On February 2, 2022, the California Court of Appeal, Fourth Appellate District, changed the status of a decision in January from unpublished to published. The decision is significant for its clear and unequivocal ruling that the California Density Bonus Law (Cal. Gov. Code, § 65915 et seq.) prevails over local zoning and land use requirements even when a proposed project violates them.

The case is Bankers Hill 150 v. City of San Diego (Jan. 7, 2022, No. D077963) ___Cal.App.5th___ (2022 Cal. App. LEXIS 83) (Bankers Hill). The proposed project was a 20-story mixed-use building with 204 dwelling units, office space, a large courtyard, and an underground parking lot. The building height was approximately 223 feet. As part of its permit application, the developer, Greystar GP II, LLC (Greystar), offered to include 18 dwelling units with deed restrictions to make them affordable to very low-income households.

As proposed, the number of dwelling units exceeded the zone’s maximum density of 147 units. The building also exceeded the City’s 15-foot setback requirement, and its height was well above the 65-foot threshold for triggering further planning review.

Nonetheless, because Greystar offered to include 18 dwelling units for very low-income households, which was 12% of the residential units, the project qualified for a density bonus under both the state’s Density Bonus Law and the City’s Affordable Housing Regulations. This allowed Greystar to increase the project from 147 dwelling units to 204 as approved by the Planning Commission and the City Council. Importantly, the City Council found that the project was consistent with the goals of the community plan, complied with applicable regulations, and helped further the community urban design element and development policies.

The trial court denied the petition for writ of mandate filed by Bankers Hill 150 and Bankers Hill/Park West Community Association (collectively, the “Association”), noting, among other things, that the petition had a “fatal flaw” by not addressing application of the Density Bonus Law.

The Density Bonus Law requires local governmental agencies to grant density bonuses and other incentives, waivers, or reductions if a developer offers to include a certain percentage of affordable housing units in its proposed project. In San Diego, for example, there is a base minimum density bonus of 20% and a maximum of 35% if a developer includes at least 5% of affordable units for very-low-income or 10% for low-income households in its project.

In addition, the law grants a developer “a reduction in site development standards or a modification of zoning code requirements or architectural design requirements that exceed the minimum building standards that results in identifiable and actual cost reductions.” This includes setbacks and height limitations. The law also requires local governmental agencies to offer a waiver or reduction of development standards that would prevent the construction of a project at the density that the Density Bonus Law would allow. For example, if the number of units with the density bonus requires a proposed building to be taller than allowed under a local zoning requirement, the requirement should be waived. The same goes for parking ratios.

There are only three limited exceptions to the Density Bonus Law that a local governmental agency may rely on: (1) there is no identifiable and actual cost reductions for a given incentive or concession; (2) the concession or incentive would have a specific, adverse impact on public health and safety or on a historic resource; and (3) the concession or incentive would be contrary to state or federal law.

In Bankers Hill, none of the exceptions applied, nor did the Association argue that they should. The Court of Appeal affirmed the trial court’s denial of the writ petition and found that “the Project was entitled to the benefits of the Density Bonus Law and the City property exercised its discretion to approve the Project.” Importantly, the court affirmed that the Density Bonus Law prevails over local development standards: “Greystar was entitled under the Density Bonus Law to a waiver of any development standard that would have the effect of physically precluding the construction of the Project at the permitted density and with the requested incentive unless the City could make the specified findings to warrant an exception from the Density Bonus Law.” (Bankers Hill, 2022 Cal.App. LEXIS 83 at *25 [emphasis added].)

The court also rejected the Association’s argument that the project’s design was dictated by the inclusion of a large courtyard. In other words, in the Association’s view, if the project did not include a large courtyard the building could have been shorter and within the setback boundary. Relying on Wollmer v. City of Berkeley (2011) 193 Cal.App.4th 1329, the court found that unless one of the statutory exceptions applies, “so long as a proposed housing development project meets the criteria of the Density Bonus Law by including the necessary affordable units, a city may not apply any development standard that would physically preclude construction of that project as designed, even if the building includes amenities beyond the bare minimum of building components.” (Id. at *28.) Quoting the Wollmer decision, the court explained that “nothing in the Density Bonus Law requires the applicant to strip the project of amenities, such as an interior courtyard, that would require a waiver of development standards. Standards may be waived that physically preclude construction of a housing development meeting the requirements for a density bonus, period. [Citation.] The statute does not say that what must be precluded is a project with no amenities, or that amenities may not be the reason a waiver is needed.” (Id. at *27.)

The request to change the status of the Bankers Hill decision from unpublished to published came from the California Building Industry Association, the Building Industry Association of the Bay Area, and Greystar. Thus, it would appear that developers would like to see this decision have statewide impact and help cut down on challenges to projects at the local level when a proposed project satisfies the requirements of the Density Bonus Law. Notably, the City of Encinas and The League of California Cities filed oppositions to the request to publish. The court’s decision to publish the decision simply stated that “the opinion meets the standards for publication specified in California Rules of Court, rule 8.1105(c).” That rule sets forth nine reasons to publish a case, including that the decision “[a]dvances a new interpretation, clarification, criticism, or construction of a provision of a … statute” and that the decision “[i]nvolves a legal issue of continuing public interest.” Whatever the reason for publication, developers and their attorneys will undoubtedly cite Bankers Hill frequently as project approvals make their way through administrative and judicial challenges.