City’s Approval of Affordable Housing Projects Did Not Violate State Law

In Wollmer v. City of Berkeley, (— Cal.Rptr.3d —-, Cal.App. 1 Dist., March 11, 2011), a court of appeal considered whether a city’s approval of two affordable housing projects violated either the state’s density bonus law or the California Environmental Quality Act (“CEQA”). The court of appeal held the projects did not violate the affordable rent requirements of the density bonus law because the project’s eligibility to receive rent subsidies under the Federal Section 8 program, and that the density bonus law allows the city to waive development standards and grant variances to accommodate project amenities such as interior courtyards and community plazas that were not residential units themselves.

The court also found that the projects were exempt from CEQA because they met the requirements for the categorical exemption for in-fill development projects which are in compliance with the current general plan and zoning, despite the fact that zoning standards for setbacks, heights and floor area ratio were modified for the project under the requirements of the density bonus law.

Facts

In November 2007, several developers (“Developers”) submitted an application to the City of Berkeley (“City”) for a mixed-use building which was to include market rate and affordable condominiums, parking, and retail space. The Zoning Adjustment Board “(“ZAB”) approved the use permit application for a five-story building with 98 residential units, including 15 affordable units, 7,700 square feet of commercial space, 114 parking spaces, and a five-foot right-of-way for a new left turn lane. The use permit qualified the Developers for a minimum 32.5 percent density bonus under Government Code section 65915 because, at the Developers’ option, 20.3 percent of the base units would be affordable to low-income households if built as condominiums, and 10.8 percent of the affordable units would be affordable to very-low-income households if built as rentals.

Stephen Wollmer (“Wollmer”) administratively appealed ZAB’s decision but City affirmed. City undertook a traffic analysis focused on the intersection at which the project would be located. The study concluded that, with the proposed addition of a new left turn late and upgrade to the traffic light, traffic flow would improve. City concluded that Developer’s Affordable Housing Project qualified for a Class 32 Categorical Exemption for In-fill Development Projects.

The population of 55 to 64 year olds in City increased 107.9 percent between 1990 and 2007. To address this change, Developers requested a modification of the use permit to allow them to either proceed with the Affordable Housing Project or a Senior Affordable Housing Project consisting of a 98 residential units, which would range in affordability from 40 percent to 60 percent of the average median income, 9,300 square feet of retail space, and 43 parking spaces. A transportation consultant concluded that the Senior Affordable Housing Project would generate fewer trips than the Affordable Housing Project. ZAB approved Developer’s modifications and City subsequently determined the Senior Affordable Housing Project was exempt from CEQA as an in-fill development project.

Wollmer filed a petition for administrative mandamus to challenge City’s approval of both projects claiming the approvals violated the state statutes governing density bonuses and CEQA. The trial court denied Wollmer’s petition.

Decision

Wollmer asserted City’s approval of both projects violated the state density bonus laws because (1) Developers would be allowed to receive Section 8 subsidies for the units that qualified for density bonuses pursuant to condition 68 of the use permit “thereby exceeding the maximum ‘affordable rent’ established in Health and Safety Code section 50053;” (2) “City’s approval of amenities should not have been considered when deciding what standards should be waived to accommodate the project;” and (3) City did not properly calculate the density bonus for the projects. The court of appeal rejected these arguments and affirmed the decision of the trial court.

California’s density bonus law rewards developers who agree “‘to build a certain percentage of low-income housing with the opportunity to build more residences than would otherwise be permitted by the applicable local regulations.’” Pursuant to Government Code section 65915, municipalities must adopt ordinances that establish procedures for implementing the directives of the density bonus statute. Section 65915 provides a progressive scale for a bonus based on the type of below market rate housing offered by the developer. An applicant for a density bonus “must agree to, and the municipality must ensure, the ‘continued affordability of all low- and very low income units that qualified the applicant’ for the density bonus, for 30 years or longer if required by certain programs, including the rental subsidy program.” The amount of rent to be charged for the lower income density bonus units must be set at an “affordable rent” as defined in Health and Safety Code section 50053. Section 50053 provides, in part, affordable rent for very low income households may not exceed “the product of 30 percent times 50 percent of the area median income adjusted for family size appropriate for the unit.”

