Demolition Protections of the Housing Crisis Act
In 2019, the California legislature passed significant tenant protections that help ensure development does not displace existing tenants, or reduce the availability of housing, as part of the Housing Crisis Act of 2019 (aka SB-330, or HCA, codified in Government Code Section 66300(d)). Those protections were changed a little bit in 2021 with SB-8. The two major themes of the requirements of the HCA are replacement of housing units, and limited rights of first refusal of the new units to existing tenants.
Unit replacement
Projects that demolish existing units, or build on a site that has had units demolished in the last five years are required to replace them with a project that will “include at least as many residential dwelling units as the greatest number of residential dwelling units that existed on the project site within the last five years.”
New projects are also required to include deed-restricted, affordable units if there are, or have been any “protected units” on the project site. “Protected Units” include:
Any units that had a low-income deed-restriction for any of the previous five years
Any units that were subject to local rent control for any of the previous five years
Any units that were rented by a tenant who was low income for any of the previous five years.
Any units that were removed from the market per the Ellis Act (Section 7060) in the previous ten years
If the site includes any of the “protected units” as noted above, the developer is required to “replace” those units. In other words, create at least as many new deed-restricted, affordable units as the number of “protected” units that existed on the project site within the last five years. The affordability level for the new units is required to be equivalent to the category of income level of any existing or prior tenants, if known. If not known, it’s assumed that the existing tenants are low-income.
If the entire building is vacant or demolished prior to the development application being filed, and the vacant or demolished units qualify as “protected units,” the project’s new replacement units must be made available at a rental rate affordable to tenants at the same affordability/income level as the former tenants. However, if the building is vacant or demolished and the income levels of the former tenants cannot be determined, then the developer is required to replace the units at the same proportionate level and rate of affordability as the city as a whole, as shown in the city’s most recent HUD data.
Note: if a “protected unit” is a single unit: one single-family home, and the proposed housing project is to replace the single-unit with no more than another one-unit, single-family home, then there is no requirement to keep the new unit affordable.
Rights of Existing Tenants
Existing tenants have some limited rights when their home is set to be demolished by a developer.
All tenants have a right to stay in their unit until six months prior to construction, with proper notice.
If a tenant is required to leave, but then the project does not move forward and the old units are rented out again, the tenants who were asked to leave are required to be offered a chance to return and to be allowed to resume paying rent at their previous rent level.
If an existing tenant is low income, prior to a city’s approval of the housing project, the developer is required to offer the tenant BOTH relocation assistance as well as a right of first refusal to move back into a new unit of “equivalent size.”
Equivalent size means a unit containing the same number of bedrooms as the tenant’s existing apartment, or if the unit being demolished is a single family home that has at least four bedrooms, equivalent size means at least a three-bedroom unit. There is no square footage minimum requirement for the replacement unit.
Notably, if an existing tenant is NOT low income, they are NOT required to be offered relocation assistance or a right of first refusal for a new unit, even if they live in a “protected” rent controlled or deed-restricted low-income housing unit that must be replaced. In those cases, if the unit itself is “protected,” it is required to be replaced, and offered to future tenants at an affordable rate, but the existing tenants are not guaranteed a right of first refusal or relocation assistance.
PLEASE NOTE that when the Housing Crisis Act was first passed in 2019, it did not explicitly require a project consisting of demolishing one otherwise “protected” single family home to require a replacement unit, even if multiple new units were being built. 2021’s SB-8 clarified that the law does apply to projects consisting of demolishing a single family home, though only if being replaced by multiple new units. Also, the 2019 version of the law may have allowed former tenants of a protected unit to receive relocation assistance and a right of first refusal to a new unit, but SB-8 clarified that only current, low-income tenants have such rights. The original HCA also required all occupants of protected units to be offered relocation assistance and right of first refusal for a new unit regardless of their income level; this was changed with SB-8 so that only low-income tenants are required to be offered relocation assistance and a right of first refusal for the new unit.
