Developer Prevails in Builder's Remedy Lawsuit

The Los Angeles Superior Court issued a highly anticipated ruling on March 4, 2024, addressing a Builder’s Remedy project denial by the City of La Cañada Flintridge. The decision confirms (i) that a local jurisdiction cannot “self-certify” its Housing Element retroactively; (ii) a Builder’s Remedy project is “vested” on the date that a complete SB 330 Preliminary Application is submitted; (iii) the Builder’s Remedy is available until substantial compliance with State Housing Element Law, potentially including the date that any required rezoning is completed; and (iv) project “disapproval” under the Housing Accountability Act (HAA) includes a “clear” decision to refuse to process a complete SB 330 Preliminary Application for a qualifying Builder’s Remedy project, as detailed below.

BACKGROUND

This case pertains to a Builder’s Remedy project that was denied by the City of La Cañada Flintridge (“City”). As we previously reported, the Builder’s Remedy applies when a local jurisdiction has not adopted an updated Housing Element in compliance with State Housing Element Law (Gov. Code § 65590, et seq.), in which case the local jurisdiction cannot deny a qualifying housing development project even if it is inconsistent with the general plan and zoning ordinance (subject to limited exceptions).

The following is a summary of the factual and procedural background in this case:

• In October 2021, the City submitted its draft Housing Element update to the California Department of Housing and Community Development (HCD) on the statutory deadline for review and certification, as required.
• In December 2021, HCD notified the City that its Housing Element update required significant revisions to fully comply with State Housing Element Law. HCD identified 14 deficient components, including but not limited to a lack of sufficient site inventory for future housing development.
• In October 2022, the City adopted its (second) revised Housing Element update and submitted it to HCD.
• In November 2022, the developer submitted a SB 330 Preliminary Application for an 80-unit mixed-use housing development project in the City’s downtown area (“Project”). The Project qualified for the Builder’s Remedy under the HAA because 20% of the units would be dedicated as affordable to lower-income households.
• In December 2022, HCD notified the City that while the (second) revised Housing Element update addressed most of HCD’s prior comments, further revisions were required to fully comply with State Housing Element Law.
• In February 2023, the City issued an incompleteness determination for the SB 330 Preliminary Application for the Project, requesting additional information on “several issues” but not alleging that the Project did not qualify for the Builder’s Remedy.
• Later in February 2023, the City adopted its (third) revised Housing Element update. The City Council resolution purported to “certify” the Housing Element update as being in substantial compliance with the State Housing Element Law as of October 2022, notwithstanding HCD’s December 2022 determination.
• In March 2023, the City determined that the SB 330 Preliminary Application for the Project was “incomplete” on the basis that the Builder’s Remedy did not apply to the Project. The Project developer then appealed that determination to the City Council.
• In April 2023, HCD notified the City that while the (third) revised Housing Element update met “most” State Housing Element law requirements, the City could not be deemed to be in substantial compliance with State Housing Element Law until it completed all required rezoning, as discussed in more detail below.
• In May 2023, the City Council denied the Project developer’s appeal on the basis that the Project did not qualify for the Builder’s Remedy, in part because the SB 330 Preliminary Application was filed after the date that the City Council (retroactively) self-certified its (second) Housing Element update. Later that month, the City informed the Project developer that its SB 330 Preliminary Application was complete, but maintained its position that the Builder’s Remedy did not apply to the Project.
• In June 2023, HCD sent a Notice of Violation to the City, advising the City that it had violated the HAA and State Housing Element Law by denying the Project developer's appeal, stating: “The City cannot ‘backdate’ its housing element compliance date to an earlier date so as to avoid approving a Builder’s Remedy application.”
• In July 2023, the Project developer and the California Housing Defense Fund separately petitioned the Los Angeles Superior Court (“Superior Court”) for a writ of mandate, alleging that the City violated the HAA, State Housing Element Law, and other state laws.
• In December 2023, the Attorney General and HCD intervened and filed a petition for writ of mandate with the Superior Court.

SUPERIOR COURT RULING

The following is a summary of the key holdings from the Superior Court’s ruling, issued on March 4, 2024. The Project developer, California Housing Defense Fund, Attorney General, and HCD are referred to collectively below as “Petitioners.”

The City Unlawfully “Self-Certified” its Housing Element

As explained by the Superior Court, if HCD finds a Housing Element not in substantial compliance with State Housing Element Law, the City must take one of the following actions: “(1) Change the draft element or draft amendment to substantially comply with [the law]; [or] (2) Adopt the draft element or draft amendment without changes[, but with] written findings which explain the reasons the legislative body believes that the draft. . . substantially complies with this article despite the findings of the department.” (See Gov. Code § 65585(f)(1), (2).).

The Superior Court agreed with Petitioners, finding that the City unlawfully blended these approaches by (i) making some changes in response to HCD’s December 2022 feedback, (ii) adopting the (third) February 2023 Housing Element update with written findings explaining why the (second) October 2022 Housing Element update was legally sufficient, and (iii) then resubmitting the (third) Housing Element update to HCD in February 2023.

The Superior Court explained that if the City believed its (second) October 2022 Housing Element update was substantially compliant with State Housing Element Law, it should have taken the appropriate steps outlined by the second option (i.e., adoption of the October 2022 Housing Element update without changes but with the required written findings) and then sued for a judicial declaration of substantial compliance.

