Why this article is important: Developers are using the builder’s remedy as a workaround for restrictive local zoning ordinances. The loophole is preemptive legislation permitting builders to organically correct local housing shortages.
Builder’s remedy potential for starts
California’s housing shortage has manifested in persistently low inventory available for sale or rent, high competition and ever higher prices for buyers and renters. For real estate professionals, this translates directly to lower rates of homeownership, fewer transaction fees and — for all residents — a lower standard of living due to static housing conditions.
The most logical solution is more residential construction (unless the state policy is to reduce the attraction of the Golden State). But the opportunities for construction are few and far between when myopic local politicians are left in charge. California is a megalopolis, as in a city with villas and barrios equal in population to the combined Sao Paulo and Mexico City, just less vibrant at the moment.
As California struggles to crawl out of its inventory deficit, not-in-my-backyard (NIMBY) advocates dig in their heels. NIMBYs successfully takedown building potential by politically advocating for restrictive local zoning ordinances to preserve the present character of their neighborhoods — and increase prices — by limiting the building of any new housing units.
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California Attorney General clashes with NIMBYs in Huntington Beach
But there is a workaround, a staging for developers to gain an overriding advantage on suppressive NIMBY efforts in local governments across the state.
Call it the builder’s remedy. This gateway provides housing developers a preemptive pass to build taller, denser projects than local ordinances (and NIMBYs) allow. Builders have the Office of the Attorney General (OAG) and the courts at their back to boot (the NIMBYs).
A builder’s remedy project is deemed compliant with local zoning regulations and general plan when the local housing element is not in compliance with California housing law. That is, state zoning and subdivision law controls, not a lesser level for local development.
Specifically, a local government may not disapprove a housing development unless it fails administratively to comply with state land use codes. Thus, the local politicians cannot make it unfeasible to build by conditioning approval on political discretion regarding local use and design review standards — unless they can show in written findings that:
- before the date of the development application, they adopted a housing element in compliance with California housing law that meets or exceeds the housing needs for the region; or
- the proposed housing development has a specific adverse effect on public health or safety. [Calif. Government Code §65589.5(d)]
Failure of the housing development to comply with the local zoning regulations or the general plan is not an adverse effect on public health or safety. [Gov C §65589.5(d)(2)]
When the builder’s remedy applies, the local agency may only require the housing development to comply with local development standards when the project is proposed on a site with a general plan designation and zoning classification that already allow the density and property type proposed. [Gov C §65589.5(f)(6)(A)]
Further, when the local agency disapproves a builder’s remedy project, it is the local agency who must prove the housing development does or does not qualify when challenged — not the housing developer. [Gov C §65589.5(f)(6)(B)]
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Housing development qualifications
A proposed housing development may consist solely of housing units, or it may be a mixed-use project. To qualify as a builder’s remedy project, the housing development needs to consist of either:
- at least 66% residential units; or
- at least 50% residential units when the project includes at least 500 new residential units (or 500 additional units when the development results in the removal of housing). [Gov C §65589.5(h)(2)(B)]
Further, the development needs to set aside:
- 100% of the housing units for lower-income households (excluding manager’s units);
- a minimum share of housing units for mixed-income households of at least;
- 7% for extremely low-income households;
- 10% for very low-income households; or
- 13% for low-income households; [Gov C §65589.5(h)(3)(C)(i)] or
- 100% of the housing units for moderate-income households. [Gov C §65589.5(h)(3)(A)]
The income limits for lower-income households are defined by the Department of Housing and Urban Development (HUD). Alternatively, when HUD has not published this information, the income for lower-income households may not exceed 80% of the area income, based on housing size. [Calif. Health & Safety Code §50079.5(a)]
Further, most builders remedy projects no longer require California Environmental Quality Act (CEQA) review. [Gov C §65589.5(h)(3)]
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Any units dedicated to moderate-, low-, very low-, and extremely low-income households need to have an affordable cost or rent. The developer needs to agree to continue to meet these affordability standards for 55 years for rentals or 45 years for owned units. [Gov C §65589.5(h)(3)(C)(ii)]
Editor’s note: “Affordability” is an amorphous term that essentially means possessing the “ability to pay.” For purposes of the builder’s remedy, an affordable housing cost is defined as a maximum of:
- 30% of 30% of the area median income for extremely low-income households;
- 30% of 50% of the area median income for very low-income households;
- 30% of 60% of the area median income for low-income households; and
- 30% of 110% of the area median income for moderate-income households, adjusted for household size. [Calif. Health & Safety Code 50053(b)]
Builder’s remedy in action
Local governments can go back and forth when it comes to application of the builder’s remedy. In recent years, especially as housing element requirements have restricted local governments with the introduction of new legislation, there are times when a local housing element is noncompliant while it remains under review from the California Department of Housing and Community Development (HCD).
For example, in the City of Santa Cruz, the housing element was set to expire in December 2023, so the city adopted a new housing element in November 2023. However, due to longer review times and multiple revisions required from the HCD, it did not go into effect until April 2024. Thus, during the four-month lapse between expiration of the housing element and state acceptance of the new one, Santa Cruz’s housing element was noncompliant. To take advantage of this lapse in compliance, four builder’s remedy projects were submitted and approved during this time.
At the time of this writing, the builders remedy is applicable in 99 jurisdictions in California, including in regions as variable as rural areas like Bakersfield and Fresno, suburban Upland and the more urban areas of West Covina and Huntington Beach.
To look up whether your jurisdiction is in compliance with state housing law, or not in compliance and allowing for the builder’s remedy treatment, see YIMBYlaw.org.
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