In 2023, despite some naysaying that the push for housing reform was over, Governor Newsom ultimately signed more than 50 housing-related bills. This article focuses on three of those bills, SB 4, SB 423, and AB 1633, which aim to expedite the development of more affordable and infill housing to address California's ongoing housing crisis.

Key Takeaways

While the number of bills signed by Governor Newsom is significant, most of the bills adopted this year were either a continuation of previous legislation, or more targeted in scope:

• SB 4 allows religious institutions and non-profit colleges to build housing without having to re-zone.
• SB 423 expands and extends eligibility for SB 35 (streamlined entitlement).
• AB 1633 tackles CEQA determination delays for infill projects by creating a cause of action and liabilities under the Housing Accountability Act.

SB 4 – Yes in God's Back Yard

SB 4 allows churches, faith institutions, and non-profit colleges to build affordable housing on their land without having to go through an expensive and difficult rezoning and discretionary approval process. This bill has the potential to open up thousands of acres of land exclusively to affordable housing developers, without needing to compete against market rate developers in the land acquisition. A recent report from UC Berkeley’s Terner Center found that approximately 171,000 acres throughout California could be eligible for projects under SB 4.

SB 4 includes detailed criteria for properties to be eligible for streamlined, "by-right" approval. Eligible projects must generally be 100% affordable housing projects with limited ground floor ancillary uses. Notably, eligible land must already be owned by a religious or higher education institution by January 1, 2024. Sites must be buffered from industrial uses and gas refineries, and each project utilizing SB 4 must pay prevailing wages.

SB 4 Allows By-Right Use

SB 4 requires a local government to approve a housing development project "by right," upon application for streamlined approval on any land owned by an independent institution of higher education or religious institution. Cities and counties cannot require faith institutions or non-profit colleges to obtain conditional use permits, planned development permits, or other discretionary approvals for a housing development project on qualifying properties.

This bill could have a significant impact on the development of affordable housing. By eliminating discretionary review and CEQA analysis, "by right" approvals can reduce years of delays and significant expense in getting projects approved. In addition, faith-based organizations have historically been strong partners in developing affordable housing for extremely low, very-low, and low-income households. Those households are also the hardest segments for market-rate developers to incorporate into mixed-use or mixed-income projects.

SB 4 Provides Flexibility in Compliance with Local Development Standards

Along with "by-right" approvals, SB 4 allows projects located in residential zones to be eligible for a density bonus, which allows a project to increase residential density, waive development standards and parking requirements, and apply other cost-reducing concessions. Projects on commercially zoned land are allowed a minimum density of 40 units per acre and can potentially include density bonuses or borrow from the allowable density of neighboring parcels. These important changes offer developers a greater range to scale a project to desired size and, ideally, provide more opportunities to find financially feasible affordable housing projects.

In addition, if a city or county determines that a project conflicts with any objective planning standards, SB 4 requires the city or county to provide the developer with written documentation explaining those conflicts within 60-90 days of submitting the development proposal, depending on the project's size. SB 4 also limits a city or county's ability to require design review in limited situations where (1) the review focuses on compliance with the criteria of a streamlined, ministerial review process; and (2) it is not used to inhibit, chill, or preclude a streamlined, ministerial approval.

SB 423 Improves and Extends SB 35

SB 35 was one of the first major housing laws that created a streamlined entitlement pathway for affordable multi-family developments by allowing a ministerial approval process for projects that comply with a city or county's objective planning standards. Since its passage in 2017, SB 35 has been responsible for approximately 18,000 new affordable units, according to the Terner Center. SB 35 was set to expire in 2026. SB 423 expands SB 35 to apply to mixed-income housing developments and ensures that this tool will remain available to 2036.

SB 423 Provides for Streamlined Housing Approvals Until 2036

SB 423 requires cities and counties to approve affordable housing projects in urban areas if the project contains two or more residential units; the project is consistent with objective design standards; and the project site is not in an environmentally sensitive area such has high habitat values, farmland, very-high fire risk or other factors.

Notably, however, SB 423 modifies SB 35’s previous coastal zone exception. As of January 1, 2025, SB 423 allows projects in coastal zones to be subject to streamlining. There are still many factors to consider, such as whether the site is subject to a certified local coastal program, vulnerable to five feet of sea level rise, on a parcel that is not zoned for multifamily housing, or in an environmentally sensitive area.

