Builder’s remedy test case heats up in Beverly Hills

Beverly Hills has long ranked as one of California’s most difficult places to build new homes, a sentiment borne out by its population data: In 1990, the city had 31,935 residents. Last July, a Census estimate counted 31,896.

But for years Sacramento has mandated that the wealthy enclave accommodate more housing, and now a legal battle over the city’s housing plan could bring major implications for builder’s remedy, the controversial development provision that has taken the state by storm since the fall.

“The [thinking] among some cities has been, ‘Well, we can deal with the builder’s remedy on a project by project basis and force developers to expend the resources to actually litigate it,’” said Matthew Gelfand, an attorney with Californians for Homeownership, a housing nonprofit that recently filed a lawsuit against Beverly Hills. “Our goal is to establish legally that the city is subject to the builder’s remedy right now.”

Californians for Homeownership is affiliated with the California Association of Realtors. FIled on Jan. 18, the suit seeks a court ruling against the city’s housing element — the document that outlines every California city’s housing plan — which has already been declared non-compliant by the state.

In response, the City of Beverly Hills, which has already adopted multiple versions of the document over the past year and could adopt another draft to send to the state later this month, signaled it doesn’t plan to acquiesce easily.

“This lawsuit … alleges that we have not done enough to provide for housing,” Larry Wiener, the Beverly Hills city attorney, said in a statement provided to TRD. “However, anyone who has been following the city’s efforts to fulfill the massive state mandate to zone for more housing units knows that the city has gone to incredible lengths to meet this mandate and the city has fulfilled our housing element requirements.”

Multiple rejections

The current dispute traces back to October 2021, when Beverly Hills and other Southern California jurisdictions faced a deadline to update their housing elements to meet state-determined quotas. For the current planning period, the state has determined that Beverly Hills, a highly desirable city with a strong local economy, needs to accommodate approximately 3,100 additional units, including nearly 1,700 affordable units. Under California law the updates are required on eight year cycles.

But more than 15 months after that deadline, the city — along with dozens of others — is still out of state compliance.

In January 2022 the California Department of Housing and Community Development (HCD), the agency that oversees the process, rejected the city’s first updated element, determining that it had failed to identify legitimate sites for potential housing. In late November HCD rejected another version. In mid-January, it rejected Beverly Hills’ revised element yet again.

“The list continues to include questionable sites,” the California Association of Realtors said in a Jan. 19 release, “including modern and recently renovated office buildings, a Jewish community center and a theater.” The sites also included health clinics run by Cedars-Sinai and UCLA.

Non-compliance theoretically opens Beverly Hills up to builder’s remedy, a provision that allows developers to bypass local zoning considerations as long as their housing projects include at least 20 percent affordable units. And one application using the strategy has already hit the city: a proposal for a 16-story, 200-unit apartment tower on Linden Drive filed by the developer Leo Pustilnikov in October.

But the builder’s remedy, which surged into statewide prominence only last fall after going all but forgotten for three decades, remains untested in the courts. If HCD and the attorney general’s office decide to pursue a case against Beverly Hills to enforce the non-compliance decision — and allow builder’s remedy projects in the city to proceed — that process could still take months, Gelfand pointed out.

Development implications

The lawsuit amounts to a test case to expedite the process by securing a court ruling on the city’s housing element. A win for the plaintiffs, or a favorable settlement, could then compel the city to revise its housing element to meet state requirements, and clarify that until it does so the builder’s remedy is valid in Beverly Hills. Under state law, the option remains on the table until a non-compliant city regains compliance, although a separate dispute is brewing about the definition of compliance.

“There could be other [developers] that would come out of the woodwork, if there were a clear legal decision that the builder’s remedy applies in the city,” Gelfand said.

Wiener, the city attorney, did not respond to a follow-up question about how Beverly Hills intends to respond to the builder’s remedy application already filed or applications that could still be coming. Another official only said that the city “will continue to address any additional applications.”

More specific court fights in Beverly Hills and other cities are likely coming. Under a different state law, developers can lock in builder’s remedy rights with only a preliminary application and then file a full project application within six months, and some cities have opted to wait to respond until the full applications are filed, adding another wrinkle to the legal drama.

To date, more than a dozen builder’s remedy applications have been filed in Santa Monica, Redondo Beach, West Hollywood and other L.A. County cities, with the charge led by Pustilnikov and WS Communities, the development firm run by Neil Shekhter and Scott Walter.

While the larger builder’s remedy story has so far largely been confined to Southern California, where developers first utilized the provision, the focus will widen soon to include the Bay Area, where jurisdictions faced a Jan. 31 compliance deadline.