The First District finds application of SB 35 to charter cities is constitutional and requires City to ministerially approve a mixed-use residential development.

May 26th, 2021

By: Sam Bacal-Graves

In Ruegg & Ellsworth v. City of Berkeley (2021) 63 Cal.App.5th 277 the First District Court of Appeal decided the first published case addressing Senate Bill 35 (SB 35). The 2017 law allows qualifying projects with an affordable housing component to make use of a streamlined, ministerial approval process if they meet the applicable objective planning standards of the locality. The Court found that there was no historic “structure” within the meaning of SB 35 on the Project site, so ministerial approval of the Project was required. The Court then held that SB 35 was constitutional as applied to charter cities and that it applies to mixed-use projects. The case contains important guidance on SB 35 and may prove to be a roadmap for projects to effectively utilize the relatively new law.

The project at issue was a mixed-use development with 260 residential units, half of which would be affordable to low-income households (Project) in the City of Berkeley (City or Respondents). The Project site is within an area designated by the City as a landmark due to the presence of a Shellmound – a registered historic and sacred burial site.

Following hostility to the original iteration of the Project, the Project proponents (Petitioners) submitted a new application under Government Code section 65913.4, the statute added by SB 35. To qualify, a project may not demolish a historic structure placed on a historic register. While the law’s streamlined approval process is only available in cities and counties that have failed to provide their share of regional housing needs as defined under the Housing Element Law, the vast majority of localities in the state, including the City, have failed to do so.

The City denied the SB 35 application, stating that the Project conflicted with the its objective planning standards. It reasoned that it would conflict with the City’s Affordable Housing Mitigation Fee and Landmarks Preservation Ordinances, could require the demolition of the Shellmound, and potentially failed to mitigate off-site traffic impacts, as required by the City Code. The City further asserted that that the statute could not constitutionally interfere with the City’s home rule authority as a Charter City to regulate and protect its historic resources.

The Project proponents filed a writ of mandate and complaint against the City, seeking an order upholding the constitutionality of SB 35, requiring the City to issue the ministerial permit, and alleging that the denial had violated both section 65913.4 and the Housing Accountability Act. The trial court denied the petition, and Petitioners appealed.

Standard of Review

Pursuant to Code of Civil Procedure section 1085, the trial court deferred to the City’s factual determination that the Project would require demolition of a historic structure. On appeal, Petitioners argued that a 2019 amendment to section 65913.4, which was not effective until after the City and trial court’s decisions, established that it was Petitioners, and not the City, who were owed deference. They advanced three alternative arguments: the amendment clarified existing law, it should govern because it became effective before the appellate court ruled, and the trial court’s approach effectively nullified the legislative intent of section 65913.4.

The Court of Appeal agreed that the standard of review applied by the trial court would nullify the statute’s legislative intent, without addressing the other arguments. The Court observed that deference is owed to an agency that has discretion to impose and enforce conditions. However, in situations where an agency is merely enforcing legislatively imposed conditions, as is the case under SB 35, the agency’s duty is ministerial, and no deference owed to it.

The Court went on to hold that the issue of whether the Project would demolish a historic structure involved one question of law and one of fact. Whether the Shellmound constituted a “structure” within the meaning of the statute was a question of statutory interpretation, subject to de novo review. Whether the Shellmound existed on the site was a question of fact. However, the Court declined to articulate the appropriate standard of review for this factual question, as it found no evidence in the record whatsoever to support City’s conclusion that it was a historic structure or that it would be destroyed.

Demolition of a Historic Structure

Section 65913.4 does not define “structure.” The City argued for an expansive definition based on the language of historic preservation statutes and their legislative intent, and urged that the term should be understood consistent with how it is used and defined in those provisions. The Court, after quoting various dictionary definitions of the term and an unrelated statute defining the word for purposes of listing state-owned historical resources, disagreed. It noted that section 65913.4 is not a historic preservation statute, but merely contains a limited exception for historic structures, which cautions against giving the exception the broadest possible meaning. Further, the Court explained the distinction between historic resources and historic structures – a distinction the City had confused. While the Shellmound was undoubtably an important historical and cultural resource, the Court found no evidence that it now was present in a state that could reasonably be described as that of a structure, nor could its remnants be recognized as part of a structure. Further, the Court held that no evidence supported that a historical structure would be demolished. The potential for disturbance of remnants and artifacts was acknowledged, but this was not an issue relevant to the analysis under section 65913.4. As such, the Court concluded that the City’s determination that the Project would require demolition of a historic structure could not be upheld.