Developers requested a density bonus of 32.4% for the Affordable Housing Project and a 30.7% for the Senior Affordable Housing Project. Condition 68 of the use permit approved by City for either project sets out the income qualification requirements pursuant to section 65915 and City’s inclusionary ordinance. The ordinance provides that “20 percent of dwelling units in a subject project must qualify as inclusionary units.” If there is more than one inclusionary unit “at least half shall be rented at a price affordable to low- or lower-income households, provided the City can make available rental subsidies through Section 8 or an equivalent program.” If there is no rental subsidy available, prices must be affordable to households at 81% of the median income for the area. Condition 68 of the use permit “allows Section 8 as the maximum housing payment for eight very-low-income rental units qualifying for the section 65915 density bonus” and the Berkeley Housing Authority awarded 87 project-based Section 8 certificates to the proposed project.

Wollmer alleged that condition 68 violates the density bonus law because Developers will be allowed “to receive substantially higher fair market rents available under the federal Section 8 housing program, rather than the maximum rents established under state law.” Wollmer asserted that very-low-income units that qualify for a bonus under state law “cannot be rented for more than what Health and Safety Code section 50053, subdivision (b)(2) allows, namely 30 to 50 percent of area median income.” Wollmer asserted “the density bonus law caps the total rent a housing provider can receive from any source to the above amount, whether that rent comes from direct tenant payment or a combination of tenant contributions and a Section 8 subsidy.”

The court of appeal rejected this argument, finding that Health and Safety Code section 50098 defines the term “rents” as those charges paid by the tenants. The court concluded that the phrase “affordable rent” within the context of the state density bonus law “is concerned with the rent that a tenant pays, not with the compensation received by the housing provider.” If Section 8 payments are involved, the phrase “refers to the tenant’s contribution, not any subsidy in the hands of the developer.” The court found City’s ordinance “encourages use of the Section 8 program as a way of accomplishing deeper affordability . . . . [b]y allowing a developer the additional incentive of a Section 8 subsidy above the low-income tenant’s contributions [and this] ‘contributes significantly to the economic feasibility of lower income housing in proposed housing developments.’”

The court further found there was nothing wrong with City’s method of calculating the project’s density bonus. City does not apply its general plan density standards to specific parcels but instead applies the density standards to “larger areas of a land use classification surrounding a proposed project.” A project is “consistent with the density standard if the number of units that would exist in the larger area upon completion of a project, as well as any other approved projects, is consistent with the general plan density for that area.” This approach allows City to determine if overall growth is consistent with the goals of the general plan. The court found the project and the density bonus were consistent with the general plan density standards.

The court also found that City did not violate the density bonus law by accommodating project amenities when it granted the density bonus. Wollmer argued City waived standards and granted variances to accommodate project amenities such as an interior courtyard, a community plaza, and high ceilings. He asserted City cannot waive development standards “unless it specifically finds that the waived standards physically preclude construction of the density-bonus qualifying project, and waivers [here] to accommodate project amenities do not meet this test.” The court rejected this argument finding that, had City not granted the waivers and variances, it would have resulted in physically precluding Developers from constructing a development that met the criteria of the density bonus law.

Finally, the court found that the categorical exemption for in-fill projects pursuant to CEQA was properly applied. In order to qualify for this exemption, a project “must comply with all applicable general plan designations and polices and all applicable zoning designations and regulations, in addition to the other protective criteria set forth in the regulation.” The density bonus law provides that it should not be interpreted in and of itself to require an amendment to the general plan, or a zoning change or other discretionary approval. The density bonus law prohibits a municipality from applying a development standard that will have the effect of physically precluding a development that qualifies for the density bonus.

City waived or reduced zoning standards for setbacks, height, and floor area ratio to accommodate the project’s density bonus. Wollmer asserted the waiver of these standards precluded the project from qualifying for the in-fill exemption. The court rejected Wollmer’s argument and further found there were no unusual circumstances that prevented a categorical exemption.

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Jeffrey L. Massey | 916.321.4500
Jon E. Goetz | 805.786.4302