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Short-term rentals have become a big issue in California in the last few years – but a new, unpublished appellate court involving Lake Arrowhead suggest that there might be a big difference between short-term rentals regulated by cities and counties and short-term rental restrictions imposed by a private non-profit entity. In the unpublished ruling, the Fourth District Court of Appeal upheld a preliminary injunction against the Arrowhead Lake Association’s new rules preventing short-term renters – and homeowners who are not members of the association – from accessing the privately owned Lake Arrowhead beach. The case still must be tried on the merits, but the appellate court said the homeowners challenging the new rules are likely to win – and, in the process, the justices shot down comparisons between the Lake Arrowhead Association and formal local government bodies – at least as far as the definition of a short-term rental is concerned. Located in the San Bernardino mountains 80 miles from Los Angeles, Lake Arrowhead is owned and operated by the Arrowhead Lake Association , a nonprofit organization which provides users with a wide variety of membership opportunities. In 1964, the previous owner of the lake entered into an agreement with homeownersin the surrounding Arrowhead Woods community, as well as their “lessees” and “houseguests,” the right to access the lake and enjoy its recreational facilities. As the short-term rental boom ramped up in 2020, the Arrowhead Lake Association changed its bylaws to bar all access to short-term renters – defined as a person who rents a home for less than 30 days – as well as Arrowhead Woods property owners who are not members of the association (as most are not). The association also put up fences and restricted access with RFID cards. (Ochoa’s preliminary injunction did not extend to the fences and the cards.) A group of Arrowhead Woods property owners sued and won a preliminary injunction from San Bernardino County Superior Court Judge Gilbert G. Ochoa. The association appealed the issuance of the preliminary injunction and the appellate court ruled in favor of the property owners who sued, saying they are likely to win the case on its merits. The ruling kept the preliminary injunction in place while the case proceeds. The court’s ruling turned in large part on the question of whether county and state definitions of lodgers and short-term renters should be applied to the association’s bylaws, which do not define lessees or lodgers. The association argued that, according to San Bernardino County regulations, a short-term renter is a transient occupant similar to a hotel guest. But in granting the preliminary injunction, Judge Ochoa wrote: “he issue is not how the County defines short-term renters for purposes of regulating and licensing owners whose homes are used for short-term rentals. The issue is the construction and meaning of lessee within the 64 Agreement at the time of the contract.” He concluded that, in the absence of a stricter definition in the agreement with the association, a short-term renter is a lessee. The appellate court agreed, noting that the relevant section in the association’s bylaws “does not distinguish between short-term renters who are given exclusive legal possession of premises and are responsible for their care and condition from those who have only the right to use the premises, subject to the landlord’s retention of control over them.” The association also argued that the court have recently created a sharp distinction between a lessee and a lodger for the purposes of eviction and transient occupancy taxes. But the appellate court applied similar reasoning, saying: “How California statutes define tenants, lodgers, and transient occupants, without reference to the state of the law in 1964 , is irrelevant to interpreting the contracting parties’ intent as to the scope of those they intended to protect as ‘lessees’ in the 1964 Agreement.” The Case: Vertical Web Ventures v. Arrowhead Lake Association, No. G062727 (filed February 7, 2024) The Lawyers: For Vertical Web Ventures and other property owners: John P. Zaimes, ArentFox Schiff, John.Zaimes@afslaw.com For Arrowhead Lake Association: Scott W. Ditfurth, Best Best & Krieger, scott.ditfurth@bbklaw.com

