What's On The Mixed-Use Horizon?

In 2025, California faces a pressing need to address its housing crisis and revitalize underutilized urban spaces. The introduction of Assembly Bill 507 (AB 507) proposed in February, marks a significant legislative effort to promote adaptive reuse projects, particularly focusing on converting nonresidential buildings into affordable residential and mixed-use developments.

Let’s take a look at AB 507: Provisions and Objectives

AB 507, introduced by Assemblymember Matt Haney, aims to streamline the process for adaptive reuse projects by offering incentives and removing certain regulatory barriers. Key provisions of the bill included:

• Streamlined Approval Processes: The bill facilitates ministerial approvals for qualifying adaptive reuse projects, eliminating the need for discretionary reviews and certain impact fees. This approach aims to expedite the conversion of nonresidential buildings into residential or mixed-use spaces.
• Incentive Programs: AB 507 will empower cities and counties to create adaptive reuse investment incentive programs, which could subsidize the development of affordable housing units for up to 30 years. These incentives are designed to encourage developers to undertake adaptive reuse projects, thereby promoting urban revitalization and addressing housing shortages.
• Exemptions from Environmental Review: Under specific conditions, adaptive reuse projects will be exempt from the California Environmental Quality Act (CEQA) compliance, reducing the time and costs associated with environmental reviews. This exemption aims to make adaptive reuse projects more feasible and attractive to developers.

The Potential Impact on Mixed-Use Development in 2025

The implementation of AB 507 will have a notable impact on mixed-use development in California that will include:

1. Increased Adaptive Reuse Projects: The incentives and streamlined processes introduced by AB 507 will lead to a surge in adaptive reuse projects. Developers will be more inclined to convert underutilized commercial properties into mixed-use developments, integrating residential units with retail and office spaces. This certain trend will contribute to the revitalization of urban areas and more efficient land use.
2. Addressing Housing Shortages: By facilitating the conversion of nonresidential buildings into affordable housing units, AB 507 will play a crucial role in mitigating California’s housing crisis. The bill’s provisions will enable the creation of new housing opportunities without the need for extensive new construction, thereby preserving open spaces and reducing urban sprawl.
3. Economic Revitalization: The adaptive reuse of vacant or underused commercial properties will stimulate local economies. Mixed-use developments will attract businesses and residents, leading to increased economic activity, job creation, and enhanced community vibrancy.
4. Sustainable Development: Adaptive reuse projects will promote sustainability by repurposing existing structures, reducing the demand for new construction materials, and have minimized waste, aligning with California’s environmental goals and commitment to reducing carbon emissions.

Challenges and Considerations

Despite the positive outcomes, the implementation of AB 507 will also be met with challenges:

• Financial Feasibility: Some developers will face difficulties in securing financing for adaptive reuse projects, particularly if the cost of retrofitting existing structures remains high. It’s an unfortunate reality, but it’s one we’ve helped countless developers address over the years.
• Building Code Compliance: Ensuring that older buildings meet current building codes and safety standards requires significant investment. Developers have to navigate complex regulations to bring structures up to code, which sometimes leads to increased project costs and timelines.
• Community Opposition: In some cases, local communities will express opposition to adaptive reuse projects, citing concerns about increased density, traffic, and changes to neighborhood character. Engaging with community stakeholders and addressing their concerns will be essential for the successful implementation of these projects.

By providing incentives, streamlining approval processes, and reducing regulatory barriers, the bill will facilitate the transformation of underutilized spaces into vibrant communities, contributing to the state’s economic, social, and environmental well-being. It will also remove a lot of the risk and guesswork from adaptive reuse projects, making them a much more attractive investment.