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In a Landmark Decision, the California Court of Appeal Holds that a City’s Decision to Deny an Application For a Multifamily Building Violated the State’s Housing Accountability Act

In a Landmark Decision, the California Court of Appeal Holds that a City’s Decision to Deny an Application For a Multifamily Building Violated the State’s Housing Accountability Act
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By Laura Harris

The First District Court of Appeal in California Renters Legal Advocacy and Education Fund v. City of San Mateo held that the City of San Mateo (City) violated the state’s Housing Accountability Act (HAA) in denying a proposal for multi-family housing based on concerns that the project’s height and scale conflicted with the city’s design standards. The court held that because the design standards were subjective, rather than objective, they could not serve as a basis to deny the application. The court also upheld the HAA against challenges that it infringed upon the city’s rights under the California Constitution. [California Renters Legal Advocacy and Education Fund v. City of San Mateo, 68 Cal.App.5th 820 (1st Dist. 2021).]

Facts and Procedural Background

The Housing Accountability Act, colloquially known as the “Anti-NIMBY” (Not-In-My-Back-Yard) law, was originally passed in 1982 with the goal of:

. . .meaningfully and effectively curbing the capability of local governments to deny, reduce the density for, or render infeasible housing development projects. (Gov. Code, § 65589.5, subd. (a)(2)(K).)

It provides that local governments may only deny an application to build housing if the proposed housing project does not comply with “objective” General Plan, zoning, and design review standards. (Gov. Code, § 65589.5, subd. (j)(i).) Dissatisfied with the dearth of housing in the state, in 2017 the California Legislature added teeth to this requirement by clarifying that a housing development is deemed to comply with such objective standards if “substantial evidence … would allow a reasonable person to conclude” that it does. (Gov. Code, § 65589.5, subd. (f)(4).) The Legislature also reiterated that the policy of the state and the HAA should be interpreted in a manner to afford the fullest possible weight to the interest, provision, and approval of housing.

In 2015, a developer applied to the City to build a ten-unit, multifamily residential building on a site surrounded by single-family residences. The site is designated for high-density multifamily residential in the City’s General Plan and zoning code. San Mateo planning staff reviewed the application and, after securing a few minor alterations to the proposal, concluded that the Project was consistent with the city’s General Plan for multifamily dwellings and with the city’s design guidelines. Staff recommended that the planning commission (PC) approve the Project.

The application came before the PC in August 2017. At the hearing, several City residents objected to the Project, opining that it was out of scale with the surrounding single-family residential neighborhood. The PC continued the hearing. Before the continued hearing, planning staff again recommended approval of the Project because it was consistent with the City’s General Plan, zoning, and design guidelines.

At the continued hearing, the PC voted to deny the application, citing concerns that the building was out of scale with the single-family homes in the neighborhood. The PC directed staff to prepare findings that the Project is inconsistent with the City’s design guidelines because it is not in scale or harmony with the character of the neighborhood, and that the building is too tall and bulky for the site. More specifically, the PC explained that there is a two-story differential between the Project and adjacent single-family dwellings, which is inconsistent with the design guidelines’ requirement that there be a “transition or step in height” between the buildings.

At its next meeting, the PC adopting the proposed findings in full and voted to deny the Project. Petitioners, California Renters Legal Advocacy and Education Fund (CARLA) and a group of housing advocates, appealed. The city council upheld the PC’s decision. Petitioners then brought an action seeking a writ of administrative mandamus on the ground that the Project’s denial violated the HAA.

The trial court denied the petition, holding that the City’s design guidelines were objective for the purposes of the HAA and that the City properly denied the application because the Project was inconsistent with the guidelines. The court also denied the petition on the ground that the HAA conflicted with the California Constitution. In particular, the court held that, to the extent the HAA conflicted with otherwise enforceable provisions of the City’s municipal code regarding housing development, the HAA is unenforceable because it intrudes into the City’s municipal affairs under the “home rule” doctrine of the California Constitution (Cal. Const. Art. IX, § 5(a)) and because it violates the prohibition on delegating municipal affairs to private parties (Cal. Const. Art. XI, § 11(a)). Petitioners moved for a new trial, which the trial court denied. Petitioners appealed.

 The Court of Appeal’s Decision

Application of the HAA to the City’s Design Standards

The First District Court of Appeal first considered whether the City properly denied the proposed multifamily housing Project under the HAA. The appellate court explained that the “pivotal question” in its application of the HAA is whether the City’s design guidelines qualify as “applicable, objective General Plan, zoning, and subdivision standards and criteria, including design review standards” that, if not satisfied, would allow the City to disapprove the Project under Government Code section 65589.5, subdivision (j)(1). The court concluded that the portions of the City’s design guidelines addressing height were not objective for the purposes of the HAA.

