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May 2024 Update: The California Department of Housing and Community Development has informed me that their interpretation of the law is that the two Additional Density Bonus options are NOT stackable, because this was not the intent of the legislature upon passing AB1287. However, Los Angeles has released their implementation guidance for AB 1287, and they are allowing up to a 100% bonus to be utilized, putting them on par with other cities.
If you are developing multifamily housing in Los Angeles or elsewhere in Southern California in 2024, it should almost certainly be a State Density Bonus project.
The State Density Bonus has been significantly improved for 2024, thanks to AB 1287. With a few rare exceptions, the State Density Bonus now provides the best bang for your buck in terms of providing additional density, waiving troublesome development standards, and requiring a feasible amount of affordability.
For developers in the City of Los Angeles, this essentially means that TOC (Transit Oriented Communities) is all but dead. In any instance, you can now get more density from the State Density Bonus than TOC, and you get much more flexibility on things like FAR, height, transition planes, open space, and setbacks. Plus, the State Density Bonus can be used where TOC doesn’t apply.
The Planning Department is discussing revamping TOC at some point this year, but until that happens the only time it might make sense to go with TOC is in the rare case of a project that only needs Base Incentives and would therefore be exempt from CEQA.
Los Angeles vs. Everyone Else
Unfortunately, the State Density Bonus still provides different bonus amounts for projects in the City of Los Angeles vs projects in any other city in the state. This is because of a boneheaded provision from AB 2345 that exempted Los Angeles from density bonuses above 35% up to 50%. This made some sense at the time in order to encourage projects to use TOC, but now that the State Density Bonus is better than TOC in all cases, this just means that projects in LA get 15% less bonus than projects elsewhere in the state. Hopefully this provision will get removed by the legislature soon.
Maximizing Density
Before we dive into the details, let’s look at the headline number: what’s the maximum density you can get using the density bonus?
The answer most people will give you is a 100% bonus outside the City of LA, and an 85% bonus for projects in Los Angeles.
But it might actually be possible to get more density than that.. Up to 138.75% outside of LA and up to 123.75% in Los Angeles. Why is this?
The big change in AB 1287 is the “Additional Density Bonus” which is designed to be stacked on top of the normal density bonus. Projects can use this Additional Density Bonus only if they have maxed out the original density bonus. AB 1287 provides for two options for the Additional Density Bonus. The first provides for up to a 38.75% additional bonus in exchange for providing up to an additional 10% of base density as Very Low Income affordable units. The second provides for up to a 50% additional bonus in exchange for providing up to an additional 15% of base density as Moderate Income affordable units.
Most people have assumed that this is an either-or scenario. A project can either choose the Very Low Income Additional Density Bonus or the Moderate Income Additional Density Bonus. However, nothing in the law’s language explicitly prevents the stacking of these two Additional Density Bonus calculations, as long as the total combined affordability percentage does not exceed 50%. Whereas the language for the original density bonus explicitly states that a city “shall grant one density bonus” (emphasis mine), the language for the Additional Density Bonus doesn’t specify that a project is only allowed one or the other.
If the intent of the Additional Density Bonus was to only allow for one, why didn’t the bill authors utilize the existing, well-established language from the primary density bonus that specifies this?
Will This Stand Up in Court?
Now, I am fairly certain that many legislators probably thought they were voting for a bill that only allowed one or the other. In fact, all of the legislative analysis for AB 1287 stated that the maximum total bonus was 100%. However, the legislative analysis for AB 1287 was of particularly poor quality and contained a number of mistakes, so I don’t give it too much weight that it’s representative of the intent behind the language of the law.
Here’s why I think there’s a fairly good chance the stackability of the two Additional Density Bonuses will hold up in court.
The density bonus has a longstanding provision that is one of my favorite sentences of all time. It states that the State Density Bonus law “shall be interpreted liberally in favor of producing the maximum number of total housing units.”
The Additional Density Bonus options being stackable and the Additional Density Bonus options not being stackable are both reasonable interpretations of the language in AB 1287. Due to the “interpreted liberally” provision, however, the interpretation that would maximize the total number of housing units should prevail. Whereas the “statutory construction” standard for other laws would focus more on original intent, the State Density Bonus prioritizes maximizing housing production.
I believe that stacking the Additional Density Bonus options clearly meets this threshold and therefore projects should be able to get up to a 138.75% bonus outside of LA and up to a 123% bonus in Los Angeles.
Using the Density Bonus in LA
Let’s walk through an example project to show how you can maximize the State Density Bonus in Los Angeles.
We’ll start with a property that a few years ago would have been pretty much undevelopable: A 7,500 sf storefront lot in South LA with the zoning C1-1VL-CPIO. (note: this is a made-up example. I don’t think there are actually any lots in South LA with this zoning!)
According to LA’s handy dandy Summary of Zoning Regulations, a lot with C1 zoning can build residential at R3 density, which means 1 home can be built per every 800 square feet of lot area. Being in the 1VL height district, a mixed-use development would be limited to 3 stories or 45 feet in height. And like almost all commercial lots in Los Angeles, it is limited to 1.5x the lot size in total floor area.
