Milpitas Municipal Code Ch. C.12 Density Bonus for Affordable Housing Developments

The purpose of this Chapter is to provide incentives for the production of housing for very low income, lower income, moderate income, and senior households in accordance with California Government Code section 65915-65918. In enacting this Chapter, it is the intent of the City to facilitate the development of affordable housing and to implement the goals, objectives, and policies of the Housing Element of the General Plan.

(Ord. No. 38.858, § 4, 9/2/25)

All terms used in this Chapter shall have the meanings established by this Title or as superseded by state density bonus law.

(Ord. No. 38.858, § 4, 9/2/25)

The City shall grant a density bonus or development bonus and/or incentives or concessions, waivers or reductions of development standards, and/or parking ratios as described in state density bonus law to a qualifying project in compliance with state density bonus law. The provisions of this Chapter shall be administered by the Department consistent with Part XIII-D (Administration and Procedures).

(Ord. No. 38.858, § 4, 9/2/25)

A. Types of Incentives. If requested by the applicant, a qualifying project shall be entitled to at least one of the following incentives, unless the City makes the findings required by California Government Code section 65915(d)(1):

1. Reduction or Modifications of Development Standards. A reduction in site development standards or a modification of the requirements of this Title, which exceed the minimum building standards provided in California Health and Safety Code section 18901-18949.31. These may include, but are not limited to, one or more of the following:

a. Reduced minimum lot sizes and/or dimensions.

b. Reduced minimum lot setbacks.

c. Reduced minimum common and/or private open space.

d. Increased maximum building height.

e. Reduced on-site parking standards.

f. Other site or construction conditions applicable to a residential development.

2. Mixed Use Zoning. Mixed use zoning to allow the project to include nonresidential uses and/or allow residential uses within a nonresidential zone. Approval of mixed use activities in conjunction with a housing development is allowed if other land uses will reduce the cost of the housing development and is consistent with the General Plan.

3. Other Cost-Reducing Regulatory Incentive. Another regulatory incentive or concession proposed by the applicant and agreed to by the City, that results in identifiable, financially sufficient, and actual cost reductions. Permissible incentives include direct financial aid (e.g., redevelopment set-aside) in the form of a loan or a grant to subsidize or provide low interest financing for on or off-site improvements, land, or construction costs.

4. Additional Density Bonus. A density bonus of more than that allowed under state density bonus law.

5. Waived, Reduced, or Deferred Fees. Waived, reduced, or deferred fees, including City fees for plan check, construction permit, and/or development impact fees.

B. Eligibility for Incentives. A project shall be eligible for one or more incentives only if it complies with all requirements in Milpitas Municipal Code Chapter XII-1 (Affordable Housing Ordinance), as applicable, and with no exceptions under Milpitas Municipal Code Section XII-1-4 (Exceptions to On-Site Development of 15 Percent Affordable Units).

C. Additional Incentives. The approval of an additional incentive or incentives above that allowed by state density bonus law shall be determined on a case-by-case basis by the Review Authority.

(Ord. No. 38.858, § 4, 9/2/25)

A. Density Bonus Agreement. The entry into and execution of the density bonus agreement shall be a condition of any application for a housing development proposed in compliance with this Chapter. The agreement shall be recorded at the applicant's cost as a restriction running with the land on the parcel or parcels on which the target units will be constructed.

B. Time Period of Affordability. Target units shall remain restricted and affordable to the designated group for a period of 55 years (or a longer period of time if required by the construction or mortgage financing assistance program, mortgage insurance program, or rental subsidy program), or otherwise as provided by law.

C. Moderate Income For-Sale Units. An applicant shall agree that the initial occupants of moderate-income units in a condominium project or a planned unit development are persons and families of moderate income, as defined in Health and Safety Code section 50093. Upon resale, the seller of the unit shall retain the value of any improvements, the down payment, and the seller's proportionate share of appreciation. The City shall recapture its proportionate share of appreciation, which shall then be used within three years for any of the purposes described in Health and Safety Code section 33334.2(e), that promote homeownership. For purposes of this Subsection, the City's proportionate share of appreciation shall be equal to the percentage by which the initial sale price to the moderate-income household was less than the fair market value of the home at the time of initial sale.

D. Certificate of Compliance. The owner shall submit annually, and within 30 days of occupancy of a target rental unit, a Certificate of Compliance, which shall include the name, address, and income of each tenant occupying the target unit.

E. Income Statements and Tax Returns. The owner shall maintain and keep on file annual sworn and notarized income statements and current tax returns for all tenants occupying the target rental units.

F. Provide Additional Information. The owner shall provide to the City any additional information required by the City to ensure the long-term affordability of the target units by eligible households.

G. Right to Inspection. The City shall have the right to inspect the owner's project-related records at any reasonable time and shall be entitled to audit the owner's records once a year.

H. Owner Occupancy. All for-sale target units shall be occupied by their purchasers; no renting or subleasing shall be permitted.

