Lay of the Land
When Senate Bill 35 (SB 35) was enacted in September 2017, the streamlined ministerial approval process it created for eligible housing developments was optimistically viewed as a powerful tool for developers to create more housing, especially in NIMBY jurisdictions loath to approve additional residential development. Over the past two weeks, two decisions on SB 35—both decided by the Honorable Helen E. Williams of the Santa Clara County Superior Court—solidified just how powerful a tool SB 35 can be.
At the heart of both cases lies the mechanics of SB 35, which provide that a housing development project is legally “deemed to satisfy” SB 35’s eligibility criteria for streamlined approval if a local government does not provide the developer, within specific timeframes, a written explanation of why the project fails to meet the eligibility criteria—even if the project actually does not meet the criteria. SB 35 has many eligibility criteria, including the requirement that the project be consistent with objective zoning, subdivision, and design review standards, devote at least two-thirds of the square footage to residential use, and be located on a site that is not contaminated.
The first of the two cases—40 Main Street Offices, LLC v. City of Los Altos, decided on April 24, 2020—involved a developer’s SB 35 application to develop a mixed-use housing project containing 15 dwelling units in Los Altos. Los Altos denied the SB 35 application with a letter stating the project was inconsistent with parking standards, but without identifying the specific parking standards or any documents containing those standards. The court ruled that Los Altos’s denial violated SB 35 because the city failed to adequately identify the applicable objective parking standards and explain how the project conflicted with them. Accordingly, the court found the project had been “deemed to satisfy” the eligibility requirements of SB 35 and ordered Los Altos to rescind its denial and approve the project.
The second of the two cases—Friends of Better Cupertino v. City of Cupertino, decided on May 6, 2020—involved a developer’s SB 35 application for a large mixed-use project to revitalize the former Vallco Fashion Mall site in Cupertino. That project proposed 2,402 units of housing, 400,000 square feet of retail, and 1.81 million square feet of office space. After Cupertino approved the project under SB 35, a local community group challenged the city’s approval, claiming Cupertino was required to disapprove the project because it did not meet certain “objective planning standards” as required for the project to be eligible for streamlined processing under SB 35. The developer disputed the community group’s arguments that the project did not satisfy the “objective planning standards” as required by SB 35. The court ruled that—regardless of whether the project complied or not—SB 35 does not impose a ministerial duty on a local government to act on an SB 35 application or reject a project that may not meet an SB 35 eligibility requirement. Specifically, the court found the “deemed to satisfy” requirement in SB 35 “contemplates that a project may proceed through streamlined review and ultimately be approved even if it is, in fact, in conflict with one or more of the objective planning standards.” Accordingly, the court upheld Cupertino’s SB 35 approval.
Because these two decisions are trial court rulings, they are not legally binding precedent. However, they may provide some insight into how any appellate courts with the power to create precedent might rule on these kinds of SB 35 issues. Thus far, there have been no published (or unpublished) appellate court decisions interpreting SB 35.
In another recent trial court decision on SB 35 (Ruegg & Ellsworth v. City of Berkeley), the Alameda County Superior Court held that SB 35 did not apply to a project in Berkeley because the project would have required the destruction of a historic shellmound, which the court determined constituted a “historic structure” under SB 35. More troubling, however, is that the court held SB 35 did not apply to mixed-use developments. The court rejected the developer’s view that SB 35 allows up to one-third of a development’s square footage to be used for non-residential usage while still being eligible for streamlined approval. The court adopted instead the interpretation that SB 35 applies to “mixed use sites which require minimum two-thirds residential use by square feet.”
It’s likely that additional case law interpreting SB 35 may use, or at least cite to, the California Department of Housing and Community Development’s SB 35 Guidelines issued in November 2018. Those Guidelines are currently undergoing an update to incorporate statutory changes since SB 35 was enacted and to address comments from local governments and developers seeking clarifications and improvements in SB 35. HCD issued a draft of the updated Guidelines in April 2020. Apparently in response to the City of Berkeley case, the updated Guidelines specifically provide that SB 35 applies to mixed-use projects so long as the project satisfies the square-footage requirements mentioned above. The draft updated Guidelines are available for public comment through May 18, 2020.
For additional information on SB 35 or the Guidelines, and how those may apply to your project, please contact a member of Cox Castle’s Land Use team.