmitted to address inconsistencies identified by the local agency, the local government must provide any additional feedback in writing within 30 days and it may not require the applicant to provide any new information that was not included in the initial list of items that were determined to be in conflict. Once a development proposal is determined to be consistent with the Act’s standards, a local government must approve the proposed development within 60 days for projects consisting of 150 units or fewer, or within 90 days for projects with more than 150 units.

AB 2729 (Patterson) [Extending Residential Development Entitlements by 18 Months] – SIGNED

AB 2729 addresses the concerns of many developers across the state that entitlements for housing projects will expire during a period of high interest rates and construction costs. It extends by 18 months the timeframe for a “housing entitlement” for a “residential development project” that was in effect on January 1, 2024 and that will expire before December 31, 2025. The 18-month extension is tolled during a legal challenge to a housing entitlement.

“Housing entitlements” include legislative, adjudicative, administrative approvals or permits for a housing development project, ministerial approvals or permits for a housing development project, and tentative maps, vesting tentative maps, and parcel maps, and do not include a development agreement, an approved or conditionally approved tentative map that has already been extended, or a preliminary application. A “housing development project” is a residential or mixed-use development in which at least two-thirds of the square footage of the development is designated for residential use.

AB 3068 (Haney, Quirk-Silva) [Office to Housing Conversion Act: Streamlining and Incentives for Adaptive Reuse Projects] – VETOED

Recognizing a potential opportunity provided by the rise in office vacancies, the Office to Housing Conversion Act creates a streamlined, ministerial approval process for adaptive reuse projects that would convert existing office buildings to housing and provides certain financial incentives.

Projects meeting the requirements of the bill are considered “by right” in all zones, regardless of the zoning of the site, and are subject to a streamlined, ministerial review process provided that any non-residential uses included in the project comply with local zoning.

To qualify, a project must:

• Be located on an infill site;
• Convert an existing building that either:
  • Is less than 50 years old;
  • Is 50 years old or more but has been determined not to be a historic resource; or
  • Is a historic resource but would comply with the Secretary of Interior’s Standards for the Treatment of a Historic Resource.
• Comply with specified affordability requirements, generally that the project provide:
  • For rental projects: at least 8% of the units for very low-income households and 5% of the units for extremely low-income households, or 15% for lower-income households; or
  • For ownership projects: at least 30% of the units for moderate-income households, or 15% for lower-income households.
• Comply with prevailing wage requirements for construction; and
• Provide at least 50% of the square footage as residential.

AB 3068 requires a city or county to approve an adaptive reuse project if the local planning director determines that the project is consistent with the bill’s objective standards. If the planning director determines that the project conflicts with any of the objective planning standards, they must provide the applicant with a written explanation of the reason(s) for the conflict. The local agency’s review must be completed—and the project must be approved, if it is consistent with objective standards—within specified timeframes, depending on project size.

To alleviate some of the costs associated with adaptive reuse projects, AB 3068 exempts an adaptive reuse project from all impact fees that are not reasonably related to the impacts resulting from the change of use of the site from nonresidential to residential or mixed use.

Development Impact Fees

SB 937 (Wiener) [Timing of Impact Fees for Residential Projects] – SIGNED

SB 937 reduces front loading of certain impact and mitigation fee costs for qualifying projects. For “designated residential development projects”—defined as either 100% affordable, subject to AB 2011, SB 35, SB 4, or State Density Bonus Law, or with 10 or fewer units—SB 937 would prohibit a local agency from imposing fees or charges for the construction of public improvements or facilities until the first Certificate of Occupancy (C of O), including a Temporary C of O, is issued. This prohibition excludes certain utility service fees related to connections, and does not apply if construction of the residential development does not begin within five years of building permit issuance.

The local agency can still require the payment of fees or charges at an earlier time if either of the following conditions is met:

• The fees or charges are to reimburse the local agency for expenditures previously made; or
• The local agency determines both of the following:
  • The fees or charges will be collected for public improvements related to providing water service, sewer or wastewater service, fire, public safety, emergency services, roads, sidewalks, construction and rehabilitation of school facilities, or other public improvements related to services to the residential development; and
  • An account has been established and funds appropriated for the public improvements or facilities.

SB 937 also restricts local agencies from charging interest or other fees on any deferred fees, which developers have cited as an additional impediment to making projects pencil. For developments with more than one dwelling, the local agency can decide whether fees should be paid on a pro rata basis (for each unit upon receipt of a C of O or when a certain percentage of units have received a C of O) or a lump-sum basis (when all units receive a C of O).

