By Right Approval for Qualifying Housing Projects in Commercial Zones
On September 28, 2022, Governor Gavin Newsom signed the Affordable Housing and High Road Jobs Act of 2022 (the Act), dramatically expanding the opportunity for housing developers to construct projects in commercial zones with limited local discretion, beginning July 1, 2023. This includes streamlined, ministerial review of 100% affordable, multifamily housing projects in commercial zones. More significantly, qualifying housing projects under the Housing Accountability Act that are along commercial corridors, as defined, receive by-right approval and enjoy generous statutory development thresholds that supersede certain locally-adopted, objective planning standards.
Requirements for Ministerial Approval of 100% Affordable Housing Projects
For a multifamily affordable housing project to qualify for streamlined, ministerial approval under the Act, 100% of the units (save for a manger’s unit) must be either dedicated to lower-income households under income limits set by the State, or be subject to rent limits established by the California Tax Credit Allocation Committee with a deed restriction ensuring an affordability period that mirrors other existing housing laws (55 years for rental units and 45 years for for-sale units). The project must be located within a zoning designation where office, retail or parking are principally permitted uses, likely covering a broad array of a local agency’s commercial zones under its general plan and/or zoning ordinance. While a qualifying affordable housing project seeking to utilize this streamlined, ministerial review must be within an urbanized area or urban cluster, as designated by the U.S. Census Bureau, that designation covers a significant portion of the state.
Among other requirements, qualifying projects must be located in areas highly developed with urban uses and less than one-third of the site, or its immediate neighbors, must be dedicated to industrial uses., as defined. If the proposed site is vacant, the site cannot be within a very high fire hazard severity zone, nor can it contain tribal cultural resources that would include an unmitigable impact that follows the existing consultation requirement with impacted tribal governments. The proposed site cannot be within a mobile home park, with limitations if the site is within a neighborhood plan area.
A qualifying multifamily affordable housing project will only be subject to streamlined, ministerial review if it meets “planning standards,” a series of objective design, development and subdivision standards. Only those objective planning standards in effect at the time the application for the project is submitted apply, providing the developer some vested rights.
Housing density for the project will be based on whether the existing zoning designation allows multifamily projects. If the existing zoning does not allow multifamily projects, the allowed housing density will instead be based on that which applies to the closest parcel in the vicinity of the site, which does allow multifamily residential use and meets or exceeds a density sufficient to meet the agency’s lower-income RHNA allocation. The Act limits qualifying projects to those more than 500 feet from a freeway, and more than 3,200 feet from an oil or natural gas extraction or refinery.
The Act provides for shortened time frames for local agency review - 60 days if the project proposes 150 or fewer residential units, within 90 days if it proposes more. The developer must also have completed a Phase I environmental assessment of the site, and taken steps to mitigate any recognized environmental conditions on the site. Additionally, the Act specifies that an incomplete application will still be deemed consistent with applicable local standards if there is “substantial evidence” that would allow a “reasonable person” to conclude consistency with those objective standards. Although ministerial approval is required for qualifying multifamily affordable housing projects, the appropriate reviewing authority of the local agency retains the ability to conduct a limited design review hearing. The Act specifies that this limited design review must not in any way “inhibit, chill or preclude” ministerial approval, leaving open the possibility of even further restrictions on the local agency’s authority.
Requirements for By-Right Ministerial Approval for Housing Projects Along Commercial Corridors
A proposed housing project that abuts a “commercial corridor,” defined as a highway between 70-150 feet (excluding freeways) with right-of-way access, may qualify for by-right, ministerial approval under the Act. To qualify, the project must include more than five rental or for-sale units and meet certain affordability percentages on the total number of housing units. Critically, this by-right approval can be granted even when the project is inconsistent with the local agency’s general plan, zoning ordinance or other codified standards. The qualifying project must be located within a zoning designation where office, retail, or parking are a principally permitted use. To be eligible, the housing development project must include frontage along the commercial corridor highway by a minimum of 50 feet, and the site must be less than 20 total acres. The surrounding area must already be highly developed with urban uses and less than one-third of the site, or its immediate neighbors, must be dedicated to industrial uses. Similar to one-hundred percentage affordable housing projects under the Act, the development must not be within sensitive areas recognized by the state, such as very high fire hazard severity zones, with similar limitations on eligibility if the site is vacant, within a mobile home park or a neighborhood plan area. A vacant site cannot be within a very high fire hazard severity zone, nor contain tribal cultural resources that would include an unmitigable impact that follows the existing consultation requirement with impacted tribal governments. The Act limits qualifying projects to those more than 500 feet from a freeway and more than 3,200 feet from an oil or gas refinery.
