Government Code Section 65583.2(c) requires, as part of the analysis of available sites, a local government to demonstrate the projected residential development capacity of the sites identified in the housing element can realistically be achieved. Based on the information provided in subdivision (b), a city or county shall determine whether each site in the inventory can accommodate some portion of its share of the regional housing need by income level during the planning period, as determined pursuant to Section 65584. The number of units calculated shall be adjusted as necessary, based on the land use controls and site improvements requirement identified in paragraph (4) (5) of subdivision (a) of Section 65583, the realistic development capacity for the site, typical densities of existing or approved residential developments at a similar affordability level in that jurisdiction, and on the current or planned availability and accessibility of sufficient water, sewer, and dry utilities.

Requisite Analysis

The analysis must consider the imposition of any development standards that impact the residential development capacity of the sites identified in the inventory. When establishing realistic unit capacity calculations, the jurisdiction must consider existing development trends of existing or approved residential developments at a similar affordability level in that jurisdiction, as well as the cumulative impact of standards such as maximum lot coverage, height, open space, parking, and FARs. The capacity methodology must be adjusted to account for any limitation as a result of availability and accessibility of sufficient water, sewer, and dry utilities. For non-residential zoned sites (i.e. mixed-use areas or commercial sites that allow residential development), the capacity methodology must account for the likelihood of residential development on these sites.

If a local government has adopted, through regulations or ordinance, minimum density requirements that explicitly prohibit residential development below the minimum density on that site, the element may establish the housing unit capacity based on the established minimum density.

Realistic development capacity for nonresidential, nonvacant, or overlay zoned sites — The capacity calculation must be adjusted to reflect the realistic potential for residential development capacity on the sites in the inventory. Specifically, when the site has the potential to be developed with nonresidential uses, requires redevelopment, or has an overlay zone allowing the underlying zoning to be utilized for residential units, these capacity limits must be reflected in the housing element.

Helpful Hints

Options to adjust for the realistic development capacity of nonresidential, nonvacant, or overlay zoned sites may include:

• Performance standards mandating a specified portion of residential development in mixed use or nonresidential zones (e.g., residential allowed only above first floor commercial).
• Incentives for residential use, market demand, efforts to attract and assist developers, or allowance of 100 percent residential development.
• Local or regional residential development trends in the same nonresidential zoning districts
• Local or regional track records, past production trends, or net unit increases/yields for redeveloping sites or site intensification. This estimate may be based on the rate at which similar parcels were developed during the previous planning period, with adjustments as appropriate to reflect new market conditions or changes in the regulatory environment.
• Monitoring programs with next-step actions to ensure sites are achieving the anticipated development patterns.

Local governments should be diligent in preparing their annual progress reports pursuant to Government Code Section 65400. [The project-by-project descriptions and resulting build-out yields would be helpful in formulating a development track record and demonstrating realistic capacity.

Size of Sites

Parcels that are too small may not support the number of units necessary to be competitive and to access scarce funding resources. Parcels that are large may require very large projects, which may lead to an over concentration of affordable housing in one location, or may add cost to a project by requiring a developer to purchase more land than is needed, or render a project ineligible for funding. A parcel smaller than one half acre or over 10 acres is considered inadequate to accommodate housing affordable to lower income households, unless the housing element demonstrates development of housing affordable to lower income households on these sites is realistic or feasible. Please note, for purposes of this requirement, “site” means that portion of the parcel designated to accommodate lower income housing needs. The housing element must consider and address the impact of constraints associated with small or large lot development on the ability of a developer to produce housing affordable to lower income households. To demonstrate the feasibility of development on this type of site, the following analysis is required.

• An analysis demonstrating that sites of equivalent size were successfully developed during the prior planning period with an equivalent number of lower income housing units as projected for the site.
• Evidence that the site is adequate to accommodate lower income housing. Evidence could include developer interest, potential for lot consolidation for small sites or lot splits or subdivision for large sites, densities that allow sufficient capacity for a typical affordable housing project, and other information that can demonstrate to HCD the feasibility of the site for development. For parcels anticipated to be consolidated, the housing element must include analysis describing the jurisdiction’s role or track record in facilitating small lot consolidation, policies or incentives offered or proposed to encourage and facilitate lot consolidation, conditions rendering parcels suitable and ready for consolidation such as common ownership, and recent trends of lot consolidation. The housing element should include programs promoting, incentivizing, and supporting lot consolidations and/or small lot development.
• A site may be presumed to be realistic for development to accommodate lower income housing need if, at the time of the adoption of the housing element, a development affordable to lower income households has been proposed and approved for development on the site.
• The housing element must also describe existing and proposed policies or incentives the jurisdiction will offer to facilitate development of these sites.

