Governor Newsom Approves Key Housing Bill: AB 2243

On September 19, 2024, Governor Gavin Newsom approved Assembly Bill (AB) 2243 (Wicks), which amends AB 2011 (Affordable Housing and High Road Jobs Act of 2022), effective January 1, 2025. As explained in our prior legal alert, AB 2011 provides for “by right” streamlined ministerial (i.e., no CEQA) approval of qualifying mixed-income and affordable housing development projects along commercial corridors in zoning districts where office, retail and/or parking uses are principally permitted.

The following is a summary of the notable AB 2011 amendments that apply to mixed-income housing development projects under AB 2243. Please note that AB 2243 also amends Senate Bill (SB) 6 (Middle Class Housing Act of 2022).

Project “Grandfathering”

AB 2243 provides:

• If an AB 2011 application is submitted on or before December 31, 2024, the existing version of AB 2011 will apply to the project unless the project sponsor chooses to be subject to any of the new or modified provisions under AB 2243.

Project Review and Approval

AB 2243 provides:

• Once the project is determined to be consistent with applicable objective planning standards, the local government is required to approve the project within 90 days (for projects with more than 150 housing units) or 60 days (for projects with 150 or fewer housing units).
• The local government must determine project consistency or inconsistency with applicable objective planning standards within 30 days when a project is resubmitted to address written feedback. The otherwise applicable timeframe is within 60 or 90 days, with the longer timeframe applying to projects with more than 150 housing units.
• A density bonus under the State Density Bonus Law, including related incentives/concessions and waivers/reductions of development standards, “shall not cause the project to be subject to a local discretionary government review process” (or CEQA review) even if the requested incentives/concessions or waivers/reductions of development standards are not specified in a local ordinance. This is important because some local governments purport to require discretionary approval for specified “off menu” incentives/concessions and waivers/reductions of development standards.
• The Phase I Environmental Assessment (ESA) requirement will now be imposed as a condition of project approval (versus required as part of the AB 2011 application). If any remedial action is required due to the presence of hazardous substances on the project site, that would need to occur prior to issuance of a certificate of occupancy (as specified).

Permitted Use Requirements

AB 2243 provides:

• Parking uses will be deemed “principally permitted” under AB 2011 even if a conditional use permit is required. Recall that the project must be located in a zoning district where office, retail and/or parking are a principally permitted use.
• Any applicable “neighborhood plan” (as defined; e.g., a specific plan) must have been adopted by the local government before January 1, 2024, and within 25 years of the date that an AB 2011 application is filed for the project. Recall that if the project is within a neighborhood plan area, that neighborhood plan must permit multi-family housing on the project site. This new provision prohibits the enforcement of outdated neighborhood plans.

Residential Density

AB 2243 provides:

• The AB 2011 (base) residential density, which varies depending on the location and size of the project site, is now the “allowable” density (prior to any density bonus) instead of a minimum (“meet or exceed”) density requirement.
• For sites within a “very low vehicle travel area” (as defined in Government Code section 65589.5(h)), the AB 2011 (base) residential density is increased to 70 dwelling units per acre (non-metropolitan jurisdiction) or 80 dwelling units per acre (metropolitan jurisdiction). Under existing AB 2011, that increased density only applies to projects within one-half mile of a major transit stop.
• The required minimum residential density will now depend on when the AB 2011 application has been determined by the local government to be consistent with applicable objective planning standards. If that consistency determination occurs before January 1, 2027, the project must be developed at 50% (or greater) of the applicable “allowable” residential density. A higher requirement applies to project sites within one-half mile of an existing passenger rail or bus rapid transit station, in which case the project must be developed at 75% (or greater) of the applicable “allowable” residential density. The 75% requirement will apply to all projects where the consistency determination is made on or after January 1, 2027.
• The imposition of applicable objective planning standards “shall not preclude a development from being built at the residential density required [under AB 2011] and shall not require the development to reduce unit size to meet the objective standards.”

