Pending State Legislation Would Significantly Amend the Builder's Remedy Under the Housing Accountability Act

This legal alert was revised on April 3, 2024, to reflect AB 1893 amendments made in the Assembly on April 1, 2024. The summary below only pertains to Builder’s Remedy projects. Please note that there are now additional amendments proposed under AB 1893 that would not be limited to Builder’s Remedy projects.

Two bills proposed to modify the Builder's Remedy under the Housing Accountability Act (HAA) (Gov. Code § 65589.5(d)(5)) are currently making their way through the State Legislature: Assembly Bill (AB) 1893, proposed by Assemblymember Wicks, and AB 1886, proposed by Assemblymember Alvarez.

As currently proposed, AB 1893 would (i) reduce the required percentage of (lower income) affordable units for mixed-income Builder’s Remedy projects from 20% to 10%; (ii) impose new size and location guardrails on Builder’s Remedy projects; and (iii) authorize local jurisdictions to require compliance with other specified objective development standards so long as they do not reduce the “allowed” project density or result in an increase in “actual costs.”

As currently proposed, AB 1886 would clarify the necessary conditions for a Housing Element to be deemed “substantially compliant” with State Housing Element Law.  That determination is important, as it dictates whether the local jurisdiction must accept and process Builder’s Remedy applications.

The following provides background on the Builder’s Remedy and then summarizes the key changes proposed by AB 1893 and AB 1886.

Background

As we previously reported, the Builder’s Remedy applies when a local jurisdiction has not adopted an updated Housing Element in substantial compliance with State Housing Element Law (Gov. Code § 65580, et seq.), in which case the local jurisdiction cannot deny a qualifying housing development project even if it is inconsistent with the local general plan and zoning ordinance (subject to limited exceptions).

To qualify, the project must currently (i) fall under the definition of a “housing development project” under the HAA (i.e., a project consisting of residential units only, mixed-use developments consisting of residential and non-residential uses with at least two-thirds of the square footage designated for residential use, or transitional or supportive housing) and (ii) dedicate at least 20% of the dwelling units in the project as lower income (or 100% of the units as moderate income), as defined in the HAA.

Use of the Builder’s Remedy has surged recently, as local jurisdictions statewide have struggled to adopt, or have resisted adopting, a Housing Element that is in substantial compliance with State Housing Element Law.  Responding to this flurry of activity and related litigation, Assemblymembers Wicks and Alvarez have proposed various amendments to the law as summarized below.

AB 1893 – Assemblymember Wicks

Reduced Affordability Requirements

As currently proposed, AB 1893 would reduce the required percentage of affordable units for a mixed-income Builder’s Remedy project from 20% to 10% where lower income units would be provided.  AB 1893 would also eliminate the affordability requirement for Builder’s Remedy projects with 10 or fewer residential units.

New Basis for Denial & New Project Requirements

As currently proposed, AB 1893 would significantly amend the most controversial component of the Builder's Remedy, which is that a local jurisdiction without a substantially compliant Housing Element (“Non-Compliant Jurisdiction”) cannot deny a qualifying Builder’s Remedy project unless specified findings are made, which are intended to create a high threshold for denial by local jurisdictions.

As currently proposed, AB 1893 would newly authorize a Non-Compliant Jurisdiction to deny a qualifying Builder’s Remedy project if the project fails to meet any of the following “objective” standards.  In other words, Builder’s Remedy projects would need to meet all of the following new requirements (unless the project is “grandfathered” as explained below):