Step by Step Guide to Unit Replacement
Once you’ve identified a development project on a site with existing residential units you need to establish what types of units are on the site.
The following are eligible for replacement
Units occupied currently or in the last 5 years by a low (80% AMI) or very low (50% AMI) income household (Area Median Incomes can be found here).
Units subject to any sort of price or rent control in the last five years.
Units subject to any sort of rent restriction through a covenant or deed restriction (subsidized affordable housing) in the last five years.
Units withdrawn from the rental market under the Ellis Act (Chapter 12.75 (commencing with Section 7060) of Division 7 of Title 1) within the last ten years
To determine if a project site has protected units you should endeavor to find the following and/or ensure that your local permitting body is aware of the following
The rent rolls for the preceding 5 years.
Any Ellis Act evictions that may have occurred on the site in the preceding 10 years.
Any information necessary to determine whether an existing building is covered by local rent control/stabilization.
Any subsidized affordable units on the site in the preceding 5 years.
The following restrictions apply to replacement units
All replacement units for “protected units” must be rented at rents that are considered affordable. If the previous tenant returns to the unit, their rent can be no more than 30% of their household income. If the previous tenant does not return, the rent must be affordable to households with low incomes, as defined by HUD.
Replacement units must be designated for affordable rents for a period of 55 years.
Existing low-income tenants of protected units must be given first right of refusal on replaced units. Tenants who are not low income are not required to be given a first right of refusal for replacement units.
This law requires permitting bodies to enforce it, it is not self-enforcing. It relies on diligence on the part of observers and community groups. If you have any questions about a specific case or how to identify protected units generally please contact us!
Hypothetical Example
A developer in Los Angeles would like to demolish an 8 unit building (built in 1987) and build 50 new units on the site. Los Angeles has a local rent stabilization law that limits price increases, so the first step is to see whether the existing units are covered. In this case the units would not be covered by LA’s rent stabilization ordinance, because the law only covers buildings built prior to 1985 (More information on local rent stabilization ordinances).
The next step is to look at the rent rolls and see what tenants have paid in the previous 5 years. You should also endeavor to ascertain the incomes of the tenants in the preceding 5 years. Compare the rents and incomes to the Area Median Income to find out whether any of the units qualify as “protected.”
Once we’ve compared the household income, household size, and low income limits set by HUD we can see which units qualify as low income and which do not. Those units where the tenants make less than the HUD-defined low-income limit must be replaced. In addition, any units that were subject to an Ellis Act Eviction must also be replaced.
In this case 5 of the 8 units must be replaced at rents affordable to low incomes. It is important to take into account household size when determining household incomes as the income limits set by HUD vary by household size.
In this hypothetical we are implicitly assuming that the current tenants are the only tenants to have rented in the last 5 years. If any tenant with qualifying income has rented a given unit in the 5 years preceding it must be replaced.
The full relevant section of law, Government Code section 66300(d) as of Jan 1, 2022, is listed below:
(d) Notwithstanding any other provision of this section and notwithstanding local density requirements, both of the following shall apply:
(1) An affected city or an affected county shall not approve a housing development project that will require the demolition of one or more residential dwelling units unless the project will create at least as many residential dwelling units as will be demolished.
(2) An affected city or an affected county shall not approve a housing development project that will require the demolition of occupied or vacant protected units, unless all of the following apply:
(A) (i) The project will replace all existing or demolished protected units.
(ii) Any protected units replaced pursuant to this subparagraph shall be considered in determining whether the housing development project satisfies the requirements of Section 65915 or a locally adopted requirement that requires, as a condition of the development of residential rental units, that the project provide a certain percentage of residential rental units affordable to, and occupied by, households with incomes that do not exceed the limits for moderate-income, lower income, very low income, or extremely low income households, as specified in Sections 50079.5, 50093, 50105, and 50106 of the Health and Safety Code.
(B) The housing development project will include at least as many residential dwelling units as the greatest number of residential dwelling units that existed on the project site within the last five years.
