Developers prevail over disputes over major housing laws – Real Estate and Construction

United States: Developers prevail over disputes over major housing laws

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The California First District Court of Appeals recently issued a long and substantial decision reaffirming the state’s ability to pass housing legislation limiting the discretion of local governments to deny housing projects. In Ruegg & Ellsworth v. City of Berkeley (Case No. A159218, April 20, 2021), the court was specifically tasked with interpreting and applying – for the first time – SB 35 (codified in the Governmental Code. § 65913.4). however, Ruegg & Ellsworth will likely have implications for developers seeking to benefit from other housing-friendly laws.

Context of SB 35

Adopted in 2017 and entered into force on January 1, 2018, SB 35 is one of several bills passed in recent years that seek to address the current housing crisis in California and penalize local governments that fail to meet their obligations. obligations to increase housing supply statewide. SB 35 provides for a streamlined ministerial approval process for certain residential projects in localities that do not meet their share of the Regional Housing Needs Assessment (RHNA) under the Housing Element Act of the ‘State. To be eligible for ministerial approval under SB 35, a proposed development must meet certain objective planning standards, including:

  • the development must be a multi-family housing development containing two or more residential units;
  • the development must be located on an urban infill site;
  • the development must be located on a property zoned for residential or mixed-use residential development;
  • the development must devote two-thirds of its area to residential use; and
  • development must contain a specified minimum percentage of affordable and below-market units.

The proposed development must also comply with all applicable objective zoning standards, subdivision standards and design review standards. Under SB 35, “objective” standards are defined as “standards which do not involve any personal or subjective judgment on the part of a public official and which are uniformly verifiable by reference to an external and uniform benchmark or criterion. available and known to both the applicant or the development promoter and the public official before submission.

In summary, SB 35 aims to increase housing production in jurisdictions that need it most by allowing projects that meet objective planning standards to bypass local discretionary scrutiny.

City tries to derail SB 35 project

Ruegg & Ellsworth involved such a SB 35 project. In 2015, Ruegg & Ellsworth and Frank Spenger Company (Plaintiffs) applied to the City of Berkeley (City) for approval of a mixed-use development containing 135 apartments and 33,000 square feet of land. retail space and parking (Project). The project site was part of a three-block area designated by the city as a historic landmark and listed in the California Register of Historic Resources as the location of the West Berkeley Shellmound (Shellmound). The Shellmound was an ancient burial site for native Californians which, at the time of the project, consisted entirely of subterranean archaeological artifacts.

After the project encountered problems during the CEQA review process regarding the potential significant impacts on the Shellmound, the applicants asked the City to suspend their application and submitted a new application in March 2018 for a project. redesigned in the same place. The redesigned project contained 260 housing units (50 percent affordable) and 27,500 square feet of retail and parking space. The request was to take advantage of SB 35 and seek ministerial approval of the project.

Faced with public opposition, the City ultimately refused to grant ministerial review of the project under SB 35. In its rejection letter, the City asserted that SB 35 could not be constitutionally applied to the project. because it infringed the City’s right, as a charter city, to manage its own municipal affairs. The letter also argued that even if SB 35 applied, the project was not eligible for ministerial approval because it was inconsistent with local “objective” standards – in particular, the City’s requirements for Affordable Housing Mitigation Fee for Very Low Income Housing; and City Requirements for Traffic Impacts. The City also argued that the project was not eligible for ministerial approval because it potentially required the demolition of a historic structure (i.e. the Shellmound) that had been listed on a historic register. national and local.

Plaintiffs’ motion and decision of the Superior Court

The applicants filed a motion for a writ of warrant contesting the City’s refusal of the project. The trial court considered the petition under the highly deferential “arbitrary and capricious” standard of review in accordance with Article 1085 of the Code of Civil Procedure. Under this standard, a city’s decision will stand unless it is “arbitrary, capricious or completely devoid of evidence.” , contrary to established public order, illegal or procedurally unfair. “On the basis of this standard of deference, the trial court concluded that the City’s decision that the project would require the demolition of a historic structure was “not entirely without evidence.” As a result, the trial court upheld the City’s denial of the project and dismissed the plaintiffs’ request for a writ of warrant. The second basis on which the trial court instance dismissed the motion was a determination that Section 65913.4 does not apply to mixed-use developments.

The Court of Appeal reaffirms the legislation in favor of housing

On appeal, the Court of Appeal reversed the decision of the trial court and ordered that the appellant’s warrant application be granted. In its decision, the court embarked on a detailed analysis of the legislative purpose of many of California’s housing laws, noting that its “primary task” was “to achieve the intention of the legislature.” Subsequently, the Court issued a number of judgments strengthening the power of the state to pass favorable housing legislation and limiting the discretion of local governments to refuse housing projects that comply with housing laws in the country. statewide. Especially:

  • The Court held that the “arbitrary and capricious” standard of review was “inappropriate” in the SB 35 cases. More specifically, the Court concluded that this standard of deference “nullifies[d] the intention of the legislator in
    [SB 35] isolating from scrutiny the fact-finding underlying an agency’s determination whether its ministerial obligation to approve a project is triggered. The Court observed that the language of SB 35 was expressly designed to “limit the authority of local governments over applications for the development of affordable housing projects meeting specified criteria” and that the obvious intention of the legislature was to ” constrain the discretionary power of local governments ”in order to encourage the production of housing. The Court concluded that the legislative intent behind SB 35 would not be served by the application of a standard of deference of review.
  • The Court also rejected the City’s arguments that SB 35 unconstitutionally infringed its right, as a charter city, to manage its own municipal affairs. The Court explained that when a state law addresses an issue of “statewide concern” and the law is “reasonably related to … being a municipal matter only . Applying this test, the Court observed that SB 35 and other pro-housing laws “clearly” addressed a state-wide issue of concern – namely the housing shortage across the country. the state – “by encouraging and facilitating the construction of housing in general and affordable housing in particular. “The Court then concluded that SB 35 was reasonably related to resolving this concern because it” removes[ed]The discretionary power of local governments to refuse applications for affordable housing development that meet specified objective criteria. The Court also concluded that SB 35 was narrowly tailored and that its intrusion into local authority was “no wider than necessary to achieve the objective of the legislation”. These facts, the Court upheld SB 35 as a valid exercise of the state’s power to legislate on matters of state-wide concern.

Implications for other housing-friendly laws

While the Court’s decision in Ruegg & EllsworthFocusing primarily on SB 35, the Court’s reasoning applies similarly to other pro-housing laws, such as the Housing Liability Act, the Density Bonus Act and the recent housing crisis law. The case provides an important signal to lower courts and local agencies that pro-housing laws should be interpreted broadly to encourage increased housing production and that denials of projects under these laws should be subject to review. more thorough judicial process.

Originally posted May 3, 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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