Housing Crisis No More: Ruegg & Ellsworth v. City of Berkeley Is A Step Toward Addressing the State’s Housing Shortage

Ruegg & Ellsworth v. City of Berkeley
(2021) (Case No. A159218)

A recent Court of Appeal decision, Ruegg & Ellsworth v. City of Berkeley, is a win for land developers and a step toward solving the housing crisis in California.  In Ruegg & Ellsworth, filed April 20, 2021, California’s First District Court of Appeal reversed the trial court’s denial of the petition filed by the developer of a mixed-use project.  The project was rejected by the city after the developer sought approval under the streamlined, ministerial process provided for in Senate Bill No. 35 (SB 35), which added section 65913.4 to the Government Code effective January 1, 2018.  For housing developments in the state, this case signals judicial deference will be given to the strong legislative intent to address the housing shortage.

Senate Bill 35

If a locality has failed to provide its share of “regional housing needs, by income category,” section 65913.4 requires a “ministerial approval process” for certain affordable housing projects that satisfy all of the “objective planning standards” enumerated in the statute.  In addition to the objective planning standards, the project must not be located on a site where the development would require the demolition of “a historic structure that was placed on a national, state, or local historic register.”  SB 35 is a measure adopted by the state legislature to reduce the housing shortage, and affordable housing shortage in particular.

The City’s Denial of Project Application

 The city denied the developer’s application to build 260 dwelling units, 50 percent of which would be affordable to low-income households, over approximately 27,500 square feet of retail space and parking.  The city’s denial letter stated that SB 35 could not constitutionally be applied to the project because of the city’s right, as a charter city, to govern itself with regard to municipal affairs, including protection of local landmarks.  And, even if SB 35 applied, the city maintained the project did not satisfy the requirements for ministerial approval due to the fact that the project might require demolition of historic structure that has been placed on a state and local historic register.  The city’s decision on this point was linked to its finding that the project is in an area (the West Berkeley Shellmound) designated a city landmark and listed in the state register of historical resources.

No Deference to the City’s Historic Structure Determination

The court did not agree with the trial court’s application of a deferential standard of review to the city’s determination that the project will require demolition of a historic structure.  The court found compelling the developer’s position that the standard of review applied by the trial court “effectively nullifies the legislative intent in section 65913.4 by insulating from review the fact-finding underlying an agency’s determination whether its ministerial duty to approve a project is triggered.”

The court reasoned that the deferential standard was applied in error because whether the Shellmound is a “structure” within the meaning of SB 35 is a legal issue the court reviews de novo, and whether the Shellmound exists on the project site is a question of fact.  However, the court did not go as far as defining the applicable standard because the record did not support the city’s conclusion that the project would require demolition of a historic structure placed on a historic register.  Importantly, the landmark designation for the area does not include any above ground buildings or structures; instead, it includes “the site itself and all items found subsurface including artifacts from the earliest native habitation, such as but not limited to native tools, ornaments, and human burials.”  Despite the city’s and intervenor’s creative attempts at interpreting and defining a “structure,” the court stated that while the Shellmound is an important historical and cultural resource, designated by the city as a “site,” SB 35 uses the term “structure,” and not “resource” or “site,” and the legislature is “certainly aware of the distinctions between these terms.”

The court also rejected the intervenor’s argument that tribal cultural resource protections under Assembly Bill 831 should be applied to the project even though they were enacted after the project application was submitted.

The City Is Not Exempt from SB 35

The city also argued that applying SB 35 would impermissibly interfere with the city’s “home rule” authority over historic preservation and the city was therefore exempt from SB 35.  To determine whether a matter comes within a charter city’s home rule authority, courts analyze four issues: whether the city ordinance at issue regulates an activity that can be characterized as a municipal affair; whether there is an actual conflict between local and state law; whether the state law addresses a matter of statewide concern; and whether the law is reasonably related to resolution of that concern and narrowly tailored to avoid unnecessary interference in local governance.  All parties and the court agreed that local historic preservation is a municipal concern, and the city’s landmark preservation ordinance is in a direct conflict with SB 35.  The legislative history and intent of the state housing laws in general, and SB 35 in particular, as well as applicable case authority, indicate that access to affordable housing is a matter of statewide concern.

The city argued that the statewide interest in housing does not automatically translate into a statewide interest in eliminating local agency authority of landmark designation.  The court rejected this framing of the issue and explained that the constitutionality of section 65913.4 does not turn on there being a statewide interest in limiting local historical preservation authority, but rather on whether the statewide interest in increasing affordable housing sufficiently justifies the legislation’s impact on that authority.  The relevant question, therefore, is whether the statute is reasonably related to resolving the statewide interest it addresses and does not unduly interfere with the city’s historical preservation authority.  The court answered the question with a “yes” based on the long history of legislative attempts to address the state’s housing crisis and frustration with local governments’ interference with that goal, and the highly subjective nature of historical preservation.

Similarly, as to the city’s argument that SB 35 interferes with its land use authority, the court held that the extent to which SB 35 interferes with local regulation of commercial uses appears to be fairly minimal, and incidental to the statute’s purpose of facilitating development of affordable housing.

The Court Ruled Against the City on Other Issues

Lastly, the court addressed whether SB 35 applies to mixed-use development.  The court followed the statute’s purpose, which is to expedite processing of affordable housing development, as well as the purpose of the state housing laws in general, and held SB 35 applies to mixed-use development.  The court also rejected the city’s argument that it could rely on its affordable housing ordinance to deny ministerial approval to a project providing 50 percent low-income housing because the city’s argument would frustrate the purpose of SB 35.  And, the court concluded the city’s traffic impact reason for denial, which was not specifically raised in the pre-denial letter required by SB 35 to be provided to the applicant, was waived.

[This alert does not constitute legal advice and no attorney-client relationship is created by viewing or responding to this alert.  Legal counsel should be sought for answers to specific legal questions.]