HCD letter of technical assistance — Carlsbad — SDBL replacement units

2020 W. El Camino Avenue, Suite 500 Sacramento, CA 95833 (916) 263-2911 / FAX (916) 263-7453 www.hcd.ca.gov

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December 14, 2023

Jeff Murphy Community Development Director City of Carlsbad 1635 Faraday Avenue Carlsbad, CA 92008

Dear Jeff Murphy:

This letter provides the California Department of Housing and Community Development (HCD) the opportunity to assist the City of Carlsbad (City) in implementing the State Density Bonus Law’s (SDBL) requirement to replace existing dwelling units that are vacated or demolished (Gov. Code, § 65915, subd. (c)(3).) This technical assistance is provided in response to a question posed by the City.

The City provided an example of a proposed residential redevelopment project that would utilize the SDBL. The project would qualify under the SDBL by providing four affordable units. The project would also require demolition of four existing residential units that are occupied by low-income families. The City asked if the four affordable units used to qualify the project under the SDBL can also count toward the replacement of the four existing units occupied by low-income families.

HCD restates the question below and offers technical guidance in response to the question:

Yes, affordable dwelling units used to qualify a housing development for the SDBL may be counted towards the replacement units required when affordable housing is demolished. A similar question was examined in HCD’s November 12, 2020, letter to the City of Foster City.[1] That letter clarified that the SDBL applies to all new units being constructed,

1 - HCD’s November 12, 2020 letter to Foster City: https://www.hcd.ca.gov/community - development/housing element/docs/smaFosterCity11122020.pdf

Jeff Murphy, Community Development Director Page 2

including any replacement units. Government Code section 65915, subdivision (c)(3)(A), states that any proposed housing development that includes demolition of affordable housing will only be eligible for a density bonus or other incentives and concessions if the demolished units are replaced and either the “proposed housing development, inclusive of the units replaced pursuant to this paragraph, contains affordable units at the percentages set forth in subdivision (b)” (Gov. Code § 65915 subd. (c)(3)(A)(i).), or each “unit in the development, exclusive of a manager’s unit or units, is affordable to, and occupied by, either a lower or very low income household” (Gov. Code § 65915 subd. (c)(3)(A)(ii).) The first option, Government Code section 65915, subdivision (c)(3)(A)(i), is applicable here. It creates a reciprocal obligation on the housing development. That is, the replacement units must be counted when calculating the number of affordable units required by subdivision (b), which lays out the basic requirements for eligibility under the SDBL. In return, the affordable units created to satisfy subdivision (b) also count toward this subdivision’s replacement requirement.

In this instance, if the proposed project requires four affordable units to qualify for the SDBL and also requires replacement of four existing units that are occupied by lowincome households, the four replacement units also count as affordable units to be eligible for the density bonus under the SDBL. Although this results in no net increase of affordable housing on the project site, it ensures there is no net loss of affordable units, which is the goal of the replacement requirements. It also enables the use of the SDBL, consistent with state law. In addition, newly constructed units will replace the older affordable units, thereby providing the community with improved affordable housing overall.

ough this results in no net increase of affordable housing on the project site, it ensures there is no net loss of affordable units, which is the goal of the replacement requirements. It also enables the use of the SDBL, consistent with state law. In addition, newly constructed units will replace the older affordable units, thereby providing the community with improved affordable housing overall.

To expand and clarify HCD’s interpretation of the application of SDBL affordability percentages and replacement units, it is instructive to look at Latinos Unidos del Valle de Napa Y Solano v. County of Napa.[2] That case addressed a local ordinance which stated that units used to meet the SDBL affordability requirements could not be counted toward the municipality’s inclusionary zoning requirements. The Court ruled that an affordable unit can be used to meet both the SDBL’s requirements and local inclusionary zoning rules, and the SDBL was subsequently amended to clarify this issue (Gov. Code, § 65915, subd. (o)(8).) The Court explained that if units in a housing development could only count towards either an inclusionary zoning requirement or the SDBL, the increased cost of providing duplicate affordable units to satisfy each separate requirement would create a greater burden on developers than is permissible under state law. Similarly, refusing to count affordable units used to qualify for a density bonus as replacement units, as required under Government Code section 65915, subdivision (c)(3)(A), would impermissibly increase the burden on developers of affordable housing.

2 (2013) 217 Cal.App.4th 1160, 1165-66 [159 Cal.Rptr.3d 284, 287-88].

Jeff Murphy, Community Development Director Page 2

HCD recognizes the complexities that arise when satisfying several requirements of the SDBL. HCD appreciates the City’s consideration of this guidance and welcomes any further opportunities to provide assistance.

If you have any questions regarding the content of this letter or would like additional technical assistance, please contact Jessica Evans at jessica.evans@hcd.ca.gov.

Sincerely,

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Shannan West

Housing Accountability Unit Chief