Daniel R. Golub, William E. Sterling and Luca Trumbull | Holland & Knight
Highlights
- Many California jurisdictions rely on housing “overlay” zones to meet rezoning requirements under State Housing Element Law. In New Commune DTLA LLC v. City of Redondo Beach, the Second District Court of Appeal held that “[a]n overlay cannot be used to satisfy the minimum density and residential use requirements … where the base zoning expressly permits development that does not include housing.”
- This decision significantly reinterprets State Housing Element Law and invalidates the City of Redondo Beach’s Housing Element, despite it having been certified by the state’s Department of Housing and Community Development.
- The new ruling may expose numerous jurisdictions to new Builder’s Remedy applications, though it is unclear whether additional litigation is required to affirmatively invalidate other housing elements.
- The decision also creates uncertainty for non-Builder’s Remedy applicants who seek to utilize housing overlay zoning to develop other residential, nonresidential or mixed-use projects.
California’s Second District Court of Appeal recently held that local governments cannot satisfy their Regional Housing Needs Allocation (RHNA) obligations by using zoning “overlays” that allow, but do not require, residential development. Residential overlay zoning is a very common practice in housing elements statewide, and this ruling could have far-reaching implications for housing production in California, particularly if it reopens the door to Builder’s Remedy projects in the many jurisdictions that have such overlay zones.
Holland & Knight’s West Coast Land Use & Environmental Group is currently assisting with more than 40 Builder’s Remedy applications statewide, accounting for more than 12,000 new homes – including some of the most recently approved Builder’s Remedy projects in the state. Our practice group is well positioned to advise with respect to the prospects of invoking Builder’s Remedy on the basis of the new opinion.
Background
California law requires every jurisdiction to adopt a general plan, often described by courts as the “‘constitution’ for future development,” with which all subsequent land use and zoning approvals must be consistent.1 Since 1965, state law has mandated that each general plan include a “‘housing element’ that, as summarized by the Court in this case, is “[e]ssentially, … a set of ‘standards and plans for housing sites in the municipality that shall endeavor to make adequate provision for the housing needs of all economic segments of the community.'”2
To comply, housing elements must include “[a] program that sets forth a schedule of actions during the planning period … that each local government is undertaking or intends to undertake to implement the policies and achieve the goals and objectives of the housing element.”3
For many decades, it was rare for a city to be found out of substantial compliance with Housing Element Law – and even rarer for there to be meaningful consequences for such lack of compliance. But in recent years, a city’s compliance with Housing Element Law has become of paramount importance, because the “Builder’s Remedy” takes effect if a city’s Housing Element does not substantially comply with Housing Element Law. (See Holland & Knight’s previous alert, “California Legislature Passes Major Reforms for “Builder’s Remedy” Projects,” Sept. 11, 2024.)
The Court’s Reasoning
An “overlay” zone is superimposed over existing zoning to permit or restrict other additional uses. In New Commune DTLA LLC v. City of Redondo Beach, the court considered an overlay zone enacted by the City of Redondo that permits housing but also expressly permits other nonresidential uses. The city identified sites subject to this overlay zoning as realistically able to accommodate lower-income housing and claimed that such sites were consistent with Housing Element Law provisions that require such sites to “be zoned with minimum density and development standards that” permit specified minimum density standards (20 dwelling units per acre in the case of suburban jurisdictions such as Redondo Beach).4 The court held that this approach fails to meet requirements imposed by Housing Element Law for two reasons.
1. Failure to Guarantee Minimum Density
New Commune DTLA LLC v. City of Redondo Beach builds on Martinez v. City of Clovis, the most recent major published opinion regarding Housing Element Law.5 In Martinez, California’s Fifth District Court of Appeal analyzed the City of Clovis’ 2015-2023 Housing Element to determine whether Clovis complied with Government Code Section 65583.2(h)(2), where it identified as housing element inventory sites parcels that were zoned to permit a residential density of less than 20 dwelling units per acre. There, the Martinez court rejected Clovis’ housing sites inventory because “the term ‘minimum density and development standards’ is not susceptible to multiple interpretations and means what it says – that the sites must be zoned with at least a density of 20 units per acre. As drafted [Clovis’s overlay zone] merely allows an additional possible density and does not impose a minimum density of ‘at least 20 units per acre.'”6
In New Commune DTLA LLC, the court relied upon similar reasoning. The court noted that because the city’s overlay zones sit atop commercial or industrial base zoning, projects can be approved without providing any residential component. As stated in Martinez, this practice allows, but does not impose, any minimum quantity of residential development.7 The court held that this impermissible structure does not ensure housing production and violates the mandatory language set forth in State Housing Element Law. Observing that the Redondo Beach Housing Element’s overlay zoning regime failed to uphold the minimum residential density requirement, the court declared that overlay zoning regime unlawful.