AB 1820 (Schiavo) [Increasing Fee Transparency] – SIGNED

AB 1820 attempts to provide more transparency regarding development fees, to allow developers to create more accurate budgets. While existing state law requires development fees to be posted online, many local agencies have not complied. In addition, many local agencies don’t disclose fees until projects are already under construction—which sometimes means developers take on huge financial risk when local agencies impose large, unexpected fees late in the development process. Further, even where fee schedules are disclosed, there is often ambiguity in how to calculate a particular fee as applied to a project.

AB 1820 will require cities, counties, and cities and counties, to provide an estimate of the impact fees housing developers will be required to pay within 30 business days of an SB 330 preliminary application, at a developer’s request. Cities, counties, and cities and counties, in addition to third-party agencies like school districts or special districts, are also required to provide a final impact fee estimate within 30 business days of housing development approval. By increasing the transparency of development fees, the bill is intended to allow developers to better understand their total costs before beginning construction.

AB 2553 (Friedman) [Enhancing the Scope of and Benefits for Transit-Adjacent Housing Development] – SIGNED

The authors of AB 2553 believe that there are too few locations that meet the current definition of “major transit stop” for purposes of impact fee collection and CEQA. This bill would revise that definition to expand the frequency of major bus route service intervals, to 20 minutes from 15 minutes or less, during the morning and afternoon peak commute periods. This change helps to counteract the reduction in transit ridership and reduced service frequencies resulting from the COVID-19 pandemic, and would allow more housing projects to qualify for lower traffic mitigation fees. AB 2553 also allows a major transit stop to be completed before or within one year from the scheduled completion and occupancy of the housing development. (Under existing law, a station must have been completed before the scheduled completion and occupancy of the housing development.) This bill would also allow more housing projects to qualify for CEQA exemptions available for infill sites and transit priority projects within one-half mile of a major transit stop.

Notably, AB 2553 would also extend the area within which AB 2097 applies. That law generally prohibits a local agency from imposing minimum parking requirements on any residential, commercial, or other development project located within half a mile of a “major transit stop.” The expanded service interval frequency would provide parking flexibility to more development projects near public transit.

Infrastructure Finance

AB 2488 (Ting) [San Francisco Downtown Revitalization and Economic Recovery Financing Districts] – SIGNED

Together with AB 3068, AB 2488 incentivizes conversion of qualifying downtown San Francisco commercial buildings to residential use. Until their dissolution in 2012, redevelopment agencies used tax increment financing (TIF) to finance infrastructure and other improvements, and the Legislature subsequently authorized several new local TIF tools to facilitate economic development.

To address the aftermath of the COVID-19 pandemic and associated extremely high commercial vacancy rates, and to reduce the impacts of the housing crisis, AB 2488 allows the City and County of San Francisco to create a new Downtown Revitalization and Economic Recovery Financing District (district) to finance commercial to residential conversion (reuse or replacement) projects with TIF. Unlike most other TIF tools, AB 2488 authorizes the use of TIF funds to finance residential development that is market rate or includes a relatively low percentage of affordable units. The Senate Committee on Housing report states that tax increment captured under AB 2488 will subsidize construction of projects that are at least 90% market rate units for as many as 30 years.

Key provisions of AB 2488 include:

• The San Francisco Board of Supervisors (Board) may form a district by resolution, and concurrently must create a district board consisting of three members of the Board, two members of the public chosen by the Board, plus an optional Board alternate.
• The district may use net available property tax increment (excluding tax increment that is allocated to other taxing entities) generated by qualifying, opt-in commercial-to-residential conversion projects to finance such projects. Projects must be of communitywide significance and provide significant benefits to the district or San Francisco.
• The district must also create and approve a financing plan, including specified information and requirements. Projects may opt in through December 21, 2032, and will be assigned a base assessed value by the district using the last assessment roll equalized prior to issuance of the first building permit for the project. The financing plan must also provide guidance on calculation of tax revenue to be distributed within the district.
• Eligible projects are considered public works for which prevailing wages must be paid, and are required to comply with labor standards adopted by the Board.
• The first 1.5 million square feet of qualifying projects are exempt from affordability requirements. Thereafter, projects must comply with one of the following affordability requirements (or the corresponding local inclusionary requirement, if higher): at least 5% of total rental units are affordable to very low-income households, at least 10% of the total units are affordable to lower-income households, or at least 10% of total units for sale are affordable to moderate-income households.

 Housing Element Compliance

 AB 2023 (Quirk-Silva, Alvarez) [Housing Element Compliance] – SIGNED

Consistent with trends in recent legislative sessions, AB 2023 is intended to give more teeth to the state’s Housing Element Law and HCD’s ability to enforce it. Generally, the Housing Element Law requires each local government to adopt a Housing Element every eight years that includes, among other things, an inventory of sites that are zoned, or will be rezoned, with adequate capacity to accommodate the local government’s share of the regional need for new housing, as determined by HCD.

