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Housing Overlays

Housing Element Sites Inventory Guidebook (AB 1397) · 2026 edition · updated 2026-07-29 · California

Affordable housing or zoning overlays are a zoning tool that allows jurisdictions to modify existing zoning to allow for or require certain types of residential development, or development at certain densities, on a parcel without modifying the standards of the underlying zoning district. Usually, they have specific requirements and conditions (e.g., a percentage of the development must be deed-restricted as affordable to lower income households for a specific number of years) that must be met in order for a developer to take advantage of the overlay. These are often combined with incentives to encourage developers to utilize the overlay. Jurisdictions use overlays to help promote a specific type of development, and to increase densities without having to go through a rezoning procedure on the actual parcel and can be more useful when issues such as density and affordable housing become contentious. To ensure the overlay is considered zoning and not just a development incentive, the overlay must demonstrate the following:

  • There is no additional discretionary action needed above what is required in the base zone (i.e., a conditional use permit or other review) for a developer to take advantage of overlay.

  • Development standards are consistent with those needed to allow for the density allowed under the overlay. Development standards for use exclusively in the overlay may be needed in order to ensure maximum allowable densities can be achieved.

  • • The developer can access State Density Bonus Law in addition to using the densities allowed in the overlay. For example, if the underlying zoning allows a maximum density of 15 units per acre, but the overlay allows a maximum density of 25 units per acre, and if the developer is using the overlay and wants to use State Density Bonus Law, the density bonus is calculated assuming the base density is 25 units per acre.

If the overlay has conditions such as an affordability requirement, incentives should be sufficient and available to make development feasible and more profitable than the underlying zoning.

For an affordable housing overlay, the element should describe affordability threshold requirements to utilize the overlay (i.e., percentage of units and levels of affordability which must be met to develop at the increased densities). Please note, the jurisdiction should talk with for-profit and nonprofit developers to determine an appropriate mix of incomes that make development feasible in their community. For example, a 100 percent affordability requirement may act as a constraint to using the overlay depending on the level of subsidy required per unit and the availability of funding to support the level of affordability or available incentives. End Housing Overlay

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▸ Contents — Housing Element Sites Inventory Guidebook (AB 1397)
Housing Element Sites Inventory Guidebook (AB 1397)
  1. SUBJECT: Housing Element Site Inventory Guidebook Government C…
  2. Housing Element Site Inventory Requirements
  3. SITE INVENTORY GUIDEBOOK FRAMEWORK
  4. PART A: IDENTIFICATION OF SITES
  5. PART B: SITES TO ACCOMMODATE LOW AND VERY LOW- INCOME RHNA
  6. PART C: CAPACITY ANALYSIS
  7. PART D: NONVACANT SITES
  8. PART E: DETERMINATION OF ADEQUATE SITES
  9. Step 1: Identification of Developable Sites Government Code se…
  10. Government Code section 65583.2(b)
  11. Step 3: Infrastructure Availability Government Code section 65…
  12. Step 4: Map of Sites
  13. Step 5: Determination of Consistency with Affirmatively Furthe…
  14. Government Code section 65583.2(c)
  15. HCD Best Practices for selecting sites to accommodate the lowe…
  16. Step 7: Environmental Constraints
  17. NEXT STEP:
  18. Step 1: NEW Sites Used in Previous Planning Periods Housing El…
  19. Unusual Circumstances
  20. Step 1B:
  21. Definition of Use By Right (Government Code section 65583.2 (i))
  22. Sample Program:
  23. Government Code section 65583.2(c)(3)
  24. Housing Overlays
  25. Step 3: Size of Sites
  26. Definition of a Large Site
  27. Specific Plans, Master Plan, and other Subdivisions
  28. NEXT STEP:
  29. Step1: Utilizing minimum densities to calculate realistic capa…
  30. Government Code section 65583.2(c)(2)
  31. - Applicable land use controls and site improvement requirements
  32. Form Based Codes
  33. Typical densities of existing or approved residential developm…
  34. No Net Loss Law
  35. NEXT STEP:
  36. Definition of a Vacant Site
  37. Step 1: Description of the nonvacant site Government Code Sect…
  38. Government Code section 65583.2(g)(1)
  39. Existing Uses:
  40. Development Trends:
  41. Market Conditions:
  42. Availability of Regulatory and/or other Incentives:
  43. Step 3: NEW Reliance on nonvacant sites to accommodate more th…
  44. Step 4: NEW Program and policy requiring replacement of existi…
  45. Program X: Replacement Unit Program
  46. Funding: General Funds
  47. NEXT STEP:
  48. Government Code section 65583.1
  49. Impact of New Accessory Dwelling Unit Laws
  50. Step 2: Determine whether there is sufficient capacity to acco…
  51. Step 3: Adequate Sites Program
  52. General Program Requirements
  53. Timing
  54. Consequences for Failing to Complete Rezoning Deadline:
  55. Housing Accountability Act and the Housing Element
  56. Annexation
  57. Common Program Questions and Answers for Shortfall Zoning:
  58. ATTACHMENT 1: SUMMARY OF NEW LAWS REFERENCED IN THE GUIDEBOOK
  59. ATTACHMENT 2: GOVERNMENT CODE SECTION 65583.2

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