September 1, 2022

California Legislature Creates Pathways for Residential Development on Commercially Zoned Land

Assembly Bill 2011 Provides a Ministerial CEQA-Exempt Pathway for Qualifying Below Market Rate and Mixed-Income Projects That Pay Prevailing Wages. Senate Bill 6 Allows Residential Use of Commercially Zoned Property Without Requiring a Rezoning.
Holland & Knight Alert
Daniel R. Golub | Chelsea Maclean | William E. Sterling | Emily Warfield

Highlights

  • California Assembly Bill (AB) 2011 of 2022 provides a streamlined ministerial approval pathway, comparable to SB 35 of 2017, for qualifying multifamily projects on commercial zoned land that pay prevailing wages for construction work and meet specified affordable housing targets. The legislation provides two distinct options for eligibility: one for 100 percent Below Market Rate (BMR) projects located on commercial zoned land, and a second for mixed-income (typically 15 percent BMR) projects located on "commercial corridors." Eligibility is further limited by numerous site and project criteria requiring careful review.
  • California Senate Bill (SB) 6 of 2022 does not provide a ministerial approval pathway, but does allow residential use on commercially zoned property without requiring a rezoning. To invoke the law, however, applicants must commit both to prevailing wages for workers and to "skilled and trained workforce" requirements.
  • This Holland & Knight alert provides a high-level analysis of the two laws to help project applicants and property owners identify whether these laws should be explored further to advance housing production on commercially zoned sites.

The California Legislature passed Assembly Bill (AB) 2011 (Wicks), the Affordable Housing and High Road Jobs Act of 2022, and Senate Bill (SB) 6 (Caballero), the Middle Class Housing Act of 2022, on Aug. 29, 2022. Both pieces of legislation aim to meet the long-discussed goal of unlocking the potential for housing production on sites currently zoned and designated for commercial or retail uses. Unless vetoed by Gov. Gavin Newsom, the laws will take effect on July 1, 2023 – not in January, as with most new laws.

A Closer Look

AB 2011, the primary housing production bill of the 2022 legislative session, creates a ministerial, California Environmental Quality Act (CEQA)-exempt, time-limited approval process for multifamily housing developments on commercially zoned property. Projects must pay prevailing wages to construction workers and meet specified Below Market Rate (BMR) affordable housing targets. The legislation provides two distinct options: one for 100 percent BMR projects and a second for mixed-income (typically 15 percent BMR) projects located specifically on "commercial corridors." Eligibility is further limited by numerous site and project criteria requiring careful review. The streamlined review process is very similar to SB 35 of 2017, a law that the Holland & Knight team has substantial experience invoking to achieve project approvals. AB 2011 sunsets in 2033.

SB 6 allows residential development on property zoned for retail and office space without needing a rezoning, and allows project applicants to invoke the Housing Accountability Act (HAA) to limit local discretion to deny or condition approval. However, SB 6 does not provide a ministerial approval pathway, and it requires applicants to commit to both prevailing wage and more costly "skilled and trained workforce" requirements for project labor (although the law provides an "off ramp" if fewer than two bidders bid for a contract under the "skilled and trained workforce" requirement). SB 6 does not contain any BMR requirements, and it has fewer site exclusions than AB 2011, and so it is likely to be used most frequently in lower-cost areas of the state and on sites where AB 2011 is not available.

Each bill has its own detailed process for establishing permissible density and other applicable development standards for residential development on sites where commercial zoning applies.

In total, the two laws create three potential pathways, which are summarized in the chart below. Please note that the laws include additional detail not captured in this summary chart, and that the chart below is intended only to give property owners and project applicants a high-level view about whether any of the three pathways should be explored further.

SB 6 Summary Chart

View larger image

To help determine whether your site or project may be eligible and to create a strategy for producing housing on commercially zoned land, please contact the authors or another Holland & Knight West Coast Land Use and Environment attorney.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.


Related Insights