Trial Court Challenges to State Housing Laws


In the last few weeks, two California trial courts interpreted state housing development laws—SB35 and the Housing Accountability Act—in ways that limit their applicability to cities. While trial court opinions are not binding on other courts, these decisions may give development opponents tools to slow the creation of new housing supply. The decisions are summarized below.

Ruegg & Ellsworth et al. v. City of Berkeley et al.

When first passed in 2017, SB35 (authored by Senator Wiener) sought to streamline the approval process for affordable housing. For two years it has done that. Some of its provisions have also been expanded.

Notably, SB35 faced mixed support in the Senate. It was supported by the cities of San Francisco, Sacramento, Oakland, San Jose and Los Angeles. It was also supported by private companies, chambers of commerce, and housing advocates. At the same time, it was opposed by nearly 90 cities across the state, including the City of Berkeley.

The City of Berkeley lawsuit is rooted in a mixed-use project (multi-family over retail) at the parking lot next to well-known Spenger’s Restaurant on 4th Street. The City of Berkeley denied the streamlined ministerial approval allowed under SB35 (i.e., without discretionary review) based on an argument that the project would require demolition of an “historic structure,” specifically an historic shell mound buried under the site.  Projects that require demolition of “historic structures” are exempt from the SB35 process.

The Alameda County Superior Court applied a very deferential standard when reviewing the City’s decision, concluding that the City’s decision could only be overturned if it was “entirely lacking in evidentiary support.”  While the project sponsor provided relevant studies showing that no intact remnants of the shell mound still existed, the City had relied on a study of the site from 2000 that concluded one boring sample “probably represents a remnant” of the shell mound.  This lone statement in a twenty-year-old study was enough for the Court to uphold the City’s determination that the project would require demolition of an historic structure.

While the Court’s determination on this point was enough to uphold the City’s decision, the Court didn’t stop there.  The Court also limited the application of SB35 to mixed-use projects in general.  Taking a very narrow reading of SB35, the Court concluded that SB35 only applies to mixed use projects when the zoning requires at least two thirds of a mixed-use project be designated for residential use.  This reading of the statute would eliminate its application to most if not all mixed use projects.

For both reasons, the Court held that Berkeley’s denial of the Spenger’s project was appropriate.

SFBARF et al. City of San Mateo et al.

The Housing Accountability Act (“HAA”) was passed in 1982 and has been modified several times since.  The HAA generally forbids a city or county from reducing the density of, or denying approval of, a housing project that complies with objective general plan, zoning, and subdivision standards and criteria unless the project will have a specific adverse impact to public health and safety that cannot be mitigated in any other way.

In the City of San Mateo lawsuit, a developer applied for a 10-unit condominium project. The City denied the project based on an alleged failure to comply with the City’s Multi-Family Design Guidelines, specifically to set back upper floors of a project that exceeds the height of neighboring buildings. Housing advocacy groups then sued the City.

The San Mateo County Superior Court upheld the City’s decision to deny the project based on its conclusion that the City’s Multi-Family Design Guidelines were objective criteria.  The Court rejected the plaintiffs’ arguments that design guidelines were fundamentally subjective.  Instead, it endorsed the City’s argument that there was a way to apply the guidelines objectively.

Here again, while this determination was sufficient to decide the case, the Court did not stop there.  The Court also concluded that the HAA is inapplicable to a charter city (like San Mateo) because it would violate the “home rule” doctrine that allows charter cities to legislate without state interference in areas that are “municipal affairs.”  This remarkable interpretation of the HAA would eliminate its application—and potentially the application of other state housing laws—in 121 charter cities in California, including San Francisco, Oakland, San Jose, Sacramento, and many others.

Conclusion

If upheld, the Berkeley and San Mateo decisions could hamper housing production statewide.  The Berkeley decision provides an arrow in the quiver of project opponents – when an SB35 project is proposed, they will argue that exemptions (like the “historic structures” exemption) eliminate the potential for ministerial review and reject SB35 processing for many if not all mixed-use projects.  The San Mateo decision would blur the distinction between subjective and objective criteria, likely leading to additional litigation, and eliminate the application of the HAA (and potentially other state housing laws) in charter cities, which include some of the largest housing centers in the state.

These are fluid areas of law. Keep in mind these are trial court decisions and are not binding on other courts, though they will likely be used by project opponents to create delay and confusion regarding housing project approvals. These cases will likely be appealed, and the appeals court decision will carry real weight. We will be watching closely for the result of those appeals.

 

Authored by Reuben, Junius & Rose, LLP Attorney Jonathan Kathrein & Matthew Visick

The issues discussed in this update are not intended to be legal advice and no attorney-client relationship is established with the recipient. Readers should consult with legal counsel before relying on any of the information contained herein. Reuben, Junius & Rose, LLP is a full service real estate law firm. We specialize in land use, development and entitlement law. We also provide a wide range of transactional services, including leasing, acquisitions and sales, formation of limited liability companies and other entities, lending/workout assistance, subdivision and condominium work.