As of January 31st, the deadline for many Bay Area cities and counties to adopt legally compliant Housing Elements now has passed, and many jurisdictions remain without certifications from the California Department of Housing and Community Development (“HCD”) that their 6th Cycle Housing Element Updates (“6th Cycle”) substantially comply with state law. As such – and until HCD certifies that these housing elements substantially comply – the Housing Accountability Act’s (“HAA”) “Builder’s Remedy” is now available in a range of Bay Area jurisdictions.

Additionally, under Assembly Bill 1398 (“AB 1389”), should these jurisdictions fail to obtain HCD’s determination of substantial compliance within 120 days of the deadline (or May 31, 2023), these jurisdictions will be required to rezone the candidate sites identified in the 6th Cycle before HCD can find the 6th Cycle in compliance with the Housing Element Law. Therefore, Bay Area developers may soon have at least two remedial options that would provide much needed leverage in for their housing projects.

I. Background

Enacted in original form in 1969, the Housing Element Law (Govt. Code §§ 65580 et seq.) requires that all cities and counties in California engage in detailed planning for their residential needs by including housing as an element of their comprehensive plans. The Housing Element process is intended to focus the attention of local government policymakers on identifying land sites for housing, and on policy actions that would make it easier or less expensive to provide additional housing units. The Housing Element Law requires that the housing element include, among other things, an inventory of land suitable and available for residential development.

When the inventory in an local government’s Housing Element does not identify sites sufficient to meet the government’s share of the regional housing needs assessment at all income levels without rezoning, the Housing Element must identify sites that can be developed for housing within the planning period.1 The Housing Element must commit to rezone sites to make up any shortfall between the amount of low- and very low-income units identified in the inventory and the needs assessment.

Once a local update has been drafted, HCD reviews it to gauge whether the plan can enable the targeted number of units — including specific amounts of housing for households of very low-, low-, moderate-, and “above moderate” incomes. If so, HCD certifies the Housing Element. If not, the jurisdiction may change its plan to incorporate HCD’s suggestions. If the element is adopted without satisfying HCD’s concerns — or fails to be updated at all — the city or county is regarded as noncompliant. Including Builder’s Remedy and AB 1398, that judgment limits its eligibility for certain state and federal funds for affordable housing and renders it more vulnerable to lawsuits that can halt development in the community. Undeniably, there have been frequent conflicts between state and local policymakers over housing element compliance.

II. Builder's Remedy

Strictly speaking, the HAA requires that an adopted Housing Element be found substantially compliant by HCD before the deadline. Because certain jurisdictions covered by the Association of Bay Area Governments waited until just before the January 31, 2023 deadline to adopt their new 6th Cycle and send them to HCD, they have not received certifications from HCD in time to forestall activation of the Builder’s Remedy.

The Builder’s Remedy is an entitlements streamlining option for housing development projects that becomes available once a jurisdiction falls out of compliance with the state’s housing element law. Specifically, under the HAA, cities and counties may only disapprove housing development projects with at least 20% of the units for sale or rent to lower-income households or 100% of the units for sale or rent to moderate-income households by making one of five specific findings. One such finding is as follows:

The housing development project is inconsistent with both the jurisdiction’s zoning ordinance and general plan land use designation as specified in any element of the general plan as it existed on the date the application was deemed complete and the jurisdiction has adopted a housing element in substantial compliance with state housing element law.2

Under this language, in order to disapprove a qualifying housing development project on the ground that it is inconsistent with a zoning ordinance and General Plan, a city or county must also have adopted a Housing Element that substantially complies with the state Housing Element Law. By negative implication, failing to have an approved Housing Element prevents cities and counties from disapproving housing development projects on the ground that they conflict with a zoning ordinance and General Plan. Practically speaking, this means that so long as a jurisdiction does not have an HCD-approved Housing Element, it will be very difficult for it to disapprove qualifying housing projects that violate its zoning ordinance or General Plan.

In anticipation of Bay Area jurisdictions falling out of compliance, housing advocacy groups have taken to declaring a “zoning holiday” in jurisdictions without HCD-certified 6th Cycles. Project applicants should be aware, however, that cities and counties may point to a separate provision of the HAA to attempt to impose certain development standards onto qualifying housing projects. Specifically, the HAA states that “nothing [in the HAA] shall be construed to prohibit a local agency from requiring the housing development project to comply with objective, quantifiable, written development standards … appropriate to, and consistent with, meeting the jurisdiction’s share of the regional housing need.”3 There is no official guidance as to what constitutes a development standard (which could be implemented under Section 65589.5(f)(1)) or a zoning standard (which could not be implemented under Section 65589.5(h)(5)), let alone when a development standard is “appropriate to, and consisted with” meeting a jurisdiction’s regional housing need.

In light of this and other uncertainties – including environmental review – relating to the Builder’s Remedy, project applicants should proceed with caution. While the Builder’s Remedy may present a unique opportunity for entitlements streamlining in noncompliant Bay Area jurisdictions, invoking the remedy will require strategic planning to avoid foreseeable pitfalls.

III. AB 1398

A new statute, AB 1398, imposes additional penalties upon jurisdictions that fail to timely adopt Housing Elements. Specifically, AB 1398 requires a local government that fails to adopt a Housing Element that HCD has found to be in substantial compliance with state law within 120 days of the statutory deadline to complete the rezoning of sites identified in the 6th Cycle no later than 1 year from the statutory deadline for the adoption of the housing element. Additionally, AB 1398 prohibits a jurisdiction that adopts a Housing Element more than 1 year after the statutory deadline from being found in substantial compliance, as described above, until required rezoning is completed, as specified.4

If a local government fails to complete the rezoning by the deadline, a local government may not disapprove a housing development project, nor require a conditional use permit, planned unit development permit, or other locally imposed discretionary permit, or impose a condition that would render the project infeasible, if the housing development project: (A) is proposed to be located on a site identified in to the 6th Cycle; and (B) complies with applicable, objective General Plan and zoning standards and criteria.5 For purposes of this provision, a housing development project is defined as a residential development having at least 49% of the housing units for very low-, low-, and moderateincome households.6 The application is considered to be for design review and does not constitute a “project” for purposes of the California Environmental Quality Act (Pub. Res. Code §§ 21000 et seq.) (“CEQA”).7 As usual, any subdivision of sites will be subject to the Subdivision Map Act (Govt. Code §§ 66410 et seq.).8

For property owners of the sites identified in the 6th Cycle, the mandatory rezoning would allow owner-occupied and rental multifamily residential “use by right” so long as these sites meet statutory minimum density standards.9 Unless a subdivision is required, development of these sites would not require discretionary agency approvals or CEQA review – cutting down what is typically a very time-consuming and controversial process.

As this rezone “remedy” is only available to sites identified in the 6th Cycle, its use by developers is limited by availability of qualifying property. Thus, whether this mandatory rezone will actually result in more housing is yet to be seen. Jurisdictions in Southern California Association of Governments and San Diego Association of Governments are already subject to the mandatory rezoning under AB 1398 with only one known projects attempting to take advantage of the resultant upzone.

A matrix of the differences between Builders Remedy and AB 1398 is included below: