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Realistic Development Capacity

Government Code Section 65583.2(c) requires, as part of the analysis of available sites, a local government to demonstrate the projected residential development capacity of the sites identified in the housing element can realistically be achieved. Based on the information provided in subdivision (b), a city or county shall determine whether each site in the inventory can accommodate some portion of its share of the regional housing need by income level during the planning period, as determined pursuant to Section 65584. The number of units calculated shall be adjusted as necessary, based on the land use controls and site improvements requirement identified in paragraph (4) of subdivision (a) of Section 65583.

Requisite Analysis

The site inventory analysis must include an estimate of the number of housing units that can be accommodated on each site identified in the land inventory within the planning period in accordance with Government Code 65583.2(c)(1&2). The element must include a description of the methodology used to estimate the realistic capacity. The element should not estimate unit capacity based on the theoretical maximum buildout allowed by the zoning; rather, residential development capacity estimates must consider:

• All applicable land-use controls and site improvement requirements.
  The analysis must consider the imposition of any development standards that impact the residential development capacity of the sites identified in the inventory. When establishing realistic unit capacity calculations, the jurisdiction must consider existing development trends as well as the cumulative impact of standards such as maximum lot coverage, height, open space, parking, and FARs.

  If a local government has adopted, through regulations or ordinance, minimum density requirements that explicitly prohibit development below the minimum density, the element may establish the housing unit capacity based on the established minimum density.

• Existing Uses:
  The inventory must consider the impact of existing development when calculating realistic development capacity. For example, to demonstrate the unit capacity of underutilized sites, the analysis should describe and explain the factors that make developing additional residential units feasible (within the planning period). Consider the following example: A one-acre parcel zoned for 20 dwelling units per acre and developed with a single-family home. The element must demonstrate the local government has a track record of facilitating and supporting the intensification of sites, and describe the incentives the local government offer would offer (through a specific program action) to attract and assist developers.

• Small Sites (less than one acre):
  The element should include an analysis demonstrating the estimate of the number of units projected on small sites, is realistic or feasible. The analysis should consider development trends on small sites as well as policies or incentives to facilitate such development. For example, many local governments provide incentives for lot consolidation. In addition, while it may be possible to build housing on a small lot, the nature and conditions (i.e., development standards) necessary to construct the units often render the provision of affordable housing infeasible. For example, assisted housing developments utilizing State or federal financial resources typically include 50-80 units. To utilize small sites to accommodate the jurisdictions share of the regional housing need for lower-income households, the element must consider the impact of constraints associated with small lot development on the ability of a developer to produce housing affordable to lower-income households.

Helpful Hints

• To support a realistic residential capacity assumption, the element could include a description of the build-out yields of recently constructed residential projects.
• To demonstrate the viability of small lot development to accommodate the local housing need, the element could include a description of the local government’s role in facilitating small-lot development (e.g., providing regulatory and/or fiscal incentives, develop and adopt small lot ordinance like the City of Los Angeles (see IV. Links)).
• As applicable, due to local housing needs and available land resources, the element could include a program action that provides for lot consolidation and/or parcel assemblage.
• Local governments should be diligent in preparing their annual reports pursuant to Government Code Section 65400. The project-by-project descriptions and resulting build-out yields would be helpful in formulating a development track record and demonstrating realistic capacity.

Analysis of Non-vacant and Underutilized Sites

The inventory sites that have potential for residential developed can include non-vacant and underutilized sites (Section 65583.2(b)(3)). The element must include an explanation of the methodology for determining the realistic buildout potential of these sites within the planning period (Section 65583.2(g)).

Requisite Analysis

Local governments with limited vacant land resources or with infill and reuse goals may rely on non-vacant and underutilized residential sites to accommodate the regional housing need. Examples include sites with potential for recycling, scattered sites suitable for assembly, publicly-owned surplus land, portions of blighted areas with abandoned or vacant buildings, areas with mixed-used potential, substandard or irregular lots which could be consolidated, and any other suitable underutilized land. Adopting policies to maximize existing land resources by promoting more compact development patterns or reuse of existing buildings also allows a local government to meet other important community objectives to preserve open space or agricultural resources as well as assist in meeting green house gas emission reduction goals.

