What is California's Density Bonus Law?
And what do developers need to do to qualify?
on July 2, 2021
Updated on July 7, 2021
It is no secret that California has a housing crunch. The U.S. Census Bureau estimates that there are 14.2 million housing units in California, which some experts believe is as much as 30% below the state’s actual needs. One strategy lawmakers are using to address this problem is the California density bonus law. As a result, savvy real estate developers may be in a position to utilize the incentives. In this article, you will find an overview of the key things to know about California’s density bonus housing development law, and other land use considerations.
“When you’re looking to develop in a specific geographic area, you look at the standards to make sure it’s zoned correctly and that it’s a large enough property for your development, but if you look at the face of the zoning code and don’t see things like the density bonus law, you’re going to miss out on important opportunities—not just to develop a particular piece of land, but to do so incredibly profitably and to massively decrease the amount of time, effort, and challenges it normally takes,” says Stephen A. Jamieson, an attorney at Solomon Saltsman & Jamieson in Los Angeles.
Know the History: California’s Density Bonus Law
Our state’s housing issues are not new. The California density bonus law was initially enacted back in 1979.
“It’s designed to encourage and incentivize lower-income housing and transit-oriented housing,” Jamieson explains.
The density bonus law achieves this objective by allowing developers to exceed the normal density restrictions when they meet certain criteria. The density bonus law is codified in California Government Code § 65915.
How Do Developers Qualify for a Density Bonus in California?
Notably, California lawmakers recently expanded and enhanced the state’s density bonus requirements. On Jan. 1, 2021, Assembly Bill 2345 officially took effect. The legislation amends the state’s long-standing density bonus law to provide additional incentives for real estate development projects that include affordable housing. Under the enhanced density bonus law incentives in California in 2021, a developer can obtain a maximum density bonus of up to 50%. A developer would be permitted to build 50% more units than would otherwise be allowed if one of the following three conditions are met:
- At least 15% of all units are reserved for “very low income” housing;
- At least 24% of all units are reserved for “low income” housing or
- At least 44% of all units are reserved for “moderate income” housing.
The California density bonus law uses a sliding scale—meaning a development project that may not qualify for a full 50% bonus may still qualify for a smaller bonus. Density bonuses are generally a 35% to 50% increase on the number of units allowed in the project.
Working With Municipalities
The density bonus law was passed by the state and imposed upon local governments to enforce when developers submit plans to them.
“Because of that, it’s important to understand that there’s a lot specified in the law about what you should or shouldn’t do, and other things that aren’t readily apparent, or which are not explicitely stated. So you can ask for a lot of things you might not see in the statute,” Jamieson says.
“If you don’t ask, you don’t get. And this is the type of thing where you really should be asking for what you want and explore that with the local government, even if it doesn’t look on its face like you might be entitled to it.”
To get the most out of the density bonus incentives, California real estate developers need to know how to navigate the law and the application process, which can be confusing. This is where an attorney comes in handy.
“Some really savvy developers who do this all the time may know it well,” Jamieson says. “Otherwise, as with anything, it’s important to find someone you can rely on and assist you in processing approvals for the project most efficient, and maximizing its profitability.”
If you have any specific questions or concerns about the density bonus law, contact an experienced California land use & zoning attorney for more information. You can also read more about it in our land use & zoning law overview.
“The value of a lawyer in any kind of land use project is to find out how to legally avoid the restrictions and to capitalize on what the statutes and ordinances allow. That may not be evident to laypersons,” says Jamieson.
Even more, if you work with city officials, “they may tell you about the restrictions and programs like the density bonus law and where it has value, and they may even be correct, but what they’re perhaps not telling you is how to do things like avoiding public hearings in various projects where possible. A good land use lawyer will look at the same set of ordinances and determine what you can do from a legal standpoint that a city may say that you can’t. That’s why developers pay lawyers.”