Under existing law, once HCD has certified a Housing Element as substantially compliant with state law, there is a rebuttable presumption of validity if that Housing Element or actions related to it are challenged in court. AB 2023 creates a rebuttable presumption of invalidity for Housing Elements deemed noncompliant by HCD, raising the standard for jurisdictions to dispute or dismiss HCD’s determination of noncompliance.

In addition, AB 2023 imposes stricter deadlines on local governments for Housing Element submittal. Previously, a jurisdiction that completed and adopted its Housing Element within the statutory deadlines had three years from the earlier of (i) the date the Housing Element was adopted, or (ii) the date that was 90 days after receipt of comments from HCD, to complete any required rezoning to implement the Housing Element. Jurisdictions that failed to meet the deadlines had to complete the required rezoning no later than one year after the statutory deadline to adopt the Housing Element. To avoid the tighter one-year timeline for rezoning, some local governments rushed to adopt draft Housing Elements just before the statutory deadlines—before HCD has provided written findings on those drafts—with the hope that HCD would deem the drafts compliant after the fact.

To address this issue, AB 2023 now places all jurisdictions in a one-year rezoning cycle unless they meet certain benchmarks to qualify for a three-year rezoning cycle. These new benchmarks require a jurisdiction to (i) submit a draft element to HCD at least 90 days before the statutory deadline for adoption, (ii) receive written findings from HCD by the statutory deadline that the draft substantially complies with state law, and (iii) adopt the Housing Element no later than 120 days after the statutory deadline.

AB 1886 (Alvarez) [Defining When a Housing Element is in Substantial Compliance] – SIGNED

AB 1886 intends to stop local agencies from attempting to self-certify Housing Element compliance. The bill codifies a regulatory interpretation HCD issued on March 16, 2023, which stated: “where a jurisdiction submits an ‘adopted’ housing element before submitting an initial draft or before considering HCD’s findings on an initial draft, HCD will consider the ‘adopted’ to be an initial draft for purposes of both HCD’s review and the jurisdiction’s statutory compliance.” HCD took the position that “a jurisdiction is ‘in compliance’ as of the date of HCD’s letter finding the adopted element in substantial compliance.”

Accordingly, AB 1886 provides that Housing Element substantial compliance does not occur until a local agency has adopted a Housing Element and either HCD or a court determines that the adopted Housing Element substantially complies with state law. Some local governments have argued that self-certification of a Housing Element, without HCD’s determination, protects them from builder’s remedy projects, which developers can pursue when the jurisdiction lacks a compliant Housing Element. This bill eliminates those arguments.

The Coblentz Real Estate Team has extensive experience with the state’s latest housing laws and can help to navigate the laws’ complexities and opportunities. Please contact us for additional information and any questions related to the impact of these pending bills on land use and real estate development.

As expected, on June 28, the California Department of Housing and Community Development (HCD) determined that San Francisco has not made adequate progress toward its State-mandated housing production goal. The City’s Housing Element—which it adopted and HCD certified in January 2023, just in time to avoid triggering certain penalties under the State Housing Element Law (see earlier post here)—sets forth the City’s plan to approve 82,000 units over an eight-year period ending in January 2031. However, according to its most recent Housing Inventory, San Francisco approved only 3,039 new units in 2023, and the City has yet to adopt the zoning amendments required by State law to implement the Housing Element.

Senate Bill 423 requires San Francisco, specifically, to annually demonstrate that it is keeping pace with its housing production. HCD’s June 28th determination means that many mixed-income housing development projects in San Francisco will now be subject to a streamlined, ministerial approval process. Qualifying projects will be approved by Planning staff and will not require a public approval hearing by the Planning Commission or Board of Supervisors, although in many neighborhoods a pre-application informational hearing at the Planning Commission will be required.

To qualify, projects must be at least 2/3 housing, meet specified labor requirements, and meet certain site-specific criteria—including that the project be located on a residentially-zoned site, not demolish tenant-occupied or rent-controlled units, and not demolish historic structures listed on a historic register—among a few other requirements. Importantly, prior to HCD’s determination, projects also had to restrict 50% of units in the project as affordable to households at 80% area median income (AMI). Now, however, the affordability requirement has been drastically reduced to just 10% of the units in the project, which must be affordable to households at 50% AMI. While the percentage of affordable units required to qualify for streamlined review is now lower, SB 423 does not relieve projects from local inclusionary housing requirements if such requirements are higher.

If the criteria are met, the following projects must be approved ministerially:

• Code-compliant projects with 2-9 dwelling units.
• Code-compliant projects with 10 or more dwelling units that meet San Francisco’s inclusionary affordable housing requirements.

Notably, Code-compliant projects include projects that take advantage of State Density Bonus Law to increase their unit count above what would typically be permitted under existing zoning.  The City’s application for streamlined approval pursuant to SB 423 is available here.