(Ord. No. 38.858, § 4, 9/2/25)

A. Concurrent Construction. Target units shall be constructed concurrently with non-restricted units unless both the City and the applicant agree within the density bonus agreement to an alternative schedule for development.

B. Distribution of Units. Target units shall be built on-site and be dispersed throughout the project. Where feasible, the number of bedrooms of the target units shall be equivalent to the bedroom mix of the non-target units of the project, except that the developer may include a higher proportion of target units with more bedrooms. All projects shall comply with all applicable development standards, except those standards, which may be modified as provided by this Chapter. Deviations from these provisions may only be permitted as allowed by this Title or as part of an approved density bonus agreement.

C. Parking. Upon request of the developer qualifying for a density bonus pursuant to this Chapter, the City shall not require vehicular parking ratios, inclusive of handicapped and guest parking, that exceed state law.

(Ord. No. 38.858, § 4, 9/2/25)

A. A request consistent with this Chapter shall be processed as part of the project application as required by Part XIII-B (Zone Regulations) or Chapter D.4 (Permits and Approvals).

B. The applicant shall submit all required items on the City's application form, including a description of the proposed number of total units, target units, density bonus units, and any incentives or waivers being requested.

C. The Planning Commission shall conduct a public hearing on the density bonus request consistent with Section D.2.040.G (Public Hearings) and shall forward a recommendation to the Council. Upon receiving the Planning Commission's recommendation, the Council shall conduct a public hearing consistent with Section D.2.040.G (Public Hearings) prior to final action on the density bonus request.

(Ord. No. 38.858, § 4, 9/2/25)

A. Agreement. A legally binding agreement between a developer and the City, which ensures that the requirements of this Chapter and state density bonus law are satisfied, shall be executed. This density bonus agreement (the "agreement") shall be reviewed and approved by the Director and the City Attorney who shall formulate a recommendation to the review authority for approval.

B. Recordation. Following execution of the agreement by the applicant and the City, the completed agreement, or memorandum thereof, shall be recorded. The conditions contained in the agreement shall be filed and recorded on the parcel or parcels designated for the construction of target units as a condition of final map approval, or, where a map is not being processed, prior to issuance of building permits for such parcels or units. The agreement shall be binding upon all future owners and successors in interest for this property, which is the subject of the housing development application.

C. Required Contents. At a minimum, the agreement shall include the following:

1. The total number of units proposed within the housing development, including the number of target units;

2. A description of the household income group to be accommodated by the housing development, and the standards for determining the corresponding affordable rent or affordable sales price and housing cost;

3. The location, unit sizes (square feet), and number of bedrooms of target units;

4. Tenure of use restrictions for target units;

5. A schedule for completion and occupancy of target units;

6. A description of any additional incentive being provided by the City;

7. A description of remedies for breach of the agreement by either party (the City may identify tenants or qualified purchasers as third-party beneficiaries under the agreement); and

8. Other provisions to ensure implementation and compliance with this Chapter and state density bonus law.

D. Sale Conditions. In the case of for-sale housing developments, the agreement shall provide for the following conditions governing the initial sale and use of target units during the applicable use restriction period:

1. Income. Target units shall, upon initial sale, be sold to and occupied by eligible very low, lower income, or, in the case of a condominium or planned unit development, moderate income households at an affordable sales price and housing cost, or to qualified senior citizen residents (i.e., maintained as senior citizen housing).

2. Restriction Sales. The initial purchaser of each target unit shall execute an instrument or agreement, approved by the City Attorney, restricting the sale of the target unit in accordance with this Chapter and state density bonus law during the applicable use restriction period. Such instrument or agreement shall be recorded against the parcel containing the target unit and shall contain provisions as the City may require to ensure continued compliance with this Chapter and the state density bonus law.

E. Rental Conditions. In the case of rental housing developments, the agreement shall provide for the following conditions governing the use of target units during the use restriction period:

1. The rules and procedures for qualifying tenants, establishing affordable rent, filling vacancies and the proper management and maintenance of target units for qualified tenants;

2. Provisions requiring owners to verify tenant incomes and maintain books and records to demonstrate compliance with this Chapter; and

3. Provisions requiring owners to submit an annual report to the City, which includes the name, address and income of each person occupying target units, and which identifies the bedroom size and monthly rent or cost of each target unit.

(Ord. No. 38.858, § 4, 9/2/25)

It is the intent of the Council that the provisions of this Chapter shall be interpreted so as to fulfill the requirements of Government Code section 65915 et seq., notwithstanding changes in state laws revising percentages, numerical thresholds, and/or other standards applicable to the granting of density bonuses or related incentives that may occur after the effective date of this Chapter. Accordingly, it is the further intent of the Council that any such changed percentages, numerical thresholds, or other standards shall be deemed to supersede and govern any conflicting percentages, numerical thresholds, or other standards contained in this Chapter, to the maximum extent permitted by law.

(Ord. No. 38.858, § 4, 9/2/25)