California Legislature Passes Major Reforms for "Builder's Remedy" Projects

California law requires cities and counties to regularly plan for new housing development and to prepare and adopt housing elements that formalize these plans. For those cities and counties that fail to adopt housing elements that meet the requirements of state law (or that fail to adopt them on time), the primary consequence is the "Builder's Remedy."

Under current law, the Builder's Remedy prohibits cities and counties from disapproving a housing development that includes 20 percent lower-income housing, unless the city or county has either timely adopted a "substantially compliant" housing element or can satisfy other rarely occurring conditions. Critically, the Builder's Remedy prohibits jurisdictions from disapproving such affordable housing projects even when those projects are inconsistent with the jurisdiction's zoning and General Plan standards. Thus, the Builder's Remedy has come to serve as a shorthand for projects that are designed to deviate from otherwise-applicable zoning standards.

The scope and applicability of the Builder's Remedy has been the subject of much debate over the past several years, with numerous cities and counties fighting against its application, even as trial courts have affirmed the Builder's Remedy as a real consequence for housing element noncompliance.

Through its adoption of Assembly Bill (AB) 1893 (Assembly Member Buffy Wicks), which strongly confirms the applicability of the Builder's Remedy, the California Legislature has acted to put these debates to bed. On Sept. 19, 2024, Gov. Gavin Newsom signed AB 1893 and AB 1886 (discussed below) into law.

AB 1893 writes the term "Builder's Remedy" directly into the Housing Accountability Act (HAA) – California's marquee law for constraining municipal discretion to disapprove housing projects – and sets new parameters that these projects must meet as of Jan. 1, 2025. In exchange for these new limitations, the law provides incentives designed to make Builder's Remedy projects more economically feasible and explicitly prohibits common practices that municipalities frequently employ to frustrate Builder's Remedy projects. Although many of these new benefits are only available to projects that meet AB 1893's requirements, the law also provides existing vested Builder's Remedy projects (which have either submitted a Senate Bill (SB 330) preliminary application or a formal "complete" application) an option to "convert" to AB 1893-compliant projects while retaining their entitlement to the Builder's Remedy. For such existing vested projects that do not "convert," AB 1893 states that its enactment is not intended to disadvantage such projects, which may choose to proceed under preexisting law.

New Parameters for Builder's Remedy Projects

Under current law, Builder's Remedy projects may take any form that the applicant chooses and may be proposed on virtually any parcel, as long as the jurisdiction lacks a substantially compliant housing element at the time of the application. AB 1893 ends this "free-for-all" approach by introducing new site restrictions, setting new density limits and allowing jurisdictions to impose certain objective local standards that would facilitate the Builder's Remedy project.

• Site Restrictions. Although most sites are still permissible locations for Builder's Remedy projects, AB 1893 now excludes sites that abut parcels with heavy industrial uses or uses that require an operating permit issued under Title V of the federal Clean Air Act.¹
• Density Maximums. AB 1893 provides relatively generous maximum densities. The applicable density is set by a complex formula that requires careful site-specific legal analysis. Ten to 65 dwelling units (du) per acre densities may be available depending upon the project location, and even higher densities may be available if the jurisdiction's General Plan, zoning or housing element allows for residential development on the site. AB 1893 also allows applicants to add any density bonus afforded by State Density Bonus Law, which can further increase density by up to 100 percent for qualifying projects.²
• Density Minimums. AB 1893 also sets new density minimums for Builder's Remedy projects. For those projects on sites that 1) are in a zone with a minimum density and 2) are within one-half mile of a commuter rail station or heavy rail station, the Builder's Remedy project must meet the applicable minimum density. For all other Builder's Remedy projects, the applicable minimum density is the lower of 1) the lowest density provided for in the jurisdiction or 2) one-half of the jurisdiction's Mullin density.³
• Objective Standards. Prior to AB 1893, Builder's Remedy projects could not be disapproved for failure to comply with objective local standards and were frequently designed in a manner that disregarded such standards. Under AB 1893, jurisdictions may impose certain objective local standards on Builder's Remedy 2.0 Projects insofar as those standards do not preclude the project from accessing the proposed density up to the maximums described above.⁴ These standards are determined as follows:
  • The standards must be "objective," "quantifiable" and "written."⁵
  • If the jurisdiction has a zoning district (or General Plan land use designation) that allows the density and unit type proposed by the applicant, the jurisdiction may require the Builder's Remedy project to comply with the standards of that zoning district or designation.⁶
  • If the jurisdiction does not have a zoning district (or General Plan land use designation) that allows the density and unit type proposed by the applicant, then the applicant may choose any objective standards associated with another zoning district or designation that facilitate the Builder's Remedy 2.0 Project's density and unit type, and those standards will apply.⁷

