June 16, 2021

Through a Retail Lens: A Look at California's Density Bonus Law, Other Legislative Updates

Holland & Knight Retail and Commercial Development and Leasing Blog
Andrew J. Starrels
Retail and Commercial Development and Leasing Blog

In a recent webinar presented as part of Holland & Knight's West Coast Land Use and Real Estate webinar series, three members of the firm's West Coast Land Use and Environmental practice group offered an overview and practical tips about how California's State Density Bonus Law (SDBL) seeks to facilitate development of housing in response to the state's well-documented housing crisis. The informative panel, which also detailed how recent laws like Senate Bill (SB) 35 can further streamline the approval process and combine with the SDBL to further promote development, also illuminated a different and thought-provoking aspect of these development incentives. While principally aimed at triggering housing production, many programs provide opportunities for synergistic retail solutions that combine with housing development, because the incentives extend to mixed-use developments as well.

Genna Yarkin, a member of the firm's West Coast Land Use and Environmental practice group, outlined four categories of the SDBL program's separate and independent benefits to qualifying residential or mixed-use projects that encourage the creation of affordable housing opportunities. The four categories include the "bonus" itself in the form of additional permitted housing units, concessions and incentives that reduce the expense of housing development, waivers from otherwise applicable development standards, and reduction of parking requirements.

Chelsea Maclean and Ryan Leaderman, members of the West Coast Land Use and Environmental practice group, explained the distinctions and separate requirements for concessions and incentives as opposed to waivers. They also offered helpful and practical tips for navigating the regulatory requirements of this important housing program, which was first enacted in 1979 and has become the subject of recent legislative amendments that emphasize the value of the program to new housing development.

The panelists also described the recently enacted SB 35 legislation, which on its own or in tandem with the SDBL, affords to qualifying housing developments an expedited, "by-right" approval pathway for the production of affordable housing in both 100 percent affordable and mixed-income projects. The panelists also briefly described several recent judicial decisions upholding the rights and incentives that these legislative programs provide.

In some communities, the SDBL and other incentive programs like SB 35 have faced criticisms, despite their legislative intentions, for perceived failures to produce sufficient – and sufficiently affordable – housing in light of California's ongoing shortage or for providing retail components that do not match community needs and often sit vacant or under-utilized. Much of the incentivized housing has consisted of market-rate, high-value housing in infill areas where the new product is beyond the means of many housing constituencies. Despite these obstacles, some infill developments have successfully deployed smaller-format retailers downsizing from big-box sites, boutique and neighborhood grocers popular with local consumers, and restaurants and other community-serving specialty retail that combine to produce vibrant urban communities. While mixed-use incentives have typically resulted in mid- and high-rise developments with ground-floor retail elements, the programs do not prohibit site plans that assemble uses in different fashions when lot size permits. The incentives, concessions and waivers offered in these programs can bring additional value to developments that nimbly accommodate various objectives and requirements. Where synergies between uses can be realized, mixed-use development with new housing presents a viable solution for both the statewide crisis of housing supply as well as the existential challenges of brick-and-mortar retail in a changing economic environment.

If you were unable to attend the webinar, please feel free to view and share the online recording (Access Passcode: #SDBL_SB35).

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