In 2022, the California Legislature passed The Affordable Housing and High Road Jobs Act of 2022, known as Assembly Bill (AB) 2011 and the Middle Class Housing Act of 2022, known as Senate Bill (SB) 6. The two pieces of legislation aimed to address California's housing crisis by paving the way for residential development on sites currently zoned for commercial or retail uses. Both bills took effect on July 1, 2023.
AB 2011 creates a ministerial, time-limited approval process for multifamily housing developments on commercially zoned property. Of particular importance, qualifying developments will be exempt from compliance with the California Environmental Quality Act (CEQA), which will make it easier to meet expedited timelines for approval. These projects are also permitted in the Coastal Zone, opening up a cleaner approval pathway in some of the toughest areas to develop. In order to qualify, projects must pay prevailing wages to construction workers and must meet specified Below Market Rate (BMR) affordable housing targets. There are two options to utilize this law for development: 1) 100% BMR projects; and 2) mixed-income projects which are located on "commercial corridors," and contain at least 15% BMR units.
SB 6 allows residential development on property zoned for retail and office space without requiring a rezoning, and allows project applicants to utilize the Housing Accountability Act (HAA) to limit local discretion to deny or condition approval. Unlike AB 2011, however, SB 6 does not provide a ministerial approval pathway, and requires applicants to commit to "skilled and trained workforce" requirements for project labor in addition to prevailing wage requirements. The law does provide for exemptions if fewer than two bidders bid for a contract under the "skilled and trained workforce" requirement, yet it is likely to result in costlier projects than AB 2011. SB 6 does not contain any BMR requirements and has fewer exclusions than AB 2011, meaning it will likely be utilized more often in lower-cost areas of the state and on parcels that do not qualify for AB 2011.
Each bill creates its own detailed process for establishing permissible density and other applicable development standards for residential development on commercially zoned sites. The pathway to approval is dependent on the percentage of BMR units, the wages being paid to construction labor, the location of the project, and whether it meets particular development standards.
Yet in combination, the two bills will allow development in zones where office, retail, or parking are principally permitted uses. For projects that are less than 100% BMR units, the size of the parcels will be limited to 20 acres or less. AB 2011 provides a 90-day approval timeline for projects of 150 units or fewer, and a 180-day timeline for projects with more than 150 units.
The bills are the newest in a growing series of efforts by the California Legislature to address the state's pervasive housing crisis. By simplifying the approval process and reducing the conditions local governments can impose on qualifying multifamily housing projects, the laws will open up many parcels that would previously have been undevelopable, either because of their current commercial zoning, because of local opposition to multifamily housing, or because of the costs associated with undertaking residential projects in commercial areas. Neither bill promises to be a panacea for developers, but each should be added to the growing toolkit for residential developers looking to create innovative projects that add to California's affordable housing stock.
The full text of AB 2011 can be found here. The full text of SB 6 can be found here.
Venable's California Land Use team is uniquely equipped to assist with any questions you may have as you consider new residential development projects, so do not hesitate to contact Ellia Thompson, Jordan Ferguson, Jeff Harlan, Jonathan Riker, or your regular Venable contact, with any questions about these bills and their potential implications for your upcoming projects.