§ 66300.6.5. — 66300.6.5. (Added by Stats. 2025, Ch. 511, Sec. 3.)

(a)
For the purposes of this section, the following definitions apply:
(1)
“Complete private bathroom” means a bathroom that consists of a toilet and a shower, with a vanity sink that may or may not be in the same room.
(2)
(A)
“Kitchen” means a section of a dwelling that includes a stove, sink, and refrigerator.
(B)
The sink described in subparagraph (A) shall be separate from the bathroom.
(3)
“Single-room occupancy unit” means a dwelling unit that does not include a complete private bathroom and kitchen.
(4)
“Studio unit” means a dwelling unit that does not include a separate bedroom, but includes a complete private bathroom and a private kitchen.
(b)
Notwithstanding paragraphs (1) and (2) of subdivision (b) of Section 66300.6, in the case of rehabilitation or replacement of an existing single-room occupancy building where units are deed restricted at affordable rents to low-income households, do not have separate bedrooms, and do not include both a complete private bath and a kitchen, an affected city or an affected county, as applicable, may reduce the number of required replacement units if it finds, based on substantial evidence in the record, that all of the following conditions are met:
(1)
The reduction is necessary to accommodate the conversion of a single-room occupancy unit to a studio or larger unit, to
accommodate the addition of facilities, including, but not limited to, private bathrooms, kitchens, or community rooms, to increase accessibility for persons with disabilities, or to address code compliance for matters related to health, welfare, life, and safety.
(2)
The conversion of the single-room occupancy unit will be completed within four years from the date of rehabilitation or demolition of the single-room occupancy unit. If the completion of improvements will take longer than four years, the project proponent may present to the jurisdiction an explanation for the delay and a good faith plan demonstrating how occupancy will be achieved at the earliest possible date. If the delay is due to circumstances outside the project proponent’s control, the jurisdiction may, at its discretion, and using objective criteria, grant a one-year extension for project completion.
(3)
The
converted single-room occupancy unit will be a rental unit with affordable rents or lower than at the applicable affordable rent level of the replaced single-room occupancy unit, provided the affordable rent level would not be precluded due to limitations or other requirements of one or more funding source of the housing development.
(4)
The converted single-room occupancy unit will only be available to households with a household income at or below the income levels for lower income, very low income, extremely low income, or acutely low income households, as specified in Sections 50063.5, 50079.5, 50093, 50105, and 50106 of the Health and Safety Code, as applicable.
(5)
A converted unit will remain available at the applicable affordable rent level of the replaced single-room occupancy unit for the longest feasible amount of time, but not less than 55 years. A covenant of
affordability shall be recorded with the county recorder prior to the issuance of the certificate of occupancy or completion of work as approved by the local agency.
(6)
(A)
A displaced single-room occupancy unit occupant shall have a right of first refusal for admission to a replacement unit, provided the single-room occupancy unit occupant would not be precluded due to unit size limitations or other requirements of one or more funding source of the housing development.
(B)
If an occupant is precluded from occupying a replacement unit due to a requirement of a funding source of the housing development, as described in subparagraph (A), the project proponent shall identify in writing the specific funding source and requirement that precludes the occupant’s return. If a displaced single-room occupancy occupant is deemed ineligible for the replacement unit due
to this requirement, the project proponent shall offer an alternative, comparable unit within their portfolio to the displaced occupant.
(C)
The initial rent for a returning single-room occupancy unit occupant shall not exceed the rent at the time of displacement by more than 5 percent. Notwithstanding the preceding sentence, if the displaced occupant was paying 40 percent or more of their household income in rent at the time of displacement, the initial rent for that occupant shall not exceed the rent paid at the time of displacement.
(D)
Subsequent rent increases shall be consistent with any other applicable law, contract, agreement, or other restrictions governing allowable rent increases, except that subsequent rent increases and maximum rents shall be subject to the following additional limitations:
(i)
The
amount of any subsequent rent increase for a replacement unit subject to this subparagraph shall not exceed the minimum amount necessary to ensure a positive cashflow for at least 20 years from the date the displaced single-room occupancy unit occupant begins residing in the replacement unit.
(ii)
The amount of rent as subsequently increased in accordance with this subparagraph shall not exceed 50 percent of the displaced single-room occupancy unit occupant’s actual household income, determined as of the date the displaced single-room occupancy unit occupant begins residing in the replacement unit.
(iii)
(I)
Subject to subclause (II), if the amount of rent charged for a replacement unit subject to this paragraph equals or exceeds the lesser of the following amounts, further annual rent increases for that replacement unit shall be limited based on increases to
the area median income under the low-income housing tax credit program, as administered by the California Tax Credit Allocation Committee:
(ia)
Fifty percent of the displaced single-room occupancy unit occupant’s actual household income, as describe in clause (ii).
(ib)
The amount of rent charged for the single-room occupancy unit at the time of the occupant’s displacement.
(II)
Notwithstanding subclause (I), no annual rent increase for a replacement unit shall result in the occupant paying more than 50 percent of their actual household income in rent, as provided in clause (ii).
(iv)
Nothing in this subparagraph shall preclude an owner, in consultation with the applicable regulating agency, from charging less than the maximum allowable rent. Nothing in
this subparagraph shall require a reduction of rent below the amount charged for the single-room occupancy unit at the time of the occupant’s displacement.
(7)
