San Rafael study session: state density-bonus law is producing more below-market units but often at lower AMI and with concessions

City staff told San Rafael's council on June 4 that state density-bonus rules are reshaping how local inclusionary policy operates, producing more below-market-rate (BMR) units numerically while shifting affordability and unit comparability.

Housing Manager Alexis Capanian explained that San Rafael's inclusionary policy currently defaults to rent limits at 80% of area median income (AMI) while state density-bonus calculations frequently yield units at 60% AMI. "There is a $800 difference per month for a one-bedroom unit and a $900 difference for a two-bedroom unit," Alexis said when she compared the two AMI levels. She warned that those differences materially change the affordability outcome for local residents.

Alexis also told the council that state density-bonus law allows developers to seek concessions and waivers to local development standards in exchange for providing affordable units. Examples include concentrating BMR units on lower floors rather than dispersing them, reducing square footage or exterior amenities, and permitting rental rather than ownership tenure. Alexis cited a letter from HCD clarifying that concessions can be applied to affordable-housing development standards.

The staff memo described the city's current inclusionary framework: projects of 15 units or fewer must provide 10% of proposed units as low-income on site, and larger developments choose among options including 10% low-income or a 5% low/10% moderate split, payment of in-lieu fees, off-site units or land donation. Alexis said larger projects recently tend to choose 10% low-income on site, and that some large projects using the state density bonus are delivering more total BMR units but at a lower AMI and sometimes with concessions that leave BMR units less comparable to market-rate units.

Councilmembers asked technical questions about whether the city could limit compounding concessions and how to administer comparability and dispersal standards. Staff said the council can direct whether the city allows particular concessions and whether to limit stacking. Several councilmembers asked staff to explore development-standard clarifications so that BMR units remain materially comparable in size, finish and placement.

Public commenters weighed in: Canal Alliance (Aaron Bernett) urged the council to consider deeper affordability (e.g., 50% AMI) for clients; development representatives warned that raising the inclusionary percentage too far could make projects infeasible.

Council direction: while council members generally declined to immediately raise the inclusionary rate above 10%, several asked staff to monitor neighboring jurisdictions and to include development-standard parity, dispersal, and concessions analysis as part of the step-one work so the city has options to preserve unit comparability while meeting housing goals.

Next steps: staff will include analysis of how the state density-bonus law interacts with the city's inclusionary requirements (AMI level effects, concession impacts, comparability rules) in the consultant-supported step-one report required by the council.