California Court Issues First Decision Addressing Builder’s Remedy; Decision on Related Lawsuit Pending

The first California court decision to issue declaratory relief to a developer under the “builder’s remedy” appears to be on the horizon. The builder’s remedy has garnered significant attention over the past two years as cities and counties go through the sixth cycle of updating their “housing elements” – a process meant to hold local government accountable for combatting the housing shortage and affordability crisis California has faced since the late 1960’s. The builder’s remedy is effectively a suspension of development standards and zoning designations in a city or county that has failed to comply with the with Housing Element Law [1] by timely adopting an updated, compliant housing element. Until now, no California court had issued a written decision interpreting the application of the builder’s remedy under the Housing Accountability Act [2] (HAA). Over the past three weeks, developments in two separate lawsuits involving the Southern California city of La Cañada Flintridge may empower developers and pro-housing advocates throughout the state seeking to increase housing production in the roughly 98 cities and counties still out of compliance under the Housing Element Law.

600 Foothill Owner, LP’s builder’s remedy project is denied by La Cañada Flintridge.

On July 21, 2023, 600 Foothill Owner, LP (Developer), the property owner and applicant of a proposed mixed use development (the Project) in the Southern California city of La Cañada Flintridge (the City), filed suit after the City denied Developer’s January 2023 Project application, in which Developer invoked the “builder’s remedy” under the HAA. Developer contends that under the HAA the City could not disapprove or render the Project infeasible based on any inconsistency with the City’s General Plan and zoning standards because the City is not in compliance with the Housing Element Law. Developer’s lawsuit seeks, among other things, declaratory relief that the protections of the HAA (including the builder’s remedy) apply to the proposed project.

Developer’s lawsuit follows important court decision involving La Cañada Flintridge.

Importantly, Developer’s lawsuit comes less than two weeks after a Los Angeles County Superior Court judge issued the first California court decision to discuss the application of what is known as the builder’s remedy, an enforcement mechanism within the HAA. In that case, Californians for Homeownership (CFH), a nonprofit organization that aims to address California's housing crisis through impact litigation, brought a lawsuit against the City seeking declaratory relief that the City failed to meet its statutory deadline to achieve state compliance of its housing element under the Housing Element Law. See Californians for Homeownership v. City of La Cañada Flintridge, Los Angeles County Superior Court Case No. 23STCP00699. As a result of the City’s untimely adoption of an approved housing element, the court held the City cannot be considered in substantial compliance with the Housing Element Law until it has completed necessary rezonings to accommodate the city's regional housing needs allocation (RHNA). The court further explained that the builder’s remedy precludes a local government’s ability to deny a development application for low-cost housing (including certain mixed-income housing) on account of non-compliance with local zoning requirements unless its housing element has been brought into substantial compliance with the Housing Element Law by completing the required rezoning.

The court ultimately denied CFH’s request for declaratory relief for the builder’s remedy on procedural grounds (i.e., because the developer itself hadn’t yet sued) but simultaneously affirmed the viability of the builder’s remedy. The court held that it would “deem declaratory relief available under these statutes if the Petition alleged that [Petitioner] is a developer with a project subject to these remedial statutes. It does not.”

What’s next?

The decision in Californians for Homeownership v. City of La Cañada Flintridge signals how it will decide future cases under similar facts in holding that, “the court would deem declaratory relief available under these statutes if the Petition alleged that [Petitioner] is a developer with a project subject to these remedial statutes.” The newly filed lawsuit by 600 Foothill Owner, LP does just that.

In reality, the issues presented in both CFH’s and Developer’s petitions are not nearly as simple as the quote above suggests. In the CFH decision, the court clarified that the City’s failure to meet its statutory deadline to adopt a compliant housing element subjects the City to the builder’s remedy provision and prohibits the City from denying qualifying builder’s remedy projects. On the other hand, the court explains that HCD’s determination that a housing element is noncompliant is not dispositive. As the City contends, it can adopt its own findings explaining why its housing element is substantially compliant with the Housing Element law, including justifying the methodology it used to make such findings, which is referred to as “self-certifying” its own housing element. As the CFH decision demonstrates, the City’s self-certification of a housing element that HCD has determined is noncompliant is both factually intensive and administratively inefficient because the only way of determining whether a city or county’s self-certified housing element is compliant under those circumstances is for a party to file a lawsuit challenging the denial of a builder’s remedy project.

Additionally, what determines a city’s or county’s noncompliant status giving rise to builder’s remedy—and the scope of permissible projects and method of obtaining approval for builder’s remedy projects—remains uncertain. To further complicate matters, it is unclear whether a City can deny a builder’s application that was submitted while the City was non-compliant, but then subsequently comes into compliance with the Housing Element law. Even if a builder’s remedy declaration is issued by the court, a developer will still need to contend with the CEQA gauntlet.

This decision in Californians for Homeownership is only the first glimpse at how California courts will balance untangling the web of housing element noncompliance and interpreting the builder’s remedy under the HAA. With the CFH decision providing a strong tailwind, the lawsuit concerning the Developer’s project is promising for builder’s remedy proponents.

For more information on this topic, including resources tracking Builder’s Remedy projects progressing throughout California, visit Farella Braun + Martel’s Firm Insights. For more information on active Builder’s Remedy projects progressing throughout California, visit: https://www.fairhousingelements.org/he-status