Can California Make Builder’s Remedy Work?

Alexandra Hack, a principal at Cedar Street Partners, has taken on an expensive endeavor.

She’s one of a handful of developers testing out the viability of builder’s remedy in California’s courtrooms in order to get more housing built.

Builder’s remedy is a long-forgotten, untested loophole that is essentially a penalty for California cities that fail to get state-approved housing plans in order by a certain deadline.

In theory, it’s a slam dunk — if a city is out of compliance, developers can bypass local zoning rules, as long as 20 percent of the project is affordable. The reality, however, is more complicated.

Hack’s builder’s remedy journey began in November 2021, when her firm’s application for a mixed-use residential and retail project located at 600 Foothill Boulevard project in La Cañada Flintridge was denied. Litigation followed.

Over two years and “millions of dollars” later, Hack got her win.

On March 5, the Superior Court of Los Angeles ruled in Hack’s favor in the case of California Housing Defense Fund v. City of La Cañada Flintridge, ordering Cedar Street Partners’ application to be processed in accordance with state law as a builder’s remedy project.

“This decision demonstrates that cities have a legal obligation to allow housing development to address our severe housing and homelessness crisis, and that if they fail to develop local plans to meet this need, the builder’s remedy will allow for it regardless,” Dylan Casey, who runs California Housing Defense Fund, told TRD on March 5. “Cities can no longer pretend that the builder’s remedy doesn’t exist.

The following day, Cedar Street got its own final decision, ordering the City of La Cañada Flintridge to “set aside” a decision from May 1 rejecting the project and saying it did not “qualify” as builder’s remedy, according to the ruling.

This ruling marks the first builder’s remedy case to be approved by a California court, creating a precedent for other projects and clearing the path for builder’s remedy in other jurisdictions. There are 67 builder’s remedy cases across California, according to data compiled by San Francisco-based non-profit Yes In My Back Yard.

“It’s very significant as the first official court ruling endorsing the builder’s remedy as a real penalty for Housing Element non-compliance,” says Dave Rand, an attorney at Rand Paster Nelson, calling it a “big boost for other builder’s remedy cases, such as in Beverly Hills.”

It has taken developers like Cedar Street Partners a lot of time, back-and-forth correspondence and financial resources to get to see their projects greenlighted in court, with many cases still pending.

Governor Gavin Newsom and the state’s attorney general, Rob Bonta, who both commented on the case in December, were thrilled with the decision. Newsom used the opportunity to warn other jurisdictions about the consequences of non-compliance.

“Today’s favorable ruling should serve as a warning to other NIMBY jurisdictions that the state will hold every community accountable in planning for their fair share of housing,” he said in a statement on March 5.

Bonta said the California Department of Justice is “pleased that the court agrees with us that La Cañada Flintridge must follow state housing laws to facilitate affordable housing and alleviate our housing crisis.”

In the absence of codified law spelling out builder’s remedy application, the intervention of high-profile state officials played a critical role.

“Probably the biggest dynamic shift in favor of the builder’s remedy against the city in this case came when the governor and the Attorney General decided to intervene — that lended huge credibility and legal heft in favor of builder’s remedy,” Rand said, as reported earlier by The Real Deal.

“Onerous and long”

Given the time and financial resources involved, Hack called builder’s remedy a “tool of last resort,” given the time and complexity that comes with it.

On the La Cañada Flintridge project, her firm received at least six letters from the same government office offering conflicting instructions and requests for more information.

Hack sounded befuddled by the government’s resistance to her firm’s plan to develop their project in City of La Cañada Flintridge, through builder’s remedy or without.

“Our site in particular, there’s an unhoused individual taking up residence in it,” she says, referring to the 600 Foothill property site location in La Cañada. “I mean, it’s completely derelict.”

Leo Pustilnikov, a self-made immigrant and the son of Soviet Jewish refugees who fled present-day Ukraine in the late 1980s, has become another outspoken proponent of the builder’s remedy movement.

Pustilnikov and other developers who have chosen to take this route have to be prepared to sue cities and sometimes be locked in back-and-forth court battles for months or even years.

Many, including Hack and Pulstilnokov have taken on several high-profile lawsuits against local governments, including in other jurisdictions like Santa Monica and Beverly Hills. His lawsuits have become costly court battles that try to navigate California’s convoluted and at times conflicting statutes.

“The court process is a very onerous and long process that adds to the timeframe,” Pustilnikov acknowledges.

Most recently, the judge denied his builder’s remedy application for a 35-unit apartment project in Redondo Beach. In that case, the judge attempted to weigh what rules were more important — coastal commission regulations or the concept of builder’s remedy.

Pustilnikov described the costs involved as “astronomical,” estimating the Redondo case will take around three years and cost around $2 million in total.

While tens of applications have been filed under builder’s remedy, no new construction has been built to date in California under the provision. That’s because it’s not exactly a shortcut.

“The process for builder’s remedy is just as bad [as alternatives],” Sonja Trauss, president of San Francisco-based non-profit Yes In My Back Yard, told TRD. “There’s nothing simple about the process, it’s all about what’s allowed. “

The history of builder’s remedy in California is still being written. It’s not a given that other jurisdictions with pending builder’s remedy cases will follow the final decision in the La Cañada case, heed the governor’s warnings or how long courts will take to deliberate.

Other developers will be watching the City of La Cañada’so response and likely appeal.

“The next big legal step is the court of appeal upholding and validating this decision,” Rand said. “It’s not considered binding case law until an appellate court issues a published legal decision on appeal.”

For those championing builder’s remedy, the decisions on La Cañada mark a significant breakthrough.

“Since its addition to state housing law in 1990, there have been no homes actually approved and constructed as a result of the [builder’s remedy] provision,” the California Housing Defense Fund said in a statement on March 6. “This is all about to change.”