Under SB 423, projects of 150 units or fewer must be approved within 90 days of submittal of an application, and projects with more than 150 units must be approved within 180 days. As stated in a press release by former San Francisco Supervisor and now State Senator, Scott Wiener, who authored SB 423, as of June 28 San Francisco is going “from the slowest approver of new homes in California to one of the fastest.”

Due to San Francisco’s specific annual housing production progress requirement and the City’s lack of progress to date, the City is likely to remain out of compliance. Accordingly, projects complying with San Francisco’s inclusionary affordable housing requirements and SB 423’s site criteria may qualify for streamlined, ministerial review for the foreseeable future. For the time being, we note that 18 other Bay Area jurisdictions do not have compliant Housing Elements and are therefore subject to the same reduced affordability requirement to qualify for SB 423 streamlining benefits. Those jurisdictions are currently Atherton, Belmont, Cupertino, Daly City, Hercules, Lafayette, Larkspur, Los Gatos, Napa County, Palo Alto, Pittsburg, Portola Valley, San Mateo, San Mateo County, Santa Clara County, Saratoga, Woodside, and Yountville. Unlike San Francisco, most or all of these Bay Area jurisdictions will return to the higher 50% affordable requirement when their Housing Elements become compliant, which for some of these jurisdictions could happen within days or weeks.

Coblentz attorneys will continue to monitor Housing Element compliance and other developments as they relate to these and other jurisdictions.

The California Supreme Court recently upheld the Environmental Impact Report (“EIR”) for the Long Range Development Plan (“LRDP”) for the University of California Berkeley (“UC Berkeley”) and a controversial housing project at a site known as People’s Park. In so doing, it applied the principle that “no matter how important its original purpose, [CEQA] remains a legislative act, subject to legislative limitation and legislative amendment.”

The Court’s ruling in Make UC a Good Neighbor v. Regents of the University of California involved a challenge brought by project opponents against UC Berkeley’s EIR for its LRDP and a specific housing project at People’s Park. The LRDP is a broad plan for UC Berkeley’s long-term physical development, including land use designations, the location of buildings, and infrastructure systems. It plans for the addition of 11,730 new student beds to accommodate long-term enrollment projections. The People’s Park housing project would develop 1,113 student beds, 1.7 acres of open landscape, and 125 affordable and supportive housing beds for lower income or formerly homeless individuals not affiliated with UC Berkeley.

Project opponents argued that the EIR failed to consider environmental impacts from “social noise” (i.e., vocal noise generated by students at parties or walking late at night), and that the EIR failed to adequately consider alternative locations other than People’s Park for the housing project. Although the trial court ruled in favor of UC Berkeley, the Court of Appeal agreed with project opponents on those two issues.

After the California Supreme Court granted review, but before oral arguments in the case, the California Legislature passed Assembly Bill (“AB”) 1307, which amended CEQA by adding two sections to the Public Resources Code: (1) section 21085, which provides that noise generated by project occupants and their guests is not a significant effect on the environment under CEQA for “residential projects”; and (2) section 21085.2, which provides that institutes of public higher education, in an EIR for a residential or mixed-use housing project, are not required to consider alternatives to the location of a proposed project if certain requirements are met.[1]

Project opponents conceded that under AB 1307, the EIR was not required to analyze social noise from or potential alternative locations to development at People’s Park. The Court confirmed that in mandamus proceedings (such as CEQA actions), “a reviewing court applies the law that is current at the time of judgment in the reviewing court.” The project opponents, however, argued that their LRDP social noise claim remained viable because AB 1307 exempted only “residential projects,” and the LRDP is not a “residential project” within the statute’s meaning. The project opponents also asked the Court to consider their alternative locations argument with respect to potential future LRDP projects.

The Court rejected both of these arguments. The Court interpreted the undefined term “residential project” broadly in holding that the EIR was not required to analyze social noise impacts of either the People’s Park housing project or the broader LRDP. The Court considered the statute’s purpose, legislative history, and public policy to discern its meaning and concluded that it was “clear” that section 21085 “should be interpreted broadly enough” to apply to the aspects of the LRDP at issue.

The Court also declined to consider the project opponents’ alternative locations argument with respect to potential future housing projects that were not before the Court.

The California Supreme Court’s decision gives UC Berkeley the green light to finally move forward with the student housing project at People’s Park, and also reaffirms principles of statutory construction and that courts should apply the law in effect at the time of their ruling. In addition, its broad interpretation of “residential project” means that not only specific projects, but also residential components of long-term planning efforts, should not be required to analyze social noise as an environmental effect under CEQA.

 

[1] These requirements are that the project must: (1) be located on a site that is no more than five acres and be substantially surrounded by qualified urban uses; and (2) have already been evaluated in the EIR for the most recent LRDP for the applicable campus.