TOP REAL ESTATE AND DEVELOPMENT LAWYERS 2025
Replacing homes, replacing intent: LA’s housing law dilemma By Sheri L. Bonstelle
T he California state Legislature has recently adopted numerous laws to increase production of new housing development projects and to expedite the review and approval process in response to the state’s housing crisis. These laws also seek to preserve the existing affordable housing stock, and to protect existing tenants by requiring one-to-one replacement of residential units in any housing or commercial project and requiring covenanted affordable units for protected units. Therefore, any developer must perform sufficient due diligence to identify whether any tenant households or Ellis Act evictions on the property would trigger affordable replacement requirements. The state legislature adopted these provisions to apply to projects that propose to demolish one dwelling unit to construct one or more dwelling units, and therefore, under certain conditions, the replacement provisions apply to single-family homes with an accessory dwelling unit (ADU) and SB9 projects. In February 2025, the Los Angeles City Council adopted two ordinances that apply the state replacement laws, but also impose additional significant restrictions. These include requiring all Protected Units, including rent- stabilized units, to be replaced with units affordable to low-income households in certain areas. The Los Angeles Housing Department’s (LAHD) policies also include a conflict
of interest provision in the affordable housing covenant that prohibits renting the replacement affordable units to family members. As a result, LA homeowners who added an accessory dwelling unit (ADU) to a house constructed before 1978 are now finding that their house and ADU are subject to the city’s Rent Stabilization Ordinance (RSO) as a multifamily building. Under the new ordinance, if the homeowner substantially renovates or demolishes and replaces the house and ADU, they may be required to rent the ADU to a low-income household that is not a member of their family. This completely undermines the initial intent of the state ADU laws, which was to allow additional space for aging parents to be able to live in a multigenerational household to provide them care. Any fire rebuild projects under the Mayor’s emergency executive order are exempt from the replacement requirements. The following is a general summary of the state law replacement requirements, but there are various exemptions and other provisions that may apply to specific projects. State housing replacement requirements The Legislature has adopted three state laws, the Density Bonus Law (Gov’n Code 65915-65918), Housing Element Law (Gov’n Code 65580- 65589.11), and the Housing Crisis Act of 2019 (HCA) (SB 330) (Gov’n Code 66300-66301), to ensure that new
state legislature amended the HCA to require one-to-one unit replacement in all projects, even those commercial projects that would not otherwise contain residential units. The purpose of the replacement requirements is to prevent the loss of housing units and the displacement of lower-income households. Density Bonus Law The state Density Bonus Law requires replacement of any residential units that were, within the past five years, (i) subject to a recorded affordable covenant, or (ii) subject to rent or price control, such as the RSO, or (iii) occupied by low or very-low-income households. The affordability level of the new covenanted units would depend on the actual incomes of the existing or prior tenants, or based on a formula for prior tenants of unknown incomes. The replacement units must be of equivalent size and covenanted affordable for 55 years. Housing Element Law The state Housing Element Law requires that each jurisdiction’s housing element includes an inventory of land suitable and available for residential development to meet the jurisdiction’s regional housing need allocation (RHNA) by income level. The residential sites must all be listed in the housing element on a site inventory form. The housing element must include a program and implementing ordinance consistent with the state Density Bonus replacement requirements (Gov’n Code 65915(c )(3)). These replacement requirements apply to all of the residential sites listed at all income levels. So, if any property on the residential site list had residential rental units in the past five years, the jurisdiction must require replacement units in any new development. The Housing Crisis Act of 2019 (SB330) The HCA expanded and amended many state statutes, including the Permit Streamlining Act and Housing Accountability Act, to increase housing production, protect existing housing units and expedite review and approval. SB 8 (2021) amended the HCA to extend the provisions to Jan. 1, 2030, and AB 1218 (2023) expanded the replacement housing and relocation assistance
requirements. If the project is a housing development project, it must include at least as many housing units as the greatest number of housing units that existed on the project site within the last five years. In addition, all development projects, including residential, nonresidential, and mixed-use projects that propose to demolish occupied or vacant Protected Units that were demolished in the past five years must provide replacement units at the required level of affordability. Under SB330, the Protected Units are defined as, in summary, those that were, within the past five years, (i) subject to a recorded affordable covenant, or (ii) subject to rent or price control, such as the RSO, or (iii) occupied by low or very low income households, or those that, within the past ten years, were (iv) withdrawn from rent or lease under the state Ellis Act (Gov’n Code 7060 et seq.) The HCA also requires replacement of all Protected Units demolished after Jan. 1, 2020 (Gov’n Code §65915(c)(3)). For housing development projects, replacement housing units must be included in the same project. For nonresidential development projects, replacement housing may be located on a different site, provided it is within the same jurisdiction as the development project and is developed prior to or concurrently with the nonresidential project. Projects that are 100% affordable are exempt from replacement requirements. Los Angeles Residential Protections Ordinance On Feb. 7, 2025, the Los Angeles City Council adopted various ordinances related to implementing the City’s Housing Element rezoning program to accommodate the approximately 450,000 residential units required by 2029 under the city’s RHNA allocation. The ordinances adopted replacement provisions to comply with the state Density Bonus Law, Housing Element Law and HCA requirements, but also added additional replacement provisions in the Resident Protections Ordinance (Ord. 188481, LAMC §16.60; Ord. 188842, LAMC Chapter 1A, §4C.15). The ordinance requires that any Protected Units occupied on the date of application shall be replaced with
housing development projects do not reduce the total number of existing dwellings and those units housing lower income persons. The replacement housing requirement applied to density bonus projects since 2015, but the HCA, adopted in 2019, and its amendments, effective Jan. 1, 2022, expanded the one- to-one replacement to any housing development project that demolished any units. In 2024, the
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