California 2023 law to build housing in commercial zones

New laws intended to help developers locate housing in old strip malls and parking lots will go on the books later next year as part of an effort to provide builders new tools to deal with the California’s lack of land for new residential construction.

Bills from Assemblywoman Buffy Wicks, D-Oakland, and Sen. Anna Caballero, D-Merced, will change zoning to allow housing in areas designated for commercial use. Once the measures take effect in July, developers who comply

with certain labor requirements will be able to use land that otherwise would have been more challenging to acquire.

Commercially-zoned sections of California make up a “substantial amount of land,” said David Garcia, policy director at UC Berkeley’s Terner Center for Housing Innovation.

“A lot of this land, it’s in really high-demand areas,” he said. “So, near jobs, near transit, along key corridors. So much of this land that right now is reserved only for commercial purposes is really well-positioned to alleviate the shortage of land to build new housing.”

These new laws are part of larger move to use zoning laws to ease a statewide housing shortage that has reached crisis proportions. For example, the Legislature in 2021 passed Senate Bill 9, which makes it easier for owners of single-family lots to subdivide them and create additional units.

What will the new laws do?

Assembly Bill 2011 from Wicks and Senate Bill 6 from Caballero tackle this issue in different ways. Wicks’ bill will allow developers to access land zoned for parking, office and retail use “by right,” meaning they won’t have to go through local government approval processes or the California Environmental Quality Act to build.

To take advantage of this, developers will need to build complexes with a certain percentage of affordable units.

Caballero’s bill will alter the zoning designation for commercial corridors without affordability requirements, but builders will still need to go through most local approval processes.

Clearing bureaucratic hurdles saves developers time and money. A Terner Center study found one case in which by-right approvals cut housing construction time by 30%.

Wicks and Caballero had to court powerful carpenters and trades unions to get their bills passed. This meant teaming up and negotiating labor provisions in both bills to satisfy the workers.

For developers to take advantage of Wicks’ bill, builders must pay workers prevailing wage, provide healthcare and participate in apprenticeship programs. Caballero’s bill satisfied the trades by requiring developers to solicit the first two bids from “skilled and trained workers,” most of whom are union members.

Will the new laws be effective?

Garcia said the provisions of the two bills will be especially valuable to developers in areas where they are already paying high labor costs or facing existing affordable housing requirements.

“From kind of a large-scale, multifamily project perspective, this is probably the most important bill of its kind that California has passed,” he said of AB 2011. “I expect it to make a difference in a lot of communities throughout the state.”

Even so, builders in some areas of the state might have a tougher time taking advantage of AB 2011 and SB 6. Garcia said builders in the Central Valley and Inland Empire face high construction costs and rents and sales prices that are not as high as those in coastal markets.

“Requiring a developer in a Central Valley city to pay prevailing wage and need an affordability requirement is probably not going to work in some of these places,” he said.

The politically collaborative nature of the bills is unique, Garcia said, as it allowed Wicks to win neutrality from the trades and advance her bill at the point where previous housing measures had failed.

Sen. Scott Wiener, D-San Francisco, is already facing a similar dilemma after introducing a bill that would make it easier for religious groups to build housing on empty land. As was the case for Wicks, his bill already has support from carpenters unions, but it’s also facing opposition from trades unions.

The negotiations that produced AB 2011 and SB 6 could provide a path forward for Wiener and other lawmakers who need union support to push through housing bills.

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Lindsey Holden covers the California Legislature for The Sacramento Bee. She previously reported on housing and local government for The Tribune of San Luis Obispo. Lindsey started her career at the Rockford Register Star in Illinois. She’s a native Californian raised in the Midwest, where she earned degrees from DePaul and Northwestern universities.