Pending State Housing Laws: Expedited Approval of Post-Entitlement Permits
Various state housing bills are currently making their way through the California State Legislature that are expected to benefit mixed-income multifamily housing developers. The following summaries reflect the status of the pending legislation as of June 6, 2025. Future amendments are expected. Important upcoming dates in the legislative process include:
September 12, 2025 – final date for the Legislature to pass bills.
October 12, 2025 – final date for the Governor to sign or veto passed bills.
January 1, 2026 – default effective date for approved bills (unless otherwise specified).
BACKGROUND
As explained in our prior legal alert, existing law (AB 2234) requires local agencies to process post-entitlement phase permits (defined below) for housing development projects (as defined) within specified timeframes. A local agency must determine whether an application for a post-entitlement phase permit application is complete within 15 days of receiving the application. The local agency must complete its review within 30 to 60 business days after the application is deemed complete (depending on the size of the project) and either: (i) provide a full set of comments with a comprehensive request for revisions; or (ii) approve the permit application within that timeframe (subject to specified exceptions). AB 2234 provides that any failure to do so is a violation of the Housing Accountability Act (Gov. Code § 65589.5) (“HAA”).
AB 1114 (Haney) and AB 281 (Grayson) amended AB 2234, effective January 1, 2024. AB 1114 extended these required review timeframes to all post-entitlement building permits, whether discretionary or nondiscretionary. This clarification is important because certain local agencies, such as the City and County of San Francisco, consider all building permits to be discretionary. AB 281 extended the required review timeframe to post-entitlement phase permits related to service from a special district, as defined in Gov. Code § 56036, such as a water district.
Under existing law, “post-entitlement phase permit” means a permit issued by a local agency (defined to mean a city, county or city and county) after the entitlements process has been completed to begin construction of a project that is at least two-thirds residential and includes, but is not limited to: (i) building permits; (ii) permits for minor or standard off-site improvements; (iii) demolition permits; and (iv) permits for minor or standard excavation and grading.
ASSEMBLY BILL 660: DEADLINES FOR LOCAL AGENCIES
AB 660 (Wilson, Ransom, Blanca Rubio, Wicks, and Haney) would amend the post-entitlement phase permit review and approval process for qualifying housing development projects (as defined) under Gov. Code §§ 65913.3 and 65913.3.1.
As currently proposed, AB 660 would:
Provide that if a local agency fails to determine whether a post-entitlement phase permit application complies with applicable permit standards within 30 to 60 business days after the application is deemed complete (depending on the size of the project), the applicant may retain a licensed professional engineer or architect to check the plans and specifications for compliance with applicable permit standards (at the applicant’s own expense).
Provide that a post-entitlement phase permit includes plan checking and building inspection for the issuance of a building permit (in addition to all required interdepartmental review) and prohibit local agencies from requiring or requesting more than two plan check and specification reviews in connection with a building permit application.
Remove the tolling provision related to review by outside entities.
Prohibit local agencies from requesting or requiring “any action or inaction as a result of a building inspection undertaken to assess compliance with applicable building permit standards that would represent a deviation from a previously approved building plan or similar approval for the building permit” (unless specified findings are made based on substantial evidence in the record related to, e.g., a specific adverse impact on the public health and safety).
Require a final written determination on an administrative appeal of a local agency’s decision on a post-entitlement phase permit (where applicable) to be made within 15 to 30 business days after receipt of the applicant’s written appeal (depending on the size of the project) versus 60 to 90 business days under existing law. All administrative appeals would be heard by the local agency’s governing body (versus the planning commission, or both, at the applicant’s option, under existing law).
Provide that if a decision on appeal is not made within that timeframe, if the appeal is denied, or an appeals process is not provided as required, the applicant may seek a writ of mandate to compel approval of the post-entitlement phase permit. That writ “shall be granted if there is substantial evidence in the record that a reasonable person could find that the application is complete and compliant with applicable standards.”
AB 660 was passed by the Assembly on June 4, 2025, and has been ordered to the Senate.
ASSEMBLY BILL 1026: DEADLINES FOR ELECTRICAL CORPORATIONS
AB 1026 (Wilson, Haney, and Wicks) would newly impose deadlines on the review and approval of post-entitlement phase permits for housing development projects (as defined) by electrical corporations (as defined in Public Utilities Code § 218).
As currently proposed, AB 1026 would:
Revise the definition of local agency to include electrical corporations, thereby requiring such entities to comply with requirements relating to post-entitlement phase permits.
