By Lee Kaplan, Associate
The following is a brief overview of new California laws enacted in 2023 and taking effect in 2024 that impact the real estate industry. As it has in recent years, the California Legislature again focused its efforts in facilitating the construction of new housing.
The following summaries highlight the general ways in which these new laws affect the real estate industry. For specific questions about the new legal landscape or to discuss how a particular project or situation may be impacted, please contact us. The Harvest team is always here to help.
Landlord/Tenant Issues
SB 267 –In instances where an applicant intends to use a governmental rent subsidy (such as a Section 8 voucher) to rent an apartment, this bill makes it illegal for a landlord to use the applicant’s credit history as part of the application process without offering the applicant the option, at the applicant’s discretion, of “alternative evidence of reasonable ability to pay” the rent for the unit, including, but not limited to, government benefit payments, pay records, and bank statements.
AB 12 –Effective July 1, this bill prohibits a residential landlord from requiring a security deposit in excess of one month’s rent, regardless of whether the unit in question is furnished or unfurnished. The bill includes an exception for small landlords, allowing up to two months’ rent to be held as a deposit if the landlord (1) is a natural person or a limited liability company in which all members are natural persons, and (2) owns no more than two residential rental properties that collectively include no more than four rental units.
Housing Approvals and Permitting Streamlining
AB 821 –This bill requires a local government to either approve any housing development that is consistent with its general plan but not with the applicable zoning ordinance, or amend the zoning ordinance to make it consistent with the general plan within 180 days after receipt of the development application.
SB 423 – In 2017, SB 35 created a streamlined approval process for infill multifamily residential projects in jurisdictions that have failed to permit sufficient housing to meet their Regional Housing Needs Allocation. SB 35 was scheduled to sunset in 2026, but SB 423 extends the sunset date 10 years out to 2036. The bill also expands the applicability of SB 35, extending its requirements to cities that have failed to adopt compliant housing elements and to cities in the Coastal Zone, with certain caveats. SB 423 also makes other technical modifications to the requirements applicable to SB 35 projects.
SB 684 – This bill requires a local government to ministerially approve, without discretionary review or a hearing, a parcel map or a tentative and final map for a qualifying housing development project that will result in 10 or fewer parcels and contain 10 or fewer units. To qualify for the bill’s protection, the lot being subdivided must:
- Be zoned for multifamily residential development;
- Be no larger than five acres and substantially surrounded by qualified urban uses; and
- Be a legal parcel located within either of the following: (i) an incorporated city, the boundaries of which include some portion of an urbanized area, or (ii) an urbanized area or urban cluster in a county with a population greater than 600,000.
Density Bonuses
AB 1287 – This bill modifies the State Density Bonus Law to create additional density bonuses for developers who provide deed-restricted affordable units beyond the previous maximum percentages in the law. Among other changes, it amends the Density Bonus Law to grant five incentives and concessions (increased from four) to projects that are 100% affordable to lower-income households, except that up to 20% of the units may be for moderate-income households. The bill also adds a provision granting four concessions and incentives to projects that are at least 16% affordable to very low-income households, or at least 45% affordable to moderate-income households in a development in which the units are for sale.
Most significantly, AB 1287 adds major new density bonuses on top of those provided by the prior version of the Density Bonus Law. The prior Density Bonus Law allowed up to a 50% density bonus to a project that includes 15% very low-income units, 24% low-income units, or 44% moderate-income (for sale) units. Now, there is an additional (second) density bonus for those projects that meet and exceed those percentages, based on a sliding scale. Under the prior Density Bonus Law, for example, a project that made 20% of units affordable to very low-income households would receive no extra reward for exceeding the maximum very low-income percentage of 15%. Under the new law, the additional 5% of units provided for very low-income households would entitle the developer to an extra 20% density bonus – stacked on top of the 35% bonus provided for the 15% set-aside under the original law, this results in a total bonus of 55%. The new additional bonuses provided under AB 1287 could allow for density bonuses of up to 100% of base density.