• The project site must be designated by the general plan or located in a zone where housing, retail, office or parking are “permissible” uses. Alternatively, if the project site is designated or zoned for agricultural use, at least 75% of the perimeter of the project site must adjoin parcels that are developed with urban uses, as defined under AB 2011. As explained in our recent legal alert, AB 2243 would amend the AB 2011 definition of “urban use” to clarify that urban use includes a public park that is surrounded by other urban uses.
• The project site must not be on a site or adjoined to any site where more than one-third of the square footage on the site is “dedicated to industrial use,” as defined under AB 2011. As explained in our recent legal alert, AB 2243 would amend the AB 2011 definition of “dedicated to industrial use” to no longer include sites (i) where the most recently permitted use was industrial, but that use has not existed on the site for over three years; or (ii) where the site is designated industrial by the general plan, but residential uses are a principally permitted use on the site or the site adjoins an existing residential use.
• The residential density for the project must not exceed the “greatest” of the following density calculations, as applicable, prior to any density bonus under the State Density Bonus Law (there is no codified limit under existing law):
  • • For project sites within “high or highest resource census tracts” (as defined): (i) 50% greater than the “maximum” density deemed appropriate to accommodate (lower income) housing for the local jurisdiction as specified in Government Code section 65583.2(c)(3)(B) (e.g., for a local jurisdiction in a metropolitan county, “at least” 30 dwelling units per acre); or (ii) three times the density allowed by the general plan, zoning ordinance, or state law (prior to any density bonus under the State Density Bonus Law), whichever is greater.
    • For other project sites, (i) the “maximum” density appropriate to accommodate (lower income) housing for the local jurisdiction as specified in Government Code section 65583.2(c)(3)(B) (see above); or (ii) twice the density allowed by the general plan, zoning ordinance, or state law (prior to any density bonus under the State Density Bonus Law), whichever is greater.
    • For project sites located within one-half mile of a major transit stop, a to-be-specified percentage above the “amount allowable” specified above, as applicable.
• The project must comply with “other” objective development standards (as defined) imposed by the local jurisdiction that apply in closest zone in the local jurisdiction for multi-family residential use at the “allowed” residential density (this calculation appears to be inclusive of any density bonus under the State Density Bonus Law). If no such zone exists, the applicable objective standards shall be those for the zone that allows the greatest density within the city, county, or city and county, as applicable. 

AB 1893 would provide that in no case may the local agency apply any objective development standards that will (i) have the effect of physically precluding the construction of the project at the “allowed” density or (ii) result in an increase in “actual costs.”  The local agency would bear the burden of proof under these circumstances.

As currently proposed, the foregoing new requirements would not apply to Builder’s Remedy applications that are “deemed complete” on or before April 1, 2024.  Under existing law, “deemed complete” is defined to mean that the applicant has submitted a SB 330 preliminary application or, if that has not been submitted, a complete development application (as defined) has been submitted.  AB 1893 would add that the local agency shall bear the burden of proof in establishing that the applicable application is not complete.

AB 1886 – Assemblymember Alvarez

A recent Builder's Remedy lawsuit exposed some ambiguity regarding when a Housing Element is deemed “substantially compliant” with State Housing Element Law.  Opposing sides of the litigation disputed whether (retroactive) self-certification by the local jurisdiction was sufficient.  The court ruled that it was not.  See our prior legal alert for our coverage of this ruling, which appears to be the impetus for the amendments proposed under AB 1886.

As currently proposed, AB 1886 would:

• Clarify the point at which a Housing Element is deemed substantially compliant with State Housing Element Law: (i) the Housing Element has been adopted by the local jurisdiction and (ii) the local jurisdiction has received an affirmative determination of substantial compliance from HCD or a court of competent jurisdiction.
• Clarify that the Housing Element shall continue to be considered in substantial compliance with State Housing Element Law until either: (i) HCD or a court of competent jurisdiction determines that the adopted Housing Element is no longer in substantial compliance (e.g., where any required rezoning is not approved in a timely manner) or (ii) the end of the applicable Housing Element cycle.
• Specify that Housing Element compliance status is determined at the time the SB 330 preliminary application is submitted for the qualifying Builder’s Remedy project, which is consistent with HCD’s prior determination that the Builder’s Remedy is vested on that filing date. If a SB 330 preliminary application is not submitted, then the compliance status would be determined when a complete development application (as defined) is filed for the Builder’s Remedy project.
• Require a local jurisdiction that adopted its Housing Element despite HCD's non-compliance determination to submit the required findings, as specified, to HCD. In any legal proceeding initiated to enforce the HAA, HCD's determination on the required findings would create a rebuttable presumption of substantial compliance or lack thereof.

Implications

AB 1886 would make it clear that a local jurisdiction cannot “self-certify” its Housing Element.  Rather, an affirmative determination must be granted by HCD or, if a local jurisdiction adopts its Housing Element notwithstanding HCD’s determination to the contrary, a court of competent jurisdiction would need to agree with the local jurisdiction, notwithstanding the “rebuttable presumption” in favor of HCD’s non-compliance determination, where applicable. 

AB 1893 is an attempt to “modernize” the Builder’s Remedy by providing clarity to developers, local jurisdictions, and courts to avoid the “legal limbo” described by Attorney General Rob Bonta.  As part of that compromise, significant new requirements would be imposed on Builder’s Remedy projects, including a new “cap” on residential density where no codified limit currently exists.  In return, the clarifications made by AB 1893 and the reduced affordability requirement for mixed-income projects could help prompt additional Builder’s Remedy projects in Non-Compliant Jurisdictions.