Helpful Hints

• To demonstrate the viability of small lot development to accommodate the local housing need, the housing element could include a description of the local government’s role in facilitating small-lot development (e.g. providing regulatory and/or fiscal incentives, developing and adopting a small lot ordinance, etc.).
• To demonstrate the viability of large lot development to accommodate the local housing need, the housing element could include developer interest, proposed specific-plan development, potential for subdivision, the jurisdiction’s role or track record in facilitating lot splits, or other information that can demonstrate to HCD the feasibility of the site for development.
• Examples of program incentives for lot consolidation include deferring fees specifically for consolidation, expediting permit processing, providing flexible development standards such as setback requirements, reduced parking or increased heights, committing resources for development of affordable housing on small sites, or increasing allowable density, lot coverage or floor area ratio.
• Examples of program incentives for large lot development include expedited or automatic approval of lot splits or creation of new parcels, waivers of fees associated with subdivision, or expedited processing or financial assistance with the development of infrastructure required to develop the site.

The inventory sites that have potential for residential developed can include non-vacant and underutilized sites (Section 65583.2(b)(3)). The element must include an explanation of the methodology for determining the realistic build-out potential of these sites within the planning period (Section 65583.2(g)).

Requisite Analysis

Local governments with limited vacant land resources or with infill and reuse goals may rely on non-vacant and underutilized residential sites to accommodate their regional housing need allocation. Examples include sites with potential for recycling; scattered sites suitable for assembly; publicly owned surplus land; portions of blighted areas with abandoned or vacant buildings; areas with mixed-used potential, substandard, or irregular lots that could be consolidated; and any other suitable underutilized land. Adopting policies to maximize existing land resources by promoting more-compact development patterns or reuse of existing buildings also allows a local government to meet other important community objectives to preserve open space or agricultural resources, as well as assist in meeting greenhouse gas emission-reduction goals.

If the inventory identifies non-vacant sites to address a portion of the regional housing need allocation, the housing element must describe the additional realistic development potential within the planning period. The analysis must describe the methodology used to establish the development potential and consider all of the following: 1) the extent existing uses may constitute an impediment to additional residential development, 2) the jurisdiction's past experience converting existing uses to higher density residential development, 3) the current market demand for the existing use, including an analysis of any known existing leases or other contracts that would perpetuate the existing use or prevent redevelopment of the site for additional residential development, 4) development trends, 5) market conditions, and 6) availability of regulatory and/or other incentives, such as expedited permit processing and fee waivers or deferrals.

Existing Uses —The housing element must demonstrate non-vacant and/or underutilized sites in the inventory that can be realistically developed with residential uses or more-intensive residential uses at densities appropriate to accommodate the regional housing need (by income) within the planning period. The housing element must describe all existing uses (such as surplus school site, operating business, nursery, etc.) and evaluate the extent these uses would constitute an impediment to new residential development. Among other things, this analysis includes considerations for the current market demand for the existing use, an analysis of any known existing leases or other contracts that would perpetuate the existing use or prevent redevelopment of the site for additional residential development, and could include other market conditions that would encourage redevelopment of the property like the condition or age of existing uses, or valuation. For example, an analysis might describe an identified site as being developed with a 1960’s strip commercial center with few tenants and, therefore, a good candidate for redevelopment, versus a site containing a newly opened retail center that is unlikely going to be available for residential development within the planning period.

Development Trends — The inventory analysis should describe recent development and/or redevelopment trends in the community. The housing element should also include a description of the local government’s track record and specific role in encouraging and facilitating redevelopment, adaptive reuse, or recycling to residential or more-intense residential uses. If the local government does not have any examples of recent recycling or redevelopment, the housing element should describe current or planned efforts (via new programs) to encourage and facilitate this type of development (e.g. providing incentives to encourage lot consolidation or assemblage to facilitate increased residential-development capacity).

Market Conditions —Housing market conditions also play a vital role in determining the feasibility or realistic potential of non-vacant sites and/or underutilized sites for residential development. The housing element should evaluate the impact of local market conditions on redevelopment or reuse strategies. For example, high land and construction costs, combined with a limited supply of available and developable land may indicate conditions “ripe” for more-intensive, compact and infill development or redevelopment and reuse.