It’s not unusual for neighboring residents who dislike a project to use the California Environmental Quality Act process as a way to try to stop the problem no matter what is environmental impact. And it’s not unusual for elected officials to give angry neighbors what they want, again by using CEQA. It is a bit unusual for an appellate court to call everybody out, however. And in a ruling that could have widespread consequences for tiering of environmental impact reports, that’s just what the Fourth District Court of Appeal has done in a case involving a proposed recycling plant. The opinion is important because it allows a exemption to tier off of a programmatic environmental impact report. Located in unincorporated territory near the City of Escondido, the so-called North County Environmental Resources (NCER) project would operate 12 hours a day and surrounding residents are understandably opposed to it. But in 2020, San Diego County’s planning staff concluded that all the project’s potentially significant environmental impacts were dealt with in the programmatic EIR prepared for the update of the county’s General Plan in 2011 and, as a result, recommended that the project exempt under §15813 of the CEQA Guidelines unless there are project-specific significant impacts “peculiar” to the project or the site. The county’s zoning administrator agreed as did the planning commission. But neighboring residents appealed the decision to the San Diego County Board of Supervisors, which reversed the exemption decision and ordered an EIR to be prepared for the project. But the board had a hard time coming up with specific “peculiar” impacts, instead ordering the EIR based on general environmental concerns. The recycling center developer sued and won at the trial court level. But the appellate court used strong language to reverse. “We have not identified substantial evidence in the record to support the Board of Supervisors’ findings that the NCER Project would result in “peculiar” impacts in the areas of aesthetics, noise, traffic, GHG emissions, and air quality, within the meaning of Guidelines section 15183, subdivisions (b)(1) and (f).,” wrote Justice Terry O’Rourke for a unanimous three-judge panel. The case is especially important because it ties together programmatic EIR tiering with an exemption in a subsequent project. CEQA Guidelines §15813 states that lead agencies “shall not” require additional environmental review for a project that is consistent with current general plan policies “except as might be necessary to examine whether there are project-specific significant effects which are peculiar to the project or its site – essentially meaning that an additional EIR does not need to be prepared if no peculiar effects are likely. But neither the law or the guidelines that a lead agency can use §15813 as the basis for an exemption. Unclear as to whether site-specific environmental impacts might result from the NCER project, the county asked the developer of the project to provide a series of additional studies. After receiving those studies, the county staff concluded (in a 106-page “Statement of Reasons for Exemption from Additional Environmental Review and §15183 Checklist Pursuant to CEQA Guidelines §15183” (available here ) that an exemption was warranted. The appellate court accepted the argument, laying down significant language explaining how §15183 can be used to support an exemption. Before the appellate court, San Diego County’s lawyers – put in a difficult position because they had to defend the Board of Supervisors’ decision even though county staff and planning commission disagreed – argued that the “fair argument” test typically applied to whether an EIR should be prepared must also be used to review not only a determination that an exemption is appropriate but also a determination that an exemption should be denied, as was the case in front of the Board of Supervisors. The court did not buy this argument, saying: “We find no meaningful distinction between an agency decision approving a CEQA exemption, and a decision denying an exemption, that would warrant a differing standard of review. Guidelines §15183 is simply a regulation that effectuates the statutory exemption in §15183, and it therefore functions as a CEQA statutory exemption.” The county sought to invoke the 1995 case of Gentry v. City of Murrieta, 36 Cal.App.4th 1359, but the court instead relied on the discussion of §15183 in the recent case of Lucas v. City of Pomona , 92 Cal.App.5th 508, a cannabis case in which the court upheld an exemption based on comformance with the city’s adopted general plan. The court also spent considerable time on the question of whether the testimony of nearby residents created the need for an EIR in the case of the recycling center. For example, one resident testified that construction of the project would force him “to listen to loud crushing machines all hours of the day.” In very clear language the court distinguished between the potential experience of individuals and the “peculiar” impacts of a project required for an EIR under §15183. “Although these comments discuss ways in which individuals and the broader community may be personally impacted by the NCER Project, they altogether fail to address whether the purported project-specific impacts will be substantially mitigated by uniform policies in the PEIR,” Justice O’Rourke wrote. He added: “These residents may very well be able to hear, see, or otherwise perceive some aspects of the NCER Project, but this is not the threshold for determining the applicability of Guidelines section 15183. Further, the County does not suggest that any of the commenters, whether individuals commenting at the public hearings, or representatives of nearby municipalities and homeowners associations, were experts or qualified to contribute expert testimony.” The Case: Hilltop Group v. County of San Diego, No. D081124 (filed February 16, 2024). The Lawyers: For Hilltop Group (developer of recycling plant): David P. Hubbard , Gatzke Dillon & Ballance, dhubbard@gdandb.com For San Diego County: Joshua M. Heinlein, Deputy County Counsel, joshua.heinlein@sdcounty.ca.gov

The City of Berkeley has already gotten hammered in court over denying an affordable housing project that would be built on a parking lot over the remnants of a Native American shellmound. But now Berkeley’s going to have to pay as well.