New Affordability Requirements

In exchange for these new restrictions on Builder's Remedy projects, AB 1893 lowers the affordability set-aside requirements for accessing the Builder's Remedy. Prior to AB 1893, a project must have been either 20 percent affordable to lower-income households or 100 percent affordable to moderate or middle-income households to qualify for the Builder's Remedy.⁸ Under AB 1893, a project that satisfies one of the following affordability requirements will qualify for the Builder's Remedy:⁹

• at least 7 percent of the units are affordable to extremely low-income households
• at least 10 percent of the units are affordable to very low-income households
• at least 13 percent of the units are affordable to lower-income households
• 100 percent of the units are affordable to moderate-income households
• projects that propose 10 units or fewer (regardless of affordability level), where the project site is smaller than one acre and the project exceeds a minimum density of 10 du/acre¹⁰

If a jurisdiction has its own requirements regarding greater affordability percentages or "deeper" affordability levels, AB 1893 allows the jurisdiction to impose those requirements instead – subject to certain restrictions – but only if it first makes findings that those requirements will not render the Builder's Remedy project financially infeasible.¹¹ Further, the local agency cannot require an affordable percentage greater than 20 percent and cannot require projects to comply with any other aspect of the local inclusionary ordinance.

Critically, AB 1893 introduces a new requirement for the affordable units in a Builder's Remedy 2.0 project: The affordable units must have comparable bedroom and bathroom counts with the market-rate units.¹²

New Benefits and Protections for Builder's Remedy Projects

AB 1893 also aims to clarify the process for entitling a Builder's Remedy project. It does this by providing additional guidance about the entitlement process, introducing new restrictions to curtail burdensome processing tactics commonly employed by jurisdictions and extending other benefits to facilitate Builder's Remedy projects:

• AB 1893 expressly provides that cities and counties may not require Builder's Remedy projects to apply for or receive a rezoning, general plan amendment, specific plan amendment or any other legislative approval.¹³
• AB 1893 prohibits jurisdictions from "singling out" Builder's Remedy projects by requiring them to procure any approval or pay any fee that is not applicable to a typical, non-Builder's Remedy project.¹⁴
• Under AB 1893, Builder's Remedy projects may not be treated as nonconforming uses but are instead deemed to comply with all applicable local standards.¹⁵
• Jurisdictions are now explicitly prohibited from taking other actions designed to frustrate Builder's Remedy projects such as subjecting these projects to more than five hearings and from engaging in a "course of conduct undertaken for an improper purpose" to "effectively disapprove" these projects.¹⁶

AB 1893's companion legislation – AB 1886 (Assembly Member David Alvarez) – addresses two other arguments frequently deployed by cities and counties seeking to thwart Builder's Remedy projects. AB 1886 clarifies the state of existing law to foreclose the following arguments:

• Many jurisdictions confronted with Builder's Remedy applications take the position that their housing elements were substantially compliant with state housing law, notwithstanding California Department of Housing and Community Development's (HCD) disagreement, thus "self-certifying" their housing elements and declaring themselves exempt from the Builder's Remedy. AB 1886 puts an end to this practice by stating that a housing element is only "substantially compliant" for purposes of the Builder's Remedy when either HCD or a court makes that determination.¹⁷
• Several jurisdictions have also challenged the notion that submitting a preliminary application for a Builder's Remedy project pursuant to SB 330 "vests" to the status of the jurisdiction's housing element. These jurisdictions argue they are free to disapprove Builder's Remedy projects on the basis of zoning noncompliance once their housing elements are certified by HCD. AB 1886 introduces new language that forecloses this argument, specifically providing a housing element's "substantial compliance" status is pegged to the date that a Builder's Remedy Project submitted an SB 330 preliminary application.¹⁸

AB 1886 explains that these amendments clarify rather than change the state of existing law.¹⁹

Procedures for Existing Builder's Remedy Projects

All new Builder's Remedy projects submitted after Jan. 1, 2025, will need to meet AB 1893's standards to be eligible for AB 1893's benefits.

