Housing Crisis: Appeals Court Reverses Lower Court Decision on Controversial Berkeley Development

Real Estate News: Real Estate Investing Podcast

An appeals court decision has ruled in favor of a development project in Berkeley that will give the state more control over local housing decisions. Some people are calling it a win for developers and the state’s effort to create more housing in California, but not everyone is celebrating. The decision was based on Senate Bill 35, which addresses the housing crisis with construction mandates for cities and counties. In this case, it ends a six-year battle to keep the Berkeley project from going forward.

SB 35 went into effect in January of 2018 as one of a number of bills meant to address a critical need for more housing. If a municipality doesn’t provide its fair share of housing to meet regional needs, developers can apply for approval under SB 35 and get their projects fast-tracked, by the state. Projects must meet several requirements to quality, including.

1 - The construction of multi-unit housing with two or more residential units.

2 - A location that is within city limits on an infill area.

3 - The property must be zoned for residential or mixed use.

4 - New homes must cover at least two-thirds of the property.

5 - And the developer must provide a minimum percentage of below-market units that can range from 10 to 50%, or more.

The Berkeley project was first introduced in 2015 as a mixed-use development with 135 homes and 33,000 square feet of retail space and parking at 1900 Fourth Street. That’s locally known as the old Spenger restaurant parking lot, near the bay. It’s also adjacent to, and overlapping an old Indian burial ground called the West Berkeley Shellmound. The National Trust for HIstoric Preservation listed the site as one of the 11 most endangered historic places, just last year.

Members of the Ohlone tribes and supporters have been fighting against the project for years. According to a Berkeleyside article, tribal leaders say they are acknowledging the legacy of their ancestors, and are protecting the desecration of a sacred site. But the historic designation doesn’t specify the boundaries of the shellmound and doesn’t specifically name the parking lots as part of the site.

After SB 35 was passed, the developer updated his plan with more homes and a high percentage of affordable units. The new plan included 260 residential units with 50% of them for low-income residents. But the city rejected the developer’s request for three reasons. It said:

1 - That SB 35 cannot be applied because it interferes with Berkeley’s right as a charter city to manage its own affairs.

2 - That SB 35 doesn’t apply to projects that require the demolition of a designated historic structure.

3 - And the project conflicts with city fees for very low-income housing units and requirements for how traffic impacts the neighborhood.

At that point, the developer pulled out, and the property was returned to the previous owners, who sued. The case went to court in 2019 and an Alameda county judge ruled in favor of the city and project opponents. But the case then made its way to the Appeals Court and the court has now overturned the earlier decision.

In its decision, the Appeals court emphasized the “crisis of insufficient housing in the state” and the mandate put forth by SB 35. That mandate makes it impossible for cities like Berkeley to reject a proposal that meets the state’s criteria for the creation of affordable housing. The court also rejected the idea that the development would entail the demolition of an historic structure or site because there are no buildings to demolish. And it ruled that the city was not using objective land use standards when it determined that the project would not comply with its affordable housing mitigation fee and traffic impact requirements.

At this point, the court has ordered Berkeley to pay court costs, and attorneys will be seeking compensation from the city as well. The case sets an important legal precedent in California by handing power to the State when it comes to issues like the affordable housing crisis, and the approval of development projects that will help fill that housing gap.

According to Wikipedia, ten Bay Area developers are seeking approval for the construction of 4,000 housing units under the SB 35 rules. The online encyclopedia also says that 28 California cities and counties have met their housing quotas while almost 300 jurisdictions have not. Projects in those jurisdictions could qualify for approval under SB 35 if they devote 50% of the units to low-income residents, among other requirements, as stated by Wikipedia.

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Links:

https://www.jdsupra.com/legalnews/california-court-of-appeal-upholds-7824522/

https://www.natlawreview.com/article/developers-prevail-dispute-regarding-key-housing-legislation

https://www.berkeleyside.org/2020/09/25/west-berkeley-ca-shellmound-most-endangered-historic-places-national-trust-historic-preservation

https://en.wikipedia.org/wiki/California_Senate_Bill_35_(2017)