The notoriously slow-growth City of Davis has reached a legal settlement over the controversial Palomino Place project, agreeing to process the project as a builder’s remedy project instead of taking it to a vote, which would be required under the city’s Measure J voter requirement. The Palomino Place proposal originally consisted of 165 housing units, including 33 affordable units, on property currently designated by the general plan for agricultural use. The settlement agreement would not quite treat the project as a purely builder’s remedy application, which would require City Council approval without discretionary consideration. Rather, according to the settlement agreement, the developer will increase its commitment for affordable housing to 25% of the project (45 units), while the city promises to process the project quickly, produce an environmental impact report, and act on the project by the end of 2024. The developer agreed to consider mitigations under the California Environmental Quality Act. The project would not go to a vote as would ordinarily be required under Davis’s Measure J. In the lawsuit filed last, the Palomino Place developer, J. David Taormino, argued that the city’s delays amounted to a denial of the project, blowing processes and deadlines required under the Housing Accountability Act, the Permit Streamlining Act, and the California Environmental Quality Act. According to the lawsuit, the city’s community development director deemed the application complete in August 2022 and began the process of securing a CEQA consultant but that process has not moved forward. “Despite Petitioners' numerous requests and repeated false starts, the City has taken no formal steps to advance the residential development project since August 19, 2022,” the lawsuit said. (For previous CP&DR coverage of the lawsuit, look here .) The legal settlement claims that the city now has an environmental consultant under contract to conduct the EIR. “After carefully reviewing state law and conferring with the city attorney, it became clear that this project qualified as a Builder’s Remedy project,” Davis Mayor Josh Chapman told the Davis Enterprise . “This settlement will save on litigation costs for the city, provide more affordable housing units for the community and resume the long awaited process for the Palomino Place project.” In the underlying lawsuit, Taormino detailed the back-and-forth between Davis and HCD over housing element compliance, providing a timeline showing that between 2021 and 2023, HCD rejected the city’s housing element three times. It originally appeared as though Davis would argue that the city, not HCD, is the ultimate arbiter of housing element compliance. This is the argument being made by La Cañada Flintridge in a similar pending case in which the city argued its own approval of the housing element resulted in compliance and HCD does not have the legal power to determine compliance. (For the rundown on the La Cañada Flintridge case, check out the string of links contained in  CP&DR ’s coverage of the city’s recent reply to the developer’s builder’s remedy lawsuit  here .)

A San Luis Obispo County can’t go forward with the second phase of a seven-lot subdivision – even though the first phase is already built.

Almost a year after losing an important appellate court ruling in a housing element lawsuit, the City of Clovis has agreed to a wide-ranging settlement agreement that includes:

