The “Builder’s Remedy” May Bring Relief to Bay Area Housing Developers Starting February 1

by | Jan 12, 2023 | Land Use, Permits and Appeals |

The Housing Accountability Act (HAA) limits the ability of a local government to deny housing development projects so long as the project complies with all applicable, objective general plan and zoning standards. However, the HAA also contains a potentially powerful provision that has been virtually untested since it was enacted nearly thirty years ago. Known as the “Builder’s Remedy,” the HAA prohibits a local government from denying any housing project that reserves at least 20% of the units for low-income households when the local government is not in “substantial compliance” with the Housing Element Law – regardless of whether the project complies with applicable development standards.

Theoretically, a Builder’s Remedy project is not constrained by any zoning code standards. A project could be as tall, and as dense, as feasibly possible. A local government that is out of compliance with the Housing Element Law would be obligated to approve a Builder’s Remedy project, unless the project would have a “specific, adverse impact upon the public health or safety” or the project violates state or federal law.

Local governments must update their Housing Elements every eight years. For jurisdictions in the Bay Area, the deadline to do so is January 31, 2023. There are a series of penalties for missing the deadline, but most of these penalties contain a 120-day grace period. Bay Area governments believed the Builder’s Remedy provision would not kick in until 120 days after the January 31 deadline, even though the HAA does not contain any reference to the Housing Element Law’s grace period. The Department of Housing & Community Development (HCD) confirmed, as shared through a tweet, that the HAA’s Builder’s Remedy provision will be in effect in any Bay Area jurisdiction that has not adopted a compliant Housing Element by February 1.

Out of the 109 Bay Area cities and counties, only two (Alameda and Emeryville) have adopted compliant Housing Elements so far. Thirty-three jurisdictions, including Oakland and San Francisco, have submitted drafts that HCD determined are not in substantial compliance with the law. A majority of jurisdictions have yet to submit a first draft. Many local governments are likely to miss the deadline, potentially opening the door to Builder’s Remedy projects, but significant uncertainties remain.

Southern California, which had an earlier deadline, offers a sneak peek into how the Builder’s Remedy may play out in the Bay Area. Many jurisdictions eventually adopted compliant Housing Elements after the deadline passed, but several developers had already submitted applications for Builder’s Remedy projects. Santa Monica tried to argue that it was no longer obligated to approve the projects now that their Housing Element was adopted. HCD disagreed, explaining that “any potential benefits afforded to the applicant as a result of the jurisdiction’s noncompliant status would remain throughout the entitlement process even if the jurisdiction subsequently achieves compliance.” Santa Monica has retained outside counsel to explore its options and the City seems poised to fight the projects.

There are many unanswered questions about the Builder’s Remedy, including whether a court would agree with HCD’s interpretations. However, for a developer in a hostile jurisdiction who has seen even their code-compliant housing projects languish, February 1 may open a unique opportunity that could swing leverage in your favor. The window to apply may close quickly and won’t come again for another eight years. If you are considering a Builder’s Remedy project, you should be prepared to submit a preliminary application to “lock in” your right to pursue a Builder’s Remedy project when the clock strikes midnight on January 31.

If you would like to learn more about the Builder’s Remedy and if it may be a viable option for a property you own, you should contact the experienced attorneys of Zacks, Freedman, & Patterson for guidance.  Contact us at your convenience to request a consultation.

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