The Community Plan Implementation Ordinance “CPIO” tag at the end of the zoning designation adds a bunch of additional design restrictions that we can kinda-sorta ignore because we’re using the Density Bonus (that’s a story for another post). However, what is important to know is that because the lot is covered by a CPIO, the use of TOC is limited.
With a C1 base density, the base density for our 7,500 square foot lot is 9 units, right? Not so fast.
Thanks to a change to the State Density Bonus that went into effect last year, you can now use the maximum allowable base density from either the zoning or the General Plan Land Use Designation. In this case, our lot has a GPLU designation of “Neighborhood Commercial.” Checking the South LA Community Plan map, we see that Neighborhood Commercial also allows C2 zoning. Therefore, we can use C2’s density of one unit per 400 square feet of land area, which results in a base density of 18.75. All Density Bonus calculations round up (even if it’s 0.001), so we now have a base density of 19 units.
For this project, we’re going to choose to use the primary State Density Provision (b)(1)(B), which requires you to build housing affordable at the Very Low Income level. In any other city, we could provide 15% of base density as VLI units in exchange for a 50% primary density bonus, however in Los Angeles, we have to max out at 11% of base density as VLI units in exchange for a 35% primary density bonus.
At the moment, we’re providing 3 Very Low Income units (0.11 * 19 = 2.09, which rounds up to 3) in a building with a total of 26 units. Up until January 1st, this was as far as you could go. But not now!
Using the Additional Density Bonus
To use the Additional Density Bonus, you first need to maximize the initial density bonus. Unfortunately, (or fortunately for the provision of affordable housing), the writers of AB 1287 appear to have forgotten that LA had a different maximum density bonus, so we’re going to need to up the initial VLI percentage to 15% without being able to get the benefit from it. However, in this case 15% of 19 and 11% of 19 both round up to 3, so there’s no material change.
An important thing to note: the text of the Additional Density Bonus says that 15% of “the total units” need to be affordable. You would think this would mean 15% of the resulting project would need to be affordable, but in Density Bonus law, “total units” is defined to mean the base density.
Now we’ll apply the Very Low Income Additional Density Bonus. To maximize the 38.75% bonus we can get here, we need to provide another 10% of base density (two units) as VLI units. In exchange, we get to build another 8 units, for a new total of 34 units, five of which are affordable. Isn’t that exciting?
Pushing the limit here, we can then apply the Moderate Income Additional Density Bonus. In exchange for 15% of base density set aside for moderate-income tenants we can get an additional 50% bonus. That’s 3 MI affordable units and 10 bonus units.
Putting It All Together
When we first started looking at this piece of land, we thought we were allowed to build nine apartments.
Now, after using the base density from the General Plan Land Use Designation and applying the original density bonus and two additional density bonuses, we have a project with 44 total units, 5 of which are affordable to Very Low Income renters and 3 of which are affordable to Moderate Income renters.
We were able to go from a piece of land that was almost certainly not economically feasible to develop into one that might be a slam dunk. The resulting 18% of total unit count being affordable is higher than we might have seen using TOC, but moderate-income units are typically break-even or even slightly profitable, and the remaining 11% Very-Low Income is right in line with TOC when accounting for differences in rent schedule.
Where the Magic Happens
The bonus potential we saw is enough to make State Density Bonus preferable to TOC, but the real pleasure of working with the State Density Bonus comes from waivers and incentives. If you recall, like most commercial properties in Los Angeles, this lot is limited to 1.5 FAR. If we had used TOC, because of the CPIO, we would have been allowed up to a .45% FAR bonus, which would give us 2.175 FAR. However, using a Density Bonus waiver, we can ask for as much FAR as we need to fit 44 units. That’s right. We could ask for 3, 4, or even 5 FAR, and as long as we’re actually using the FAR for housing, the city is not allowed to deny us.
The same thing goes for height. Whereas in Tier 1 or Tier 2 TOC we’d only be allowed 1 story or 11 feet in additional height, using the State Density Bonus we can get as much height as we need.
And that’s not all! Waivers and incentives can also be used for open space requirements, setbacks, transition plane requirements, and more!
What Else Can I Do?
The density bonus plays really well with other state housing laws, like ADU laws and the Housing Accountability Act.
Is your property located within a half-mile of a Major Transit Stop (i.e. anywhere where TOC applies)? Thanks to AB2097, you can build with no parking if you so wish.
State Density Bonus projects are also fully-compatible with the full array of CEQA exemptions, even if you’re getting waivers and incentives. For most projects, that looks like a Class 32 exemption. For mid-sized projects that hit the site plan review threshold (which should be noted, does NOT count any affordable units or any bonus units), this might be a Sustainable Communities exemption.
How Do I Get Started?
If you are a landowner, developer, religious institution, or non-profit in Southern California looking to use the State Density Bonus to build housing, the Los Angeles Housing Production Institute can help advise you on your project. If you are located elsewhere in California, LAHPI is happy to provide general advice and put you in touch with a local land use consultant that can be of further assistance. You can email Joe Cohen at [email protected]
If you are a land use attorney, consultant, architect, or academic who wants to learn more about maximizing the Additional Density Bonus, I am also happy to discuss. Again, my email address is [email protected].
About the Los Angeles Housing Production Institute
LAHPI exists to solve the housing crisis in Los Angeles. We believe that this requires significantly increasing the production of diverse housing options for people of all income levels throughout the region.