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The supply and affordability of housing is one of the most pressing and challenging issues facing the country, especially in California, where local governments and advocacy groups historically averse to high-density building are challenging new efforts by state government to encourage residential development.

For one current example, see the growing number of cities challenging S.B. 9, a new law that took effect this year and intended to encourage more housing by allowing for all existing single-family lots to be redeveloped into up to four new residential units.

Southern California cities spanning from wealthy coastal communities such as Redondo Beach and Rancho Palos Verdes, to middle-class inland municipalities including Lakewood and Carson, have recently filed lawsuits to challenge the constitutionality of S.B. 9, arguing that control over residential zoning is one of the fundamental powers reserved for local government and may not be usurped by state regulation.

Other municipalities have employed different approaches. The affluent Northern California community of Woodside attempted to secure an exemption from S.B. 9 on the basis of the presence of protected mountain lion habitat, while residents of neighboring Atherton concerned regarding impacts on their city’s 1 acre minimum residential lot size have urged their representatives to consider paying the yearly $1.2 million fine in lieu of making efforts to comply.

Although such resistance is expected to continue, observers of California’s real estate industry are noticing increasing momentum in favor of state government’s development efforts. Over the past year, California courts have issued a handful of decisions addressing various efforts to push back against the preemption of local regulations, and a body of precedent is beginning to emerge that indicates some important trends.

Two recent decisions arose from amendments strengthening California’s 1979 Density Bonus Law, which gives developers the right to increase density beyond local limits in exchange for providing a certain amount of affordable housing.

In 2021 in the California Second District Court of Appeal, Schreiber v. City of Los Angeles involved a challenge to those provisions of the Density Bonus Law allowing developers of affordable housing to request a certain number of incentives to achieve cost savings on projects, such as relief from zoning or architectural design requirements.

The Los Angeles City Planning Commission approved incentives for a mixed-use project featuring floor areas and heights beyond applicable limits and that reserved 10 of 54 residential units for low- and moderate-income housing. Opponents sued on the basis that the Density Bonus Law requires applicants to submit information showing that the requested incentives will actually result in cost reductions.

The Second Appellate District held that developer-applicants do not need to prove that requested incentives will result in actual cost reductions to obtain a permit; the Density Bonus Law creates a presumption of cost reductions that can only be challenged by local government via a showing of substantial evidence to the contrary. This is a high standard of proof and opponents may find it difficult to devote the resources necessary to meet this burden.

Another statewide precedent was set in January, in Bankers Hill 150 v. City of San Diego, which addressed another feature of the Density Bonus Law.

The law held that the law entitles projects to waivers of any local development standards that would physically prevent the project from proceeding at the permitted density. With the incentives granted, some waivers are subject to various exceptions involving adverse impacts on public health and safety, or properties previously designated as historically significant.

San Diego approved a 20-story mixed-use project incorporating several incentives including the waiver of local height and setback requirements. Opponents claimed that the approval violated the city’s general plan on the basis that it was possible to revise the project’s design and eliminate a large courtyard intended for community use that would have the effect of allowing the project to achieve compliance with some of the standards at issue.

In Bankers Hill 150, the California Fourth District Court of Appeal held that projects may involve waivers of local development standards that would prevent them from being built as designed, even if a project can be redesigned to comply with such standards. The Court of Appeal further held that exceptions to the waivers made available under the Density Bonus Law must be strictly construed and limited to those exceptions expressly recognized, and declined to infer the existence of an alternative compliant designs exception.

A recent decision of interest arises from the local regulations enacted during the era when local redevelopment agencies were still permitted. In May, in AIDS Healthcare Foundation v. City of Los Angeles, the Second Appellate District affirmed the trial court’s rejection of a challenge to the city’s approval of a proposal to construct a large apartment building in Hollywood that would allocate 5% of residential units to affordable housing.

The AIDS Healthcare Foundation sued on the basis that the project failed to meet the 15% affordable unit minimum allocation that was required under both the city’s master plan and the neighborhood plan that was created in 1986 by the city’s now-dissolved redevelopment agency. The Court of Appeal held that the partial repeal of local regulations that accompanied the dissolution of local redevelopment agencies in 2011 included the elimination of the 15% requirement.

Perhaps most importantly, the Court of Appeal also held that the minimum percentage of affordable housing required by the city in a particular area applies to the area as a whole rather than to each project located therein.

Another recent noteworthy decision relates to efforts to achieve more housing via the construction of alternative dwelling units, or ADUs, on existing residential lots. Despite continued resistance by homeowners associations, a panoply of state laws has been enacted to override local regulations and promote the construction of ADUs in all neighborhoods.

However, the city of Malibu still denied a local family’s application for a permit to install an ADU on their property intended as housing for a disabled grandmother on the basis that the project failed to comply with setback and maximum square footage requirements required under a coastal development permit as mandated by the Coastal Commission, and also exceeded what was necessary to provide reasonable accommodation for a disabled resident.

In July in the Los Angeles County Superior Court in Riddick v. City of Malibu, the trial court agreed with the homeowners that ADUs attached to the main residence are exempt from the requirement for a coastal development permit, but nonetheless upheld the city’s denial of the application on the grounds that the homeowners failed to justify their request for reasonable accommodation of the intended new resident’s disability.

The inclusion of such proposed features as an expanded master bedroom and bathroom were deemed unnecessary to achieve the accommodation. It is not yet known whether this decision will be appealed, but the clarification that attached ADUs do not require a permit is expected to encourage more development in coastal areas that have long been subject to significant constraints.

Various new large mixed-use projects are underway throughout the state that may generate further litigation as local opponents seek to test the limits of new state regulations.

Planning for multifamily housing is ever-more complicated — as soon as one problem is resolved another crops up — resulting in a maze of legal challenges ranging from permit delays to complex disputes with contractors and design professionals. California is expected to retain its reputation as a fertile ground for real estate litigation.

However, in an environment of rising interest rates and indicators of a looming recession, those developers interested in infill projects may still find reason for hope in multiple signs that state government has made a fundamental shift away from NIMBYism and is willing to override local controls.

Sean Gaffney is a partner at Crosbie Gliner Schiffman Southard & Swanson LLP. The article was published in Law360 (subscription required).