In First Published Opinion Interpreting SB 35, Court of Appeal Rejects City of Berkeley’s Attempts to Avoid Application of the Law and Orders Streamlined Approval of Mixed-Use Infill Project

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On April 20, 2021, the First District Court of Appeal filed its first published opinion interpreting California Senate Bill 35’s streamlining provisions in Ruegg & Ellsworth v. City of Berkeley.  The Court held that the City of Berkeley erred in finding a mixed-use development project ineligible for SB 35 streamlining.  Because the project met the essential qualifications under SB 35, the First District commanded the trial court to issue a writ of mandate directing the City to approve the project without further environmental review.  This marks the first published decision to enforce the State’s new affordable housing laws and is a harbinger of battles to come.

In 2015, the developer submitted an application for a mixed-use development on a surface parking lot that is part of a three-block area the Berkeley Landmarks Preservation Commission designated as a City of Berkeley Landmark in 2000, as the location of the West Berkeley Shellmound.  After several years of legal wrangling with the City and stakeholders over that proposal, and following the passage of SB 35, the developer submitted a new application, proposing a mixed-use project comprised of 260 dwelling units—50 percent of which were designated as “affordable to low-income households”—above approximately 27,500 square feet of retail space and parking.

Passed by the Legislature in 2017, SB 35 requires local governments that have failed to provide their fair share of regional affordable housing to approve housing projects meeting certain objective criteria.  If a project meets all of the planning standards in SB 35, it is eligible for a streamlined, ministerial approval process, avoiding costly and time-consuming discretionary review subject to the political whims of the local government.  To qualify for SB 35 streamlining, a project must, among other things, propose urban infill residential development, have at least two-thirds of the square footage devoted to residential use, and not involve demolition of a historic structure that is on a national, state, or local historic register.  In addition, SB 35 requires a project to meet all objective general plan, zoning, subdivision, and design review standards in effect at the time the application is submitted.  Objective standards are those that require no personal or subjective (discretionary) judgment, and must be verifiable by reference to an external and uniform source available prior to submittal.

The City denied the developer’s request for streamlined review under SB 35, finding that the project conflicted with the City’s Affordable Housing Mitigation Fee (AHMF) requirements and Landmarks Preservation Ordinance; that if the Shellmound or another historic structure was beneath the site, the project could require demolition of a historic structure that was placed on a historic register; and that the project potentially conflicted with the City’s requirements that a project meet applicable performance standards for off-site impacts and not exceed amount and intensity of use that can be served by available traffic capacity.  The City also argued that application of SB 35 to the project would violate the City’s rights as a charter city under the California Constitution.

The developer filed a lawsuit seeking judicial determination on a variety of grounds.  The trial court denied the petition, finding that: (1) the City’s determination that the project would require demolition of a historic structure was not “entirely without evidentiary support,” and (2) SB 35 did not apply to mixed-use developments.

The First District disagreed.  First, the Court found that the trial court had erred in reviewing the City’s findings regarding SB 35 eligibility under the deferential “arbitrary and capricious” standard.  The Court pointed out that if the deferential standard of review applied by the trial court were appropriate, the Legislature’s intent of limiting local authority to address the housing crisis would be nullified.

The Court also found that application of SB 35 to the project did not violate the “home rule” doctrine with regard to charter cities, and that the trial court erred in concluding that the law could not be applied to mixed-use projects.  The City argued that a strict interpretation of SB 35 without any deference to the agency would impermissibly infringe upon its local historical preservation authority.  But the Court rejected this theory as well.  Although the City is a charter city, the Court emphasized, it is not exempt from SB 35 because a charter city’s right to “home rule” has its limits.  The Legislature had articulated a statewide interest in remedying the California housing crisis multiples times, and SB 35 “addresses the crisis level statewide lack of affordable housing by eliminating local discretion to deny approval where specified objective planning criteria are met.”

Turning to the objective criteria under SB 35, the Court found “no evidence” to support the City’s finding that the project was beyond the reach of SB 35 because it could involve demolition of a historic structure.  Although it was undisputed that the project was located on the Shellmound, a state-listed historic resource, the Court found that the Shellmound itself was not a “structure” within the meaning of SB 35.  In addition to being a non-issue under SB 35, the Draft EIR for the project proposed in 2015 had concluded that impacts on the Shellmound could be reduced to a “less-than-significant level” with mitigation.

The Court also determined that the project met the SB 35 objective planning standards because although it contained a commercial component, it complied with the SB 35 requirement that two-thirds of the floor area in mixed-use projects be dedicated to residential units because those units were proposed to occupy 88 percent of the space.

This opinion confirms the importance of “the Legislature’s long history of attempting to address the State’s housing crisis and frustration with local governments’ interference with that goal.”  The decision establishes that state housing laws are to be applied broadly and without deference to the local agencies, and sets a precedent for SB 35 and other California housing laws that are wending their way through the courts.  Developers, local governments, and legal practitioners should be aware of SB 35’s application requirements and exceptions, and keep abreast of the law’s latest developments to avoid the pitfalls that befell the City in this case.

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