Retroactive Application of Amendments to Section 65913.4

A pair of bills passed in 2020, AB 831 and AB 168, added protections for potential tribal resources to section 65913.4. Confederated Villages of Lisjan, a Native American Tribe, intervened in the case and argued that the bills’ protective provisions should be retroactively applied to Project. Both Petitioners and Respondents disagreed, as did the Court, though its analysis is omitted from this summary as the new requirements will apply to all future projects.

Home Rule and State Intrusion into Municipal Affairs

Respondents argued that section 65913.4 could not constitutionally be applied to them, as it would interfere with the City’s home rule authority over historic preservation. Under the California Constitution and the home rule doctrine, charter cities are granted significant authority to govern themselves, free of state intrusion, as to those matters deemed municipal affairs. To determine whether a charter city’s home rule authority extends to a particular matter, courts apply a four-part analysis. The only aspect of the analysis which was disputed in this case were whether SB 35 is reasonably related to increasing the amount of affordable housing, a legitimate matter of statewide concern, and narrowly tailored to avoid unnecessary interference in local governance in pursuit of that goal.

While Respondents acknowledged that increasing the amount of affordable housing is a legitimate statewide interest, they questioned whether this translates into a statewide interest in eliminating protections for local landmarks. The Court, though, found the framing to be inapposite, as the relevant question was whether the purpose of the ministerial approval statute was a matter of statewide concern. Nor was the Court persuaded by Respondents’ argument that SB 35’s measures were overly broad and that the Legislature had overreached. The Court found a clear connection between legislative purpose of expediting and increasing approvals of affordable housing developments and the removal of local governments’ ability to deny these applications. It also found the intrusion to be narrow, given the law’s application only to jurisdictions failing to satisfy their mandated Regional Housing Need Allocation. Further, the Legislature had long lamented local governments’ activities and policies limiting the approvals of affordable housing, and expressed its frustration over the historic magnitude of California’s housing crisis. As such, the Court held that the intrusion into local authority over historical preservation was not broader than necessary to achieve the purpose of the legislation, at least as it related to the Shellmound and its site.

Application of SB 35 to Mixed-Use Developments

The trial court had also denied the petition on the basis that section 65913.4 does not apply to mixed-use developments. The Court ruled that SB 35 does apply to mixed-use developments, finding that the trial court’s interpretation was strained, unreasonable, and made no sense in light of the statute’s purpose. The Court noted its interpretation accorded with that of the Department of Housing and Community Development, which was tasked with issuing SB 35 guidelines. Additionally, amendments adopted after the Project was denied also made clear that the statute does apply to mixed-use projects. The Court also rejected the City’s argument that its home rule authority over commercial uses prevented such a conclusion.

Conflicts with Objective Standards

Section 65913.4 requires a project to be consistent with all objective zoning, subdivision, and design review standards in order to qualify for the streamlined approval process. The City argued that the Project failed to do so for two reasons.

First, the City alleged that the Project did not comply with its Affordable Housing Mitigation Fee (AHMF) ordinance. The Court held that the AHMF ordinance was not an objective standard but a mitigation fee. The Court also noted that the fee or provision of required housing need not be made at the time of the application – it must only occur prior to the first building permit. Lastly, the Court also found persuasive Petitioners’ argument that the statewide interest in ministerial approval of low-income housing should not be defeated by a local ordinance requiring a lower percentage of low-income housing than the statute (though with an included component for housing affordable to very low-income households).

The City also argued that the Project failed to comply with the City Code’s requirement to mitigate off-site traffic impacts. However, the City did not raise this until after the time in which the statute required it to identify for Petitioners the objective standards which the Project conflicted with. As such, the City was no longer able to argue that the Project did not comply with this.

The Court reversed the trial court’s judgment, remanding with directions to grant the Petition, thereby requiring the City to allow the project to move forward.

Key Points: SB 35 provides a streamlined, ministerial approval process for qualifying projects with an affordable housing component. Though the law has stringent criteria, if the requirements are met, it provides a powerful tool for securing ministerial approval from an otherwise antagonistic local government, allowing projects to proceed without CEQA review.