Revise the definition of post-entitlement phase permit to include permits required by utilities that are not owned and operated by a local agency.
AB 1026 was passed by the Assembly on May 29, 2025, and has been ordered to the Senate.
ASSEMBLY BILL 1308: DEADLINES FOR BUILDING DEPARTMENTS
AB 1308 (Hoover and Wicks) would apply to building permits for new residential construction, a residential addition, or a residential remodel where the project: (i) includes between one to ten dwelling units; and (ii) contains no floors used for human occupancy located more than 40 feet above ground level.
As currently proposed, AB 1308 would:
Require building departments to provide an estimated timeframe for completion of inspection of the permitted work under a qualifying residential building permit. If that timeframe exceeds 30 days from receipt of a notice of completion — or the building department has not conducted the inspection within 30 days – the applicant may retain a private professional provider (as defined) to inspect the permitted work (at the applicant’s own expense).
Incentivize building departments to conduct an inspection of permitted work within 60 days of receipt of a notice of completion. If that deadline is not met, the permittee would be entitled to reimbursement of any permit fees paid (unless the inspection was performed by a private professional provider).
Require building departments to respond to the inspection report (as specified) from the private professional provider within 14 days. If the permitted work is compliant (as specified), the building department must issue a certificate of occupancy (or equivalent final approval) within that timeframe.
AB 1308 was passed by the Assembly on May 23, 2025, and has been ordered to the Senate.
SENATE BILL 328: DEADLINES FOR DEPARTMENT OF TOXIC SUBSTANCES CONTROL
SB 328 (Grayson) would impose deadlines on the Department of Toxic Substances Control (Department) for the review and approval of post-entitlement phase permits for housing development projects (as defined) that a local agency has deemed complete pursuant to AB 2234 (Gov. Code § 65913.3(b)) and that requires a response from the Department. If SB 328 is passed by the Legislature and approved by the Governor, the deadlines below would go into effect on July 1, 2028.
As currently proposed, SB 328 would:
Require the Department to provide written notice to a request regarding subsequent actions in the Department’s post-entitlement phase permit review process, including whether any additional information is required to review the request, within a specified time period.
Upon receipt of a request, the Department shall respond within: (i) 60 business days of receipt of the request for a housing development project with 25 units or less; or (ii) 120 business days for a housing development project with 26 or more units.
Require the Department to comply with the applicable 60 or 120-day time period in all responses to requests for additional information from the requestor.
SB 328 was passed by the Senate on May 29, 2025, and has been routed to the Assembly.
Recent Amendments to the Starter Home Revitalization Act
SB 684 and SB 1123 (Caballero) expand the Starter Home Revitalization Act to further facilitate the construction of “starter” home projects consisting of up to 10 dwelling units (not exceeding an average of 1,750 net habitable square feet) on up to 10 parcels. SB 684 provides for a streamlined ministerial (i.e., no CEQA) approval process for qualifying housing development projects in multifamily zoning districts, effective January 1, 2024. SB 1123 extends the same streamlined ministerial approval process to qualifying housing development projects on vacant lots in single-family zoning districts, effective July 1, 2025.
STREAMLINED MINISTERIAL APPROVAL PROCESS
The Starter Home Revitalization Act requires ministerial and expedited approval of qualifying housing development projects. The Act provides:
The local agency must ministerially consider an application for a qualifying housing development project, including the parcel map or tentative and final map, without discretionary review or a hearing. This means that the project will not be subject to environmental review under CEQA or administrative appeal.
The local agency must approve or deny an application for a qualifying housing development project and the associated parcel map or a tentative map within 60 days of receipt of a “completed” application. If it makes no decision within that time limit, the project will be deemed approved as a matter of law.
The local agency may only disapprove a qualifying housing development project, including the parcel map or tentative and final map, if it makes a written finding, based on the preponderance of the evidence, that the project would have a specific adverse impact, as defined in Gov. Code § 65589.5(d)(2), upon the public health and safety for which there is no feasible method to satisfactorily mitigate or avoid the specific adverse, impact. This creates a high threshold for the local agency.
Except as specified below (minimum parcel square footage), the local agency cannot impose minimum requirements on the size, width, depth, or dimensions of an individual parcel created by a qualifying housing development project. As of July 1, 2025 (the effective date of SB 1123), the local agency also cannot impose minimum parcel frontage requirements.