The appellate court explained that the question of whether the design standards are “objective” within the meaning of the HAA is a question of law to which the court owes the City no deference. At the time the City denied the application, the HAA did not define the term “objective,” so the court looked to the ordinary meaning of that term. The dictionary defines “objective” as “‘expressing or dealing with facts or conditions as perceived without distortion by personal feelings, prejudices or interpretations.’” Along this same line, the 2020 amendments to the HAA define “objective” as:

. . .involving no personal or subjective judgment by a public official and being uniformly verifiable by reference to an external and uniform benchmark or criterion available and knowable by both the development applicant or proponent and the public official. (Gov. Code, § 65589.5, subd. (h)(8).)

The court noted that under either definition, a standard is not “objective” if it requires the use of personal judgment.

Under this lens, the First District held that the language in the City’s design guidelines requires subjective judgment, and is therefore not objective. For example, the design guidelines provide that if building height varies by more than one story, the City may require a “transition or a step in height.” The fact that the guidelines allow a choice in how to address the height differential shows that the standard is not entirely objective. Moreover, the terms “transition” and “step in height” are open to interpretation. For instance, some might view the placement of large trees in between buildings, or the addition of trellises, as providing a “transition” or a “step in height.” Indeed, under the City planning staff’s original interpretation of the design guidelines, the question was treated as one of design choice that could be resolved in a variety of ways depending on which form the designer viewed as most “compatible” with adjacent buildings. Furthermore, even assuming the design guidelines require a setback in height, they do not state how large the setback must be, in turn leaving that determination open to subjective determination. Based on these and similar considerations, the court held that the City’s design standards are subjective, rather than objective, so those standards cannot be a basis to deny a housing project under the HAA.

The court further explained that its determination that the City’s design guidelines are not objective is supported by subdivision (f)(4) of the HAA, which the Legislature added in 2017 to reinforce the objectivity requirement. That subdivision provides that a standard is “objective” if there is substantial evidence that would allow a reasonable person to conclude a project is consistent with the standard. Here, a reasonable person could interpret the design guidelines as allowing a “transition” comprised of trees rather than a setback in building height, or could find a sufficient setback where the building includes trellises. In fact, this is what the City’s planning staff initially reasonably concluded when it originally concluded that the Project was consistent with the design guidelines and recommended that the PC approve the Project.

California Constitutional Challenges

The First District next considered whether the HAA violates the California Constitution—in particular, whether subdivision (f)(4) of the HAA violates the “home rule” doctrine for charter cities, and the prohibition on delegation of municipal functions. The court concluded that it does not.

The “Home Rule”

The California Constitution’s “home rule” provides that charter cities may govern themselves without legislative intrusion into municipal affairs. (See Cal. Const., Art. XI, § 5.) The courts apply a four-part test to determine whether the Legislature may exert control over a charter city’s action, despite its right to home rule: 1) whether the ordinance at issue regulates a “municipal affair”; 2) whether the case presents an actual conflict between local and state law; 3) whether the state law addresses a matter of statewide concern; and 4) whether the state law is “reasonably related” to resolving the concern at issue and is “narrowly tailored” to avoid unnecessary interference with local governance. Under this test, if the court determines that the subject of the state statute is of statewide concern and that the statute is reasonably related to its resolution and not unduly broad, then the conflicting charter measure is deemed not to be a “municipal affair” and the Legislature may pass legislation addressing it.

Applying these factors to the HAA and the City’s design review ordinance, the Court of Appeal held that the first two prongs were met because planning and zoning laws are a traditional municipal affair and, to the extent the City’s ordinances allow the City to reject applications for housing developments based on subjective standards, the ordinances are in direct conflict with the HAA. As to the third prong, the parties agreed that the provision of housing is a matter of statewide concern. The City argued, however, that subdivision (f)(4) of the HAA does not itself address a matter of statewide concern because local governments’ denial of housing projects is not the sole cause of the housing crisis. Other factors, such as high construction costs, a shortage of construction labor, and delays caused by the need to comply with CEQA, also contribute to the shortage. The court rejected this argument, explaining that the Legislature, the California Supreme Court, and the courts of appeal have all acknowledged a statewide interest in providing enough housing to meet all of California’s needs. The fact that local governments’ denials of housing permits are not the only cause of the crisis is immaterial. The question is whether the problem the Legislature is trying to solve is a statewide problem, not whether the solution is the only possible solution.

As to the fourth and final prong—i.e., whether the statute is reasonably related to resolving the identified statewide concern and narrowly tailored to avoid unnecessary interference with local government—the appellate court found that the Legislature’s limitation on local governments’ ability to deny new development based on subjective criteria is reasonably related to providing additional housing. Furthermore, the statute is narrowly tailored in that it leaves local governments free to establish and enforce policies and development standards, as long as those standards are objectiveand do not otherwise interfere with the jurisdiction’s ability to meet its share of regional housing needs. Additionally, the HAA does not bar local governments from imposing conditions on projects to meet subjective standards; the HAA only prohibits local governments from reducing a project’s density or denying the project altogether based on subjective standards. The HAA also allows local governments to deny a proposed housing project if the project would have an unavoidable adverse impact on health and safety. (See Gov. Code, § 65589.5, subd. (j)(1)(A) and (B).) Accordingly, the statute is not only reasonably related to a statewide concern, but also narrowly tailored to avoid undue interference with local control over zoning and design decisions. Therefore, § (f)(4) of the HAA does not violate California Constitution’s “home rule.”