The net loss of single-room occupancy units due to a rehabilitation or replacement in accordance with this section will not exceed 25 percent of the total single-room occupancy units in the development. Notwithstanding the preceding sentence, a project proponent may further reduce the number of units provided at the replacement project site if those additional units are replaced on a one-for-one basis, by either the project proponent or its designee. The offsite replacement housing shall meet all of the following conditions:
(A)
The units shall be rental units with affordable rents at the applicable affordable rent level of the replaced single-room occupancy unit.
(B)
The units shall be available to households with a household income at or below the income levels for lower income, very low income, extremely low income, or acutely low income, as specified in Sections 50063.5, 50079.5, 50093, 50105, and 50106 of the Health and Safety Code, as applicable.
(C)
The units shall remain available at the applicable affordable rent level of the replaced single-room occupancy unit for the longest feasible time, but not less than 55 years. The covenant of affordability shall be recorded with the county recorder prior to the issuance of the certificate of occupancy.
(D)
(i)
Except as otherwise provided in clause (ii), the replacement units shall be located within the applicable of the following:
(I)
If there is an applicable local community plan area,
within the same local community plan area as the converted single-room occupancy units.
(II)
If there is no applicable community plan area, and the converted single-room occupancy units are located within a redevelopment project area, as described in Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code, within the same redevelopment project area as the converted single-occupancy units.
(III)
If there is no applicable community plan area, and the converted single-room occupancy units are not located within a redevelopment project area, as described in Part 1 (commencing with Section 33000) of Division 24 of the Health and Safety Code, within the same jurisdiction as the converted single-room occupancy units.
(ii)
In lieu of locating replacement units within the same local community plan
area, redevelopment project area, or jurisdiction as the converted single-room occupancy units, as described in clause (i), the replacement units may be located within a census tract or census block group, as applicable, that is designated as highest resource or high resource on the opportunity area maps developed by the California Tax Credit Allocation Committee and Department of Housing and Community Development and located within the same jurisdiction.
(E)
Replacement units shall not be existing rental units occupied by a low-income household.
(F)
All replacement units shall be made available for occupancy as soon as possible, but no more than four years from the date of rehabilitation or demolition of the single-room occupancy unit, whichever is earlier. If the project takes longer than four years due to extenuating circumstances, the project proponent may present to the
jurisdiction a good faith plan demonstrating that occupancy would have been achieved within four years. If the delay is due to circumstances outside the project proponent’s control, the jurisdiction may, at its discretion and using objective criteria, grant a one-year extension for project completion.
(8)
(A)
Prior to the issuance of a permit for demolition, rehabilitation, or conversion of the single-room occupancy unit, the project proponent shall submit a replacement housing plan to the jurisdiction that includes all of the following:
(i)
A description of the proposed conversion, demolition, or rehabilitation, including the substantial evidence required to show that reduction is necessary to accommodate the conversion of a single-room occupancy unit to a studio or larger unit, to accommodate the addition of facilities, including, but not limited to,
private bathrooms, kitchens, or community rooms, to increase accessibility for persons with disabilities, or to address code compliance for matters related to health, welfare, life, and safety; the total number of units proposed and all related amenities; the total number of existing units; and the bedroom composition of the existing units.
(ii)
A report on the current rental rates for each single-room occupancy unit, the number of vacancies and length of vacancies in the single-room occupancy building, and the length of residency of each occupied unit.
(iii)
A statement as to whether any occupants will be displaced as a result of the proposed project.
(iv)
A statement, with supporting documentation, as to when and why the unit was vacated.
(v)
A plan
for the replacement of the occupied and vacant single-room occupancy units, including, but not limited to, the following:
(I)
The number of existing units.
(II)
The bedroom composition.
(III)
Whether the property is vacant or occupied.
(IV)
The existing rent levels.
(V)
Whether affordable covenants exist on that property, and, if so, the nature and duration of those covenants.
(vi)
The time and manner that the replacement units will become available for occupancy.
(vii)
If the removed units exceed 25 percent of the single-room occupancy units, the proposed
location of replacement single-room occupancy units, with a description of the proposed property, including the location and previous use of the property.
(B)
The jurisdiction shall review the replacement housing plan within 30 days of submission or resubmission.
(C)
The jurisdiction shall not issue a permit for demolition, rehabilitation, or conversion of the single-room occupancy without first approving the replacement housing plan.
(9)
A single-room occupancy removal shall be subject to the required relocation benefits and requirements, including the relocation plan, under Chapter 16 (commencing with Section 7260) of Division 7 of Title 1, the local jurisdiction’s relocation benefits, or any other relocation benefits to which a displaced person is entitled, whichever is greatest, and shall be provided to all
displaced persons, as defined in Section 7260. If any units are vacant, the owner shall provide documentation demonstrating when and why the unit was vacated. If a jurisdiction reasonably determines that a unit was vacated due to the owner’s attempt to avoid relocation assistance obligations, the owner shall be required to pay relocations assistance to a displaced occupant and offer a right of return to the new unit.
(c)
A borrower may conduct a market study to support the unit sizes proposed in the replacement housing plan. If a market study is required by a regulating agency, it shall be conducted at the borrower’s expense and must conform to the market study guidelines adopted by the California Tax Credit Allocation Committee, including those for acquisition or rehabilitation projects pursuant to paragraph (10) of subdivision (h) of Section 10322 of Title 4 of the California Code of Regulations.

Legislative History

Added by Stats. 2025, Ch. 511, Sec. 3. (SB 21) Effective January 1, 2026.