Texas Site (“Land”) Condominiums
As Texas markets continue to evolve, so too do the legal and structural tools available to developers. One such tool—the site condominium—has gained traction as a creative alternative to traditional subdivision platting. While the concept has existed since the adoption of the Texas Uniform Condominium Act (TUCA) in 1994, site condominiums have become especially popular as a way to obtain project approvals, increase flexibility, and accommodate modern residential and mixed-use designs.
What Is a Site Condominium?
Unlike traditional condominiums that define ownership within a building (typically by walls, floors, and ceilings), a site condominium defines a unit as a discrete area of land—essentially functioning as a platted lot but created through a condominium declaration and condominium plans rather than through traditional subdivision platting. Each unit can include both the land and any improvements located on it, and there are no shared walls or vertically stacked units.
Because of TUCA’s flexibility, a developer may configure units to fit the project’s layout, market needs, or site conditions—without conforming to the rigid rectilinear boundaries of a standard subdivision plat. This allows developers to preserve trees, optimize views, and allocate impervious cover more efficiently, all while maintaining fee-simple ownership for purchasers.
The 2019 Legislative Change
House Bill 2569, enacted in 2019, clarified that a site condominium unit does not require upper or lower (horizontal) boundaries unless the project design necessitates them. This change, which I authored, removed a long-standing technical uncertainty in Chapter 82 and aligned Texas law with Federal Housing Administration (FHA) requirements for site condominium eligibility.
Why Developers Use Site Condominiums
Developers increasingly turn to the site condominium model for both residential and commercial projects because it offers:
Regulatory efficiency: In many jurisdictions, a site plan can be approved faster than a subdivision plat.
Design flexibility: Units can be irregularly shaped to respond to topography or aesthetic considerations.
Market versatility: The structure accommodates detached, attached, and mixed-use products.
Consumer familiarity: Purchasers hold title to their own land area and improvements—similar to lot ownership—but within a legally cohesive framework that can assign shared maintenance or architectural controls.
For attached townhome developments, the site condominium structure also mitigates construction-defect risk by allowing the exterior building envelope to be included within the unit itself, thereby narrowing the association’s repair and claim responsibilities.
The Subdivision Question
A recurring issue for developers is whether creating multiple land-based condominium units constitutes a “subdivision” that triggers local platting requirements. While the Texas Uniform Condominium Act allows a condominium declaration and plat to be recorded without prior approval, counties and cities retain the right to apply subdivision and development regulations under Section 82.051(e) of the Property Code.
In a 2004 Attorney General opinion (GA-0223), the State clarified that counties have authority to treat certain condominium developments—especially those dividing land into distinct sites—as subdivisions for regulatory purposes. The opinion emphasized that how property is owned (for example, by condominium form rather than fee simple) does not, by itself, exempt a project from county oversight. Counties may still require platting under Local Government Code Chapter 232 when they determine that a condominium layout effectively divides land for separate ownership or occupancy.
That said, the opinion also reaffirmed that Chapter 82 prohibits local governments from discriminating against condominiums or imposing more burdensome requirements than would apply to a physically identical subdivision. The balance struck by the statute and the opinion is practical: while a county may regulate a site condominium as a subdivision, it must do so on equal terms.
Texas has 254 counties, and each applies these principles differently. Some treat site condominiums as a distinct category and simply review them as site plans; others require full subdivision approval. For developers, the takeaway is simple— a brief jurisdictional check early in the process can save weeks of delay later. Site condominiums remain a flexible, legally sound option throughout Texas, but local practice still matters.
While this balance was intended to provide counties with reasonable discretion, the result has been a patchwork of inconsistent treatment across the state. With 254 counties interpreting the same statutory framework differently, developers face significant uncertainty as to whether a proposed site condominium will be processed as a subdivision, a site plan, or something in between. In some jurisdictions, this inconsistency has become outcome-determinative—effectively prohibiting site condominiums altogether by requiring that the land be platted into individual lots. This approach undermines the purpose of the Texas Uniform Condominium Act, which was designed to offer an alternative ownership structure expressly recognized under state law. Greater consistency in local interpretation would help ensure that developers and property owners can rely on the condominium form as the Legislature intended, without unnecessary procedural barriers or duplicative regulation.
The site condominium form has become a valuable option in Texas development, allowing projects to achieve flexibility, density, and efficiency while preserving consumer protections under TUCA. Whether used for small infill tracts, townhome clusters, or commercial enclaves, the model offers a sophisticated balance between traditional subdivision principles and modern ownership structures.
No Award, No Protest – COFC Narrows Post-Award Challenges in Strata-G Solutions
Key Takeaways
The Court of Federal Claims confirmed that contractors cannot file a bid protest until an agency makes a final award.
Advisory ratings or warnings, even if they strongly discourage participation, do not create ripe grounds for protest.
Before filing, contractors should confirm that the agency’s action is a true award decision, not an intermediate procurement step.
The U.S. Court of Federal Claims recently issued a decision that further emphasizes the strict timing requirements for filing post-award bid protests — namely, that a protest challenging an agency’s award decision must be filed after the agency makes its award decision. This is true even when an offeror receives a poor initial evaluation rating and is explicitly told that an award is unlikely.
Background: CBP Discouraged Strata-G Without Issuing a Decision
In Strata-G Solutions, the U.S. Customs and Border Protection (CBP) issued a solicitation for an indefinite-delivery indefinite-quantity (IDIQ) contract for aircraft support services. CBP’s evaluation process included two phases: the first involved an evaluation of each offeror’s prior experience in aircraft support services and the second involved an evaluation of each offeror’s technical approach and price.
After first phase submissions, offerors were informed that CBP would assign each a confidence rating and subsequently issue a “nonbinding” recommendation regarding whether the offeror should proceed to phase two. Although CBP’s recommendation was characterized as “merely advisory” and not prohibiting offerors from participating in the second phase, the recommendation was intended to help minimize costs for offerors who had “little chance of receiving an award.”
The protester, Strata-G Solutions, LLC, received only a “some-confidence” phase one rating and was advised by CBP not to participate in phase two. Before phase two submissions could be evaluated, Strata-G filed a protest, challenging, in part, that CBP’s phase one evaluation did not follow the terms of the solicitation.
Court Found No Harm Because Award was Still Possible
The court dismissed the protest on ripeness grounds because the arguments were premised on Strata-G not winning the award — which had not yet occurred. Because the court viewed CBP’s recommendation as “a glimpse into a possible future . . . that ‘may or may not occur,’” Strata-G’s alleged injury was only hypothetical, as it still had a chance of award. In other words, irrespective of Strata-G’s actual chances of winning the award, because the agency could still have theoretically selected it, Strata-G could not present a ripe controversy until CBP rendered a final award decision.
Takeaway: Contractors Can’t File a Bid Protest Without Final Agency Action
This protest serves as a cautionary tale for contractors who wish to challenge an agency’s initial evaluation before an award is made. When considering whether to file a protest, clients should carefully evaluate whether the triggering government action is a genuine award or simply an intermediary procurement step.
Source: Strata-G Sols., LLC v. United States, No. 25-805, 2025 WL 2754748 (Fed. Cl. Sept. 16, 2025).