If the inventory identifies non-vacant sites to address a portion of the regional housing need, the element must describe the additional realistic development potential within the planning period. The analysis must describe the methodology used to establish the development potential considering all of the following: 1) the extent existing uses may constitute an impediment to additional residential development; 2) development trends; 3) market conditions; and 4) availability of regulatory and/or other incentives such as expedited permit processing, and fee waivers or deferrals.

1. Existing Uses:
   The element must demonstrate non-vacant and/or underutilized sites in the inventory that can be realistically developed with residential uses or more intensive residential uses at densities appropriate to accommodate the regional housing need (by income) within the planning period. The element must describe all existing uses (such as surplus school site, operating business, nursery, etc.)and evaluate the extent these uses would constitute an impediment to new residential development. The condition or age of existing uses and the potential for such uses to be discontinued and replaced with housing (within the planning period) are important factors in determining “realistic” development potential. For example, an analysis might describe an identified site as being developed with a 1960’s strip commercial center with few tenants and, therefore, a good candidate for redevelopment, versus a site containing a newly opened retail center that is unlikely going to be available for residential development within the planning period.

2. Recent Development Trends:
   The inventory analysis should describe recent development and/or redevelopment trends in the community. The element should also include a description of the local government’s track record and specific role in encouraging and facilitating redevelopment, adaptive reuse, or recycling to residential or more intense residential uses. If the local government does not have any examples of recent recycling or redevelopment , the housing element should describe current or planned efforts (via new program actions) to encourage and facilitate this type of development (e.g., providing incentives to encourage lot consolidation or assemblage to facilitate increased residential development capacity).

3. Market Conditions:
   Housing market conditions also play a vital role in determining the feasibility or realistic potential of non-vacant sites and/or underutilized sites for residential development. The element should evaluate the impact of local market conditions on redevelopment or reuse strategies. For example, high land and construction costs, combined with a limited supply of available and developable land may indicate conditions “ripe” for more intensive compact and infill development, or redevelopment and reuse.

4. Availability of Regulatory and/or other Incentives:
   The analysis should describe an existing or planned financial assistance or regulatory concessions or incentives to encourage and facilitate additional or more intense residential development on non-vacant and underutilized sites. Many local governments develop partnerships with prospective developers to assist in making redevelopment/reuse economically feasible. Examples of these incentives include: 1) organizing special marketing events geared towards the development community, 2) posting the sites inventory on the local government’s webpage, 3) identifying and targeting specific financial resources, and 4) reducing appropriate development standards.. Absent a track record or development trends to demonstrate the feasibility of a recycling or redevelopment strategy, the housing element should describe existing or planned financial assistance or regulatory relief from development standards that will be provided to encourage and facilitate more intensive residential development on the identified underutilized sites.

Helpful Hints

To demonstrate and quantify the residential development history of non-vacant and/or underutilized sites, local government could rely on it annual general plan progress reports pursuant to Government Code Section 65400. The project-by-project descriptions and resulting build-out yields could be used to demonstrate a track record for recycling and/or redevelopment of non-vacant and/or underutilized sites.

Zoning to Accommodate the Development of Housing Affordable to Lower Income Households

The densities of sites identified in the inventory must be sufficient to encourage and facilitate the development of housing affordable to lower-income households (Section 65583.2(c)(3)(A) &(B).

