HCD Reverses Course: No Zoning Amendments for Builder’s Remedy Projects

| Chloe Angelis
HCD

Back in May, we wrote about a March 28, 2024, Department of Housing and Community Development (“HCD”) Letter of Technical Assistance to the City of Compton, which determined that the Builder’s Remedy does not prohibit a city or county from requiring Builder’s Remedy projects to obtain zoning or general plan amendment approvals.[1]  Since then, HCD has issued a Letter of Technical Assistance and a subsequent Notice of Violation[2] to the City of Beverly Hills, walking back that March determination and confirming that a Builder’s Remedy project cannot be denied based on inconsistency with a jurisdiction’s zoning ordinance or general plan land use designation.

The Builder’s Remedy, which is part of the Housing Accountability Act (“HAA”), allows developments that meet certain affordability thresholds to bypass local zoning when a city or county is out of compliance with housing element requirements.

In the March letter to the City of Compton, HCD wrote that “the Builder’s Remedy does not expressly prevent the City from requiring discretionary permits and/or legislative actions (e.g., GPAs, Zoning Changes, CUPs, specific plan amendments, etc.) that would be required for similar projects where the Builder’s Remedy does not apply.”  While the March letter focuses on a general plan amendment and zoning change intended “to remedy the inconsistencies between the project and applicable regulatory documents that will result when the project is approved,” the determination cuts to the core of the Builder’s Remedy, which is meant to provide a path for qualifying projects to completely bypass local zoning.

Thankfully, the latest pair of HCD letters to the City of Beverly Hills reverses course.  At issue in these letters is a 165-unit project with 20% low-income units.  The applicant had appealed an incompleteness letter, in which the City instructed the applicant to pursue a general plan amendment and zoning change.  Pending the City Council’s decision on the appeal, the applicant sought direction from HCD on whether a general plan amendment and zoning change could legally be required under the HAA.

The June 26, 2024, Letter of Technical Assistance acknowledges the earlier City of Compton Letter and walks back the March conclusion, explaining that a requirement to pursue a general plan and/or zoning amendment is, in fact, a violation of the HAA:

“While it remains true that the statutory language in the HAA does not expressly prevent the City from requesting or requiring legislative actions (e.g., a GPA/ZC) that would be required for similar projects where the Builder’s Remedy does not apply, requiring such action where the Builder’s Remedy does apply leads to an absurd outcome . . .

The HAA is clear that a project protected by the Builder’s Remedy may not be disapproved for inconsistency with a jurisdiction’s general plan and zoning ordinance.  Accordingly, a jurisdiction that refuses to process or approve a project subject to the Builder’s Remedy due to the applicant’s refusal to submit a GPA/ZC requested or required by the jurisdiction to resolve such an inconsistency violates the intent of the HAA.

. . . In other words, the requirement for a GPA/ZC is essentially a requirement for consistency, and disapproving the project for failure to resolve that inconsistency is effectively a disapproval on the grounds of inconsistency.  The HAA prohibits such a disapproval.”

Following the June letter, HCD issued a Notice of Violation after the Beverly Hills City Council ignored HCD’s prior guidance and denied the applicant’s appeal of the City’s incompleteness letter, based on a finding that a general plan amendment and zoning change are required for the application to be deemed complete.

HCD confirms in the Notice of Violation that, irrespective of the HAA, the Permit Streamlining Act prohibits a city from determining that an application is incomplete on the basis that it does not include an item (in this case, a general plan amendment and zoning change application) that was not included in the submittal requirement checklist.

The Notice of Violation also offers two important reminders about processing preliminary development applications (pursuant to Government Code section 65941.1) and the rights provided by a vested preliminary development application:

(1) The 90-day deadline that an applicant has to respond to a notice of incompleteness resets each time a city issues a notice of incompleteness, such that a project with multiple incompleteness letters and responses could have multiple 90-day response periods without losing the vested right of a preliminary development application.

(2) A vested preliminary development application remains vested unless the number of units or the square footage changes by at least 20%. Other project changes do not affect the rights conferred by a vested preliminary development application.

[1] HCD RE: 1601 W. El Segundo Blvd., Compton – Letter of Technical Assistance (March 28, 2024); available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/compton-hau604-ta-03282024.pdf.

