The California Court of Appeal has delivered a victory to Holland & Knight clients Ruegg & Ellsworth and Frank Spenger Company, as well as to housing advocates across the state, in a landmark opinion on the state's new housing laws. In Ruegg & Ellsworth v. City of Berkeley (2021) ___ Cal.App.5th ____, the Court of Appeal agreed with Holland & Knight's arguments that state laws intended to limit local opposition to housing must be interpreted broadly, rather than interpreted to defer to city decisions to deny housing, and that the state may constitutionally limit cities' discretion in order to address the ongoing housing crisis. The result finally advances 260 homes in the case at issue – and delivers the first published opinion affirming the validity of the California State Legislature's 2017 housing package.

Ruegg & Ellsworth v. City of Berkeley is the first published opinion applying Senate Bill (SB) 35, which was passed in 2017 to encourage the development of housing by fast-tracking the permitting process for housing developments that meet an exhaustive list of qualifications. Qualifying projects that provide the required percentage of on-site affordable units need only to comply with the city or county's "objective" development standards, and can bypass time-consuming and costly discretionary review processes that the Legislature found to be a key contributor to the statewide housing supply crisis. Holland & Knight has successfully invoked SB 35 and other housing laws in order to efficiently entitle clients' projects, and last year, Holland & Knight attorneys became the first in the state to win a trial court judgment ordering a city to approve an SB 35 development project.

Court's Decision

In 2018, Holland & Knight was one of the first law firms to shepherd a project through the SB 35 process for a 50 percent affordable housing development proposed on a vacant parking lot in Berkeley, California. The project would create 130 homes at below-market affordable rents for low-income households. Despite the fact that the project met all of the city's objective standards and satisfied all requirements imposed by SB 35, the City of Berkeley denied the project. In its April 20 opinion, the Court of Appeal told the city it violated the law by doing so.

The opinion confirms that it is "inappropriate" for courts to provide the traditional deference afforded to local governments when applying state housing laws intended to limit local discretion, because deferring to a city would "effectively nullify" the Legislature's intent in limiting local authority to address the "crisis of insufficient housing in the state." The Court of Appeal found that the city had failed to demonstrate any valid basis to find that the project failed to meet any applicable objective standard. It therefore directed that the trial court issue an order that the city approve the project.

The Court of Appeal also rejected a multi-pronged challenge from the city contending that SB 35 is unconstitutional. Rejecting the city's claim to be exempt from SB 35 because of its status as a "charter city," the Court of Appeal explained that a charter city's right to "home rule" has its limits: When there is a statewide interest and the state's legislation is tailored to address that interest, the act is constitutional. Here, said the Court of Appeal, the state has repeatedly articulated the statewide interest in remedying the California housing crisis, and SB 35, like other state housing laws, "addresses the crisis level statewide lack of affordable housing by eliminating local discretion to deny approval where specified objective planning criteria are met."

Takeaways and Conclusion

The case sets an important precedent not only for SB 35 but for all of the state's housing laws. The court's reasoning – that state housing laws must be applied broadly, not grudgingly – equally applies to laws such as the Housing Accountability Act, and will be useful in obtaining approvals in both friendly and unfriendly jurisdictions.