Holland & Knight Wins First Superior Court Case Affirming California's "Builder's Remedy"

Holland & Knight's West Coast Land Use and Environmental Group, on behalf of 600 Foothill Owner LP (600 Foothill), an affiliate of client Cedar Street Partners LLC, has won the first California superior court case affirming the applicability of the Housing Accountability Act's (HAA) "Builder's Remedy" in a lawsuit against the City of La Cañada Flintridge. Holland & Knight Partner Ryan Leaderman and Associates William Sterling and Kevin Ashe briefed the groundbreaking case, with assistance from Partner Sarah Marsey.

Mr. Leaderman led the Holland & Knight team's representation of 600 Foothill, while Mr. Sterling argued the substance and issues of the HAA, Builder's Remedy, and the state's Housing Element law at trial.

Background

The HAA is California's marquee law for constraining municipalities' discretion to disapprove housing developments or render them infeasible. One such constraint, which has come into focus only recently, is the Builder's Remedy. The Builder's Remedy prohibits cities and counties from disapproving a housing development that includes 20 percent lower-income housing, unless the city or county has either timely adopted a "substantially compliant" housing plan (Housing Element) or can satisfy other rarely occurring conditions. Critically, the Builder's Remedy prohibits jurisdictions from disapproving such affordable housing projects even when those projects are inconsistent with the jurisdiction's zoning and other applicable local standards. By providing a meaningful consequence – the mandatory approval of non-zoning-compliant affordable housing projects – the Builder's Remedy works in tandem with Housing Element requirements to encourage cities and counties to produce robust Housing Elements and have those elements certified by the California Department of Housing and Community Development (HCD).

In November 2022, 600 Foothill proposed a mixed-use project (Project) consisting of 80 apartments (16 of them reserved for lower-income households) on the site of a former church in the city of La Cañada Flintridge (City) in Los Angeles County. Because the City had failed to procure a substantially compliant Housing Element at the time the Project's preliminary application was submitted, the Project was entitled to the protections of the Builder's Remedy. Despite this protection, the City determined that the Project's application was incomplete because it was inconsistent with the City's zoning, which provided for a much lower density on the Project site. Because those zoning standards could not lawfully be applied to a Builder's Remedy project, Holland & Knight appealed the City's incompleteness determination on behalf of 600 Foothill. When the City denied that appeal, 600 Foothill sued the City for violating the HAA and various related legal requirements.

The Superior Court's Decision

Following trial, the Los Angeles County Superior Court ruled in 600 Foothill's favor on the core issues regarding Builder's Remedy and the City's Housing Element. Though nonprecedential, the court's opinion provides meaningful, first-of-its-kind guidance regarding both the scope of Builder's Remedy and the validity of Housing Elements that are adopted without being certified by HCD.

First, the court rejected the City's argument that they had not disapproved the Project (in violation of the HAA), but instead was merely requiring it to comply with the City's zoning and related ordinances. Rather, the court held that the City's refusal to process the Project "as a Builder's Remedy project" was a "disapproval" under the HAA and therefore unlawful. The court also rejected related arguments from the City that the HAA's protections were inapplicable until the City had completed its planning procedures, including review under the California Environmental Quality Act (CEQA).

Second, the court affirmed that the City's adopted Housing Element was in fact noncompliant during the relevant period, meaning that the Builder's Remedy was in play. The court reached this conclusion based on numerous independent deficiencies with the Housing Element. The first and most straightforward issue with the Housing Element was a consequence of 2022's California Assembly Bill (AB) 1398, which increased the penalties for tardy jurisdictions and remains an underappreciated aspect of Housing Element law. (See Holland & Knight's previous alert, "Many California Local Governments Face Tight Rezoning Deadlines," Sept. 5, 2023.) Under AB 1398, because the City failed to get its Housing Element certified by HCD within one year of its deadline, that Housing Element was automatically noncompliant until it implemented the rezoning commitments contained in the Housing Element.

The court also addressed a number of substantive deficiencies in the City's Housing Element, including two major deficiencies highlighted by the Holland & Knight Team: the Housing Element's failure to analyze and mitigate the potentially discriminatory impacts of its placement of affordable housing, as required by California's Affirmatively Furthering Fair Housing statute, and the City's placement of nearly all affordable housing on sites with active current uses, despite any evidence that those uses would cease during the planning period. Further, and critically, the court rejected the City's efforts to assert that its Housing Element was substantially compliant notwithstanding HCD's rejection – an "agree to disagree" position often referred to as "self-certification."

Finally, the court weighed in on the much-debated question of deference to HCD's determinations regarding Housing Element status. Notably, the California Attorney General's office intervened on HCD's behalf in a companion case to the 600 Foothill litigation, arguing that courts should defer to HCD's Housing Element status determinations because HCD was the sole agency given statutory authority to reach those determinations. The court agreed, holding that "HCD's determination of substantial compliance with the Housing Element Law, or lack thereof, is entitled to deference from the courts" in view of "HCD's statutory mandate and its expertise[.]" At the same time, the court conducted its own analysis, independently concluding that the City's Housing Element was noncompliant as a matter of law during the relevant period.

The court also affirmed positions asserted by the Holland & Knight team on several related issues. Most notably, the court found that the City's conduct violated the provisions of the Permit Streamlining Act (PSA) because the City unlawfully issued multiple determinations that the Project application was incomplete (despite the PSA allowing only a single "exhaustive list" of incomplete items) – a result crucially obtained by Mr. Ashe.

Having found both that the City lacked a compliant Housing Element during the relevant time and that it disapproved the Project, the court held that the City abused its discretion and violated the HAA when it refused to process the Project as a Builder's Remedy project. As such, the court issued a writ directing the City to set aside its determination and instead "process the application in accordance with the HAA and state law." The court also retained jurisdiction over the matter to ensure that its order will be carried out, as is required when such HAA violations are found.

Conclusion

The 600 Foothill result represents the first victory for the Builder's Remedy in court. The ruling comes at a critical time, as many jurisdictions continue to struggle to produce Housing Elements that satisfy the requirements of state law and others stake out a "self-certification" position. The court's rejection of that approach emphasizes the need for jurisdictions to produce Housing Elements that actually comply with the requirements of state law and can therefore be certified by HCD – and to complete that process in a timely manner. And by holding that Builder's Remedy projects cannot simply be defeated by procedural loophole, the court's ruling ensures that Builder's Remedy remains a meaningful and impactful consequence for noncompliant jurisdictions.

"We are thrilled that our Holland & Knight team was able to get this important milestone victory for our client. Together with the intervention of the Attorney General’s office and plaintiff California Housing Defense Fund in their companion case to our litigation, we have helped to set the table to allow more desperately needed housing across the state," Mr. Leaderman said.

Developers and project proponents interested in learning more about invoking the HAA's Builder's Remedy can contact the authors or another member of Holland & Knight's West Coast Land Use and Environmental Group.

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.