2. Violation of Residential-Only Requirement for Lower-Income Sites
As a similar but independent basis to find the city’s housing overlay regime unlawful, the court noted that the same statute requires that at least 50 percent of all lower-income housing sites identified in the sites inventory be “accommodated on sites designated for residential use and for which nonresidential uses or mixed uses are not permitted.”8 But the court noted that the city’s housing overlay “preserves underlying commercial and industrial zoning that expressly permits nonresidential uses including retail, office, manufacturing, and warehousing.” “The city cannot simultaneously permit and prohibit a particular use on a single site.”9 Therefore, because the housing overlay prevented the city from allocating at least 50 percent of lower-income units on exclusively residential sites, the court concluded that the city’s housing element failed to satisfy Housing Element Law.10
Implications
This decision signals a stricter judicial application of Housing Element Law than the approach taken by the California Department of Housing and Community Development (HCD), which certified numerous housing elements that relied upon (now-unlawful) zoning overlays as substantially compliant with State Housing Element Law.11 Notably, in both Martinez and New Commune, HCD had certified the Housing Elements at issue as substantially compliant. Both courts emphasized that HCD’s view was entitled to considerable weight, but the courts were unwilling to defer to HCD’s determination with respect to a requirement the courts considered proscribed by the statutory text. HCD’s view of Housing Element Law is likely to remain persuasive, particularly when the agency determines a locality’s Housing Element does not substantially comply with Housing Element Law – but these opinions emphasize that HCD’s imprimatur does not provide a complete safe harbor to cities whose Housing Elements fail to meet statutory requirements.
The court’s decision raises major questions about the ongoing validity of many certified housing elements, notwithstanding HCD’s certification. In particular, developers and housing advocates are expected to contend that housing elements reliant on overlays are invalid as a matter of law, such that the Builder’s Remedy is now available in impacted jurisdictions. To reject new Builder’s Remedy applications, these local governments will be forced to rely on housing elements that run afoul of the court’s holding. In fact, at least one case has already been filed asserting that the New Commune opinion invalidates a previously certified Housing Element.12
Local governments, of course, may argue that the court’s decision does not automatically invalidate housing elements in other jurisdictions. Resolution of these issues through litigation is anticipated.
In addition to the potential reopening of the Builder’s Remedy window, this decision introduces general uncertainty for applicants seeking approval for projects located within existing housing overlay zones. As previously discussed, it remains unclear whether zoning overlays currently in effect are automatically invalidated or whether a court must affirmatively invalidate each overlay pursuant to a legal challenge. In the face of such a challenge, applicants for residential development may argue that they possess vested rights to proceed under the housing overlay zone, notwithstanding the New Commune decision. Applicants for nonresidential development may also seek to assert their vested rights if residential developers use the principles underlying the Martinez and New Commune decisions to argue that nonresidential development is prohibited within housing overlay zones. The New Commune decision temporarily complicates the approval process for all projects within housing overlay zones, and these arguments will likely arise in litigation.
Conclusion
The recent decision in New Commune DTLA LLC v. City of Redondo Beach meaningfully builds on the principle set forth in Martinez v. City of Clovis: the language of State Housing Element Law is mandatory and unambiguous, and housing overlay regimes that fail to satisfy minimum density requirements do not comply with the law. Collectively, these cases represent a significant shift in the interpretation of State Housing Element Law, compelling jurisdictions to promptly reevaluate their housing elements to mitigate litigation risk and potentially reopening the door to Builder’s Remedy projects. In light of this development, developers and property owners should carefully review the housing elements of target jurisdictions to determine whether those elements improperly rely on now-unlawful housing overlay zones to satisfy RHNA obligations. This is especially pertinent for developers of sites zoned for nonresidential uses. For assistance in evaluating these adopted Housing Elements or assessing the prospects of invoking the Builder’s Remedy, or to receive more information on how this ruling may affect your projects or properties, consult a Holland & Knight attorney.
Notes
1 DeVita v. County of Napa (1995) 9 Cal.4th 763, 772-73 (quoting Lesher Communications, Inc. v. City of Walnut Creek (1990) 52 Cal.3d 531, 540).
2 New Commune DTLA LLC v. City of Redondo Beach (2025) 115 Cal.App.5th 111, 122 (quoting California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435, 444).
3 Gov. Code § 65583(c).
4 Gov. Code § 655583.2(h)(2).
5 Martinez v. City of Clovis (2023) 90 Cal.App.5th 193.
6 Id. at 240 (quoting Gov. Code § 65583.2(h)). Emphasis added.
7 See New Commune, 115 Cal.App.5th at 135 (quoting Martinez, 90 Cal.App.5th at 244).
8 Gov. Code § 65583.2(h)(2). See also New Commune, 115 Cal.App.5th 111 at 136.
9 New Commune, 115 Cal.App.5th at 136.
10 Id.
11 Id. at 137.
12 The Mission LLC v. State of California, Case No. 2:25-cv-10231 (C.D. Cal., Oct. 24, 2025).
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