Attorney General Finds Impact Fees on Density Bonus Projects Invalid

In response to questions from a variety of cities across the state regarding the application of “public benefit fees” to density bonus projects, the State Attorney General’s Office published an opinion on April 9 clarifying the issue. The Attorney General’s office concluded that local ordinances imposing a fee only on units created through a density bonus under state law (Government Code Section 65915) are invalid. 

Several cities, including San Francisco, require that projects receiving additional units or floor area under the State Density Bonus Law pay an additional affordable housing fee on the “bonus” units or increased floor area (see more here).

In its opinion, the Attorney General’s Office referenced the legislative intent behind creation of the State Density Bonus Law, which is to encourage the construction of housing for low or moderate income households by providing incentives to developers in return for the construction of these housing units. Rather than encouraging construction of affordable housing, the opinion explained, imposing fees on developers for acquiring density bonuses in fact creates a disincentive to affordable housing production.

Under the State Density Bonus Law, which was adopted in 1979, cities are required to grant a density bonus and a certain number of concessions or incentives to a developer who agrees to construct housing developments that provide either affordable or senior housing and meet certain criteria. Additionally, the law states that cities/counties shall adopt an ordinance that specifies how compliance with the State Density Bonus Law would be implemented. 

We will be following how this recent opinion affects current and future projects. You can view the full opinion here.