California Court of Appeal Decision Provides New Guidance on Housing Elements, Fair Housing Law

The California Fifth District Court of Appeal's recent opinion in Martinez v. City of Clovis provides considerable guidance to local jurisdictions across the state as they wrestle with heightened housing element requirements and the consequences of failing to meet those requirements. (See Holland & Knight's previous alert, "'Builder's Remedy': Bay Area Will Soon Face a Powerful Housing Tool," Oct. 21, 2022.)

The case concerns the California Department of Housing and Community Development's (HCD) certification of the City of Clovis' (City) housing element for the 2015-2023 period. Challenges to the housing elements updated during the current cycle are not likely to reach the California Fifth District Court of Court of Appeal for years. As such, interestingly, this case provides insights into the current cycle of housing element updates based on a housing element from the prior cycle.

The court conveyed reluctance to disturb HCD's determinations on housing elements as long as some record evidence allows the court to discern the department's rationale. Only where that rationale was both unexplained and inexplicable was the court willing to intervene.

In this instance, the court partially rejected the HCD determination that the City housing element complied with state housing law. Specifically, it found that a zoning overlay that allowed both a high-density and lower-density development option did not satisfy a Housing Element Law requirement for a minimum density to be established for sites designated to accommodate a carryover portion of a Regional Housing Needs Assessment (RHNA) allocation. However, it found no error in the City's approval (and HCD's substantial compliance finding) with respect to the housing element's discussion of development potential on non-vacant sites.

The decision demonstrates that a court will not uphold a housing element that does not comply with mandatory obligations even if it is HCD-approved. University of California, Davis Professor of Law Chris Elmendorf further predicted in a tweet: "1) Cities using 'self-certification' gambit to avoid builder's remedy should expect to lose in court. 2) Yimbys & others who would challenge HCD-approved housing elements on basis of bad sites / analysis should expect to lose in court."

The court also affirmed arguments by the petitioner, a Clovis resident (Petitioner), that the City violated its Affirmatively Furthering Fair Housing (AFFH) obligations, providing first-of-its-kind guidance on the implementation of these new duties. The decision provides important insight into the interplay between the courts and HCD when reviewing housing elements for compliance with state law.

Background

During the fifth planning cycle, the City was required to accommodate a RHNA allocation of 6,328 units, as well as 4,425 unbuilt units that were allocated in the previous fourth cycle.

To secure HCD's approval, the City's housing element made specific commitments to "provide adequate zoning … to cover the unaccommodated need [from the previous cycle]." Based on these commitments, HCD certified the City's housing element in 2016. The City, however, never acted to zone for the carryover portion. As such, HCD in 2018 revoked its certification of the City's housing element.

The City responded by amending its general plan and zoning ordinance to, among other things, adopt a new overlay zone district. This overlay zone district, which the City called the "RHN Overlay," added "another layer of permitted uses and standards over and beyond the existing (i.e., base layer) zoning." Importantly, it did not remove the base layer zoning, such that "both types of housing are allowed" and "multi-family housing development and single-family housing development compete for sites." The City's RHN Overlay applied citywide, "allowing high density multi-family housing by right on existing residentially zoned parcels from one to 10 acres." Following the City's adoption of the RHN Overlay, HCD recertified the City's amended housing element.

The Petitioner sued the City, alleging that it violated Housing Element Law¹ because the amended housing element failed to adequately accommodate City's carryover RHNA allocation. She also alleged that the City's approach violated its duty to "affirmatively further fair housing" under Government Code 8899.50.

HCD's Findings of Substantial Compliance with State Housing Law

The court first considered the Petitioner's argument that HCD erred when it found the City's amended housing element to be in "substantial compliance" with state housing law. This argument focused on the RHN Overlay for the carryover portion of the City's RHNA allocation.

Housing Element Law provides more stringent requirements for low-income housing that should have been accommodated during the previous cycle, but has instead been rolled over to a new planning cycle. Specifically, when identifying certain sites to accommodate low-income units, jurisdictions must rezone those sites to 1) permit multifamily residential development by right where at least 20 percent of the units are affordable, and 2) provide certain minimum density requirements.² The parties and the Court agreed that the City's carryover units were subject to these more stringent requirements.