Freeway & Industrial Use Proximity

AB 2243 provides:

• The term “freeway” does not include freeway on-ramps and off-ramps that serve as a connection between the freeway and other roadways that are not freeways. Recall that under existing AB 2011, housing is strictly prohibited within 500 feet of a freeway so this revised definition is important, particularly since the California Department of Housing and Community Development (HCD) previously opined that freeway on-ramps and off-ramps are included.
• Rather than a flat prohibition, for any housing located within 500 feet of a freeway: (i) the building must have a centralized heating, ventilation, and air-conditioning system and the outdoor intakes for that system cannot face the freeway; (ii) the building must provide air filtration media for outside and return air that provide a minimum efficiency reporting value of 16, which must be replaced as specified; and (iii) the building must not have any balconies facing the freeway. This new provision allows for appropriate flexibility, similar to SB 4 (Affordable Housing on Faith and Higher Education Lands Act of 2023).
• “Dedicated to industrial use” does not include sites (i) where the most recently permitted use was industrial, but that use has not existed on the site for over three years; or (ii) where the site is designated industrial by a general plan adopted before January 1, 2022, but residential uses are principally permitted on the site. Recall that under AB 2011, project sites are disqualified where more than one-third of the square footage is dedicated to industrial use or the project site adjoins a site exceeding that threshold. This revised definition is important because it allows for AB 2011 projects on sites that are appropriate for residential development.
• “Industrial use” does not include (i) power substations or utility conveyances such as power lines, broadband wires, and pipes; (ii) a use where the only source permitted by a district is an emergency backup generator; or (iii) self-storage for the residents of a building. This revised definition is important because it avoids confusion about what types of uses should be deemed industrial uses for purposes of AB 2011.

Conversion Projects

AB 2243 provides:

• There is no residential density limit for the conversion of existing buildings to residential, except where the project would include net new square footage exceeding 20% of the “overall square footage of the project.”
• The local government is prohibited from requiring common open space beyond “what is required for the existing project site” versus required pursuant to the objective standards that would otherwise apply pursuant to the closest zoning district that allows for the AB 2011 residential (base) density, where applicable.
• The local government must provide a development impact fee “credit” for any existing office, commercial, or “similar use” that is converted to residential use (as specified) “so that the amount of the fee is attributable only to the development’s incremental impact on public facilities and services.”

Large Shopping Mall Redevelopment Projects

AB 2243 provides:

• A “regional mall” site may be up to 100 acres (versus the otherwise applicable 20 acre-project site size maximum). Regional mall is defined to include a mall where (i) the permitted uses on the site include at least 250,000 square feet of retail, (ii) at least two-thirds of the permitted uses on the site are retail, and (iii) at least two of the permitted retail uses on the site are at least 10,000 square feet.
• The following additional requirements must be met for AB 2011 projects on regional mall sites that are over 20 acres: (i) the average size of a block (as defined) cannot exceed three acres, (ii) at least five percent of the project site must be dedicated to open space, and (iii) buildings must abut within ten feet of the street for at least 60% of the frontage along any newly created street that has a right-of-way of less than 70 feet (i.e., does not qualify as a commercial corridor).

Coastal Zone Projects

AB 2243 provides:

• AB 2011 projects are prohibited in the coastal zone unless SB 35 coastal zone requirements are met (pursuant to Government Code section 65913.4(a)(6)(A)), as recently modified by SB 423, with the exception of the requirement that the project site must be zoned for multi-family housing.
• Where a project site is located in the coastal zone, the public agency with coastal development permitting authority, as applicable, must approve the permit if it determines that the project is consistent with all objective standards of the local government’s certified local coastal program or certified land use plan, as applicable.
• Any density bonus, incentives/concessions, waivers/reductions of development standards, and/or (reduced) parking ratios granted pursuant to the State Density Bonus Law “shall not constitute a basis to find the project inconsistent with the local coastal program.”

Setback Requirements

AB 2243 provides:

Density bonus incentives/concessions or waivers/reductions of development standards permitted under the State Density Bonus Law may now be utilized to deviate from specified AB 2011 setback requirements related to existing adjacent residential uses.

Clarifications

AB 2243 clarifies:

• The “allowable” density under AB 2011 is calculated prior to any density bonus under the State Density Bonus Law.
• The number of on-site affordable housing units required under AB 2011 is based on the number of housing units in the project prior to any density bonus (i.e., the “base” units), which is consistent with the State Density Bonus Law.
• “Urban uses” includes a public park that is surrounded by other urban uses.
• The width of the right-of-way includes sidewalks for purposes of determining whether it is a “commercial corridor.”

AB 2243 also clarifies the process for calculating the on-site affordable housing requirement under AB 2011 where the local government requires a higher percentage of affordable units and/or a deeper level of affordability.