New California Housing Law Benefits Developers, Higher Ed, Religious Groups

California has a new affordable housing law benefitting both developers and religious and higher education institutions.

California Senate Bill 4 was signed by Governor Newsom October 11, 2023. It streamlines approvals for affordable housing development on land owned by religious institutions and independent higher education institutions. This means that qualifying housing projects can now be built regardless of zoning restrictions if certain requirements are satisfied.

Who could benefit from California’s new affordable housing law?

It’s estimated that there are over 170,000 acres in California that are owned by qualified religious and higher education institutions who could benefit from this law. Qualifying institutions and developers are:

• Religious institutions — Institutions owned, controlled, and operated and maintained by a bona fide church, religious denomination, or religious organization.
• Higher education institutions — Independent institutions of higher education excluding the California Community College and California State University systems. These qualifying institutions may benefit if they owned enough developable land prior to January 1, 2024.
• Qualified developers include:
  • Local public agencies authorized to develop or operate affordable housing,
  • Developers that are nonprofit corporations,
  • Developers contracting with nonprofit corporations with a welfare exemption under Section 214.15 of the Revenue and Taxation Code, or
  • Developers who have previously contracted with religious and higher education institutions.

What development does the affordable housing law allow?

Under the new law, 100% of the apartments or other housing units must be for lower-income households — excluding the building manager’s unit(s) — with the following exceptions:

• Up to 20% of the units can be for moderate-income households.
• Religious and higher education institutions may use 5% of the units for staff.

Other rules include:

• Parking requirements — The project must provide off-street parking of up to one space per unit, unless state or local laws permit a lower standard. Off-street parking is not required if the project site is within a half mile of either a high-quality transit corridor or a transit stop or within one block of a car-share vehicle.
• Industrial zone restrictions — There are development restrictions based on proximity to sites zoned for light and heavy industrial use and refineries.
• Long-term affordability requirements — There are strict affordability requirements, which will be enforced through deed restrictions for 55 years on rental units and 45 years on purchaser units.

What are the law benefits?

Landowners benefit from streamlined permitting and an exemption for ministerial approval of projects under the California Environmental Quality Act. This alone could cut a year or more out of the development process typically caused by the extensive review and process.

Developers can also use Internal Revenue Code Section 179D tax deductions for qualifying energy efficient systems installed in buildings (building envelope, HVAC, and lighting). Recent changes to Section 179D deductions allow tax-exempt entities to allocate the deductions to architects, engineers, or developers designing and installing these qualifying energy-efficient systems.

How we can help

California’s new affordable housing law unlocks development opportunities for religious and higher education institutions and developers. For developers, the law allows them to build projects faster with the expedited approval process.

CLA’s industry-specialized professionals work with both real estate developers and nonprofits to identify financial, tax, operational, and strategic opportunities.

Contact us

Discover how your higher ed or religious group may benefit from California’s new affordable housing law. Complete the form below to connect with CLA.