The RHN Overlay adopted by the City allowed by-right approval for multifamily developments at the required densities (here, at least 20 units per acre) on any qualifying parcel in the City. As an overlay, however, it left the lower base densities and discretionary approval requirements intact. The Petitioner seized on this fact, arguing that the statute's "plain language mandates that rezoned sites have a single minimum density of at least 20 units per acre, which the RHN Overlay failed to do because it did not replace the low-density allowed by the base zoning with a mandatory density of at least 20 units per acre."³ The City, meanwhile, argued that the statute "does not require exclusive zoning at a density of 20 units per acre," and that "the existence of a separate base zoning district is irrelevant to whether the overlay satisfies the density requirements."⁴

The court agreed with the Petitioner, emphasizing the mandatory nature of the statutory requirement that carryover sites "shall be zoned with minimum density …."⁵ Accordingly, the court found that "the base zoning allows for development at a lower density and, thus, the RHN Overlay sites do not comply with" statutory requirements.⁶ It may be noted that this holding finding a dual density zoning overlay to be a violation of Housing Element Law does not apply to a city that has met its share of the RHNA since the more exacting minimum density obligation applies to cities with a shortfall of housing units carried over from a prior planning cycle.

The Court's Discussion of Deference to HCD's Housing Element Determinations

Housing Element Law specifies that when HCD certifies a housing element, its determination is entitled to a rebuttable presumption of validity.⁷ Having reached the conclusion that the RHN Overlay did not satisfy the plain meaning of state housing law, the court then explained that "courts generally will not depart from the HCD's determination unless it is clearly erroneous or unauthorized."⁸

In this instance, however, the court determined that HCD's determination of substantial compliance was "clearly erroneous," emphasizing the lack of any explanation for why HCD found the RHN Overlay satisfactory: "other than the HCD's bare approval of the RHN Overlay, there is nothing to explain the HCD's rationale for finding that the overlay complies with the Housing Element Law. The City did not provide any HCD guidance concerning the use of overlays when accommodating a carryover under section 65583.2(h), and the HCD's informal interpretation of statutory requirements is not binding on us."⁹ In other words, deference to HCD was inappropriate because its decision was unexplained and the court could not infer its rationale based on other materials in the record.

The court underscored its deference to HCD when it rejected a second argument from the Petitioner about another alleged inadequacy in the City's housing element. Specifically, Housing Element Law requires that the City's analysis of certain sites' development potential discuss, among other things, "any existing leases or other contracts that would perpetuate the existing use."¹⁰ The Petitioner highlighted the absence of any such discussion from either the City's housing element or its subsequent correspondence with HCD.¹¹ The court rejected this challenge as addressing "only a technical imperfection of form," explaining that "HCD impliedly concluded that the information provided by the City fulfilled its obligations" and that although "the City's letters did not explicitly address existing leases and contracts, it was reasonable for HCD to infer from the combined correspondence that there were no such leases or contracts."¹² More generally, the court found no error in the housing element's discussion (and HCD's substantial compliance finding) with respect to the development potential of non-vacant sites or the methodology used to determine the development potential.

Taken together, these two determinations indicate the court's reluctance to disturb HCD's actions as long as some record evidence allows the court to discern HCD's rationale. Only where that rationale was both unexplained and inexplicable was the court willing to intervene.

The City's Duty to "Affirmatively Further Fair Housing"

The court also addressed the Petitioner's allegations under the state's AFFH law.¹³ The AFFH statute was enacted in 2018, and the Martinez court is the first appellate court to interpret its provisions.