In the latest expansive ruling in favor of housing developers, a Los Angeles Superior Court judge has ruled that La Cañada Flintridge’s decision not to move forward with a builder’s remedy project constituted “disapproval” of the project under the Housing Accountability Act and has ordered the city to move forward with approving the project as a builder’s remedy application. “While the City Council may not have voted to deny the conditional use permit, tentative tract map, and tree removal permit,” wrote Judge Mitchell Beckloff, “the City Council voted on May 1, 2023 and determined the Project could not proceed as the project proposed-a Builder's Remedy project. Because the Project was proposed as a Builder's Remedy, the City Council's May 1, 2023 vote on the project application was a "disapproval" within the meaning of the HAA.” The La Cañada Flintridge decision adds to recent housing element rulings in favor of developers comes after an Alameda County judge’s ruling that Berkeley owes a developer a total of $4 million for denying a builder’s remedy application and a Los Angeles judge’s decision to suspend Beverly Hills’ permit authority because of defects in its housing element. (In addition, Davis and Clovis have recently settled major housing element lawsuits. For a summary, see my recent Insight column  here .) The La Cañada Flintridge case is perhaps the most closely watched builder’s remedy case in the state. (Previously CP& DR coverage of the case can be found here .) The 39-page ruling, issued on March 4, breaks new ground because it interpreted a refusal to move a builder’s remedy application forward as a project denial. The city repeatedly argued that it had the power to deny the application because it adopted a compliant housing element. The city adopted a housing element in October 2022 and, after review by the Department of Housing & Community Developed, adopted a revised element in February 2023. The applicant, 600 Foothill Owner LLC, filed the builder’s remedy application in November 2022. 600 Foothill is controlled by Cedar Street Partners, a Glendale-based developer. A major legal question in several builder’s remedy cases has been whether a local jurisdiction can self-certify that its housing element is compliant with state law or, instead, needs approval of the state Department of Housing and Community Development. However, Judge Beckloff did not rule on this question directly. Rather, repeatedly noting that he was “exercising … independent judgment,” he ruled that the October 2022 housing element was not compliant with state law. The case in question was not the case the developer brought against the city but, rather, a companion case brought by the California Housing Defense Fund. In the case brought by the developer, the City of La Cañada Flintridge took issue the idea that the Department of Housing and Community Development has independent authority to determine whether a housing element is compliant or not. Only the courts have that power, the city said in its recent rebuttal to the developer’s July lawsuit. In the rebuttal, the city also said it doesn’t have to pursue Affirmatively Furthering Fair Housing (AFFH) goals required by HCD because the U.S. Supreme Court recently struck down affirmative action in  Students for Fair Admissions v. Harvard. In its lawsuit, the developer alleged that after it approved the housing element in October 2022, the city engaged in a shifting position, requiring additional information to deem the builder’s remedy complete, then supposedly applying new city-approved standards to the project and “backdating” a revised housing element before finally denying the project in May. ( CP&DR ’s coverage of the developer’s lawsuit can be found  here .) In its rebuttal to the Cedar Street Partners lawsuit, the city argued that does not have the legal power to determine whether or not a housing element is in compliance. “HCD cannot be given or wield any power to  finally  determine that a Housing Element is not “substantially compliant” with the Housing Element Law,” said the city’s response, adding that only the courts can decide whether a housing element is in compliance with state law. (Assemblymember David Alvarez, D-San Diego, recently introduced AB 1886 , which would resolve this issue by saying HCD approval is required.) But in the California Housing Defense Fund case, Judge Beckloff concluded that even by the city’s own reckoning, it did not have a compliant housing element in October 2022 – as evidenced by the fact tht the Ctiy Council adopted a revised housing element in February 2023 based on comments from HCD. The city also took a strong position on Affirmatively Furthering Faith Housing (AFFH), which has been a strong emphasis in housing elements by HCD ever since Gustavo Velasquez took over as director. Valasquez was Assistant Secretary for Fair Housing at the federal Department of Housing and Urban Development in the Obama Administration and championed a federal AFFH rule there. Since moving to Sacramento he has similarly championed AFFH in virtually all HCD activities, including housing elements. But La Cañada Flintridge claimed the recent U.S. Supreme Court ruling striking down affirmative action in higher education ( Students for Fair Admissions v. Harvard) rendered the whole AFFH discussion moot. In the California Housing Defense Fund case, Judge Beckloff embraced the city’s view that only the courts can decide whether a housing element is in compliance with state law. But then he ruled against the city. On the question of whether the housing element was in compliance with state law, he found, among other things, that the city had not done an adequate job of analyzing whether non-vacant sites identified for housing would actually be available during the period the housing element covers (2021-2029). On the Affirmatively Furthering Fair Housing argument, the judge focused on the fact that many of the sites identified for low-income housing were in close proximity to a freeway. The city argued that it has met AFFH analysis requirements by reaching out to various stakeholder groups, but the judge ruled that “outreach alone does not substantially comply with the requirement. He added, “Outreach does not constitute analysis.” The Case: California Housing Defense Fund v. City of LaCañada Flintridge , Los Angeles County Superior Court No. 23STCP02614 (Ordered filed March 4, 2024). The Lawyers: For California Home Defense Fund: Lisa Ells, Rosen Bien Galvan & Grunfeld, lells@rbgg.com

Opponents of an affordable housing project in downtown Livermore have won the latest legal skirmish, with an appellate court ruling that the city must allow a referendum on the project to move forward.

The City of Fresno has filed a lawsuit against Fresno County over the environmental impact report associated with the county’s general plan. In the lawsuit, which comes after several rounds of comments on the EIR, the city generally asserts that the county’s mitigation measures on land use and agricultural land conversation lack teeth and don’t meet legal requirements.

A Superior Court judge has ordered the City of Huntington Beach to continue processing a wide variety of housing applications and suspended the city’s ability to knock down the density on projects identified in the housing element, pending resolution of a lawsuit from the state. On March 28, San Diego Superior Court Judge Katherine Bacal granted the state’s request for temporary relief and a preliminary injunction preventing Huntington Beach from:

A California Environmental Quality Act challenges to the expansion of a gun club on land owned by the City of Ukiah in unincorporated Mendocino County isn’t moot simply because the expansion has been completed, an appellate court has ruled. The county – which initially concluded it had no regulatory authority over the project – could still impose meaningful CEQA mitigations assuming the expansion of the club leads to increased activity, the court concluded. The case will now return to Mendocino County Superior Court for more action.