Delegation of Municipal Functions

The Court of Appeal next considered whether subdivision (f)(4) of the HAA violates the California Constitution’s prohibition on “delegat[ing] a private person or body power to … perform municipal functions.” (Cal. Const. Art. XI, § 11, subd. (a).) The court held that, contrary to the City’s arguments, the HAA does not prevent local agencies from adopting and enforcing objective land use and design standards that are consistent with their other obligations. While subdivision (f)(4) of the HAA lowers the burden to show a project is consistent with objective standards, the statute does not cede municipal authority to private persons. For example, local agencies maintain the discretion to determine whether the record contains substantial evidence that a reasonable person would find the project consistent with applicable objective standards, and the authority to impose conditions of approval on the project, provided that they do not reduce the project’s density where applicable objectives are met.

The City argued that subdivision (f)(4) of the HAA would allow anyone, even the project proponent, to place evidence in the record that a project is consistent with objective standards and thereby force a local agency to approve the project. The court rejected this argument, however, because the “substantial evidence” standard provides a sufficient degree of scrutiny, such that not all self-serving evidence will support the conclusion that a project is consistent with applicable objective standards. Furthermore, subdivision (f)(4) requires that the evidence allow a reasonable person to consider whether the project is in conformity with the objective standards. Therefore, the statute does not require a local agency to approve a project based on the unsupported opinion of a single person, or upon evidence that a reasonable person would not find credible.

Accordingly, the court rejected the city’s arguments that subdivision (f)(4) of the HAA impermissibly delegates municipal authority.

Due Process

Finally, the City argued that subdivision (f)(4) violates the rights of neighboring landowners by depriving them of an opportunity to be heard before a housing project is approved. More specifically, the City argued that subdivision (f)(4) renders local government review a useless exercise because if anyone submits evidence that the project is consistent with applicable objective standards, the project is deemed consistent and must be approved.

The court rejected the City’s argument. Even assuming that due process protections apply to a municipality’s determination that a project is consistent with objective standards under subdivision (f)(4), there is no due process violation. The substantial evidence standard requires evidence that is of “ponderable legal significance” and is reasonable, credible, and of solid value. Nothing in the HAA prevents neighbors from presenting evidence to the agency that the substantial evidence standard is not met. Furthermore, neighbors can also present evidence that the agency should impose conditions on the project to minimize adverse effects, or even deny the project if it would have an unavoidable and “specific, adverse impact upon the public health or safety.” (Gov. Code, § 65589.5, subd. (j).) Therefore, although subdivision (f)(4) may affect which arguments carry the day, it does not deprive opposing neighbors with a meaningful opportunity to be heard.

Finally, the court returned to the history of the HAA. The Legislature has steadily strengthened the statute’s requirements, making it progressively clear that the statute must be taken seriously. The reason the HAA is so strong today is because California’s housing supply is in crisis. The court saw no inconsistencies with the provisions of the HAA and the California Constitution.

Conclusion and Implications

Since the Housing Accountability Act was first passed in the 1980s, California has faced statewide housing shortages that can lead to homelessness, physical health conditions, lengthy commute times, and equitable and environmental consequences. The First District Court of Appeal’s decision marks the first time an appellate court has interpreted the current iteration of the HAA, and serves as an important victory for housing advocates and the YIMBY (Yes-In-My-Backyard) movement. The opinion not only upholds the HAA as constitutional, but reiterates its directive that municipalities increase local housing supply. It also serves as a warning to California cities and counties to take the HAA’s requirements seriously when determining whether to deny a housing project that is not a risk to public health and safety and only inconsistent with arguably subjective standards. Nevertheless, the opinion will likely have far-reaching implications throughout the State and efforts to address the housing crisis. The First District’s opinion is available online at: https://www.courts.ca.gov/opinions/documents/A159320.PDF

Laura Harris, Esq., is Senior Counsel at the Sacramento law firm of Remy Moose Manley, LLP. Laura’s practice focuses on land use and environmental law. Laura handles all phases of the land use entitlement and permitting processes, including administrative approvals and litigation. Laura’s practice covers the California Environmental Quality Act (CEQA), the National Environmental Policy Act (NEPA), the State Planning and Zoning Law, the federal Endangered Species Act (ESA), air quality, climate change, water quality, vehicle miles traveled, affordable housing, natural resources, endangered species, wetlands and related matters.