The shoot first and ask questions later approach to California’s Builder’s Remedy Law

The recent amendments to the "Builder's Remedy" law in California has created a wild-west scenario for housing and mixed-use development. Institutional developers are left wondering whether to shoot first and ask questions later.

Media buzz around California has hyped-up the "Builder's Remedy" law as a "zoning holiday" from local development regulations that would allow developers to force any project with at least 20% affordable housing against the will of cities and NIMBY ("Not In My Back Yard") communities. Proponents of this zoning holiday interpretation of the Builder's Remedy include housing advocates such as California YIMBY and the California State Department of Housing and Community Development (HCD), both of whom further their mandates by pushing this interpretation. But actual housing developers and the spirit of more housing stand to lose by damaging local planning relationships and embroiling their projects in litigation.

The problem with this zoning-holiday interpretation is it is not clearly supported by the statute text, judicial opinions, or other legal precedent. So it is rightly considered bold, if not aggressive. Especially considering cities and counties are not likely to give up their constitutional powers to shape their own communities without a fight. Real examples of this include the City of Huntington Beach, which triggered a wave of litigation, including a lawsuit by the State, when it outrightly banned Builder's Remedy development applications. The City of Santa Monica, considered to be the poster-child of Builder's Remedy, fought against 13 Builder's Remedy applications.

To be clear, there is no law entitled "The Builder's Remedy," and that term appears nowhere in California law. It is a colloquial term typically referring to a state law and policy intended to empower market actors (builders, developers) to overcome local political or legal obstacles to equal access to affordable housing and community goods and services. In California law, the term "Builder's Remedy" refers to an untested provision of the three-decades old California Housing Accountability Act, recently amended by SB 330 and the 2019 Housing Crisis Act. The pertinent text of the "Builder's Remedy" is in subsection (d)(5) of Government Code Section 65589.5.

The plain text of this statutory provision restricts cities and counties that fail to timely adopt a housing element from either (a) disapproving or (b) imposing "infeasible conditions" on the grounds of inconsistency with the local zoning standards. In other words, the "Builder's Remedy" penalizes jurisdictions who fail to prioritize housing by stripping them of their power to enforce zoning ordinances in their review of qualifying applications. In turn, it serves as an incentive for builders and developers to target those non-compliant jurisdictions with Builder's Remedy applications for developments that include at least 20% housing.

The proponents of a more aggressive interpretation of "zoning holiday" read this to mean that developers "unlock" the zoning holiday by simply submitting the Builder's Remedy preliminary application at any time before the City or County adopts a compliant housing element. This interpretation believes that such an application vests rights in not only the frozen zoning ordinances and development standards at the time of the application submittal, but also the city's non-compliant status under this state law subsection (d)(5) of Government Code Section 65589.5.

Contrary to this interpretation, several provisions of this statute indicate that even if a city or county fails to adopt a housing element at the time of the preliminary application, the city may still later deny a "housing development project" inconsistent with zoning codes so long as at the time of that disapproval, it has by then adopted a compliant housing element. (Gov. Code § 65589.5(d)("...a local agency shall not disapprove a housing development project..."). Related Section 65941.1(d)(1) makes clear that an additional full "application" is required to be submitted after the preliminary application. The phrase "disapprove the housing development project" is defined to mean the time a housing development application is disapproved by votes of the agency. (Gov. Code, § 65589.5(6)). In addition, even where the city has failed to adopt a housing element at the time of approval, the statute still permits a city to impose conditions on the project so long as they are "feasible." These statute provisions create avenues for cities to evade the teeth of the Builder's Remedy by functionally delaying "the time of approval" of the project until after a city achieves housing element compliance.

In addition to ambiguity in the text of the Builder's Remedy statute, the zoning holiday interpretation of the Builder's Remedy must overcome conflicting legal obstacles outside the statute. These include the vested rights doctrine, constitutionally provided police-powers granted to local governments, and the California Environmental Quality Act (CEQA).

Vested Rights Doctrine. The vested rights theory crucial to the "zoning holiday" interpretation is vulnerable to defeat by cities and counties opposing Builder's Remedy projects. Common law vested rights doctrines are premised upon good faith reliance upon a validly issued permit or grant of right to build. (See Toigo v. Town of Ross, 70 Cal. App. 4th 309, 321 (1998)). Modern legislatures created statutory early-vesting laws to advance the vested rights doctrine. But it is well-settled in California courts that the vested rights in those early-vesting statutes are limited to the right of having the application reviewed under the development standards "frozen" at the time of the preliminary application. (Davidson v. County of San Diego 49 Cal.App.4th 639, 648 (1996). There is no such authority expanding that vested right in a city or county's non-compliant status under a state law, and no such authority expanding that vested right to mandatory approval of the entire application, irrespective of development standards.

Deprivation of Local Constitutional Police Powers. Cities and counties will also argue the Builder's Remedy is an unconstitutional deprivation of local police power to regulate health and safety. Similarly, cities will argue this is textbook state preemption of local control. Moreover, even if an applicant prevails in establishing some vested rights in the ability to bypass local zoning laws, California law holds that cities may still squelch those vested rights through subsequent police power enactments necessary to protect public health or safety. (Davidson v. County of San Diego, 49 Cal.App.4th 639, 648 (1996)).

CEQA. Unfortunately for California's housing crisis, any Builder's Remedy project is subject to burial under CEQA litigation, and is a likely target. In bypassing the zoning codes, and specific and general plans, the project also forgoes the protection of the CEQA compliance of those development standards. Furthermore, the related Builder's Remedy statutes under the Housing Crisis Act indicate any vested rights in the project will not extend to future laws or policies adopted in furtherance of CEQA. (Gov. Code § 65589.5(o)(1)).

The pragmatic interpretation of the Builder's Remedy

The lack of legal support and certainty around the effect of the Builder's Remedy, combined with the likelihood that cities will oppose and litigate the application, means developers should be wary of an overly-aggressive interpretation of this untested law. A shoot-first, ask-questions-later approach may not be worth the upside because it risks embroiling the project in years of litigation and irrevocably damaging business relationships with (and around) local planning jurisdictions, cities and counties. This is especially true when there are viable alternative avenues to project approval. An ordinary application under the Housing Crisis Act still provides advantages in streamlining, vested rights in development standards, and ministerial approvals.

The best opportunity for a "Builder's Remedy" application is where a city is making little-to-no effort to timely adopt a compliant housing element, such that it will not have a compliant housing element at the time of project approval. But even then, non-adversarial negotiations will be required to achieve timely project approval. By contrast, where local planning jurisdictions are in the process of achieving compliance with the housing element, a "Builder's Remedy" application will be viewed as "shots-fired." In exceptional cases, submitting a "Builder's Remedy" application concurrently with another ordinary application may be advantageous to the extent some bargaining leverage is necessary to achieve approval of the ordinary project application. In such cases, the developer should carefully build a record in support of probable appeal and litigation. Although the HCD agency has limited deference in its interpretation of the Builder's Remedy statute, recent events indicate HCD is ready and willing to supply developers with written "technical assistance" containing time-stamped findings of city and county non-compliance that would support the developer's enforcement of the zoning holiday interpretation of Builder's Remedy.