The provision in SB 10 allowing local elected officials to override zoning provisions adopted by local voters is constitutional because the local electeds are “cloaked in the mantle of the state” when they choose to implement SB 10, an appellate court panel has ruled. Along the way, the panel struck a blow in favor of the market, saying that California’s housing crisis is the result of a lack of supply and the state is the “logical” entity to try to fix the problem, rather than local governments. SB 10, adopted by the Legislature in 2021, permits local governments to allow up to 10 units on a single parcel of land without going through an environmental review under the California Environmental Quality Act. The law isn’t mandatory; local governments must implement it with an ordinance for it to take effect. It hasn’t been widely used (see previous CP&DR coverage here), but it did draw an almost immediate lawsuit from the AIDS Healthcare Foundation and the City of Redondo Beach, which zeroed in on SB 10’s provisions that allow local officials to override density caps adopted by the voters. The foundation and Redondo Beach argued that the provision is unconstitutional because, under California’s system of initiative and referendum enshrined in the state constitution, voters prevail over their legislators. Redondo Beach passed a "subsequent voter requirement" for major land use changes in 2008, which has led to several ballot measures and litigation over the now-shuttered AES power plant near the beach. In 2022, a Los Angeles judge ruled against the plaintiffs (see CP&DR coverage of that ruling here) and a unanimous three-judge panel of the Second District Court of Appeal has now affirmed the ruling, saying the SB 10 provision is constitutional. “We so conclude,” wrote Justice Brian Hoffstadt, “because the housing shortage is a matter of statewide concern, because Senate Bill 10 conflicts with (and hence preempts) local initiatives that make housing density caps mandatory, and because Senate Bill 10’s more narrowly tailored mechanism of cloaking counties and cities in the mantle of state preemptive authority so that they may decide whether to supersede a local density cap on a parcel-by-parcel basis—rather than effecting a wholesale invalidation of all local density caps in every county and city—is not constitutionally problematic.” In reaching the conclusion, the three-judge panel noted that while land use issues have been “‘historically’” and “traditionally” a function of local governments in California, “the sub-issue of ensuring affordable housing has been a matter of statewide concern for nearly six decades.” But using a traditional supply-and-demand argument, the court also found a factual basis for state override of local powers in the land use arena. “Under basic economic principles, prices go up when demand exceeds supply,” Hoffstadt wrote. “Thus, the rise in housing prices at every income level in California is logically linked to the insufficient supply of housing at all of those income levels. What is more, the task of ensuring a great supply of housing is one that is logically handled at the state level. That is because local governments are susceptible to ‘not in my backyard’ (or NIMBY) pressure.” Critical to the court’s ruling was its conclusion that local elected officials, when they adopt an SB 10 enabling ordinance, are not acting as local officials but rather as agents of the state government. The AIDS Healthcare Foundation and Redondo Beach made a series of arguments about the constitutionality of the SB 10 provision, including the argument that pre-emption is unnecessary because local voters can be asked to lift existing density caps and therefore there is no conflict between those caps and SB 10. But the court wrote: “Local housing density caps conflict with and are inimical to Senate Bill 10.” (In an apparent error, the court actually wrote “housing destiny caps”.) The court added that the plaintiffs’ argument “utterly ignores that a main reason our Legislature enacted Senate Bill 10 is because local electorates were blocking attempts to increase housing density.” The plaintiffs also argued that the legislative intent to override local caps was not strong enough in SB 10 but the court disagreed. Referring to the Government Code section amended to accommopdate SB 10, the court wrote: “Section 65913.5 explicitly grants local legislative bodies the power to “adopt an ordinance to zone a parcel for up to 10 units of residential density per parcel” “otwithstanding any local restrictions . . . including . . . restrictions enacted by local initiative.” (§ 65915.3, subd. (a)(1), italics added.) Indeed, section 65913.5 even goes so far as to erect a separate and higher procedural requirement for superseding an initiative-based housing density cap than for superseding a legislatively enacted cap—namely, a two-thirds vote rather than a simple majority. (Id., subd. (b)(4).)” Critical to the court’s ruling was its conclusion that, in adopting an SB 10 enabling ordinance, local elected officials are not acting in their local capacity – which would be overridden by the voters – but as agents of the state. The plaintiffs had argued that the way SB 10 was written – not by taking all initiative power away from the voters and giving it to elected officials, but rather, by creating a narrow exception – effectively pits the local elected officials against their own voters. “This argument ignores that the local legislative body in this instance is wearing the mantle of state preemptive power, and hence it is not pitting “local” against “local” but rather “state” against “local”—and the Constitution dictates that the state should prevail in that battle,” the court wrote. The Case: AIDS Healthcare Foundation v. Bonta, No. B321875 (filed March 28, 2024) The Lawyers: For AIDS Healthcare Foundation and City of Redondo Beach: Michael Webb, Redondo Beach City Attorney, michael.webb@redondo.org , and Beverly Grossman Palmer, Strumwasser & Woocher, bpalmer@strumwooch.com . For State of California: , Benjamin M. Glickman, Benjamin.Glickman@doj.ca.gov , and Seth E. Goldstein, seth.goldstein@doj.ca.gov , Deputy Attorneys General.