UNEP Report Provides Roadmap to Advance Biobased Technologies
On October 22, 2025, the United Nations Environment Program (UNEP) announced the availability of a report entitled The Climate Technology Progress Report 2025: Advancing Biobased Technologies in the Bioeconomy, which finds that biobased technologies, such as the conversion of food waste into fuel, could reduce reliance on fossil fuels, lowering greenhouse gas emissions and helping countries combat climate change. UNEP states that as technical innovation is making biobased technologies more practical to employ, more countries are developing policies to leverage these solutions in a range of fields, from construction to energy generation. The technologies are reshaping industries, with the global bioeconomy valued at $4 to $5 trillion (USD) and projected to reach up to $30 trillion (USD) by 2050. According to UNEP, the report serves as a roadmap for policymakers seeking to accelerate adoption of biobased technologies to counter climate change. The report calls for scaling up financing mechanisms, including venture capital and green finance. It underscores the importance of inclusive governance, policy coherence, and alignment with national socio-economic priorities. UNEP notes that “[p]hasing out fossil fuel subsidies, supporting just transitions, and ensuring that Indigenous Peoples benefit from the bioeconomy are emphasized as key to equitable outcomes.”
Friend or Fraudster – How a Contractor Scam Artist Drove a Company Into Bankruptcy
Property owners beware: that friendly contractor who becomes “like family” might just set you up for financial ruin. A recent decision from the United States Bankruptcy Court for the Eastern District of North Carolina serves as a stark reminder that trust without verification can cause devastating financial consequences. In B & M Realty, LLC v. Elam, Judge David M. Warren awarded over $1.17 million in damages against a contractor who perpetrated what the court called the most “egregious case of fraud and deceit” he had ever seen.
When Maria Brown-Lindsey and her brother inherited multiple rental properties in North Carolina upon their father’s death in 2013, they saw an opportunity. The properties could be rented more profitably if they were repaired and renovated. A tenant introduced them to Dwight Elam, who represented himself as a licensed general contractor capable of managing the extensive renovation work through his company, United Properties.
There was just one problem: Elam was not and never had been a licensed general contractor. Not only that, Elam operated through a maze of similarly-named entities – United Properties, United Properties Plus, LLC, and United Properties PL, LLC – that had no distinct operations. Most troubling, United Properties had been administratively dissolved before Elam even met the property owners.
What made Elam’s scheme insidious was how he cultivated trust. The court noted that the parties became close and “like family” during their dealings. Rather than viewing this as a mitigating factor, Judge Warren found it made Elam’s deceit “even more abominable,” describing him as “a deceitful and skillful scam artist” who “played into the Lindseys’ emotions to extract thousands of dollars.”
Elam’s fraud extended beyond construction services. Despite having no legal training or license, he advised the family to form a limited liability company – B & M Realty, LLC – to hold the properties. He then convinced them that additional capital would be necessary to complete renovations and secured financing on their behalf.
Between October 2018 and December 2019, the family paid Elam and United Properties approximately $140,000 through direct payments. Elam also received an additional $183,280 from loan proceeds he helped arrange. The loans were secured by the properties themselves and the proceeds were supposed to fund renovations. That never happened. Elam took the money and the properties remained largely unimproved but now burdened with significant debt.
Elam’s scheme forced B & M Realty into Chapter 11 bankruptcy, where they also filed an adversary proceeding (a lawsuit in bankruptcy) against Elam and his companies. After an unsuccessful reorganization attempt, the company was forced to sell or surrender most of the inherited properties to creditors. The bankruptcy court ultimately confirmed a reorganization plan that allowed for additional funding from any recovery against Elam.
Judge Warren had no difficulty finding that United Properties and its related entities were mere instrumentalities of Elam himself. The court found no evidence of corporate operations distinct from Elam’s “fictitious fronting” of corporate names. Under North Carolina’s “instrumentality rule,” the court pierced the corporate veils, making Elam personally liable for all claims against his various business entities.
The court’s damage calculation reflected both the severity of Elam’s fraud and the remedies available under North Carolina’s Unfair and Deceptive Trade Practices Act (UDTPA). Starting with $323,280 in converted funds plus interest, the court trebled the damages to over $1.13 million. The court also awarded attorney’s fees of $40,060, bringing the total judgment to $1,173,710.53.
This case offers several important lessons for businesses and individual property owners dealing with contractors:
Verify contractor licensing. North Carolina maintains an online database of licensed contractors. A few minutes of research could save hundreds of thousands of dollars and years of litigation.
Be wary of contractors who offer legal advice. Licensed contractors renovate properties and licensed attorneys provide legal counsel. When someone without proper credentials ventures into both areas, it’s a red flag.
Question unusual business structures. When a contractor operates through multiple similarly-named entities, especially dissolved ones, it may signal an attempt to confuse creditors and avoid liability.
Document everything. Maintain clear records of what work is to be performed, timelines for completion, and how funds will be used. Vague arrangements invite abuse.
Don’t let emotions cloud business judgment. Professional relationships should remain professional. Don’t let friendship stop you from asking hard questions.
This case is a sobering reminder that in business relationships, you should heed President Reagan’s adage: trust but verify. Falling for a scam can be financially devastating. The bankruptcy courts can provide a modicum of recompense and they will not hesitate to pierce corporate veils when entities are used as instruments of fraud and hold a fraudster personally liable. But if that fraudster has spent all the money he stole, then your million-dollar judgment may be worthless.
Regulatory Reform in Washington – Clean Energy Siting Council Releases 2025 Report Recommending Reforms to Speed Clean Energy Projects
Key Takeaways
What’s Happening: Echoing Beveridge & Diamond’s recommendations from its 2024 report to the Washington Department of Commerce to speed development of renewable energy and other technologies necessary to meet Washington’s ambitious decarbonization goals, Washington State’s Clean Energy Siting Council has released its 2025 Annual Report, “Improving Clean Energy Project Siting and Permitting,” outlining its recommendations to accelerate the deployment of clean energy infrastructure. The report identifies barriers to achieving the state’s energy goals, including the lack of available transmission capacity, and proposes legislative and administrative actions to address them.
Who’s Impacted: Clean energy developers, transmission operators, local siting authorities, and Tribal governments.
How to Respond and When: The Council provides recommendations on transmission capacity, clean energy development, permitting, community engagement, and emerging technologies. These recommendations are not project or agency-specific. Stakeholders should review the Council’s recommendations and engage with legislators, regulators, local authorities, and community leaders to advocate for the adoption of policies where interests align.
Council Recommendations
Transmission
The Council identifies transmission capacity as the most significant bottleneck to clean energy deployment. It recommends creating a state entity to finance and develop transmission infrastructure, requiring utilities to improve the capacity and efficiency of existing infrastructure, and streamlining permitting processes for transmission projects via federal, state, and local coordination and the development of transmission siting and permitting tools.
Clean Energy Development
To accelerate project deployment, the Council recommends supporting projects such as microgrids that do not require transmission connections and incentivizing the conversion of existing sites from fuel-based power generation to clean facilities. The Council also recommends supporting joint development of clean energy projects with Tribes to improve economic and community development.
Permitting
The Council emphasizes improving permitting through meaningful engagement and proactive planning. Key recommendations include establishing long-term funding mechanisms for Tribal governments to support their participation in project reviews, including legal, technical, and cultural resource assessments. The Council also recommends early engagement with Tribes on proposed State Environmental Policy Act (SEPA) categorical exemptions, ensuring that potential impacts on Tribal and cultural resources are adequately addressed.
To support local governments, the Council recommends providing planning resources, training, and standardized tools to help integrate clean energy into comprehensive plans and zoning regulations. This includes developing template language, standardized definitions, and guidance for reviewing and updating local land use policies. Additionally, the Council recommends a statewide effort to assess publicly owned lands for suitability for clean energy development, including rights-of-way, brownfields, and industrial areas. The Council recommends that funding and incentives should be made available to support Tribes’ and local communities’ participation in these planning processes.
