Density Bonus Law Impacts and Schreiber v. City of Los Angeles
Density Bonus Law Impacts and Schreiber v. City of Los Angeles
Density bonus law (Gov. Code, § 65915) requires local jurisdictions to adopt an implementation ordinance to ensure compliance with it. (§ 65915, subd. (a).) Some local jurisdictions adopt implementation ordinances that modify or add to the requirements of density bonus law, and many jurisdictions fail to update their implementation ordinances when density bonus law is amended. These practices can lead to inconsistencies between state law and local ordinances.
As discussed below, Schreiber v. City of Los Angeles (2021) 69 Cal.App.5th 549, resolved such an inconsistency, holding that a local implementation ordinance is preempted to the extent that the implementation ordinance imposes application requirements that exceed those required under density bonus law.
Background
Schreiber concerns a project in the City of Los Angeles (“City”) that requested “off-menu”[1] incentives[2] afforded by density bonus law. Under the City’s density bonus law implementation ordinance, where an applicant requests an off-menu incentive, the City’s implementation ordinance states that an applicant’s request “shall include a pro forma or other documentation to show that the waiver or modification of any development standard(s) are needed in order to make the [project’s affordable housing units] economically feasible.” (L.A. Mun. Code (“LAMC”), § 12.22-A.25.g.3.i.a [emphasis added].) Consistent with the City’s requirements, the project applicant submitted a third-party financial feasibility analysis with its project application in 2016.
In 2017, Assembly Bill No. 2501 (“AB 2501”) went into effect. AB 2501 clarified that under density bonus law, “[a] local government shall not condition the submission, review or approval of an application pursuant to this chapter on the preparation of an additional report or study that is not otherwise required by state law, including this section.” (Gov. Code, § 65915, subd. (a)(2).) Accordingly, the City published a memorandum stating that the City would no longer require “[f]inancial pro-formas and third-party reviews” to determine whether a project would be eligible for an incentive under density bonus law, but did not update its implementation ordinance.
In 2018, the City Planning Commission approved the project, including the applicant’s request for off-menu incentives, finding that the record did not contain substantial evidence that would allow the City Planning Commission to deny the incentives. Following the City’s approval of the project, neighbors filed a petition for a writ of administrative mandate, arguing (1) that the Planning Commission abused its discretion when it approved the off-menu incentives without obtaining the required financial documentation and (2) that the City’s approval of the project was not supported by substantial evidence. The trial court denied the petition, and the neighbors filed an appeal.
Court of Appeal Upholds the Project Approval
Schreiber found that both density bonus law and City code implementing it require the City to grant requested incentives unless the City can make findings that the requested incentives’ do not result in cost reductions or the incentives would have a specific, adverse impact on public health, safety, the physical environment, or any property listed in the California Register of Historical Resources. (Schreiber, supra, 69 Cal.App.5th at pp. 555-556.) According to the Court, both density bonus law and the City’s implementation ordinance place the burden of proof on the City to overcome the presumption that the incentive would result in cost reductions. Notably, neither the project applicant nor the City was required to show or find that the incentives would result in cost reductions. Rather, the City was required only to disapprove the requested incentives if it could make a negative finding that the incentives would not result in cost reductions.
The Court next determined that while AB 2501 prohibited a municipality from requiring an “additional report or study that is not otherwise required by state law,” AB 2501 did not prohibit a municipality from requesting or considering information relevant to cost reductions. The Court drew a distinction between information pertaining to economic feasibility and information showing that an incentive would result in “cost reductions.” While the City could request the latter, AB 2501 prohibited the City from requesting the former. Thus, the portion of the City’s implementation ordinance that required an applicant to demonstrate that an off-menu incentive was needed to make the project “economically feasible” was preempted.
The Court then turned to the neighbors’ claim that the administrative record did not contain substantial evidence supporting the City’s approval of the project. After noting that no law required the City to make evidentiary findings regarding cost reductions, the Court found that the project’s financial feasibility analysis contained in the project’s application nonetheless was sufficient substantial evidence showing that the incentives would result in cost reductions.
The primary take-away from this case is to always check a density bonus local implementation ordinance against state law. To the extent the local ordinance requires an applicant to do more than density bonus law, it is preempted.
[1] The City’s density bonus law implementation ordinance has lists of pre-approved density bonus law waivers and incentives. Requests for modifications to City standards not on its pre-approved lists are considered “off-menu.”
[2] Density bonus law uses “incentive” and “concession” interchangeably. For readability, we use “incentive” to refer to both incentives and concessions in this post.