If the project meets all requirements, a coastal development permit must still be obtained. The city or the Coastal Commission must approve the permit if it determines that the project is consistent with all objective standards of the city or county's certified local coastal program.

SB 423 Modifies Some of the Prior Provisions Under SB 35

SB 423 modifies SB 35's prior provisions by now allowing projects in certain fire severity zones to proceed, provided that the site has adopted specified standards. SB 423 also allows the use of “prevailing wages” rather than “skilled and trained” (predominantly union) workers for all affordable housing projects with more than 10 units, except for projects that are 85 feet above grade. For projects with 50 units or more, the developer must provide healthcare benefits. When available, the developers must hire workers participating in an apprentice program.

A major change from SB 423 is that it shifts the review authority to the planning director, and requires a city or county to approve a project if the planning director (not the city council or board of supervisors) determines the project is consistent with the applicable objective standards. For projects proposed in areas designated as a moderate resource area, low resource area, or an area of high segregation and poverty, SB 423 further streamlines a city or county's review of eligible projects by setting timelines for conducting public hearings. Additionally, SB 423 limits the review of eligible projects by only permitting design review by the local government’s planning commission or any equivalent board or commission responsible for design review. These modifications remove some of the current delays in processing SB 35 projects, and ultimately reduce time and expense for developers.

AB 1633 Addresses CEQA Abuse

On October 11, 2023, Governor Newsom signed AB 1633, which amends the Housing Accountability Act (the “HAA” or Gov. Code § 65589.5) to impose penalties on cities and counties that fail to make the appropriate CEQA exemption finding for infill housing projects. This bill was largely advanced in response to the City and County of San Francisco's controversial denial of a project with a significant amount of affordable housing at 469 Stevenson Street.

AB 1633 applies to infill housing projects that meet specific eligibility criteria. Projects are not eligible if they are located in environmentally sensitive areas, such as the coastal zone and high or very-high fire hazard severity zones. A project must satisfy green criteria, such as close proximity to a major transit stop, and must have a minimum of 15 dwelling units per acre.

AB 1633 Authorizes Penalties Under the Housing Accountability Act for Unwarranted CEQA Delays

AB 1633 entitles a project proponent to statutory penalties and attorney's fees if a city or county fails to comply with tight deadlines for making a CEQA exemption determination. It also creates a new cause of action if a project proponent provides substantial evidence that a city or county required an improper form of CEQA review.

Under AB 1633, cities and counties will be required to make timely determinations regarding the level of environmental review for a project. Cities and counties will be required to find a project exempt from CEQA if the project proponent provides substantial evidence that the project is eligible for an exemption. This seemingly technical change provides a significant shift in favor of project proponents, and reduces a city or county's discretion to abuse CEQA.

If a city or county does not make a timely exemption determination, a project proponent can provide notice to the city or county, which sets forth a 90 to 180-day deadline for the lead agency to make an exemption determination. If there is substantial evidence in the record that the project is exempt, AB 1633 requires the local agency to issue an exemption by this deadline. Failure to do so will result in a violation of the HAA.

AB 1633 also redefines the HAA to impose penalties on a city or county for the failure to timely make other CEQA approvals, such as for a negative declaration, addendum, EIR, or other comparable document.

For negative declarations, AB 1633 defines "abuse of discretion" to include an agency’s failure to adopt a negative declaration following a public hearing, when a local agency acts in bad faith, or there is no fair argument that further environmental review is required. This preserves the existing standard of review for negative declarations.

A violation of the HAA subjects cities and counties to significant penalties, including statutory penalties of $10,000 per housing unit. If a court finds that a local agency has acted in bad faith, it can also issue an order to approve the project within 60 days as well order the payment of attorney's fees to the project proponent.

As a result of AB 1633, cities and counties will have 90 to 180 days to respond if a developer provides notice of an improper CEQA decision or delayed determination. This provision should vastly speed up the CEQA process for reviewing exemptions, reducing time and expense for project proponents, and streamlining infill housing projects. It will also limit a city and county's discretion to improperly require a higher (i.e. more time-consuming and expensive) level of CEQA review than what should otherwise be required under the law.

All three bills go into effect January 1, 2024. While the legislature has been successful in removing barriers to development and incentivizing housing developers, housing laws have consequently become very nuanced. Developers and local agencies with questions regarding the application of these laws are encouraged to contact the authors of this alert and Hanson Bridgett’s Land Use Group.