There are a number of eligibility limitations on housing projects along commercial corridors when they has been existing housing on the site, or the site is presently zoned to accommodate housing. A project will not be eligible for by-right approval if there is required demolition of units occupied by tenants within the last 10 years, or existing housing is subject to rent control or an enforceable restriction requiring the housing be reserved for lower-income individuals. Similarly, a project will not be eligible for by-right approval if there would need to be demolition of permanent housing existing within the last 10 years, the structure is listed on an historic register, the property site currently contains between one and four dwelling units or is zoned only for single-family use and is currently vacant.
A qualifying housing project that abuts a commercial corridor will only be subject to by-right, ministerial review if it meets an affordability threshold for the housing units being considered. For a project with rental units, the project must either include 15% lower-income restricted units, under income limits set by the state, or 8% very-low income restricted units and 5% extremely low-income units, using the same state limits. For a for-sale project, 30% of the units must be made available to moderate-income households or15% of the units must be made available to lower-income households, under income limits set by the state. The required affordability term to restrict these units mirror those of other housing laws: 55 years for rental units and 45 years for for-sale units. If a local agency has its own more restrictive inclusionary housing requirements, those control over the state thresholds. Market rate and affordable units shall share the same bedroom and bathroom count ratio, include the same amenities, and cannot be clustered within the development.
A qualifying housing project that abuts a commercial corridor must meet a series of objective planning standards in effect at the time the application for the project is submitted. What makes these by-right approvals unique is that for housing density, height and setback, the applicant of a qualifying housing project that abuts a commercial corridor is only subject to the local codified zoning standards when they are more generous than the statutory thresholds set forth in the Act. Even if the existing local zoning does not permit the project, the local agency will apply the applicable objective standards in the closest zone that allows multifamily residential use, where the statutory objective planning standards will control, unless the local standards are more generous to the developer. Similar to one hundred percent affordable projects under the Act, the developer must have completed a Phase I environmental assessment of the site, and taken necessary mitigation steps as part of the application submittal process.
Prevailing Wage and Other Requirements Affecting Both Types of Projects
Both qualifying types of housing projects under the Act, described above, are subject to prevailing wage requirements, with certain exceptions. There are additional labor requirements for projects where more than 50 housing units are created.
The Act provides that evaluating the criteria that result in ministerial approval under the Act are not subject to CEQA. This includes the determination by the local agency that the proposed project is consistent with all applicable objective standards, and any required subdivision under the Subdivision Map Act necessary for approval.
Qualifying projects may take advantage of other state laws that offer additional housing incentives, such as Density Bonus Law. But those projects are also subject to replacement obligations should the project require demolition of units protected under the Housing Crisis Act and other state laws. For commercial corridor housing projects, while the required affordability mix will qualify for incentives under Density Bonus Law, the applicant is precluded from seeking a concession from any local requirement that the project must have commercial retail on the ground floor.
The Act amends a series of existing reporting obligations to the state’s Housing and Community Development Department, including the number of project applications submitted under the Act as part of the agency’s Annual Progress Report. Housing element compliance will also be measured in part based on the local agency’s compliance with new provisions under the Act. For qualifying commercial tenants, the agency has certain relocation obligations once the existing commercial lease expires.
A local agency may adopt its own local ordinance that implements the provisions set forth within the Act.
The Act creates multiple opportunities for development in traditional commercial areas. Local agencies should review their objective standards and zoning criteria to determine if these should be modified or updated to address the development of housing in commercial zones.
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