(C) (i) Any existing occupants will be allowed to occupy their units until six months before the start of construction activities with proper notice, subject to Chapter 16 (commencing with Section 7260) of Division 7 of Title 1.
(ii) Any existing occupants that are required to leave their units shall be allowed to return at their prior rental rate if the demolition does not proceed and the property is returned to the rental market.
(D) The developer agrees to provide both of the following to the existing occupants of any protected units that are lower income households:
(i) Relocation benefits to the occupants of those affordable residential rental units, subject to Chapter 16 (commencing with Section 7260) of Division 7 of Title 1.
(ii) A right of first refusal for a comparable unit available in the new housing development affordable to the household at an affordable rent or an affordable housing cost. This clause shall not apply to any of the following:
(I) A development project that consists of a single residential unit located on a site where a single protected unit is being demolished.
(II) (ia) Units in a housing development in which 100 percent of the units, exclusive of a manager’s unit or units, are reserved for lower income households.
(ib) Notwithstanding sub-subclause (ia), clause (ii) shall apply to protected units occupied by an occupant who qualifies for residence in the new development and for whom providing a comparable unit would not be precluded due to unit size limitations or other requirements of one or more funding source of the housing development.
(iii) (I) For purposes of complying with clause (ii), if one or more single-family homes that qualify as protected units are being replaced in a development project that consists of two or more units, “comparable unit” means either of the following, as applicable:
(ia) A unit containing the same number of bedrooms if the single-family home contains three or fewer bedrooms.
(ib) A unit containing three bedrooms if the single-family home contains four or more bedrooms.
(II) For purposes of this clause, a comparable unit is not required to have the same or similar square footage or the same number of total rooms.
(iv) This subparagraph does not apply to an occupant of a short-term rental that is rented for a period of fewer than 30 days.
(E) This paragraph does not confer additional legal protections upon an unlawful occupant of a protected unit.
(F) For purposes of this paragraph:
(i) “Affordable housing cost” has the same meaning as defined in Section 50052.5 of the Health and Safety Code.
(ii) “Affordable rent” has the same meaning as defined in Section 50053 of the Health and Safety Code.
(iii) “Equivalent size” means that the replacement units contain at least the same total number of bedrooms as the units being replaced.
(iv) “Persons and families of low or moderate income” has the same meaning as defined in Section 50093 of the Health and Safety Code.
(v) “Lower income households” has the same meaning as defined in Section 50079.5 of the Health and Safety Code.
(vi) “Protected units” means any of the following:
(I) Residential dwelling units that are or were subject to a recorded covenant, ordinance, or law that restricts rents to levels affordable to persons and families of lower or very low income within the past five years.
(II) Residential dwelling units that are or were subject to any form of rent or price control through a public entity’s valid exercise of its police power within the past five years.
(III) Residential dwelling units that are or were rented by lower or very low income households within the past five years.
(IV) Residential dwelling units that were withdrawn from rent or lease in accordance with Chapter 12.75 (commencing with Section 7060) of Division 7 of Title 1 within the past 10 years.
(vii) (I) “Replace” shall have the same meaning as provided in subparagraphs (B) and (C) of paragraph (3) of subdivision (c) of Section 65915.
(II) Notwithstanding subclause (I), for purposes of a development project that consists of a single residential unit on a site with a single protected unit, “replace” shall mean that the protected unit is replaced with a unit of any size at any income level.
(3) This subdivision shall not supersede any objective provision of a locally adopted ordinance that places restrictions on the demolition of residential dwelling units or the subdivision of residential rental units that are more protective of lower income households, requires the provision of a greater number of units affordable to lower income households, or that requires greater relocation assistance to displaced households.
(4) This subdivision shall only apply to a housing development project that submits a complete application pursuant to Section 65943 on or after January 1, 2020.
(5) This subdivision shall not apply to a housing development project for which an application was submitted after January 1, 2019, but prior to January 1, 2020, in a jurisdiction with a population of under 31,000 as of the 2020 United States Census that has a rent or price control ordinance.