Can density bonus solve California’s housing crisis?

REGION — As California grapples with a massive housing shortage estimated at 2-4 million units, the state’s density bonus law, designed to spur affordable housing development, remains a lightning rod for debate over how to address the crisis.

Lauded as a critical tool to increase housing supply, density bonus has also drawn sharp criticism for its impact on local communities and the perceived trade-offs it entails, reflecting the broader tensions surrounding housing policy across the state.

Under the law, developers can build additional market-rate units in exchange for including affordable units in their projects. The inexpensive units are also deed-restricted, ensuring they remain available to lower-income residents. 

But despite adding below-market-rate units to the state’s housing stock, the policy’s effectiveness and fairness remain subjects of ongoing and heated debate.

How Density Bonus Works

First enacted in 1989, the density bonus law allows developers to exceed local zoning restrictions in exchange for including a certain percentage of affordable units in their projects. Under the law, developers meeting affordable housing thresholds can receive waivers on height limits, parking requirements and other local regulations.

The law has evolved significantly over the years, with amendments such as this year’s Assembly Bill 1287 introducing additional incentives for developers to expand housing production further. (Under AB 1287, a project setting aside 15% of its units for very low-income households can qualify for a 50% density bonus, allowing more market-rate units to be built on the same parcel.)

Proponents argue the policy is indispensable in a state where high land and construction costs often render affordable housing projects financially unviable.

“The idea behind density bonus is that if a developer builds more affordable units, they can have additional market-rate units too,” state Sen. Catherine Blakespear (D-Encinitas) told The Coast News. “It’s one of several tools the state uses to create more affordable housing units.”

To qualify for density bonus, developers typically allocate 10% to 15% of total units as affordable. According to Blakespear, higher percentages would render projects “infeasible,” discouraging development altogether. 

“I think it’s important to remember that the only actual affordable units built in Encinitas are because of density bonus,” she said.

Shane Phillips, housing initiative manager at UCLA’s Lewis Center for Regional Policy Studies, called the density bonus a “win-win scenario.”

“Affordable units often result in significant financial losses for developers,” Phillips said. “The density bonus helps offset these losses by allowing developers to build more market-rate units, stabilizing prices and creating additional supply.”

Marco Gonzalez, co-founder of Coast Law Group, described density bonus policies as “effective and important” but noted their varying impact depending on the type of housing built. 

“In a perfect world, [density bonus] would only be applied to multifamily housing or subdivisions with middle-income rates,” Gonzalez said.

Criticism of Density Bonus

Yet, not everyone agrees the law strikes the right balance. Critics argue that the policy’s benefits are skewed toward developers, with limited gains for low-income Californians.

Chris Elmendorf, a law professor at UC Davis and an expert in land use and housing policy, highlighted the downsides of current affordable housing policies, particularly deed-restricted affordable units via inclusionary zoning or density bonus programs.

Elmendorf, who has served on working groups and task forces convened by the state’s Department of Housing and Community Development, pointed out that this system often relies on lotteries, where only a tiny fraction of applicants — sometimes as few as one in 2,000 — secure a subsidized unit. 

The Yale Law graduate criticized this approach, arguing that it “fixes people into one location, regardless of their life circumstances” because beneficiaries must give up their housing subsidy if they relocate. Elmendorf described the system as disconnected from the realities of modern life, where mobility is often key to economic and personal advancement.

“If you want to move for a job, you have to give up your housing subsidy,” Elmendorf said. “If you want to get an education, you’ve got to give up your housing subsidy. If you have a kid and need to move to a different place, you give up your housing subsidy — that’s crazy.”

The “lopsided” ratio of market rate to affordable units also raises concerns, according to Blakespear, who emphasized the importance of balancing affordability requirements with feasibility to avoid stalling housing production altogether.

Phillips’ study highlighted a trade-off in inclusionary zoning policies, which often accompany density bonuses.

“Higher requirements reduce production overall,” Phillips said. “It’s better to get 10% of something than 50% of nothing. At a certain point, increasing affordable housing requirements not only reduces market-rate housing but also decreases the production of affordable units.”

Former Encinitas mayor Tony Kranz also criticized the “flawed” density bonus policy as a “deal with the devil” that relies on developers to subsidize affordable housing and undermines local character.