Community Engagement and Emerging Technologies
The Council emphasizes the need for accessible, transparent, and inclusive community engagement in clean energy siting and recommends developing multilingual educational materials and outreach programs to inform communities about clean energy technologies.
To prepare for the integration of emerging clean energy technologies, like hydrogen, advanced nuclear, nuclear fusion, and agrivoltaics, the Council recommends supporting local governments in updating zoning codes and planning documents to account for gaps under current municipal codes. Additionally, the Council recommends that the state identify barriers to geothermal development through exploratory drilling, water resource studies, and collaborative planning with Tribes, agencies, and industry to inform potential future programmatic environmental review.
FERC Seeks Comments by November 14, 2025 on Proposed DOE Reforms to Accelerate the Interconnection of Large Loads
By letter dated October 23, 2025, Department of Energy (“DOE”) Secretary Chris Wright (“the Secretary”) directs the Federal Energy Regulatory Commission (“FERC”) to act to accelerate the interconnection of large retail loads, such as data centers. This direction comes at a time when there are reliability concerns, a continued focus on generator interconnection, and relatively new concerns regarding possible delays in the interconnection of large loads. On October 27, 2025, FERC issued a Notice Inviting Comments on the DOE proposal, with initial comments due by November 14, 2025 and reply comments due by November 28, 2025.[1] FERC action consistent with the DOE’s direction could mark a significant—and, to many, concerning—departure from FERC’s historic jurisdictional boundaries. FERC oversight of the interconnection of retail load would mark a fundamental change to how FERC has exercised its jurisdiction and could be viewed by certain states and transmission providers as an intrusion into state authority over retail regulation.
The letter directs FERC to initiate a rulemaking proceeding proposing the exercise of FERC’s jurisdiction over the interconnection of loads larger than 20 MW to “rapidly accelerate” their addition to the grid.[2] Specifically, the letter declares that in order “[t]o usher in a new era of American prosperity . . . large loads, including AI data centers, served by public utilities must be able to connect to the transmission system in a timely, orderly, and non-discriminatory manner.”[3] The letter includes a draft Advance Notice of Proposed Rulemaking (“ANOPR”)[4] pursuant to the Secretary’s authority under Section 403(a) of the Department of Energy Organization Act (“DOE Act”) and directs final FERC action no later than April 30, 2026.[5]
Looking to FERC’s earlier efforts to standardize transmission providers’ interconnection service to generation facilities, a FERC role in standardizing large load interconnection could be seen by some as beneficial. Currently, large loads are interconnected based on requirements established by individual transmission providers, typically subject to state regulation. Load interconnection agreements, as a result, are non-standard. FERC’s generator interconnection procedures and agreements are intended to promote transparency and standardization, which in turn is intended to facilitate generator interconnections throughout the United States. However, despite FERC’s continued efforts, the generator interconnection process continues to be challenging for both generation developers and transmission providers. The ANOPR directs FERC to require transmission providers to consider the interconnection of load and generating facilities together, in part to optimize study time and costs of grid improvements.
Standardizing large load interconnection agreements and procedures could discourage speculation by data center developers, which potentially results in inaccurate load forecasts. For example, standardizing increases in early deposits by large load developers—which has recently been required by some transmission providers—may encourage developers to more quickly abandon projects that are not economically viable. In turn, this could promote more accurate load forecasts, which are crucial to maintain reliability.
As with generator interconnection upgrade costs, determining an equitable method of cost allocation for constructing needed grid upgrades to facilitate load interconnection is likely to be challenging, whether there is a standardized large load interconnection process or not.
Significantly, the DOE’s proposal is limited to load interconnections with transmission—in other words, the proposed action would not extend to load interconnections with distribution systems, no matter the size of the load. Also, even if FERC takes the steps proposed by the DOE and some version of the rules in the ANOPR becomes effective, states will retain authority over the ultimate retail sale of electricity to the load and exert significant authority that way.
The Secretary Weighs in on Issues that Have Been Hotly Contested at FERC for Over a Year
For over a year, FERC’s jurisdiction over (and policy regarding) the interconnection of co-located load to the transmission grid has been the subject of several contested FERC proceedings, with the following occurring in the fourth quarter of 2024:
Technical Conference: FERC held a technical conference related to the co-location of large loads with generation or storage, specifically focused on data center load.[6]
Susquehanna Interconnection Agreement: FERC rejected a transmission interconnection agreement intended to facilitate behind-the-meter electricity sales to an Amazon data center co-located with a nuclear generation facility. In a highly contested proceeding, FERC rejected the proposed interconnection service agreement without providing much guidance to stakeholders on what terms governing the transmission interconnection of co-located load would be acceptable. FERC summarily concluded that the filing parties failed to demonstrate that the agreement’s unique provisions were necessary to mitigate reliability concerns, novel legal issues, or other unique factors.[7]
PJM Litigation: Constellation Energy Generation filed a complaint against PJM Interconnection, LLC (“PJM”) challenging PJM’s tariff for its allegedly disparate treatment of co-located data centers.[8] FERC denied the complaint but initiated a broader review of co-location issues in the PJM market, consolidating several related proceedings in the process.[9] In addition to directing a review of the adequacy of PJM’s existing co-location rules, FERC solicited comments on jurisdictional principles. Specifically, FERC asked whether an interconnection agreement to interconnect co-located load with the PJM transmission system is in interstate commerce, and thus whether it is within FERC’s regulatory jurisdiction.[10]
Accordingly, the issues raised by the Secretary’s letter are not new to FERC. The letter does, however, take a direct position on the appropriate scope of FERC’s jurisdiction—a position that assumes a more aggressive posture than FERC has been willing to take to date. If FERC were to move forward with the ANOPR and ultimately implement policies similar to those directed by the DOE, it is not certain whether the expanded scope of FERC’s jurisdiction would withstand judicial review.
Jurisdictional Considerations
In the letter, the Secretary acknowledges that FERC has not, historically, exerted jurisdiction over load interconnections with transmission.[11] Nonetheless, the letter argues that the interconnection of large loads to access the “interstate transmission system . . . falls squarely within the Commission’s jurisdiction.”[12] The attached ANOPR cites to four legal justifications for establishing FERC jurisdiction in this way:
Large load interconnections are similar to generator interconnections (addressed in FERC Order No. 2003) and thus are a “critical component of open access transmission service”[13] that require “minimum terms and conditions to ensure non-discriminatory transmission service.”[14]
The interconnection of large loads to the transmission system directly affects wholesale electricity rates, which fall within FERC’s jurisdiction to ensure just and reasonable rates.[15]
The ANOPR does not hinder States’ authority because it does not assert jurisdiction over retail electricity sales and does not propose reforms to the siting, expansion, or modification of generation facilities.[16]
“The Commission has exclusive jurisdiction over the transmission of electric energy in interstate commerce, including the rates, terms, and conditions of transmission service, and all facilities for such transmission or sale of electric energy at wholesale in interstate commerce.”[17]
These arguments form the jurisdictional basis for the reforms proposed in the ANOPR.
Proposed Reforms
The ANOPR cites several drivers for the rulemaking, including demand growth driven by home and vehicle electrification, along with increasing large commercial and industrial loads such as data centers.[18] The ANOPR seeks to standardize load interconnection procedures and agreements for transmission providers to provide transmission interconnection service to large loads, defined as loads greater than 20 MW, and allows customers to file joint, co-located load and generation interconnection requests.