Requisite Analysis

To identify the sites and establish the number of units that can accommodate the local government’s share of the regional housing need for lower-income households, the element must include an analysis that demonstrates the identified zone and densities which encourage and facilitate the development of housing for lower-income households. To provide local governments with greater certainty and clarity in evaluating and determining what densities facilitate the development of housing affordable to lower-income households, the statute provides two options:

• The analysis must, at a minimum, describe the following:
  1. market demand and trends;
  2. financial feasibility; and
  3. information based on residential project experience within a zone(s) where the densities facilitated the development of housing for lower-income households. Information gathered from local developers, and examples of recent residential projects that provide housing for lower-income households is helpful in establishing the appropriateness of the zone. It is recognized that housing affordable to lower income households requires significant subsidies and financial assistance. However, for the purpose of the adequate sites analysis and the appropriateness of zoning, identifying examples of lower density subsidized housing projects alone, is not sufficient or appropriate to demonstrate the adequacy of a zone and/or density to accommodate the housing affordable to lower-income households. In addition, the analysis of “appropriate zoning” should not include residential buildout projections resulting from the implementation of a jurisdiction’s inclusionary program as this tool is not a substitute for addressing the “adequate sites” requirement. For example, most communities have found that inclusionary policies work best when the underlying zoning and development standards act to significantly promote housing affordability, including the provision of higher densities and flexible development standards.
• As an alternative to preparing the analysis described above, Government Code Section 65583.2(c)(3)(B) allows local governments to utilize “default” density standards deemed adequate to meet the “appropriate zoning” test. The purpose is to provide a numerical density standard for local governments, resulting in greater certainty in the housing element review process. Specifically, if a local government has adopted density standards that comply with the population based criteria summarized on the next page, no further analysis is required to establish the adequacy of density standard. The default densities for each jurisdiction in the State can be found in HCD’s AB 2348 Technical Assistance paper.

Helpful Hints

Local governments should reach out to the development community (both for-and non-profit) for feedback and input on the ranges of density needed to promote project feasibility for housing affordable to lower-income households.

In the description of individual projects, the element could describe the amount of per-unit subsidy needed to make the units affordable to lower-income households.

Environmental Constraints and Adequate Infrastructure

Government Code Section 65583.2(b)(4) requires a general description of any environmental constraints to the development of housing within the jurisdiction, the documentation for which has been made available to the jurisdiction. This information need not be identified on a site-specific basis.

Requisite Analysis

Environmental Constraints

The housing element must analyze the suitability of the sites which are identified for residential development relative to environmental conditions or issues. This analysis should address the degree of certainty the proposed development potential of these sites is subject to, addressing the following:

1. The housing element must include a general description of any known environmental features (e.g., presence of floodplains, protected wetlands, oak tree preserves) that have the potential to impact the development viability of the identified sites. This site suitability analysis must demonstrate that the existence of these features will not preclude development of the sites identified in the inventory at the projected residential densities/capacities as indicated in the element.

2. The element should also describe the status of the sites regarding the environmental determinations, along with any adopted mitigation measures, that have been made or are pending for the areas identified, pursuant to the California Environmental Quality Act (CEQA). The element need only describe those environmental constraints where documentation of such conditions is available to the local government.

   The analysis could identify which sites would likely be subject to negative declarations or mitigated negative declarations, versus any sites which are not covered by an applicable an environmental impact report. For example, many of the sites identified in the land inventory may qualify for one of the exemptions pursuant to CEQA (Public Resource Code Sections 21083.3(e), 21159.21, 21159.22, 21159.23, or 21159.24). The element should also describe whether any of the sites identified pursuant to Government Code Section 65583.2 are subject to pending litigation on environmental grounds that could impact their availability for development during the planning period; the circumstances should be described in the element.

3. The analysis could also describe housing element policies or objectives that will result in outcomes with environmental benefits. The element could describe how specific sites in inventory or particular programs or policies will avoid or minimize environmental impacts that might otherwise occur. For example, planned siting of affordable infill housing or higher density transit-oriented development accessible to employment and services are supportive of objectives to minimize an increase in vehicle miles traveled (VMT) or greenhouse gas emissions and air quality objectives.

   Also, while the statute requires a general analysis of environmental constraints, local governments will find it beneficial in demonstrating site suitability and realistic buildout capacity to describe site specific environmental conditions (see sample analyses).

Adequate Infrastructure Capacity

Government Code Section 65583.2(b)(5) requires a general description of existing or planned water, sewer, and other dry utilities supply, including the availability and access to distribution facilities. This information need not be identified on a site-specific basis.