Availability of Regulatory and/or other Incentives —The analysis should describe an existing or planned financial assistance or regulatory concessions or incentives to encourage and facilitate additional or more intense residential development on non-vacant and underutilized sites. Many local governments develop partnerships with prospective developers to assist in making redevelopment/reuse economically feasible. Examples of these incentives include: 1) organizing special marketing events geared towards the development community, 2) posting the sites inventory on the local government’s webpage, 3) identifying and targeting specific financial resources, and 4) reducing appropriate development standards. Absent a track record or development trends to demonstrate the feasibility of a recycling or redevelopment strategy, the housing element should describe existing or planned financial assistance or regulatory relief from development standards that will be provided to encourage and facilitate more intensive residential development on the identified underutilized sites.

Reliance on nonvacant sites to accommodate more than 50 percent of the RHNA for lower income households

If a housing element relies on nonvacant sites to accommodate 50 percent or more of its RHNA for lower income households, the nonvacant site’s existing use is presumed to impede additional residential development, unless the housing element describes findings based on substantial evidence that the use will likely be discontinued during the planning period. In addition to a description in the element, findings should also be included as part of the resolution adopting the housing element.

Helpful Hints

To demonstrate and quantify the residential development history of non-vacant and/or underutilized sites, local government could rely on its annual, general-plan progress reports. The project-by-project descriptions and resulting build-out yields could be used to demonstrate a track record for recycling and/or redevelopment of non-vacant and/or underutilized sites.

The densities of sites identified in the inventory must be sufficient to encourage and facilitate the development of housing affordable to lower-income households (Section 65583.2(c)(3)(A) &(B).

Requisite Analysis

To identify the sites and establish the number of units that can accommodate the local government’s share of the regional housing need for lower-income households, the housing element must include an analysis that demonstrates the identified zone and densities that encourage and facilitate the development of housing for lower-income households. To provide local governments with greater certainty and clarity in evaluating and determining what densities facilitate the development of housing affordable to lower-income households, the statute provides two options:

At a minimum, the analysis must describe the following:

• Market demand and trends.
• Financial feasibility.
• Information based on residential project experience within a zone where the densities facilitated the development of housing for lower-income households.

Information gathered from local developers and examples of recent, residential projects that provide housing for lower-income households is helpful in establishing the appropriateness of the zone. It is recognized that housing affordable to lower-income households requires significant subsidies and financial assistance. However, for the purpose of the adequate sites analysis and the appropriateness of zoning, identifying examples of lower-density, subsidized housing projects alone, is not sufficient or appropriate to demonstrate the adequacy of a zone and/or density to accommodate the housing affordable to lower-income households.

In addition, the analysis of “appropriate zoning” should not include residential build-out projections resulting from the implementation of a jurisdiction’s inclusionary program, because this tool is not a substitute for addressing the “adequate sites” requirement. For example, most communities have found that inclusionary policies work best when the underlying zoning and development standards act to significantly promote housing affordability, including the provision of higher densities and flexible development standards.

As an alternative to preparing the analysis described above, Government Code Section 65583.2(c)(3)(B) allows local governments to utilize “default” density standards deemed adequate to meet the “appropriate zoning” test. The purpose is to provide a numerical density standard for local governments, resulting in greater certainty in the housing element review process. Specifically, if a local government has adopted density standards that comply with population-based criteria, no further analysis is required to establish the adequacy of density standard.

*Micropolitan: Urban cluster of at least a 10,000 population, but less than a 50,000 population.
**Metropolitan Statistical Area (MSA): A city with 50,000 or more inhabitants, or the presence of an Urbanized Area (UA) and a total population of at least 100,000.
***Housing Elements Gov. Code Section 65583.2(e)(2)(A)(i): If a county that is in the San Francisco-Oakland-Fremont California MSA has a population of less than 400,000, that county shall be considered suburban. If this county includes an incorporated city that has a population of less than 100,000, this city shall also be considered suburban. This paragraph shall apply to a housing element revision cycle, as described in subparagraph (A) of paragraph (3) of subdivision (e) of Section 65588, that is in effect from July 1, 2014, to December 31, 2028, inclusive.

Helpful Hints

Local governments should reach out to the development community (both for- and nonprofit) for feedback and input on the ranges of density needed to promote project feasibility for housing affordable to lower-income households.

In the description of individual projects, the housing element could describe the amount of per-unit subsidy needed to make the units affordable to lower-income households.

Government Code Section 65583.2(b)(4) requires a general description of any environmental constraints to the development of housing within the jurisdiction, the documentation for which has been made available to the jurisdiction. This information need not be identified on a site-specific basis.

