(a) For purposes of this section, all of the following definitions apply:

1. (1) “Department” means the Department of Housing and Community Development.
2. (2) “Office” means the Office of Land Use and Climate Innovation.
3. (3) “Region” means the territory of the metropolitan planning organization within which a project is located, or the territory of the regional transportation planning agency within which a project is located if the project is located outside of the boundaries of a metropolitan planning organization.
4. (4) “Transit-Oriented Development Implementation Fund” means the fund created pursuant to Section 53561 of the Health and Safety Code.
5. (5) “Transit-Oriented Development Implementation Program” means the program established pursuant to Part 13 (commencing with Section 53560) of Division 31 of the Health and Safety Code.

(b)

1. (1)

   1. (A) If a lead agency determines that a project will have a significant transportation impact pursuant to the metrics adopted pursuant to paragraph (1) of subdivision (b) of Section 21099, the lead agency may mitigate the transportation impact to a less than significant level by helping to fund or otherwise facilitating vehicle miles traveled-efficient affordable housing or related infrastructure projects, provided the projects meet the requirements of mitigation measures contained within this division and Chapter 3 of Division 6 of Title 14 of the California Code of Regulations, including by contributing an amount, to be determined pursuant to the office’s guidance issued pursuant to subdivision (d), to the Transit-Oriented Development Implementation Fund for purposes of the Transit-Oriented Development Implementation Program.
   2. (B) This section shall not preclude the lead agency’s use of other mitigation strategies, including, but not limited to, transportation demand management, transit improvements, active transportation infrastructure, road diets, or utilizing local or regional mitigation banks and exchanges.
2. (2) Moneys may be deposited into the Transit-Oriented Development Implementation Fund pursuant to paragraph (1) beginning on or before July 1, 2026, as determined by the department.
3. (3) Consistent with paragraph (1), a project applicant may use the Transit-Oriented Development Implementation Fund as one optional strategy to mitigate a significant transportation impact under this division. The ultimate use of this mitigation option is subject to the discretion of the lead agency that retains full authority to determine the sufficiency of any proposed mitigation consistent with this division.

(c)

1. (1) Moneys deposited into the Transit-Oriented Development Implementation Fund pursuant to subdivision (b) shall be available to the department, upon appropriation by the Legislature, for the purpose of awarding funding for affordable housing or related infrastructure projects, including infrastructure necessary for higher density uses, under the Transit-Oriented Development Implementation Program in the following priority order:

   1. (A) First priority to affordable housing or related infrastructure projects in location-efficient areas, as defined in the office’s guidance issued pursuant to subdivision (d), within the same region as the project.
   2. (B) Second priority to affordable housing or related infrastructure projects within the same region as the project.

   3. (C)

      1. (i) Third priority to affordable housing or related infrastructure projects in location-efficient areas that are outside of the originating region but within an adjacent region, provided the project site is located within a defined proximity radius established by the office issued pursuant to clause (ii).
      2. (ii) The proximity radius shall be specified in the office’s guidance and may vary based on regional characteristics such as population density and travel patterns. The intent of this provision is to support projects in neighboring regions that offer similar vehicle miles traveled-reducing benefits due to the project’s location efficiency, including access to high-quality transit, jobs, and essential services.
2. (2) Affordable housing or related infrastructure projects for which funding was applied from other state funding programs, but was not awarded due to limited program resources, or was awarded but a financing gap still exists, may be considered for funding pursuant to this subdivision. The applications for funding for these affordable housing or related infrastructure projects shall be eligible for consideration through a streamlined and expedited administrative review process to accelerate delivery.
3. (3) For each award of funding for affordable housing or related infrastructure projects pursuant to this subdivision, the department shall, in partnership with the office, confirm the estimated reduction in vehicle miles traveled associated with the affordable housing or related infrastructure project using the methodology established in the office’s guidance issued pursuant to subdivision (d).

(d) On or before July 1, 2026, and at least once every three years thereafter, the office, in consultation with other state agencies, as appropriate, shall issue guidance related to the implementation of this section. This guidance shall include all of the following:

1. (1) A methodology for determining the amounts that are required to be contributed to the Transit-Oriented Development Implementation Fund pursuant to subdivision (b) to mitigate the environmental impacts associated with vehicle miles traveled.
2. (2) A definition of location-efficient areas that reflects a reasonable nexus between the location of the transportation impact of the project and the location of the vehicle miles traveled-efficient affordable housing or related infrastructure project which shall consider the location efficient area’s consistency with an adopted sustainable communities strategy pursuant to Section 65080 of the Government Code, alternative planning strategy pursuant to Section 65080 of the Government Code, or other adopted regional growth plan intended to foster efficient land use.
3. (3) A process for validating a project’s vehicle miles traveled funding contribution, which shall be designed to provide certainty to the lead agency and project applicant that the contribution satisfies applicable mitigation requirements under this division for significant transportation impacts.
4. (4) A methodology for estimating the anticipated reduction in vehicle miles traveled associated with affordable housing or related infrastructure projects funded pursuant to subdivision (c). This methodology may consider existing methodologies, but shall be tailored to the specific purposes and structure of this section, including accounting for relevant factors influencing vehicle miles traveled reduction, including proximity to transit, job access, walkability, and the level of affordability, and the length of the affordability period, of the affordable housing or related infrastructure project.

(e)

1. (1)

   1. (A) The initial guidance, which is required to be issued by the office on or before July 1, 2026, pursuant to subdivision (d), shall not be subject to the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).
   2. (B) Before finalizing the initial guidance, the office shall provide public notice, make a draft version publicly available, and allow for a public comment period of at least 30 days. The office shall consider all comments received before issuing the final guidance.
2. (2) The office shall commence the regular rulemaking process for subsequent guidance on or before January 1, 2028, in compliance with the rulemaking provisions of the Administrative Procedure Act (Chapter 3.5 (commencing with Section 11340) of Part 1 of Division 3 of Title 2 of the Government Code).