The element must include a general description of the public infrastructure necessary to serve housing development. The analysis must include a description of how the infrastructure capacity associated with the identified development potential can be accommodated, to establish the feasibility of the sites for development within the planning period. This analysis is also related to the evaluation of development fees and exactions and permit processing, particularly where development fees are planned to enable construction of infrastructure improvements.

The analysis should indicate whether the housing development potential would require expansion or improvement of existing facilities, or new infrastructure development, and should identify the requirements of all applicable agencies, including the county, special districts, and any regional bodies. Where mitigation of particular infrastructure constraints is beyond the capacity of the local government alone (e.g., regional water facility construction, or levee repair), the element should describe what role the local government is or will play in supporting mitigation of the constraint. If the requisite infrastructure capacity is not available upon adoption of the element, the element must include program actions (e.g., implementation of capital improvement plans, financing through general obligation or special district bonds, etc.) to address infrastructure capacity limitations or shortfalls (see Program Screens).

The element must include sufficient detail to determine whether the service levels of water delivery/treatment systems and sewer treatment facilities are sufficient to accommodate development on the identified sites. Those sites in the inventory identified as being suitable and available for housing to accommodate the regional housing need for above moderate-income households, but located in areas not served by public sewer systems, need not be listed on a parcel-by-parcel basis.

Chapter 727, Statutes of 2005 – Water and Sewer Service Priority

Chapter 727, Statutes of 2005 (SB 1087) establishes processes to ensure the effective implementation of Government Code Section 65589.7. This statute requires local governments to provide a copy of the adopted housing element to water and sewer providers. In addition, water and sewer providers must grant priority for service allocations to proposed developments that include housing units affordable to lower-income households. Chapter 727 was enacted to improve the effectiveness of the law in facilitating housing development for lower-income families and workers. This memorandum notifies pertinent agencies of these existing and new responsibilities.

For local governments, Chapter 727 now requires all cities and counties to immediately deliver the adopted housing elements of the local general plan and any amendments to water and sewer service providers. The Department recommends that copies of existing housing elements and amendments be submitted to service providers within a month of receipt of this notice. Future updates or amendments to the housing element should be sent within a month after adoption. When submitting copies of housing elements to service providers the Department further recommends inclusion of a summary/ quantification of the local government’s regional housing need allocation and any other appropriate housing information. Moreover, to effectively implement the law, local governments should consult with water and sewer providers during the development and update of the housing element, as well as sending copies of the adopted plan. This will facilitate effective coordination between local planning and water and sewer service functions to ensure adequate water and sewer capacity is available to accommodate housing needs, especially housing for lower-income households.

For water and sewer providers, Chapter 727 establishes specific procedural requirements to facilitate implementation, such as:

1. Requiring water and sewer providers to adopt written policies and procedures, no later than July 1, 2006, that grant priority to proposed development that includes housing affordable to lower-income households. For private water and sewer companies regulated by the Public Utilities Commission, the commission shall adopt written policies and procedures for use by those companies in a manner consistent with the statute.
2. Prohibiting water and sewer providers from denying or conditioning the approval or reducing the amount of service for an application for development that includes housing affordable to lower-income households, unless specific written findings are made.
3. Requiring Urban Water Management Plans to include projected water use for single-family and multifamily housing needed for lower-income households.

Helpful Hints

• Planning and housing department staff should coordinate with the Public Works Department to identify infrastructure improvements planned and prioritized as part of a local Capital Improvement Program (CIP). The CIP is a long range major public infrastructure and planning tool for municipalities and often includes an assessment and strategy statement of the jurisdiction’s policies and financial tools to manage the physical development of the community.
• If a portion of the sites identified pursuant to Section 65583.2 are included within an “infill opportunity zone” pursuant to a Congestion Management Plan (CMP) (Government Code Section 65089(a) and 65088.4), the applicable development conditions or exemptions from traffic level of service standards should be described.

Sample Analyses

• Sample Sites Inventory
• Model County Infrastructure Analysis (Sonoma County)