Kranz, who referred to the state’s housing policies as a “political science experiment” that has triggered significant local backlash, further argued that while the system aims to increase affordability, low-income units comprise only a tiny fraction of market-rate homes, resulting in minimal progress toward solving the housing crisis.

“Housing advocates wanted affordable housing, [and] they got their affordable housing on the backs of the developers at the cost of the character of their communities,” Kranz told The Coast News. “Residents saw nothing but apartment projects popping up around the city, and they reacted by voting out local officials.”

The Role of Local Control

The law has also become a flashpoint for debates over local control. In cities like Encinitas and Carlsbad, residents argue that state mandates encroach on their ability to shape their communities.

Carlsbad Mayor Keith Blackburn described the state’s density bonus policies as “overreach” that disregards carefully crafted local growth plans, such as the city’s long-standing Growth Management Plan, a policy established 35 years ago through a vote by Carlsbad residents.

This plan requires that infrastructure be developed before new housing or other projects are approved, ensuring that growth is carefully managed.

“My pushback against policies like density bonus is we’re taking away local power, how our residents and their representatives, being the mayor and council, handle and plan the city,” he said. “The state doesn’t care if you have a plan. They (essentially) said, ‘You will do what we want you to do.’”

Blackburn also strongly criticized the punitive measures imposed by the state for noncompliance — such as the builder’s remedy, a legal tool allowing developers to sidestep local zoning and general plan requirements if a city’s housing element is not in compliance — describing the consequences as excessive and undermining the role of local government.

“What city can possibly stand up for their residents and say we disagree with the state when the state has such overstepping, ridiculous consequences if we don’t do what they tell us to do?” Blackburn said.

Blakespear countered that local governments often use “local control” as a pretext for resisting new housing altogether, noting that cities retain significant authority in deciding how and where to zone for housing but must meet state-set affordability targets.

“When people say they want local control, what they’re really saying is they want the ability to close the door and say no to new housing,” Blakespear said.

Phillips said the local control debate boils down to an issue of collective action.

“Every city says someone else can build the housing,” he said. “But when everyone deflects responsibility, no one builds. That’s why state mandates are crucial to ensure equitable contributions from all communities.”

Kranz, however, questioned the state’s propensity to hamstring municipalities’ ability to control how their communities grow.

“Density bonus isn’t working,” he said. “The real problem lies with state mandates that tie cities’ hands. Hopefully, the state and local governments can reconnect the conversation to find better solutions.”

Alternative Solutions

Some experts advocate for rethinking California’s approach to affordable housing altogether. Elmendorf suggested expanding federal Section 8 housing vouchers, calling them the “single most effective affordable housing program.”

However, Elmendorf acknowledged that federal funding has been insufficient to meet current needs.

For Phillips, the solution may lie in middle-density housing — such as three- to four-story buildings — as a compromise between single-family homes and high-rises.

“If all we’re allowing is single-family homes or high-rise apartments, we’re selecting the two most expensive types of housing,” Phillips said.

Phillips also championed accessory dwelling units, or ADUs, as a low-impact solution that adds housing stock without significantly altering neighborhood character.

Blakespear praised ADUs for “sprinkling housing throughout established neighborhoods” without drastically altering their character by “putting a big apartment complex on the corner.”

“Some of these units are naturally affordable because they’re rented to family members or caretakers at below-market rates,” Blakespear said. 

Gonzalez supported state intervention in some cases, arguing that it helps counteract urban sprawl. 

“If sprawl is bad, and we need to accommodate growth, the only option is infill — and that’s done better with multifamily housing than single-family,” he said. 

However, Gonzalez emphasized the need for local governments to conduct thorough environmental assessments and update infrastructure plans to support increased density. According to Gonzalez, developers take a vested interest in ensuring their projects are livable because poor infrastructure would negatively impact their bottom line and the marketability of their properties.

“Developers are constantly paying impact fees and paying for infrastructure upgrades, whether that’s a new traffic light or a bigger sewer pipe,” he said. “They’re 100% thinking about that all the time.”

As California grapples with its housing shortage, policymakers, residents and advocates must navigate complex trade-offs to ensure the state’s housing policies serve all Californians.

“We need to provide housing for all people at all levels,” Blakespear said. “We don’t want to price out our workforce, our teachers, our firefighters or our seniors.”