The Secretary included fourteen principles in the ANOPR to guide FERC’s rulemaking process. The principles urge FERC to require the consideration of the interconnection of load and generating facilities together to optimize study time and costs of grid improvements, while expediting the process for additional power to come online. The principles also include guidance for studying co-located or hybrid facilities and ensuring reliability while reducing study time. For example, the ANOPR states that the study of any large load and/or hybrid facility that agrees to be curtailable should be expedited.[19] The Secretary clarifies that facilities should be responsible for the cost of any network upgrades they are assigned pursuant to the interconnection studies, but leaves open the possibility of costs being offset through a crediting mechanism.[20] As drafted, the ANOPR seeks comment on the fourteen proposed principles.
DOE Action Pursuant to Section 403(a) Does Not Guarantee Any Particular FERC Outcome
The DOE issued the ANOPR pursuant to Section 403(a) of the DOE Act, which authorizes the Secretary to propose rules, regulations, and statements of policy of general applicability that concern matters within FERC’s jurisdiction.[21] Further, FERC is required to consider and take final action on any proposal made by the Secretary “in an expeditious manner in accordance with such reasonable time limits as may be set by the Secretary for the completion of action by the Commission on any such proposal.”[22]
In 2017, Rick Perry, Secretary of Energy during the first Trump administration, similarly invoked Section 403 and issued an ANOPR to FERC to consider establishing a grid reliability and resilience pricing plan (“2017 ANOPR”).[23] At the time, this was the first time Section 403 had been used since 1985. The 2017 ANOPR directed FERC to consider a rule requiring certain wholesale electricity markets to establish new rules and required FERC to take final action within 60 days. The 2017 ANOPR sought to address a perceived reduction in baseload generation, particularly coal and nuclear resources, and to recognize that wholesale markets were not adequately compensating these generators for the grid resiliency benefits they were providing.
FERC considered the 2017 ANOPR and promptly issued a Notice Inviting Comments on the proposed rule. Subsequently, FERC terminated the proceeding by finding that the Secretary’s proposed rule did not meet the statutory requirements under the Federal Power Act (“FPA”).[24] FERC determined that there must be a showing that existing tariffs are unjust, unreasonable, unduly discriminatory, or preferential before FERC will consider a tariff reform.[25] FERC did initiate a new proceeding: “(1) to develop a common understanding among the Commission, industry, and others of what resilience of the bulk power system means and requires; (2) to understand how each RTO and ISO assesses resilience in its geographic footprint; and (3) to use this information to evaluate whether additional Commission action regarding resilience is appropriate at this time.”[26] However, on February 18, 2021, FERC also terminated this subsequent proceeding, finding that “concerns about the resilience of the bulk power system are best addressed on a case-by-case and region-by-region basis.”[27]
In short, when DOE similarly invoked Section 403 back in 2017, it did not result in any meaningful changes to FERC rules or policies. While this does not guarantee the same result here, this does suggest that FERC has significant and independent latitude in acting on DOE direction undertaken pursuant to Section 403.
Next Steps
The letter and ANOPR were issued immediately before Laura Swett was named Chairman of FERC. Chairman Swett, who is now sworn in and in office, has not made any public statements on these issues but, as noted above, promptly issued a Notice Inviting Comments on the ANOPR. Commissioner David Rosner—the immediately preceding Chairman who remains at FERC as one of two Democratic Commissioners—has stated, however, that he is excited to work with the DOE on the proposal and that “getting large load interconnection right is a generational opportunity that’s key to winning the AI race, reshoring American manufacturing, and keeping electricity reliable and affordable for everyone. There is broad bipartisan support for the Federal Energy Regulatory Commission taking action soon on these issues, and I appreciate the Secretary turning to FERC to do so.”[28] Separately, Mark Christie—former Republican FERC Chairman who is no longer at FERC but publishes views from a new position—suggested that the proposal represents “an unprecedented expansion of federal control and intrusion on the states’ historic retail regulatory authority” and expressed concerns about reliability and increased costs to consumers. This jurisdictional tension is at the heart of the pending DOE proposal.[29]
Likely key to any outcome at FERC will be FERC’s interpretation of the holding of New York v. FERC, cited in the ANOPR, in which the Supreme Court upheld FERC’s authority to require open access transmission through FERC Order No. 888.[30] There, the Supreme Court upheld FERC’s decision to exercise jurisdiction over only unbundled retail transmission sales while declining to assert jurisdiction over bundled retail sales. The Supreme Court acknowledged that unbundled retail transmission is interstate commerce and subject to FERC’s jurisdiction, but supported FERC’s decision not to assert jurisdiction over bundled retail transactions, thereby committing FERC’s exercise of such jurisdiction to FERC’s discretion.[31] The ANOPR references Justice Clarence Thomas’s dissent, in which he disagreed with the majority’s finding of FERC’s discretion, stating that “[w]hile Congress understood that transmission is a necessary component of all energy sales, it granted FERC jurisdiction over all interstate transmission, without qualification.”[32]
Although FERC may have jurisdiction over a transmission owner’s provision of interconnection service to large retail loads, FERC has historically been sensitive to encroaching on areas that have traditionally been a part of state retail ratemaking authority. While FERC retains ultimate decision-making authority as to its agenda and the contents of its orders, and could satisfy the requirements of Section 403(b) of the DOE Act without issuing a final order (as it did with the 2017 ANOPR), the Secretary has made his policy preferences clear and it will be up to FERC, led by Chairman Swett, to determine what actions it will take. Significantly, as of today, FERC has three Republican Commissioners and two Democratic Commissioners, with Commissioner Rosner likely being sympathetic to the Trump appointees’ positions on promoting AI growth more generally based on his recent statements.
[1] Interconnection of Large Loads to the Interstate Transmission System, Notice Inviting Comments, Docket No. RM26-4-000 (Oct. 27, 2025).
[2] Secretary of Energy’s Direction that the Federal Energy Regulatory Commission Initiate Rulemaking Procedures and Proposal Regarding the Interconnection of Large Loads Pursuant to the Secretary’s Authority Under Section 403 of the Department of Energy Organization Act (Oct. 23, 2025) (“DOE Letter”).
[3] DOE Letter at 1.
[4] Ensuring the Timely and Orderly Interconnection of Large Loads, DOE Letter at 3-16 (“ANOPR”).
[5] The Secretary also issued a separate and distinct letter and ANOPR to FERC on the same day proposing a change to FERC’s hydroelectric permitting process. This proposed regulatory change clarifies that third party opposition is not a basis to deny an application for a preliminary hydroelectric permit.
[6] See Commissioner-led Technical Conference Regarding Large Loads Co-Located at Generating Facilities, Fed. Energy Regul. Comm’n (Nov. 1, 2024)
[7] PJM Interconnection, LLC, 189 FERC ¶ 61,078 (2024).
[8] Constellation Energy Generation, LLC v. PJM Interconnection, LLC, Complaint Requesting Fast Track Processing of Constellation Energy Generation, LLC, Docket No. EL25-20-000 (filed Nov. 22, 2024).
[9] See PJM Interconnection, LLC, 190 FERC ¶ 61,115 (2025).
[10] See id.
[11] DOE Letter at 1.
[12] Id.
[13] ANOPR at P 13 (citing Standardization of Generator Interconnection Agreements & Procs., Order No. 2003, 104 FERC ¶ 61,044 (2012)).
[14] Id. at P 13.
[15] Id. at P 14.
[16] Id. at P 15.
[17] Id. at P 16.
[18] Id. at P 1.
[19] See id. at P 24.
[20] See Id. at P 25.
[21] 42 U.S.C. § 7173(a).
[22] 42 U.S.C. § 7173(b).
[23] Grid Reliability and Resilience Pricing, Docket No. RM18-1-000 (Sept. 28, 2017).
[24] Grid Reliability and Resilience Pricing, 162 FERC ¶ 61,012 (2018).
[25] See id. at P 14.
