Density bonuses and affordable housing in California : examining the economic impact on three cases

Abstract

The State of California faces a shortage of housing in many of its urban and suburban communities. This shortage has led to increasing home prices and there has been growing citizen demand to address housing affordability. The California State government recognized in 1992 that incentives were needed to stimulate the development of both housing that was designated for low-income residents and housing that was priced at market rate. The government understood that any law that acted as a further exaction on private developers would be counterproductive to their goals and thus adopted a density bonus program, to be implemented by local planning authorities, with the creation of California Government Code Sections 65915 through 65918. The paper will use three case studies to analyze the law's effectiveness as an incentive to private developers. By understanding the impact of the density bonus on individual projects, we will be able to make detailed insights into what is successful and what problems exist with the current program.