AFFH requires all public agencies in the state to "affirmatively further fair housing" by "taking meaningful actions, in addition to combating discrimination, that overcome patterns of segregation and foster inclusive communities free from barriers that restrict access to opportunity based on protected characteristics."¹⁴ The statute specifically states that the "duty to affirmatively further fair housing extends to all of a public agency's activities and programs relating to housing and community development."¹⁵

Arguing that the City violated these AFFH obligations, the Petitioner alleged that the City had engaged in a "longstanding pattern and practice of evading statutory obligations to create opportunities for low-income people and households of color."¹⁶ She specifically argued that "a determination that the City violated the Housing Element Law compels a finding that the City took 'action that is materially inconsistent with its obligation to affirmatively further fair housing.'"¹⁷ The court agreed and, in doing so, provided first-of-its-kind guidance about both the substance and procedure behind an AFFH claim.

First, the court addressed the scope of the AFFH duty, explaining that the statute creates affirmative obligations on the part of public agencies: "it does more than prohibit acts of discrimination; [it] also requires action by stating that a public agency must administer its programs 'in a manner to affirmatively further fair housing.'"¹⁸ Thus, to comply with AFFH, public agencies must do more than simply avoid housing discrimination.

Second, the court determined that the City's violations of Housing Element Law also constituted violations of its AFFH obligations: "we conclude as a matter of law that the violations of [Housing Element Law] that are the basis for a judgment in Martinez's favor … establish that the City has failed to affirmatively further fair housing[.]"¹⁹ Here, the court reasoned that "one purpose of Housing Element Law and its requirement that municipalities zone sufficient sites to accommodate their RHNA is to further affordable housing for lower income households."²⁰ This analysis indicates the court's conclusion that any housing element requirement that intersects with the provision of affordable housing implicates AFFH duties, but leaves open the broader question of whether all material violations of Housing Element Law constitute AFFH violations as well.

Finally, the court provided clarity on a procedural issue with AFFH enforcement. The AFFH statute does not explicitly state that the AFFH duties are enforceable in court, or how it should be enforced if so. Relying on the statute's imposition of a "mandatory duty" on public agencies, the court answered this question by concluding that "the duty to affirmatively further fair housing is enforceable in court and an ordinary writ of mandate is an appropriate mechanism for enforcing that duty."²¹

Takeaways

The Martinez opinion offers timely guidance to jurisdictions endeavoring to achieve compliant housing elements, as well as those interested in challenging those efforts. For example:

• Deference to HCD determinations regarding housing element certification is substantial, but not unlimited, and will not shield HCD determinations that are wholly unexplained and cannot be understood based on evidence in the record. In the current highly charged environment surrounding housing element reviews, where there is ample debate among multiple stakeholders, this decision carries significance in granting HCD deference above the fray.
• AFFH violations are enforceable in court and may exist wherever a jurisdiction has failed to comply with Housing Element Law, particularly insofar as affordable housing is concerned.

For more information, contact the authors or another member of Holland & Knight's West Coast Land Use and Environmental Group.

Notes

¹ Gov. Code §§ 65580 et seq.

² Gov. Code § 65583.2(h).

³ Martinez v. City of Clovis (Apr. 7, 2023) 90 Cal. App. 5th 193 , 2023 WL 2820092, at *15.

⁴ Id. at *15 (emphasis added).

⁵ Id. at *16.

⁶ Id. at *16.

⁷ Gov. Code § 65589.3.

⁸ Martinez, 2023 WL 2820092 at *14 (internal quotations and citations omitted).

⁹ Id. at *18.

¹⁰ Gov. Code § 65583.2(g)(1).

¹¹ Martinez, 2023 WL 2820092 at *23.

¹² Id. at *22-23.

¹³ The Petitioner also brought discrimination claims under the Fair Housing Act and the Fair Employment and Housing Act, the substance of which was upheld by the Court, but which are beyond the scope of this alert.

¹⁴ Gov. Code 8899.50(a).

¹⁵ Gov. Code 8899.50(a).

¹⁶ Martinez, 2023 WL 2820092 at *48.

¹⁷ Id. at *48.

¹⁸ Id. at *48.

¹⁹ Id. at *50.

²⁰ Id. at *50.

²¹ Id. at *51.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.