San Jose Fights Developers Who Downzoned Housing Projects

Several lawsuits are making their way through the California courts challenging the state’s enforcement of builder’s remedy, which fast-tracks new housing projects by enabling developers to go around zoning officials in cities who haven’t had their long-term plans for new housing approved by the state.

These legal challenges are seeking to block builder’s remedy housing projects, restoring a city’s right to reject them, but soon they may be joined by a case that flips this script:

San Jose, which a week ago had its eight-year housing element plan approved by California’s Department of Housing and Community Development (HCD), has wasted no time in pushing back against developers it is accusing of downsizing approved housing projects by improperly invoking builder’s remedy.

After San Jose failed to gain state approval for its housing plan in time to meet the state’s January 2023 deadline, developers for 29 housing projects in the city invoked builder’s remedy.

Builder’s remedy has been on the books for several decades in California, but was rarely invoked until last year, when the state said it would enforce the loophole in cities without approved housing plans until they come into compliance.

Now in compliance, San Jose said this week that nearly a third of the builder’s remedy applications it received since last June involved the downsizing of housing projects it had previously approved-they call it “downzoning” -reducing the number of apartments to be built by a total of 4,177 units, according to a report in SiliconValley.com.

This week, San Jose sent letters of rejection to the developers of the downsized projects, initiating what observers expect will be a legal dispute that could redefine the parameters of builder’s remedy.

Among the projects that were downsized using builder’s remedy is the Berryessa BART Urban Village, a high-profile transit-oriented development that the city approved, anticipating that 3,450 new housing units would be built at a site now occupied by the San Jose Flea Market.

According to city officials, the developers of the Berryessa project invoked builder’s remedy to reduce the scope of the project by 940 units, “decimating” the city’s signature transit-oriented development.

“The public sector has done our part by investing billions of dollars in the transit infrastructure connecting BART to Berryessa, now it’s time for our development partners to do their part by producing dense housing and jobs near the station as they committed to do,” Mayor Matt Mahan told The Mercury News.

According the report in SiliconValley, San Jose will use two arguments to try to restore the units cut from the Berryessa project.

First, the city says the housing plan eventually approved by HCD was adopted by the City Council on June 20. Therefore, the city claims, San Jose was in “substantial compliance” and builder’s remedy applications made after June 20 should be moot (the city’s rejection letters involve project applications that were filed after June 20).

San Jose’s other argument cuts to the heart of builder’s remedy: the city says it was intended to create new housing, not reduce it. “Builder’s remedy is about enabling more housing construction, not downzoning,” Mayor Mahan told SiliconValley.