Court of Appeal Upholds SB 35 and Orders City of Berkeley to Issue Ministerial Approval of Mixed-Use Affordable Housing Project

The Court of Appeal reversed a trial court judgment and issued an order directing the City of Berkeley to grant ministerial approval pursuant to Senate Bill (SB) 35 for a 260-unit mixed-use project. (Ruegg & Ellsworth v. City of Berkeley (2021) 63 Cal.App.5th 277.) This is the first appellate case to address the SB 35 streamlined approval process for housing. While much of the opinion concerned issues unique to the project, the court’s decision confirms the validity of the statute and its limitations on the discretion of local agencies under SB 35.

The case involved the City’s denial of one of the first SB 35 applications in the state. The City’s planning department denied the application for the mixed use development (with 135 apartments and retail) on grounds that SB 35 could not constitutionally be applied to limit the discretion of a charter city; that SB 35 does not apply to mixed-use developments; and that the project did not comply with the requirements for ministerial approval for various reasons, including that the project might require demolition of a historic structure.

The court first addressed whether the project is ineligible for SB 35 approval because it would require the demolition of a “historic structure,” which is an exception to ministerial approval included in the statute. The City had denied the developer’s application for ministerial approval, in part, on the grounds that construction of the project would require the destruction of a tribal shellmound, a local historic landmark that conflicting surveys indicated may encroach onto the project site. While the trial court had deferred to the City’s determination on the issue, the court of appeal reversed, rejecting the City’s interpretation of the term historic “structure” as including the shellmound and finding there was no evidence that the shellmound remnants could reasonably be viewed as a structure.

Next, the court turned to arguments that applying SB 35 to require ministerial approval would amount to an unconstitutional interference with the City’s “home rule” authority over historic preservation and land use issues as a charter city. On this issue, the court explained that, although local historical preservation and land use regulation are traditional municipal affairs, SB 35 was enacted to address a statewide issue—the housing crisis and specifically the lack of affordable housing. Moreover, because the statute’s interference with local governance is narrowed by limiting its application to cities that have failed to meet regional housing obligations and numerous other provisions limiting the scope of eligible projects, the court concluded there is no unconstitutional interference with the City’s home rule authority in this instance.

The court of appeal also rejected the City’s argument that mixed-use projects are ineligible for the ministerial approval process unless the zoning for the site specifically provides that mixed use projects contain two-thirds residential uses. Again disagreeing with the trial court, the court held that the relevant inquiry is whether the project includes at least two-thirds residential uses, reasoning that any interpretation which would further limit the number of eligible projects would be counter to the legislature’s intent to promote affordable housing construction.

Finally, the court rejected the City’s arguments that, even if SB 35 applies, the project is inconsistent with applicable objective zoning standards, namely, the City’s Affordable Housing Mitigation Fee ordinance and traffic standards. First, the court explained that an affordable housing mitigation fee is not the type of “objective planning standard” with which a project can be inconsistent, thus, the ordinance could not provide the City with a valid basis to deny ministerial approval under SB 35. Second, with regard to the alleged failure to comply with traffic standards, the court found that the City failed to provide the developers any specific criteria by which to assess project traffic impacts. Because the statute requires that a city provide applicants with documentation of which standard(s) a project conflicts with and explanation as to why, the court concluded that the City’s assertion the project fails to comply with traffic standards is an insufficient basis for its denial of ministerial approval.

While the opinion ultimately turned on the unique factual circumstances and regulations at issue, the court’s decision emphasizes the Legislature’s intent to promote housing construction and to limit local governments’ ability to impede development in areas where housing is needed most through the application of subjective local regulations. The opinion is likely to embolden the use of SB 35 for new housing projects in California and highlights that local agencies should provide objective development standards and strictly adhere to the procedures and timelines included in SB 35.