[26] Id. at P 18.
[27] Grid Resilience in Regional Transmission Organizations and Independent System Operators, 174 FERC ¶ 61,111 (2021).
[28] David Rosner, LinkedIn Post (Oct. 24, 2025).
[29] Mark C. Christie, LinkedIn Post (Oct. 24, 2025).
[30] New York v. Fed. Energy Regul. Comm’n, 535 U.S. 1 (2002).
[31] Id. at 25-28.
[32] Id. at 42 (Thomas, J., dissenting).
This article was authored by Lily Walton, Josh Robichaud, Catherine McCarthy and Boris Shkuta.
New FAR Thresholds Broaden the Coverage for Streamlined Acquisitions
What Changed and Why? The FAR Council Issues a Rule to Amend FAR Thresholds for Inflation Every Five Years Pursuant to a Statute.
Effective October 1, 2025, the Federal Acquisition Regulation (FAR) Council issued a final rule to amend FAR thresholds applied in federal procurements. By statute, these thresholds are required to be updated for inflation every five years, using the Consumer Price Index. The threshold changes do not apply to the Construction Wage Rate Requirements statute, the Service Contract Labor Standards statute, performance and payment bonds, and trade agreements thresholds.
What Are the Key Changes?
1. Micro-Purchase Threshold (MPT): The MPT is the threshold below which government purchases can be made without soliciting competitive bids, simplifying procurement procedures to expedite small transactions.
Standard MPT: Increased from $10,000 → $15,000
Contingency Operations:
U.S.: $20,000 → $25,000
Outside U.S.: $35,000 → $40,000
Impact: Provides agencies with a higher threshold to make fast and small purchases without competition.
2. Simplified Acquisition Threshold (SAT): The SAT is the monetary limit under which federal agencies can use simplified acquisition procedures to streamline the procurement process, making it easier and faster to acquire goods and services.
Standard SAT: Increased from $250,000 → $350,000
Contingency Operations:
U.S.: $800,000 → $1,000,000
Outside U.S.: $1,500,000 → $2,000,000
Impact: More procurements qualify for streamlined procedures, reducing administrative work and speeding up awards.
3. Cost or Pricing Data Threshold: This is the threshold at which contractors may be required to submit certified cost or pricing data to establish fair and reasonable pricing. This type of data is often burdensome to prepare and is accompanied by exposure to defective pricing claims under the Truthful Cost or Pricing Data statute (formerly TINA).
Contracts After July 1, 2018: $2,000,000 → $2,500,000
Contracts Before July 1, 2018: $750,000 → $950,000
Impact: Fewer contracts meet the threshold for certified cost and pricing data, reducing burden and exposure to defective pricing issues.
4. Subcontracting Plan Thresholds: This is the threshold at which federal contractors are required to submit a subcontracting plan, detailing how they will provide opportunities for small businesses to participate in the contract.
Supplies/Services: $750,000 → $900,000
Construction: $1,500,000 → $2,000,000
Impact: Fewer primes will need formal subcontracting plans.
5. 8(a) Competition Limitation Threshold: This is the threshold beneath which federal agencies may issue awards to 8(a) firms on a sole-source basis. Above this threshold, the contract must be competitively awarded among eligible 8(a) participants.
General Ceiling: $25,000,000 → $30,000,000
Manufacturing Ceiling: $7,000,000 → $8,500,000
Impact: Agencies and 8(a) contractors have easier access to sole-source awards.
6. Simplified Procedures: Commercial Products/Services Threshold:
• Ceiling: $7,500,000 → $9,000,000• Impact: Provides a higher threshold for agencies to purchase commercial items using streamlined procedures, making commercial items more accessible and easing the regulatory burden of selling commercial items to the government.
The new FAR thresholds help mitigate the impact of inflation and provide agencies with more ability to use streamlined procedures to make smaller purchases with less regulatory burden. With the current Administration’s recent emphasis on procurement of commercial items, the increased threshold for streamlined commercial acquisitions will be helpful to contactors who are seeking to offer commercial products and services to the government.
The new thresholds will also increase opportunities for small businesses and 8(a) contractors. From FY 2022 to 2024, the government awarded more than, approximately, 560,000 awards valued at or below the MPT of $10,000. With the heightened threshold, the government estimates a nine percent increase in the number of MPT awards. Additionally, from FY 2022 to 2024, the government awarded approximately 235,000 contract actions above the current MPT but at or below the current SAT to more than, approximately, 48,000 different contractors. The government estimates that, with the increased SAT threshold, another 5,150 contract actions (two percent) could be awarded to approximately 3,580 different entities via contracts at or below the SAT.
Zoe Waldman, Intern, contributed to this client alert.
Is Your Subcontractor an Independent Contractor or an Employee? The Answer May Not Be as Simple as You Think
Most construction contracts include a provision stating that the contractor or subcontractor is an independent contractor and not an employee of the owner or contractor. That should settle the matter, right? Wrong. Depending on the context and jurisdiction, such contractual provisions may mean little or nothing at all.
Check State Laws
In 2024, the Minnesota Legislature passed a law that contains 14 mandatory requirements for a construction contractor to qualify as an independent contractor under the state labor laws. Among other requirements, the contractor must:
Have federal and state tax ID numbers;
Receive and retain Form 1099s;
Have certain types of unemployment and workers’ compensation insurance;
Have control over the means of performing the work;
Have a written contract that is fully executed no later than 30 days after work commences; and
Submit written invoices.
Contractors in Minnesota who do not satisfy all these and other requirements are considered employees. The state may assess fines of up to $10,000 per violation against those who misclassify their contractors and subcontractors as independent contractors.
In Minnesota ABC v. Blissenbach, the Minnesota Chapter of the Associated Builders and Contractors (ABC) challenged the new law in federal court arguing that it was unconstitutional. ABC alleged several common practices that the law arguably proscribes, including not executing written subcontracts within 30 days of beginning work and paying subcontractors without receiving an invoice. The district court rejected ABC’s constitutional challenge, and just last week, the Eighth Circuit Court of Appeals affirmed. The Eighth Circuit held that the law was not unconstitutionally vague and did not violate the Excessive Fines Clause of the U.S. Constitution. As a result, the law remains in effect and may be enforced by the Minnesota Department of Labor and attorney general.
Takeaways
The Blissenbach decision is a good reminder to consult state law regarding the classification of independent contractors for purposes of complying with state employment laws.
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Does “Indemnify” = “Hold Harmless”? – Part 2
Earlier this May, we wrote about how the Alabama Supreme Court held that “hold harmless” and “indemnify” may be considered synonyms, even if the terms appear separately in a contract.
The court’s decision in Adams v. Atkinson, No. SC-2024-0528, 2025 WL 1416851 (Ala. May 16, 2025),was an important precedent at the time, as it suggested that a “hold harmless” clause could impose a duty of indemnity even if the term “indemnity” was not explicitly mentioned. The court emphasized the context-specific nature of its decision, suggesting that the parties to the trust agreement in Adams intended the hold harmless provision to operate as a reimbursement mechanism rather than merely a waiver of rights.
However, on September 19, 2025, the Alabama Supreme Court withdrew its opinion in Adams. This withdrawal was based on the ground that the beneficiary to the trust agreement at issue “waived her right to challenge the unaddressed arguments of the defendants that could have supported the circuit court’s judgment of dismissal” because she “did not address in her initial brief on original submission all the defendants’ arguments raised in their motion to dismiss.”
This is an important development because parties who want a “hold harmless” provision to act only as a waiver of rights, rather than as a duty to indemnify, may now argue that Adams has no precedential value. On the other hand, the Alabama Supreme Court could revisit its original reasoning in Adams in a future case, and that reasoning might still influence how similar disputes are decided.