[2] HCD RE: 125-129 Linden Drive, Beverly Hills – Notice of Violation (August 22, 2024) and HCD RE: 125-129 Linden Drive, Beverly Hills – Letter of Support and Technical Assistance (June 26, 2024); both available at https://www.hcd.ca.gov/sites/default/files/docs/planning-and-community/HAU/beverly-hills-hau-1071-nov-082224.pdf.

 

Authored by Reuben, Junius & Rose, LLP Partner, 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.

LA Court Weighs In on the Builder’s Remedy

| Sabrina Eshaghi
Builder's Remedy

Until now, the notorious “builder’s remedy” had not been tested in court, leaving developers with serious questions about how it works and whether it’s worth potential legal challenges from unamenable cities. Recently, however, a superior court in Los Angeles referenced the builder’s remedy in a ruling that implied the remedy is available in the City of La Cañada Flintridge. This case, and others that are still in the pipeline, will have significant implications for developers who have filed builder’s remedy projects, or are considering doing so, as well as for cities across the state.

Builder’s Remedy

According to the HCD’s Housing Element Review and Compliance Report (as of 7/24/23), only 33 out of 109 Bay Area jurisdictions have adopted fully compliant Housing Elements. As discussed in our previous e-update, the deadline for Bay Area cities and counties to revise housing elements has passed, and those that remain noncompliant have opened themselves up to builder’s remedy projects.

The builder’s remedy is a mechanism in the Housing Accountability Act that prohibits any city that has not adopted a compliant housing element by the required deadline from applying its general plan and zoning standards to reject certain housing development projects. To qualify for the builder’s remedy, a project must provide either 20% of the units as affordable to 80% AMI households (low-income), or 100% of the units as affordable to 120% AMI households (moderate-income).

Because the builder’s remedy has never been tested in court, there is uncertainty about how the builder’s remedy applies in practice and how cities will process these projects. Many cities that failed to adopt compliant housing elements have openly defied state law by stating that the builder’s remedy doesn’t apply to them or by passing an ordinance banning builder’s remedy projects.

La Cañada Flintridge Case

Southern California jurisdictions were required to adopt their updated Housing Element by October 15, 2021. The City of La Cañada Flintridge adopted its Housing Element on October 4, 2022, which was determined to be inadequate by HCD. On February 21, 2023, the city adopted an amended Housing Element, which HCD again found to not be in substantial compliance with state law.

While stopping short of confirming HCD’s finding and determining whether the substance of the city’s Housing Element complied with state law, the court found that the Housing Element is not in compliance with state law because the city missed mandatory deadlines. Specifically, the city failed to adopt a Housing Element within 120 days of the deadline and was therefore subject to the penalty requiring it to complete its rezoning within one year of the statutory deadline-i.e., by October 15, 2022- instead of the three years otherwise permitted. Because the city’s challenged Housing Element was not adopted until February 21, 2023, and the Housing Element had still not been certified by HCD, the court was required to find that the city’s Housing Element will not be in substantial compliance with the Housing Element Law until the required rezoning is complete. This appears to put to rest the idea that a city can avoid all the consequences of failing to obtain HCD certification by “self-certifying” its own Housing Element.

Although the city argued that the timelines under the Housing Element Law are purely directory, the court disagreed and confirmed that the timelines are mandatory. In making that finding, the court looked to the penalties that apply for missing the deadlines and confirmed “there are at least two significant penalties for failing to timely adopt a housing element. First, there is the rezoning penalty…that is the subject of this litigation…Second, the HAA contains [the] builder’s remedy that limits a city’s ability to deny a development for low-cost housing unless its housing element…is in substantial compliance with the Housing Element Law.” To our knowledge, this is the first time a court has opined on or directly referenced the builder’s remedy by name.

The court did not issue an explicit declaration that the builder’s remedy applies in the city because the organization that filed the lawsuit, Californians for Homeownership, did not have legal standing without a pending project. Nevertheless, the judge seemed to signal that a developer with a pending project may be able to obtain such a declaration.

The court’s acknowledgment of the builder’s remedy is a positive sign for those with a pending builder’s remedy project. According to the Real Deal, the president of the California Association of Realtors said in a statement, “For far too long, certain cities and counties have treated compliance with state housing laws as optional. This decision sends a clear message: complying with these laws is not optional.”

As discussed in our previous e-update, other housing advocacy groups have also filed lawsuits against jurisdictions that are out of compliance with the Housing Element Law. We will continue to keep you updated as decisions are issued in these cases.

 

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.