In a groundbreaking ruling, the Santa Clara County Superior Court found that the city of Los Altos acted in bad faith when it denied a 15-unit density bonus project that was proposed under SB 35 and subject to the Housing Accountability Act (HAA). Instead of sending the project back to the City for further consideration, the Court in this case required the City to reverse the denial and approve the project. Although the ruling does not serve as binding precedent, it provides Los Altos and other cities in California with a clear warning that unsubstantiated project denials will not be upheld in court.
After attempting to obtain approval through the standard discretionary review process since 2013, the developer changed course and submitted an application for the project under SB 35 in 2018. SB 35 requires streamlined ministerial approval for projects providing a certain amount of affordable housing in cities that are not meeting their Regional Housing Needs Allocation (RHNA) goals. Under SB 35, a project that meets the affordability requirement can be denied if the city provides written documentation of the project’s inconsistencies with “objective planning standards” within a specified time frame.
In response to the application, the City claimed that the developer had submitted two separate applications, one for streamlined review under SB 35 and one for standard discretionary review, one of which would need to be withdrawn. Nevertheless, staff responded to the SB 35 application stating that it was not eligible for streamlined review because it failed to provide the correct amount of affordable housing, which the City later conceded was an error. The letter also noted that the project failed to provide sufficient parking and lacked adequate access to the proposed parking. The City replied to what it characterized as the discretionary review application with a separate incomplete letter. After some additional correspondence, the City informed the developer that an administrative appeal was required despite provisions to the contrary in the Municipal Code, and that the deadline for filing an appeal was that same day. The developer managed to file a timely appeal, but it was ultimately denied.
The Court held the City’s response to the application did not comply with SB 35 because the City failed to identify the objective standards it was relying on in denying the application. The project exceeded the amount of parking required under SB 35, and the City had not provided any explanation justifying the need for additional parking. As for access, the Court found that absent any specific requirements in the Code, this was not an objective standard that could be applied to the project under SB 35. The Court also rejected the City’s argument that the incomplete letter relating to what it determined to be a separate discretionary review application included other objective standards that the project failed to meet. The Court stated that the City was required to be held to the reasoning articulated in the SB 35 denial letter. Because the City failed to provide adequate notice of any inconsistencies within the time frame permitted under SB 35, the project was deemed to comply with the objective standards. Any claims of inconsistencies made outside that time frame were not entertained by the Court.
The Court also found that the City’s denial violated the Density Bonus Law for a number of reasons. Most notably, the Court rejected the City’s argument that more evidence was required to determine whether the concessions would result in cost reductions. The Court found that the burden was on the City to support their denial by making a finding that the concession would not result in a cost reduction. The onus was not the developer to prove otherwise.
Lastly, the Court held that the City failed to show it complied with the Housing Accountability Act, which requires cities to make specific findings before denying certain housing projects that comply with objective zoning standards. Under the HAA, cities must provide a written determination that the project is inconsistent with applicable zoning standards within a certain time period. As noted above, the City did not find the SB 35 application incomplete. Instead, they denied the SB 35 application outright and failed to provide a valid explanation for the alleged inconsistencies with objective zoning standards. As such, the Court found that the City acted in bad faith under the HAA because the denial of the application was “entirely without merit.”
By bolstering SB 35 and the Housing Accountability Act, this case serves as a victory for developers and pro-housing advocates, and a cautionary tale for cities. It suggests that denials of SB 35 projects must strictly comply with the letter of the law to be upheld.
Authored by Reuben, Junius & Rose, LLP Attorney Sabrina Eshaghi
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.