State Housing Law Enforcement
AB 434 –Existing law grants the California Department of Housing and Community Development (HCD) authority to enforce state housing laws. The HCD is also responsible for reviewing the housing elements of local government’s general plans to ensure compliance with state law. AB 434 reduces the timeline for HCD’s review of locally approved housing elements or amendments from 90 days to 60 days. Moreover, it expands the HCD’s enforcement authority, expressly granting the department authority to enforce specific housing laws, including:
- The process for ministerial approval of ADUs and Junior ADUs that meet specified conditions (Government Code 65852.2, 65852.22);
- The prohibition on local governments’ denial of permits for certain unpermitted ADUs (Government Code 65852.23);
- The ministerial approval requirement for duplexes in single-family zones under specified conditions (Government Code 65852.21);
- The Middle-Class Housing Act of 2022, which made housing an allowable use on sites zoned for residential, office, or parking uses, under specified conditions (Government Code 65852.24);
- AB 1033 regarding the separate conveyance of ADUs, as discussed above (Government Code 65852.26);
- SB 684 regarding ministerial approval of 10 or fewer units in multifamily zones as discussed further below (Government Code 65852.28);
- the five-hearing maximum for a proposed housing development project that complies with the objective general plan and zoning standards (Government Code 65905.5);
- The requirement for local governments to permit building construction and on-site subdivision improvements simultaneously, under specified conditions (Government Code 65913.4.5);
- The requirement for ministerial approval of 100% affordable housing projects on land owned by religious institutions and nonprofit universities (Government Code 65913.16);
- Protections against demolition and loss of residential units. (Government Code 66300.5);
- The requirement for ministerial approval of certain single-family lot splits, under specified conditions (Government Code 66411.7); and
- The requirement for ministerial approval by a local government of a parcel split of up to 10 parcels in multifamily zones, under specified conditions (GC 66499.41).
AB 1485 –This bill allows the Attorney General to automatically intervene (without court permission) in any lawsuit brought by a third-party alleging violations of state housing laws. It removes the previous requirement for the Attorney General’s Office to file a motion for permission to intervene before involving itself in a lawsuit seeking to enforce state housing law.
For-Sale Affordable Units
AB 323 – Developers may be required to construct deed-restricted affordable units pursuant to local inclusionary zoning ordinances in order to take advantage of the benefits of the State Density Bonus Law. Previously, when affordable units were required in for-sale developments, developers could petition the local government to change the designation for those units from ownership to rental. AB 323 requires the developer of a for-sale affordable unit pursuant to an inclusionary zoning policy or the Density Bonus Law to initially sell the unit to an income-qualified owner-occupant. If no suitable purchaser is found within 180 days of the issuance of a certificate of occupancy for the unit, the developer may sell the unit to a qualified nonprofit housing corporation, subject to certain conditions.
Surplus Land
SB 747 –The Surplus Land Act (the “SLA”) requires public agencies to follow specified procedures when disposing of public lands no longer needed for agency use. The SLA is intended to prioritize and encourage the development of affordable housing on such lands. SB 747 makes clarifying changes to the SLA, amending it to, among other things:
- Confirm that the SLA does not apply to leases of 15 years or less;
- Add new categories of “exempt” surplus land, including land owned by public-use airports, certain lands owned by transportation agencies, and certain lands transferred to community land trusts; and
- Clarify that “valid legal restrictions” for purposes of determining whether land is “exempt surplus” include contractual restrictions on housing predating September 30, 2019.
Coastal Development
AB 584 – The California Coastal Act of 1976 requires those pursuing development within the Coastal Zone to obtain a permit from both the California Coastal Commission and the applicable local government. An exemption to this permit requirement previously existed for improvements necessary to protect life and public property from imminent danger up to a maximum of $25,000. AB 584 increases the $25,000 cap to $125,000, subject to annual adjustments for inflation.
Accessory Dwelling Units (ADUs)
AB 1033 – Previously, California law concerning ADUs prohibited the sale of an ADU separately from the primary residence. Now, AB 1033 allows – but does not require – local governments to allow for the separate conveyance of ADUs as condominiums by ordinance. It also provides specific requirements for any such local ordinances, such as requirements for compliance with other state laws applicable to condominiums, and requirements for lender and HOA consent as applicable.
AB 976 –California law previously prohibited local governments from requiring that either the primary residence on a lot with an ADU, or the ADU itself, be occupied by the owner of the lot – but this prohibition was set to expire in 2025. AB 976 now makes the prohibition on ADU owner-occupancy requirements permanent.
House Flipping
AB 968 –This bill requires “flippers” of residential properties – including properties of up to four units – to disclose any recent repairs and renovations to the property in addition to all other existing disclosures. The bill notably applies to properties that are resold within 18 months of the initial closing. Required disclosures include:
- Room additions;
- Structural modifications;
- Other alterations or repairs; and
- Copies of any permits obtained (or contact information for a third-party provider who obtained the permits).
These disclosures may alternatively be disclosed as a list as given by the contractor to the seller. Additionally, where the cost of labor and materials was $500 or greater, the seller must disclose (1) the name of each contractor and (2) the contact information of each contractor as provided to the seller.
Notaries
AB 696 –This bill will allow California notaries to perform online notarization services. However, before online notarization may begin, the Secretary of State must first certify that it has developed the necessary technology to do so, which the State must do by January 1, 2030. The Secretary of State is also required to adopt rules and regulations to facilitate online notarial transactions safely and securely.
