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.

State Warns San Francisco Concerning Rejected Housing Projects

| Thomas P. Tunny
State

The Board of Supervisors (“Board”) recently issued two unusual denials of large housing projects – the projects would have provided over 800 dwelling units, over 130 of which were affordable.  In an even more unusual move, last week the California Department of Housing and Community Development (“HCD”) informed San Francisco officials that the City may have violated state housing laws by rejecting the projects.  Without getting into the Board politics behind the project denials, the State’s actions are notable.  The State rarely takes such a public stance concerning local planning and zoning decisions, indicating the high priority the State is placing on the provision of housing and the concern with these decisions.

The Two Rejected Housing Projects

The two housing projects at issue are located at 469 Stevenson Street and 450-474 O’Farrell Street.  The 469 Stevenson Street project is a mixed-use, 27-story high rise with 495 dwelling units, including 89 affordable units.  The Board of Supervisors denied the project on CEQA grounds, overturning the Planning Commission’s certification of the project’s Final Environmental Impact Report (“FEIR”).  In HCD’s own words, the Board cited “various vague concerns about FEIR deficiencies, including seismic concerns, effects (e.g., shadowing) on historic resources, and gentrification.”

The project at 450-474 O’Farrell Street is a modification of an earlier project.  The new project proposes more, smaller units (316 vs. 174) that are “affordable by design”, and included 43 affordable/below market rate units.  The Board overturned the Planning Commission’s approval of a Conditional Use Authorization for the project without yet issuing written findings.

HCD Letter

HCD made its concerns known to City officials in a letter last week.  The message was pointed.  HCD expressed concern that the Board’s decisions “represent[] a larger trend in the City/County,” noting that “California’s housing production does not meet housing need. In the past ten years, housing production has averaged fewer than 80,000 new homes each year, far fewer than the 180,000 new homes needed…. As a result, the cost of housing has skyrocketed, and San Francisco stands amongst the top two most expensive housing markets in the United States.”

HCD raised significant concerns with the City’s compliance with the Housing Accountability Act (“HAA”).  Under the HAA, a local government cannot disapprove or reduce the density of a housing development project that complies with applicable, objective general plan, zoning, and subdivision standards and criteria, including design review standards, in effect at the time that the application was deemed complete, unless it makes written findings supported by a preponderance of the evidence on the record that the project would have a specific, adverse impact upon the public health or safety and there is no feasible way to mitigate that impact.  The Board did not make such findings for either project.

HCD also expressed “concern[] about the significant delays in the approval of housing generally and in the City/County in particular.”  As to the O’Farrell project, HCD expressed concern that the City violated the “5 Hearing Rule” set forth in the Housing Crisis Act of 2019 (SB 330).  The Planning Commission had six hearings on the project and the Board appeal was the seventh hearing.

Lastly, HCD warned the City about its implementation of and compliance with its existing Housing Element and its upcoming Housing Element update.  The Housing Element update “must … demonstrate local efforts to remove governmental constraints that hinder the locality from meeting its share of the regional housing need and include program actions with metrics and milestones to remove or mitigate identified constraints…. Academic research continues to show that San Francisco’s processing and entitlement timeframes and procedures exceed the norms for other jurisdictions of similar size and complexity and act as a constraint on the development of housing.”

HCD concluded by reminding the City that HCD “has both the authority and duty to review any action or failure to act by a city, county, or city and county that it determines is inconsistent with an adopted housing element… or in violation of the HAA.”  HCD’s investigation remains open and they are continuing their review of the City’s practices with respect to housing review and approval generally.

 

Authored by Reuben, Junius & Rose, LLP Attorney Thomas P. Tunny.

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.