Requisite Analysis

Environmental Constraints

The housing element must analyze the suitability of the sites that are identified for residential development relative to environmental conditions or other known issues, including:

• The housing element must include a general description of any known environmental features (e.g. presence of floodplains, protected wetlands, oak tree preserves) that have the potential to impact the development viability of the identified sites. This site-suitability analysis must demonstrate that the existence of these features will not preclude development of the sites identified in the inventory at the projected residential densities/capacities as indicated in the housing element.
• The housing element should also describe the status of the sites regarding the environmental determinations, along with any adopted mitigation measures that have been made or are pending for the areas identified, pursuant to the California Environmental Quality Act (CEQA). The housing element need only describe those environmental constraints where documentation of such conditions is available to the local government.

The analysis could identify which sites would likely be subject to negative declarations or mitigated negative declarations versus any sites that are not covered by an applicable environmental impact report. For example, many of the sites identified in the land inventory may qualify for one of the exemptions pursuant to CEQA (Public Resource Code Sections 21083.3(e), 21159.21, 21159.22, 21159.23, or 21159.24). The housing element should also describe whether any of the sites identified pursuant to Government Code Section 65583.2 are subject to pending litigation on environmental grounds that could impact their availability for development during the planning period (the circumstances should be described in the element).

• The analysis could also describe housing element policies or objectives that will result in outcomes with environmental benefits. The element could describe how specific sites in inventory or particular programs or policies will avoid or minimize environmental impacts that might otherwise occur. For example, planned siting of affordable, infill housing or higher-density, transit-oriented development accessible to employment and services are supportive of objectives to minimize vehicle miles traveled (VMT) and greenhouse gas emissions and air quality objectives.

Also, while housing element law requires a general analysis of environmental constraints, local governments will find it beneficial to describe site specific environmental conditions when demonstrating site suitability and realistic build-out capacity.

Adequate Infrastructure Capacity

Government Code Section 65583.2(b)(5) requires a description of existing or planned water, sewer, and other dry utilities supply, including the availability and access to distribution facilities. Parcels included in the inventory must have sufficient water, sewer, and dry utilities supply available and accessible to support housing development or be included in an existing general plan program or other mandatory program or plan, including a program or plan of a public or private entity providing water or sewer service, to secure sufficient water, sewer, and dry utilities supply to support housing development. This does not impose any additional duty on the city or county to construct, finance, or otherwise provide water, sewer, or dry utilities to parcels included in the inventory.

Provide an analysis in the housing element describing existing or planned water, sewer, and other dry utilities supply, including the availability and access to parcels on the site inventory (including any parcels identified for rezoning), distribution facilities, general plan programs or other mandatory program or plan (including a program or plan of a public or private entity to secure water or sewer service) to support housing development on the site. The housing element must include sufficient detail to determine whether the service levels of water delivery/treatment systems and sewer treatment facilities are sufficient and have the capacity to accommodate development on all identified sites in order to accommodate the RHNA. For example, the water supply should be a reliable supply that meets federal and state drinking water standards. Please note sites identified as available for housing for above moderate-income households can still be in areas not served by public sewer systems.

The analysis should indicate whether the housing development potential would require expansion or improvement of existing facilities or new infrastructure development, and should identify the requirements of all applicable agencies, including the county, special districts, and any regional bodies. Where mitigation of particular infrastructure constraints is beyond the capacity of the local government alone (e.g. regional, water-facility construction or levee repair), the housing element should describe what role the local government is (or will be) playing to support mitigation of the constraint. If the requisite infrastructure capacity is not available upon adoption of the housing element, the housing element must include program actions (e.g. implementation of capital improvement plans, financing through general obligation or special district bonds, etc.) to address infrastructure capacity limitations or shortfalls.

The housing element must include sufficient detail to determine whether the service levels of water delivery/treatment systems and sewer treatment facilities are sufficient to accommodate development on the identified sites.

Chapter 727, Statutes of 2005 – Water and Sewer Service Priority 
Chapter 727, Statutes of 2005 (SB 1087) establishes processes to ensure the effective implementation of Government Code Section 65589.7. This statute requires local governments to provide a copy of the adopted housing element to water and sewer providers. In addition, water and sewer providers must grant priority for service allocations to proposed developments that include housing units affordable to lower-income households.

Helpful Hints

• Planning and housing department staff should coordinate with the local public works department to identify infrastructure improvements planned and prioritized as part of a local capital improvement program. The capital improvement program is a long-range, major public-infrastructure and planning tool for municipalities and often includes an assessment and strategy statement of the jurisdiction’s policies and financial tools to manage the physical development of the community.
• If a portion of the sites identified pursuant to Section 65583.2 are included within an “infill opportunity zone” pursuant to a congestion management plan (Government Code Section 65089(a) and 65088.4), the applicable development conditions or exemptions from traffic level-of-service standards should be described.