Builder's Remedy projects that submitted SB 330 preliminary applications (or formal complete applications) before Jan. 1, 2025, also have the option to take advantage of AB 1893. Current Builder's Remedy projects that already comply with AB 1893's new definition of a "Builder's Remedy project" should qualify for AB 1893 automatically on Jan. 1, 2025.

For all other current Builder's Remedy projects, AB 1893 provides an option to convert to AB 1893. Critically, this conversion option allows a project to retain its SB 330 vesting (and thus its entitlement to proceed as a Builder's Remedy project) while making the revisions needed to comply with AB 1893 – even if those changes would violate the typical rule that a project cannot change its unit count or size by more than 20 percent and retain its vesting.²⁰

Projects that cannot or choose not to convert to AB 1893 are still eligible for the protections of the HAA pre-AB 1893 and may choose to be processed in accordance with the language of the HAA as it existed on the date of the project's vesting.²¹ Although the pre-AB 1893 HAA does not expressly include the term Builders' Remedy in the statute, both HCD and at least two superior court judges have affirmed the applicability of the "Builders' Remedy" under the pre-AB 1893 HAA. Additionally, projects that cannot convert should also benefit from the clarifications provided by AB 1886 (described above), which are declaratory of existing law.

Conclusion

With AB 1893 and AB 1886, the Legislature has put to bed the debate over whether the Builder's Remedy is an intended consequence of housing element noncompliance and has taken away many of the tools that local governments use to frustrate these projects. At the same time, the Legislature has expressed a preference for projects that comply with the new guardrails established by AB 1893. Applicants with existing Builder's Remedy projects should carefully consider whether those projects are already compliant with AB 1893 and, if not, whether conversion is possible and advisable. For assistance with this analysis, please contact Holland & Knight's West Coast Land Use and Environmental Group.

Please note that AB 1893 makes other changes to the HAA that apply to non-Builder's Remedy projects as well. These additional changes will be addressed in Holland & Knight's forthcoming review of new housing legislation.

Notes

¹ Gov. Code § 65589.5(h)(11)(E) (as amended by AB 1893).

² Gov. Code § 65589.5(h)(11)(C) (as amended by AB 1893).

³ Gov. Code § 65589.5(h)(11)(D) (as amended by AB 1893).

⁴ Gov. Code § 65589.5(f)(6) (as amended by AB 1893).

⁵ Gov. Code § 65589.5(f)(6)(A) (as amended by AB 1893).

⁶ Gov. Code § 65589.5(f)(6)(A) (as amended by AB 1893).

⁷ Gov. Code § 65589.5(f)(6)(A) (as amended by AB 1893).

⁸ Gov. Code § 65589.5(h)(3).

⁹ Note that these affordability percentages apply to the "base project," before considering any density bonus.

¹⁰ Gov. Code § 65589.5(h)(3) (as amended by AB 1893). Note that AB 1893 also specifically provides that projects that are 100 percent affordable to lower-income households qualify for Builder's Remedy 2.0; however, this provision is redundant of the separate provision allowing Builder's Remedy 2.0 for projects that are at least 13 percent affordable to lower-income households. Gov. Code § 65589.5(h)(3)(B), (C) (as amended by AB 1893).

¹¹ Gov. Code § 65589.5(f)(6)(G) (as amended by AB 1893).

¹² Gov. Code § 65589.5(f)(6)(G)(ii) (as amended by AB 1893).

¹³ Gov. Code § 65589.5(f)(6)(D)(i) (as amended by AB 1893).

¹⁴ Gov. Code § 65589.5(f)(6)(D-E) (as amended by AB 1893).

¹⁵ Gov. Code § 65589.5(f)(6)(D)(iii) (as amended by AB 1893).

¹⁶ Gov. Code § 65589.5(h)(6)(D-E) (as amended by AB 1893).

¹⁷ Gov. Code § 65585.03 (as amended by AB 1886).

¹⁸ Gov. Code § 65589.55(a) (as amended by AB 1886).

¹⁹ Gov. Code § 65589.55(b) (as amended by AB 1886); AB 1886 (2024), § 3.

²⁰ Gov. Code § 65589.5(f)(7)(B) (as amended by AB 1893)

²¹ Gov. Code § 65589.5(f)(7)(A) (as amended by AB 1893); AB 1893 (2024), § 1, subd. (i).

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.