As we usher in the new year, we also welcome a significant development in California’s housing landscape. The Assembly Bill No. 1287 (AB 1287), which is set to take effect this year, promises to bring substantial density bonus and benefits to property owners and developers.
Background: AB 1287 Bill Summary
AB 1287 is a housing statute that builds upon the existing Density Bonus Law, which incentivizes developers to construct affordable housing. Under the existing law, developers who dedicate a certain percentage of their base density to Very-Low, Low, or Moderate Income homes become eligible for a density bonus and other benefits. The more affordable units are dedicated, the more bonus and other benefits become available.
Problem
However, the current structure of the Density Bonus Law encourages developers to dedicate a relatively small number of base density units at the deeply affordable Very-Low Income level. This has led to a “missing middle” with very few projects choosing to include homes that are deed-restricted at Moderate Income.
“It has been a challenge to create new incentives for Moderate Income production, without undermining the continued production of Very-Low Income units, which continue to be very necessary for Californians who have the greatest challenges finding affordable homes.” – Assemblymember David Alvarez, the author of the bill.
The Solution
AB 1287 addresses this issue by requiring a city or county to grant a housing development a density bonus and incentives when an applicant proposes to maximize existing incentives to construct deed-restricted affordable units, and provides additional deed-restricted moderate-income units. The project would then become eligible for an additional density bonus and incentives, stacked on top of the existing available benefits under the Density Bonus Law.
“This is a major legislative accomplishment. The Middle-Income Homes Bonus program will expand housing opportunities throughout California. It benefits all Californians by encouraging construction of more homes at every income level.” – Colin Parent, CEO of Circulate San Diego, a co-sponsor of the bill.
AB 1287: A Boost for California Housing
AB 1287 is expected to bring several benefits for property owners and developers:
Streamlined Funding for Affordable Housing
The bill streamlines funding for affordable housing. This means that property owners and developers can access funds more easily, reducing the financial burden and risk associated with developing affordable housing projects.
Encouragement for Moderate-Income Homes
AB 1287 encourages developers to build more moderate-income homes. This is a significant step towards addressing the housing affordability crisis in the state, as it caters to a segment of the population that often finds itself priced out of both low-income and market-rate housing.
AB 1287 introduces a unique incentive that is activated only when a project fully utilizes the production of Very-Low, Low, or Moderate Income units, as permitted by the current Density Bonus Law. It’s only when these maximums are achieved, an extra bonus becomes accessible when a project additionally deed-restricts a set of Moderate Income units.
This arrangement guarantees that the new Moderate Income Bonus does not compromise existing incentives under the Density Bonus Law. In fact, it provides fresh economic motivations to maximize the production of deeply affordable units by offering an extra lure in the form of the stacked bonus and additional concessions.
The implementation of this program could enable a developer to dedicate 15% at Very-Low income to receive a 50% bonus. Furthermore, it could also dedicate another 15% at Moderate Income to receive a second stacked 50% bonus. The Moderate Income benefits would accumulate on top of the existing Density Bonus Law benefits, in an amount depicted in this table:
| Percentage of Additional Moderate Income Units | Percentage Density Bonus | Concessions Percentage |
|---|---|---|
| 5 | 20 | 1 |
| 6 | 22.5 | 1 |
| 7 | 25 | 1 |
| 8 | 27.5 | 1 |
| 9 | 30 | 1 |
| 10 | 32.5 | 2 |
| 11 | 35 | 2 |
| 12 | 38.75 | 2 |
| 13 | 42.5 | 2 |
| 14 | 46.25 | 2 |
| 15 | 50 | 3 |
Increased Housing Production
The bill is part of a broader legislative effort to boost housing production in the state. More than 100 housing production laws have gone into effect since 2017, and new construction has indeed increased. This trend is expected to continue with the implementation of AB 1287, providing more opportunities for developers.
Here are some examples of how this new law can benefit different types of property owners and developers:
Property owners looking to build two or more ADUs can use AB 1287 to increase the number of units they can build on their property. For example, if a property owner has a lot with a base density of four units, they can dedicate one unit to very low-income households and one unit to moderate-income households, and receive a 100% density bonus, allowing them to build eight units in total. This way, they can provide affordable housing and generate more income from their property.
Developers of mixed-use projects can use AB 1287 to create more housing units above commercial spaces. For example, if a developer has a lot with a base density of 20 units, they can dedicate three units to very low-income households and three units to moderate-income households, and receive a 100% density bonus, allowing them to build 40 units in total. This way, they can create more vibrant and diverse communities and benefit from the increased demand for housing near amenities and transit.
Developers of large-scale projects can use AB 1287 to maximize the density and affordability of their projects. For example, if a developer has a lot with a base density of 100 units, they can dedicate 15 units to very low-income households and 15 units to moderate-income households, and receive a 100% density bonus, allowing them to build 200 units in total. This way, they can contribute to the state’s housing goals and take advantage of the streamlined funding and incentives offered by AB 1287.
Non-profit housing organizations that focus on affordable housing can use AB 1287 to increase the number of units they can build in their projects. For instance, if a non-profit has a lot with a base density of 10 units, they can dedicate two units to very low-income households and two units to moderate-income households, and receive a 100% density bonus, allowing them to build 20 units in total. This can significantly increase the impact of their projects and help more families in need.
Developers working on infill projects in urban areas can use AB 1287 to maximize the use of their lots. For example, if a developer has a lot with a base density of 30 units, they can dedicate six units to very low-income households and six units to moderate-income households, and receive a 100% density bonus, allowing them to build 60 units in total. This can help to revitalize urban areas and provide more housing options close to jobs and amenities.
Developers in rural areas, where the need for affordable housing is often high, can use AB 1287 to increase the number of units they can build. For example, if a developer has a lot with a base density of 5 units, they can dedicate one unit to very low-income households and one unit to moderate-income households, and receive a 100% density bonus, allowing them to build 10 units in total. This can help to address the affordable housing shortage in rural areas.
Property Owners with Large Lots: Property owners with large lots can use AB 1287 to build more units on their property and generate more income. For example, if a property owner has a lot with a base density of 50 units, they can dedicate 10 units to very low-income households and 10 units to moderate-income households, and receive a 100% density bonus, allowing them to build 100 units in total. This can provide a significant boost to their rental income.
These are just examples. The actual benefits of AB 1287 will depend on the specific circumstances of each project. It’s always a good idea to consult with a professional when planning a housing development project. We invite you for a free architect consultation with Yifu Design Studio if you want to learn more about how we can take advantage of the new law for your project.
Looking Ahead
As we step into the new year, AB 1287 represents a beacon of hope in California’s efforts to address its housing crisis. By providing benefits and incentives for property owners and developers, the bill aims to increase the production of affordable housing in the state. While the full impact of the bill remains to be seen, it is a promising development in the state’s ongoing efforts to ensure housing affordability for all Californians.
References
- AB 1287 (Alvarez) Middle Income Homes Bonus, California Legislative Information
- Density Bonus Law, California Department of Housing and Community Development
- California’s Housing Crisis: A Brief Overview, Legislative Analyst’s Office
- California’s Housing Production Laws: A Summary of Recent Changes, California Department of Housing and Community Development
- California Housing Production Report 2020, California Department of Housing and Community Development