Given these developments, parties should carefully consider the specific language used in indemnity and hold harmless clauses to ensure their intentions are clearly reflected.
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West Virginia Public Service Commission Clarifies Rules on Pole Replacement Cost Allocations
As part of an effort to facilitate broadband deployment, and closely tracking recent FCC decisions with respect to the assignment of cost responsibility for pole replacements, the West Virginia Public Service Commission (PSC) declared on October 15, 2025 that pole owners – not broadband providers – must pay to replace utility poles that already have been “red tagged” for replacement as too old, unsafe, or deteriorated.
The PSC order clarifies an August 2025 pole attachment order, which “in line with the FCC’s recent interpretation of its own rules,” required that costs of pole replacements should be shared by all beneficiaries, not imposed entirely on new attachers. The West Virginia PSC’s October 15th order clarified that “red-tagged poles,” i.e. those “already slated for replacement” or “that require replacement due to age, deterioration, safety violations, accident, or any other cause,” must be replaced at the cost of the pole owners. The PSC also observed that “[f]ailure to ‘red-tag’ a pole that should have been red-tagged, would have been red-tagged upon close inspection, or is likely to be red-tagged in the near future does not place that pole in the category of an acceptable pole with remaining life that is replaced solely to accommodate an attacher.”
The PSC said it its order aimed to “promote fairness and efficiency in broadband deployment especially in underserved areas where infrastructure upgrades are critical.” The PSC, moreover, was critical of pole owners that “have not been consistent and aggressive in identifying poles that should be replaced.”
More broadly, and consistent with a demonstrably heightened awareness of state utility commissions that regulate pole attachments, the West Virginia PSC stated that it is “concerned that continuing delays are jeopardizing the availability of federal funding for broadband expansion,” which “is unacceptable.”
West Virginia’s order mirrors several recent actions by the FCC meant to facilitate broadband deployment, including July 2025 and December 2023 orders addressing pole replacement costs and pole attachment application timelines. For example, the FCC’s 2023 pole attachment order expanded the definition of “red tagged” poles, clarifying that a pole replacement is not “necessitated solely” by a new attacher including when (1) a pole replacement is required by applicable law; (2) the current pole fails engineering standards such as those in the National Electrical Safety Code (“NESC”); (3) a pole replacement is necessary due to changes in a utility’s internal construction standards; (4) the pole must be replaced due to road expansion or moves, property development, in connection with storm hardening, or similar government-imposed requirements; or (5) the pole already is on a utility’s replacement schedule.
The FCC also is continuing to examine ways to streamline pole permit applications, make-ready processes, and contractor approvals—and is considering whether light poles should be subject to access mandates of Section 224(f) of the Communications Act.
SB 79 – Major Changes to Transit-Oriented Development in California
After months of high drama, California Senate Bill 79 (“SB 79”) was signed by Governor Newsom on October 10—the latest salvo in a year of ambitious legislation to increase housing supply in California. Effective July 1, 2026 (within incorporated cities[1]), the new law opens new residential building opportunities near existing rail and bus stations in California’s most populous metropolitan areas.
Application and Key Provisions for Local Governments
SB 79 applies to and upzones “urban transit counties”—those with 15 or more passenger rail stations. Currently, only eight California counties meet this description – Alameda, San Francisco, San Mateo, Santa Clara, and Sacramento in Northern California; and Los Angeles, Orange, and San Diego Counties in the Southern half of the state.
Within these counties, the bill creates a tiered structure of rules to preempt locally imposed height and density limits, based on the proximity a given development site has to “transit-oriented development stops.” These are “major transit stops” (as defined by Pub. Resources Code § 21064.3) with an existing rail or bus rapid transit station, ferry terminals served by bus or rail transit service, and intersections of two or more major bus routes with a frequency of service interval of 20 or fewer minutes during morning and afternoon peak commute periods. In addition, this includes stops on a route for which a “preferred alternative” has been selected or which are identified in a regional transportation improvement program when served by “heavy rail transit,” “very high frequency commuter rail” (72 trains per day), “high frequency commuter rail” (48 trains per day), “light rail transit,” or bus service. Notably, “commuter rail” does not include Amtrak Long Distance Service.“Tier 1” transit oriented development stops are those served by heavy rail transit and very high frequency commuter rail. “Tier 2” transit-oriented development stops are those served by light-rail transit, high-frequency commuter rail, or bus rapid transit service.
On sites zoned for commercial, residential, or mixed uses within the requisite distance of these stops, as summarized on the table below, a proposed housing project with least five dwelling units and a minimum density of 30 dwelling units per acre (or a higher minimum if required by local zoning) will qualify as a “transit-oriented housing development project,” and is allowed by-right, subject to the standards summarized below. Distances are measured in a straight line from the edge of the development site parcel to a pedestrian access point for the transit stop.
SUMMARY TABLE – SB 79 DEFAULT RULES FOR HEIGHT, DENSITY, AND FLOOR AREA RATIO
Tier 1 TOD Stop Served by heavy rail transit or very high frequency commuter rail (≥ 72 trains/day across both directions)
Tier 2 TOD Stop Served by light rail transit (includes trolley, tramway, and streetcar services), high frequency commuter rail (≥ 48 trains/day), or bus rapid transit
Site Distance from TOD Stop
35,000
35,000
Height (ft): A local government may not impose any height limit less than:
75
65
65
55
Density (du/ac): A local government shall not impose any maximum of less than:
120
100
100
80
FAR: A local government shall not enforce any other local development standard(s) that would preclude a residential floor area ratio of up to:
3.5
3
3
2.5
Additional Incentives: A development is eligible for (1-3) additional incentives under the Density Bonus Law if it meets a density threshold of:
90 du/ acre
75 du/ acre
75 du/ acre
60 du/ acre
Alternative Plans and Exemptions
While SB 79 asserts strong state preemption over local land use, it does permit local governments to propose alternative plans. To qualify, these plans must offer at least equal net capacity (by units and floor area) to the default SB 79 standards. This alternative can be implemented through housing element amendments, specific plans, overlays, or compliant zoning ordinances, subject to review and approval by the Department of Housing and Community Development (HCD).
The alternative plan may not reduce the maximum allowed density for any individual site by more than 50% below the applicable state minimum, except in special circumstances (e.g., very high fire hazard zones, sites vulnerable to one foot or more of sea level rise, or those containing designated historic resources). For Tier 2 TOD zones, density may not fall below 30 units per acre, and floor area ratio below 1.0, except for specified exempted sites.
The bill allows local governments to exempt certain industrial lands and areas not accessible to transit by walking paths. Areas within one-half mile of straight-line distance but not walkable by a less-than one-mile pedestrian path can be excluded from SB 79 upzoning. “Industrial Employment Hubs” of 250 or more contiguous acres which have been designated as such as of January 1, 2025 and which already prohibit residential uses can similarly be excluded.
The ability for local governments to use exemptions and alternative plans is time-limited, extending until 2032 for Bay Area counties, and January 1, 2027 for the remaining counties.
Agency Transit-Oriented Development Projects
The bill also envisions residential or mixed-use projects on transit-adjacent public property. On infill sites owned by the transit agency and within 200 feet of a transit-oriented development stops, or on sites where 75 percent of the project area would exist within one half-mile of the stop. The bill requires:
at least 50% of the project’s total square footage dedicated to residential purposes,
at least 20% of units reserved for lower-income households, with long-term affordability covenants (minimum 55 years for rentals, 45 years for ownership),
average unit size not exceeding 1,750 net habitable square feet,
sites must not be recent acquisitions by eminent domain (post-July 1, 2025), and
objective development and labor standards, including prevailing wage requirements for tall buildings and phased affordability for mixed-use developments.