The Builder’s Remedy is “Vested” on the Date a Complete SB 330 Preliminary Application is Submitted

The HAA provides that a housing development project “shall be subject only to the ordinances, policies, and standards adopted and in effect when a [complete] preliminary application…was submitted.” (See Gov. Code § 65589.5(o)(1).) Construing this provision alongside the Builder’s Remedy, the Superior Court agreed with HCD’s prior determination that the Builder’s Remedy is also vested if the local jurisdiction is not substantially in compliance with State Housing Element Law at the time that a complete SB 330 Preliminary Application is submitted.

The Superior Court found that the City’s non-vesting argument was inconsistent with the HAA policy of promoting housing and that if deemed correct, “as a practical matter ‘no housing developer would ever submit a builder’s remedy application because of the uncertainty about whether the project would remain eligible long enough to be approved.’”

The Superior Court suggested that if the City had “developed any argument” that the SB 330 Preliminary Application for the Project was incomplete at the time of submission, that could have thwarted the vesting of the Builder’s Remedy.

The Builder’s Remedy is Available Until Any Required Rezoning is Completed

As explained by HCD and as cited by the Superior Court: “A jurisdiction that adopts a housing element more than one year after the statutory deadline shall not be found in compliance with [State Housing Element Law] until it has completed the rezoning required by” the State Housing Element Law. (See Gov. Code § 65588(e)(4)(C)(iii).).

As applicable here, the City’s statutory deadline to adopt a substantially compliant Housing Element was in October 2021 and the City “failed to secure certification” of its Housing Element update within 120 days thereafter (as also required by statute); therefore, the City’s deadline to complete its required rezoning was in October 2022. The Superior Court noted: “It is undisputed the City did not complete the required rezoning until September through November 2023” and the City “shall not be found” in substantial compliance until then.

The Superior Court ultimately determined that because the City had not completed its required rezoning before the SB 330 Preliminary Application for the Project was submitted in November 2022, the Builder’s Remedy applies to the Project. Presumably, the Superior Court would have come to the same conclusion if the SB 330 Preliminary Application for the Project was filed on a later date, but before the required rezoning was completed.

The City Unlawfully “Disapproved” the Builder’s Remedy Project

The HAA provides to “disapprove the housing development project includes any instance in which the local agency . . . [v]otes on a proposed housing development project application and the application is disapproved, including land use approvals or entitlements necessary for the issuance of a building permit. . .” (Gov. Code § 65589.5(h)(6).).

Petitioners argued that the City Council’s decision on the aforementioned appeal was a “disapproval” of the developer’s Project within the meaning of the HAA, while the City argued that because the City Council did not vote on the actual entitlements required for the Project, there was no disapproval. The City also argued that the City could not, as a matter of law, approve or disapprove a housing development project prior to conducting environmental review under the California Environmental Quality Act (CEQA).

The Superior Court disagreed with the City, emphasizing that the use of the word “include” under the HAA cues broad interpretation, as well as the state legislature’s express intent that the HAA “be interpreted and implemented in a manner to afford the fullest possible weight to the interest of, and the approval and provision of, housing.” The Superior Court found that because the City Council had “voted” on the SB 330 Preliminary Application for the Project and “made clear” that no entitlements would be approved for the Project as a Builder’s Remedy Project, the “decision falls within the HAA’s broad definition of ‘disapprove.’”

The Superior Court was also unpersuaded by the City’s CEQA argument, noting that there is no requirement for a City to undergo CEQA review before deciding to disapprove a project.

Independent Judicial Review of Substantial Compliance with State Housing Element Law

The Superior Court noted that HCD is mandated by statute to determine whether a Housing Element is in substantial compliance with State Housing Element Law and accordingly, pursuant to “HCD’s statutory mandate and its expertise, HCD’s determination of compliance with the Housing Element Law, or lack thereof, is entitled to deference from the courts.”

However, the Superior Court also noted that “HCD’s housing element compliance determinations are not binding on the courts” and therefore, “to be clear” substantial compliance “is properly subject to the court’s independent review as a question of law.”

As applicable here, the Superior Court found that in exercising its independent judgement, the City’s October 2022 Housing Element update did not substantially comply with State Housing Element Law.

REMEDIES AND THE ROAD AHEAD

The Superior Court ultimately granted the petition and issued a writ directing the City to set aside the May 2023 City Council decision and compelling the City to process the application for the Builder’s Remedy Project in accordance with state law, including the HAA and CEQA. The Superior Court found that a writ compelling the City to approve the Project without CEQA review would not be an equitable or proportionate remedy.

Based on the Superior Court’s determination, developers and local jurisdictions should be mindful of (i) the rezoning requirement under State Housing Element Law, which could extend the window for vesting the Builder’s Remedy; (ii) purported “self-certification” of a Housing Element update where the required findings are made retroactively; and (iii) the ability of a reviewing court to defer to HCD on a substantial compliance determination, subject to the court’s independent review as a question of law.

A copy of the Superior Court's Order for the case (600 Foothill Owner LP v. City of La Cañada Flintridge (Super. Ct. Los Angeles County, 2024, No. 23STPC02575 [Related to Case No. 23STCP02614]) is available here.