HCD Letter Could Complicate Builder’s Remedy Approvals

On March 28, 2024, the Department of Housing and Community Development (“HCD”) issued a Letter of Technical Assistance[1] to the City of Compton that potentially creates a new complication to the approval of Builder’s Remedy projects.

The Builder’s Remedy allows developments that meet certain affordability thresholds to bypass local zoning when a city or county is out of compliance with housing element requirements. As Reuben, Junius, and Rose partners Melinda Sarjapur and Matthew Visick explained in their April 24 update (State Law Could Overhaul “Builder’s Remedy”), some cities have pushed back on the validity of the Builder’s Remedy as a tool to overcome burdensome zoning controls, and there are numerous Builder’s Remedy cases making their way through the courts.

The Builder’s Remedy is part of the Housing Accountability Act (“HAA”)—which provides that cities and counties must make one of five findings in order to deny a project that would create very low, low, or moderate income housing. One such finding states that a project’s inconsistency with a city or county’s zoning ordinance or general plan can only be used to reject the project if the city or county has adopted a compliant Housing Element.

HCD’s March letter to the City of Compton confirms that when a city or county does not have a compliant Housing Element, it cannot deny a project that meets the requisite affordability thresholds because of the project’s inconsistency with the applicable zoning or general plan land use designation. However, HCD’s letter explains that the Builder’s Remedy does not prohibit a city or county from requiring Builder’s Remedy projects to obtain discretionary permits or zoning or general plan amendments that would be required for similar non-Builder’s Remedy projects.

The letter notes that in this case, the City of Compton intended only for the required general plan amendment and zoning change “to remedy the inconsistencies between the project and applicable regulatory documents that will result when the project is approved.” Even so, the guidance cuts directly against the benefit that the Builder’s Remedy is arguably meant to provide—an open door for projects with sufficient affordability in jurisdictions that have failed to adopt a valid housing element.

Significantly, the HCD letter goes on to explain that if a city or county’s insistence on a general plan amendment or zoning change makes a project infeasible, then that jurisdiction would be in violation of the HAA. The letter specifically notes that “if insisting on a GPA or Zoning Change delays project approval or increases the cost of the approval process, a violation of the HAA would result.”

It is almost impossible to imagine how a requirement to pursue a zoning or general plan amendment wouldn’t delay a project or increase costs. Zoning and general plan amendments are legislative actions requiring approval by a city council or board of supervisors. Adding a legislative component to Builder’s Remedy projects automatically politicizes these approvals.

The March letter to the City of Compton is a bit contradictory:  on the one hand, the HAA does not prohibit cities from requiring discretionary permits or legislative actions as part of Builder’s Remedy entitlements; but on the other hand, anything that delays project approval or increases costs would amount to an HAA violation.

With numerous Builder’s Remedy cases making their way through the courts, and pending state legislation to revise the Builder’s Remedy, this HCD letter potentially muddies the water for Builder’s Remedy projects in the meantime.

Authored by Reuben, Junius & Rose, LLP Attorney Chloe Angelis.

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.

[1] HCD RE: 1601 W. El Segundo Blvd., Compton – Letter of Technical Assistance (March 28, 2024).