Transit agencies may adopt minimum zoning standards (height, density, FAR, and permitted uses) for district-owned TOD properties. If local governments do not update their zoning to match these standards within two years, the agency standards become the default zoning for agency-owned property.
Key Provisions For Private Developers
SB 79’s upzoning provisions come with requirements and standards for developers of transit-oriented housing projects, but also with eligibility for streamlined ministerial approval and protections under the Housing Accountability Act, along with density bonuses and intensifiers.
Standards
With respect to standards, proposed units within these transit-oriented housing projects may not exceed an average total area floor space of 1,750 net habitable square feet. In addition, no portion of the project can be designated for use as a hotel, motel, bed and breakfast or other transient lodging. Development must also meet the requirements of an applicable airport land use compatibility plan.
An inclusionary provision in the bill requires projects of more than ten dwelling units to dedicate 7 percent, 10 percent, or 13 percent of the total units to extremely low income, very low income, or lower income households. The affordability requirement remains in place for 55 years for owned units and 45 years for rental units. If a local government’s inclusionary zoning ordinance contains stricter affordability than SB 79, the local ordinance applies. The bill also strictly prohibits demolition of certain rent-controlled or recently occupied housing and mandates compliance with all local anti-demolition and anti-displacement ordinances.
For buildings over 85 feet, SB 79 imposes labor standards requiring payment of prevailing wages and additional project-specific certifications. Agency-owned sites developed under TOD standards must also meet similar labor requirements, unless governed by an existing project labor agreement.
Eligibility for Streamlined Ministerial Approval and Housing Accountability Act
A housing development project proposed pursuant to SB-79 is eligible for the streamlined ministerial approval process pursuant to Government Code section 65913.4 (originally adopted by SB 35 in 2017 and amended by SB 423 in 2023) if it provides a minimum of 10% very low (rental) or 10% low income (for-sale) affordable units. Projects may also qualify for other exemptions from CEQA (including Assembly Bill 130, which went into effect earlier this year).
Additionally, SB 79 provides that a housing development project will be considered consistent with the Housing Accountability Act’s requirements as long as its own standards and applicable objective local standards that do not prevent it from meeting the law’s requirements. By establishing such alignment with the Housing Accountability Act, new housing projects are more likely to avoid disapproval under the Act’s strict rules.
Density Bonuses
SB 79 expands access to state Density Bonus Law benefits by calculating base density from the higher density allowed by SB 79, unlocking significant additional units, incentives, and parking reductions. Additional concessions may be accessed for deeper affordability or higher project minimum densities as noted in the table above. However, SB 79 does not require a local agency to grant an incentive or waiver to exceed its statutory height limits.
Oversight, Enforcement and Penalties
HCD is charged with overseeing compliance with SB 79, including promulgating standards to allow density to be counted in local agencies’ housing element sites inventory. Each metropolitan planning organization (“MPO”) is charged with creating a map of eligible sites, with HCD’s guidance which, once created, provides a rebuttable presumption of eligibility.
A local government that denies a housing development project under SB 79’s structure and is located in a high-resource area shall be presumed to violate the Housing Accountability Act, unless it can demonstrate a health, life, or safety reason for denying the project. This provision is effective beginning on January 1, 2027.
FOOTNOTES
[1] The law will take effect in unincorporated county areas as of the 7th Cycle Housing Element Update under the Housing Element Law.
Legislature Adopts Bill to Limit Density Bonus Law Benefits for Mixed-Use Projects
California Senate Bill 92 (“SB 92”), introduced in January 2025 by Senator Catherine Blakespear and having been passed by both the California State Assembly and State Senate was approved by the Governor on October 10, 2025. SB 92 amends California’s Density Bonus Law (Government Code Section 65915 et seq.) (“SDBL”) to limit a developer’s ability to apply for concessions, incentives, and waivers of development standards for mixed-use projects that include nonresidential uses.
Specifically:
cities and counties will not be required to provide certain SDBL benefits to a hotel, motel, bed and breakfast inn or other transient lodging component of a mixed-use project, except a residential hotel (i.e., a building containing 6 or more guestrooms or efficiency units to be used as the primary residence of the guests[1]); and
for any applications submitted after January 1, 2026, concessions or incentives granted under the SDBL shall not result in a proposed project with a commercial FAR greater than two and a half times the premises’ current allowed base zone commercial FAR. Additionally, projects that have submitted a preliminary application (under the Housing Crisis Act of 2019, or “SB 330”[2]) are not subject to this limit.
According to comments from the bill’s author, these changes address the purpose of the SDBL to create housing and not hotels and other nonresidential uses. According to its stated Legislative intent, however, the purpose of the SDBL is “to cover at least some of the financing gap of affordable housing with regulatory incentives, rather than additional public subsidy[.]”[3] A series of reforms adopted since 2020 broadened the benefits developers can receive in order to offset the cost of providing affordable units, while limiting local agencies’ ability to deny those benefits. The Legislature’s action in adopting SB 92 reveals a step-back in the flexibility afforded to developers to structure projects that include affordable housing under a law that has helped develop thousands of deed-restricted affordable units throughout the State.[4] This change could incrementally reduce the use of the SDBL to develop projects that include affordable units, especially in coastal and other high-cost areas where developers often rely on the benefits afforded by SDBL.
Existing Density Bonus Law
The SDBL is a heavily utilized tool that encourage developers to include affordable units in their project by providing economic benefits that decrease the overall cost of the project. The SDBL can be used to achieve increases above the base density of property that allows residential use without rezoning, which otherwise requires a discretionary (legislative) approval. It also permits deviations from development standards that would otherwise limit the development of the project as proposed, including the existence of affordable units, without discretionary deviations or variances. [5] In 2022, Assembly Bill (“AB”) 1551 was enacted to make clear that mixed-use developments (projects that include both residential and non-residential uses) qualify for benefits under the SDBL.[6]
Density Bonus
If a “housing development project”, including a mixed-use development, includes at least five residential units and the minimum percentage of affordable units (starting at 5% Very Low Income (i.e., households earning up to 50% of the Area Median Income (AMI)) units), the project is entitled to receive bonus density, ranging from 5% to 100%, depending on the level of affordability and percentage of affordable units in the development.
The SDBL was updated by Assembly Bill (“AB”) 1287 (2023)[7] to allow for “stacking” or combining density bonuses projects to earn between 20% and 50% percent more density (70-100% total), if the developer also agrees to restrict 5-10% of the units in the project for Very Low Income or 5-15% of the units in the project for Moderate Income (up to 120% AMI) families. With AB 1287, a project can achieve double the base density with a minimum of 20% of the base density units restricted to Very Low Income households, without discretionary rezoning. on the distribution
SB 92 does not alter the requirement that if a “housing development project” includes the requisite percentage of affordable units, the project will still be eligible to receive between 5% to 100% density bonus.
