New Decision Helps Multifamily Developers by Striking Down a Restrictive Local Ordinance

On July 11, 2013, in Latinos Unidos del Valle de Napa y Solano v. County of Napa (A135094), the First District reversed and remanded a trial court's decision that Napa County's restrictive density bonus ordinance did not conflict with State Density Bonus Law ["DBL"] (Gov. Code § 65915). This decision, which is among the small number of published opinions that address the DBL, puts to rest a threshold issue regarding the application of the DBL to projects that are also subject to local inclusionary zoning requirements.

Napa County Density Bonus Ordinance

Napa's density bonus ordinance provided that density bonuses would apply when the applicant provided affordable units in addition to the affordable units required by the County Code's inclusionary requirements, which required that up to 20% of new dwelling units be made available to moderate income households. The effect of Napa's "in addition to" requirement was that a project would qualify under the DBL only if it provided at least 22% of its units to lower income households, instead of the 10% (in this case) threshold established in the DBL.

Statutory Background

The purpose of the DBL since its enactment in 1979 is to address the shortage of affordable housing in California through a combination of density bonuses, incentives, and development standard waivers for projects that provide certain percentages of affordable units. A detailed discussion of the legislative history, mechanics, and key issues regarding the DBL is found in the article "The Density Bonus Law: Has its Time Finally Arrived?" As relevant here, the benefits of the DBL apply when a developer "seeks and agrees to construct a housing development" that proposes the requisite number of affordable units. (Gov. Code § 65915(b)(1).)

The "Seeks and Agrees" Issue

An issue that was debated during 2005 amendments to the DBL was whether a developer actually "seeks and agrees to construct a housing development" with affordable units if the developer is already required to provide affordable units by a local agency's inclusionary zoning requirement. Some pro-government advocates and local agencies, including Napa County, have asserted if a project is already required to provide affordable units under a local inclusionary ordinance, then those units must not count when determining if the project meets the threshold number of affordable units to qualify under the DBL.

The Appellate Court's Decision

The appellate court rejected the County's arguments that "seeks and agrees" means that a developer must provide affordable units above and beyond what is required by its inclusionary zoning ordinance, explaining that "allowing the county to increase the number of affordable units required for a density bonus would conflict with subdivision (f) of section 65915, which bases the amount of density bonus on the percentage of affordable housing units in the project." The Court then held that to "the extent the ordinance requires a developer to dedicate a larger percentage of its units to affordable housing than required by section 65915, the ordinance is void."

Effects of the Latinos Unidos Case

The DBL is being widely implemented by multifamily developers as this key residential market expands and strengthens. Even though the DBL applies to all counties and cities, including charter cities, many jurisdictions are reluctant to apply the DBL for a number of reasons. Local agencies' use of inclusionary zoning requirements will likely accelerate as a result of the recent Sixth District decision in CBIA v. City of San Jose (H038563) and if pending Assembly Bill 1229, which seeks to overturn the Palmer/Sixth Street decision, becomes law. Thus, Latinos Unidos provides important protection to multifamily developers and those who support the development of affordable housing units by eliminating an otherwise significant impediment to qualifying a residential project under the DBL.