An appellate court has upheld the City of Berkeley's application of the density bonus law and the California Environmental Quality Act exemption for an infill project.
The decision means that a 98-unit, mixed-use affordable housing or senior affordable housing project (depending on which the developer chooses) in Berkeley can move forward. The case illustrates the broad reach of the density bonus law for projects that fit within its requirements. Combined with the earlier ruling in Friends of Lagoon Valley v. City of Vacaville, (2007) 154 Cal.App.4th 807 (see CP&DR Legal Digest, October 2007), the case also demonstrates the reluctance of the courts to narrowly interpret the provisions of the density bonus statute.
The ruling is also the first published decision upholding a city's use of the Class 32 categorical exemption from the California Environmental Quality Act (CEQA) for an urban infill project.
In 2007, the developer (RB Tech Center, Memar Properties, CityCentric Investments and Ashby Arts Associates) approached the city with two alternatives for a 0.79-acre site at San Pablo and Ashby avenues: a mixed-use affordable housing project or a senior affordable housing project. Both projects would have retail on the ground floor and 98 units of housing on the five floors above. The city reviewed both projects and determined that the developer was entitled to certain density bonuses for either project. Also, the city determined that both projects were exempt from environmental review under the Class 32 categorical infill exemption (14 Cal. Code of Regulations § 15332).
Ultimately, the city's zoning adjustments board approved a use permit allowing the developer to build either project. Berkeley resident Stephen Wollmer appealed, but the Berkeley City Council denied the appeal last year.
Wollmer sued, and Alameda County Superior Court Judge Frank Roesch found in favor of the city. Wollmer appealed.
In its decision, the First District Court of Appeal began by addressing the application of the density bonus law to the developer's projects. Wollmer raised three novel arguments: "(1) condition 68 of the use permit allowed the developers to receive Section 8 subsidies for density-bonus-qualifying units, thereby exceeding the maximum ‘affordable rent' established in Health and Safety Code § 50053; (2) the city's approval of amenities should not have been considered when deciding what standards should be waived to accommodate the project; and (3) the city improperly calculated the project's density bonus." The appellate court found for the city on all issues.
Section 8 Subsidies and the Density Bonus Law
The crux of the project opponent's first argument was that the total amount of rent that the developer would receive from very low-income tenants qualifying for Section 8 subsidies would exceed "affordable rent," and, therefore, the project could not qualify for a density bonus.
Government Code § 65915 requires that "[r]ents for the lower income density bonus units shall be set at an affordable rent as defined in § 50053 of the Health and Safety Code." Section 8 subsidies are provided by the federal government to cover the difference between the fair market rental value of a property and the amount that very low-income tenants can afford. Landlords who enter into Section 8 agreements receive one check from the tenant and the balance from the government.
In this case, one of the conditions of approval for the projects (condition 68) allows the rent received under Section 8 as the maximum allowable rent for the very low-income rental units. In addition to setting the cap for very low-income residents at the level permitted under Section 8, the city also granted the developer the very low-income density bonus. Wollmer argued that because Section 8 results in the developer/landlord receiving the fair market rental value, albeit not from the tenant, the rent would exceed "affordable rent" as defined in Health and Safety Code § 50053. The court disagreed.
The court found that the Health and Safety Code § 50098 defined rent as "the charges paid by the persons and families of low or moderate income for occupancy in a housing development." The Health and Safety Code regulations also specifically state that "affordable rent" includes "rent charged as a tenant contribution under the provisions of Section 8" (25 Cal. Code of Regulations § 6922, subdivision (d)). Therefore, according to the court, rent received under Section 8 qualifies as affordable rent. The relevant inquiry is what the tenant pays, not what the landlord receives in total from the tenant and other sources.
In light of the statutes and regulations, the court held that the city lawfully granted a density bonus for very low-income units that allowed receipt of rent under the Section 8 program.
Amenities in its Density Bonus Determination
In addition to requiring density bonuses, Government Code § 65915 requires that the local agency grant waivers or reductions from development standards that would otherwise preclude the construction of a project that meets the density bonus statute criteria. In this case, the city granted waivers of height and setback requirements in order to accommodate the development envisioned by developer, which included amenities such as a courtyard and higher ceilings. Petitioners argued that these amenities should not have been included as part of the "development" in order to obtain the waiver of development standards.
According to the appellate court, the narrow interpretation urged by Wollmer was incorrect and went against the spirit of the density bonus law. The city properly included the amenities as part of the development in waiving some of its development standards.
"Had the city failed to grant the waiver and variances, such action would have had ‘the effect of physically precluding the construction of a development' meeting the criteria of the density bonus law," Justice Timothy Reardon wrote for the unanimous three-judge appellate panel.
Calculation of the Project's Density Bonus
In calculating density bonuses, the local agency uses the density allowed under the zoning code, unless the zoning code is inconsistent with the general plan, in which case the maximum general plan density is used. In this case, the city used the zoning code to establish the density baseline.
The opponent asserted that Berkeley's zoning code is inconsistent with the general plan, and, thus, the city should have used the general plan (which has a lower density). However, the court pointed out that the general plan specifically states that the zoning code is consistent and that the more specific provisions in the zoning code govern. Therefore, the court held that the city properly calculated the density bonus.
After upholding the city's application of the density bonus law, the court addressed the opponent's CEQA argument. This also involved a novel argument concerning the interplay between the density bonus law and the CEQA infill exemption.
Wollmer contended that the infill exemption did not apply because the city waived some of the development standards, resulting in a project that is inconsistent with the general plan and zoning code. The infill exemption requires consistency. As Wollmer noted, without the waivers or reductions granted under the density bonus law, a variance would have been required for the project and the infill exemption would not have applied. For purposes of this argument, the relevant portion of the CEQA Guidelines say: "The project is consistent with the applicable general plan designations and policies and all applicable zoning designations and regulations."
The court reasoned that the development standards waived under the density bonus law were not applicable to the project for two reasons: 1) the density bonus law authorized the waiver, and 2) the city's code requires the city to grant density bonuses upon a proper application. Therefore, the court held that environmental review under CEQA was not required because the infill exemption applied.
Wollmer v. City of Berkeley, No. A128121, 2011 DJDAR 4658. Filed March 11, 2011. Ordered published March 30, 2011.
For Wollmer: Stephen Wollmer in pro. per.
For the city: Laura McKinney, city attorney's office, (510) 981-6998.
For the developers: Andrew Sabey, Cox, Castle & Nicholson, (415) 392-4200.