Concessions or Incentives and Waivers
In addition to bonus density, under current law, a project meeting the minimum criteria is entitled to “concessions” and “incentives” which include:
A reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards can result in identifiable and actual cost reductions such as a reduction in setback and square footage requirements or the ratio of vehicular parking spaces that would otherwise be required. These cost reductions help result in an incentive for more affordable housing and lower rents for targeted units.[8]
Approval of mixed-use zoning in conjunction with a housing project if commercial, office, industrial, or other land uses will reduce the cost of the housing development and if the commercial, office, industrial, or other land uses are compatible with the housing project and the existing or planned development in the area where the proposed housing project will be located. [9]
Other regulatory incentives or concessions proposed by the developer or the city or county that result in identifiable and actual cost reductions to provide for affordable housing costs, or for lower rents for targeted units. [10]
The number of concessions or incentives a project qualifies for, like the density bonus, depends on how many affordable units are proposed and the level of affordability the project includes. Local agencies bear the burden of proof to deny a requested concession or incentive.[11]
In addition to concessions or incentives, the SDBL provides that an applicant may submit a proposal for the waiver or reduction of development standards that have the effect of “physically precluding” the construction of the project at the densities or with the concessions or incentives permitted under the SDBL.[12] While the number of concessions or incentives is limited and based on the percentage and affordability level of the affordable units in the project, there is no limit on the number of waivers a project can receive.
SB 92
SB 92 includes the following text in Section 65915 of the Government Code:
“(l) (1) (A) A concession or incentive shall not result in a proposed project with a commercial floor area ratio that is greater than two and a half times the premises’ current allowed base zone commercial floor area ratio.
(B) This paragraph shall not apply to proposed projects that have submitted a preliminary application or an entitlement application prior to January 1, 2026.
(2) Subdivision (e) and subdivision (k) do not require a city, county, or city and county to approve, to grant a concession or incentive requiring approval of, or to waive or reduce development standards otherwise applicable to, a hotel, motel, bed and breakfast inn, or other transient lodging, other than a residential hotel, as defined in Section 50519 of the Health and Safety Code, as part of a housing development subject to this section. For purposes of this paragraph, ‘other transient lodging’ does not include a resident’s use or marketing of their unit as short-term lodging, as defined in Section 17568.8 of the Business and Professions Code, subsequent to the issuance of a certificate of occupancy in a manner otherwise consistent with local law.”
Floor Area Ratio Cannot Exceed Two and a Half Times
As discussed above, the SDBL is applicable to mixed-use developments that include five or more residential units and the requisite percentage of affordable units to be eligible for a density bonus, concessions or incentives and waivers of development standards. Generally, FAR is a development standard that measures the ratio of floor area in the development to the lot area of the premises.[13] Through use of the SDBL, reductions in setbacks, increases in development square footage and reduced parking requirements (as parking is often excluded from FAR) can result in a project’s FAR increasing by more than two and a half times that permitted by the base zone.
Under SB 92, a concession or incentive would no longer permit an “unlimited” increase in FAR, as applied to the commercial component of a mixed use development. Previously, a city or county would have been required to grant a concession or incentive to an eligible project regardless of whether it would result in the commercial portion of the project exceeding the allowed FAR for commercial space on the premises by more than two and a half times. While SB 92 continues to allow an increase in commercial FAR that would otherwise be allowed on the site subject to this limit, it constrains developers’ flexibility to leverage commercial uses to make residential development with affordable units feasible.
Timing
This provision of SB 92 does not apply to proposed projects that have submitted a preliminary application or an entitlement application prior to January 1, 2026. Accordingly, pending projects that propose to exceed the limit but have not filed an entitlement application should consider filing a preliminary application before SB 92 takes effect to be eligible to receive a commercial FAR greater than two and a half times the premises’ current allowed base zone commercial floor area ratio.
A preliminary application under SB 330 requires only high-level project information and permits applicants for a housing development project that includes a mix of commercial and residential uses with two-thirds of the project’s square footage used for residential purposes to proceed under the law in place as of the time of submission and payment of the permit processing fee to the agency from which approval for the project is being sought, provided that a full application for development is thereafter filed within 180 days.[14]
Hotels Eliminated
In addition to the limit on commercial FAR in a housing development project, SB 92 also expressly states that local agencies are not required to grant incentives or concessions that require approval of, or waive or reduce development standards otherwise applicable to a proposed hotel component of a mixed use development, including a hotel, motel, bed and breakfast inn or other transient lodging, except for a residential hotel.[15]
Accordingly, a city or county could deny any such concession, incentive or waiver relating to a hotel component of a housing development project subject to the SDBL (even if it does not increase commercial FAR by more than two and a half times the base commercial FAR).
Implications – Less offset for the additional cost of building affordable units
Although SB 92 purports to align with the policy goals of the SDBL to create more affordable housing, without the benefits developers receive under SDBL to offset the cost of including affordable units in the development, the effect of SB 92 could be a reduced number of affordable units, especially in planned mixed-use developments in more expensive locations throughout the state.
With the cost of developing affordable units being offset by the ability to develop certain uses, such as hotel rooms, SDBL concessions and incentives allow for the development of affordable units in areas that would otherwise be too expensive for a developer’s project to be financially feasible. For example, coastal development is the most expensive development due to, among other contributing factors, the price of land and additional regulatory requirements such as obtaining a Coastal Development Permit from the Coastal Commission. Thus, SDBL is a tool that developers can use to include affordable units in a project near the coast while pursuing a financially feasible development.
SDBL concessions and incentives, such as removal of height restrictions or parking requirements, for the development of a project that includes hotel use and five or more residential units with the requisite amount deed restricted as affordable is a tool for developers to pursue a mixed use project in an area, such as the coast, that would otherwise be too expensive.
Accordingly, by eliminating hotels, motels, and other transient lodging uses from being eligible for concessions and incentives that offset the additional costs of building affordable units, SB 92 creates another barrier making the already expensive development of affordable units near the coast even less financial viable.
Developers Rowing Against Policy
As the bill’s author Senator Blakespear noted, “The California Legislature created the density bonus law to encourage private market developers to include deed-restricted affordable housing in their projects in exchange for zoning waivers and concessions. Legislators carefully constructed this law to require a fair exchange between developers and the communities they were building in. … SB 92 will close [a] loophole brought to light … and ensure density bonus law provides the fair bargain it was designed to deliver.”[16]
SB 92 is an example of a legislative reaction to developers using a law aimed at encouraging the development of affordable units for other types of development, even where the law allowed flexibility to include such other uses as a means of making affordable units feasible. This serves as a cautionary tale when utilizing the benefits of a law to achieve what may be viewed as a different outcome than is intended. Certain lawmakers view the practice of developing the requisite amount of affordable units in order to increase commercial FAR or to obtain other concessions and incentives for hotel development, as a “loophole” and as a result, drafted SB 92 to close it.
Sheppard Mullin’s Real Estate, Energy, Land Use & Environmental Practice Group will continue to monitor and report on recent housing laws and their impact on development.
FOOTNOTES
[1] Health and Safety Code Section 50519
[2] Government Code Section 65941.1.
[3] Government Code Section 65915(u).
[4] https://shou.senate.ca.gov/system/files/2025-02/recent-leg-actions-factsheet-updated-feb-2025_0.pdf
[5] Government Code Section 65915(b)(1)(G).
[6] Government Code Section 65915(i).
[7] Government Code Section 65915(v). Sheppard Mullin’s Land Use Team Authors New California Law Expanding Affordable Housing Incentives | Sheppard Mullin (San Diego Land Use partner Jeff Forrest drafted the bill pro bono for Circulate San Diego).
[8] Government Code Section 65915(k)(1).
[9] Government Code Section 65915(k)(2).
[10] Government Code Section 65915(k)(3).
[11] Government Code Section 65915(d)(4).
[12] Government Code Section 65915(e)(1).
[13] “Floor area ratio” means the ratio of gross building area of the eligible housing development, excluding structured parking areas, proposed for the project divided by the net lot area. Government Code Section 65917.2(a)(2).
[14] Government Code Section 65941.4.
[15] Health & Safety Code Section 50519.
[16] 202520260SB92_Senate Floor Analyses.pdf