The proposed subdivision must conform to all applicable objective requirements of the Subdivision Map Act. The local agency may also impose local objective zoning, subdivision and design standards during the project approval process but cannot: (i) require setbacks between the units, except as required under the California Building Code; (ii) require side and rear setbacks greater than four feet from the original lot line (no setback shall be required for an existing structure or replacement structure in the same location, as specified); (iii) impose a FAR limit of less than 1.25 (for projects with 8-10 units) or less than 1.0 (for projects with 3 to 7 units); (iv) impose certain parking requirements (as specified); or (v) impose requirements that only apply to Starter Home Revitalization Act projects.
The imposition of local objective zoning, subdivision and design standards also cannot physically preclude the development of a qualifying housing development project built to the densities specified in Gov. Code § 65583.2(c)(3)(B) (e.g., at least 30 dwelling units per acre for a jurisdiction in a metropolitan county and at least 20 dwelling units per acre for a suburban jurisdiction). There is one exception to this rule, which pertains to the maximum building height for qualifying housing development projects in single-family zoning districts (see below). This provision should make it more challenging for local agencies to impose local standards.
The local agency must approve the building permit for an approved housing development project before the final subdivision map has been recorded, meaning that construction can begin even though the official subdivision process is not yet fully complete. However, a certificate of occupancy will not be issued until the final map is recorded.
Assembly Bill (AB) 2234 separately requires local agencies to process post-entitlement phase permit applications, including but not limited to building permit applications, for housing development projects within specified timeframes. The local agency must determine whether an application for a post-entitlement phase permit application is complete within 15 days of receiving the application. For housing development projects with 25 or fewer units, the local agency must complete its review within 30 business days after the application is deemed complete and either: (i) provide a full set of comments with a comprehensive request for revisions; or (ii) approve the permit application within that timeframe (subject to specified exceptions).
AB 2234 provides that any failure to meet the foregoing deadlines is a violation of the Housing Accountability Act (Gov. Code § 65589.5) (HAA).
The local agency may condition issuance of the building permit on the project applicant fulfilling certain requirements, such as a guarantee that a final map will be recorded or the provision of security for the fulfillment of conditions of approval and construction of any necessary infrastructure improvements.
QUALIFYING PROJECTS: THRESHOLD REQUIREMENTS
The following threshold requirements must be met for a housing development project to qualify for streamlined ministerial approval under the Starter Home Revitalization Act. Additional requirements vary depending on whether the project is proposed in a multifamily zoning district or a single-family zoning district (see below).
The project cannot propose more than 10 dwelling units on more than 10 lots. As of July 1, 2025 (the effective date of SB 1123), the local agency may choose (but is not required) to also permit accessory dwelling units or junior accessory dwelling units, which would not count toward the 10-unit maximum. See also Senate Bill (SB) 1211 (Skinner), which expands opportunities for building ADUs.
Minimum density requirements must be met:
If the lot proposed to be subdivided is identified in the local jurisdiction’s legally compliant housing element, the project must result in at least as many dwelling units projected for the parcel in the housing element and must include any low- or very low-income housing units assumed for the parcel to meet the local jurisdiction’s regional housing needs allocation (RHNA), as specified in the housing element. This is consistent with the “no net loss” rule under state law.
If the lot proposed to be subdivided is not identified in the housing element, or the housing element is non-compliant, the project must result in at least as many dwelling units as the maximum allowable residential density under local zoning. As of July 1, 2025 (the effective date of SB 1123), under this scenario, the project must result in the greater of: (i) at least 66% of the maximum allowable residential density under local zoning; or (ii) at least 66% of the applicable residential density specified in Gov. Code § 65583.2(c)(3)(B) (e.g., at least 19.8 dwelling units per acre for a jurisdiction in a metropolitan county and at least 13.2 dwelling units per acre for a suburban jurisdiction).
It is unclear how these minimum density requirements are intended to be reconciled with the 10-unit maximum under the law. To illustrate, if the single-family zoned lot proposed to be subdivided is 1.5 acres (the maximum), is not identified in the housing element, and is located in a metropolitan county, the minimum residential density requirements above would require a total of at least 30 dwelling units (rounded up), which exceeds the 10-unit maximum.
The lot proposed to be subdivided must be a legal parcel located within an incorporated city, urbanized area or urban cluster (as defined) and must be served by public water and municipal sewer systems.
The lot proposed to be subdivided must be substantially surrounded by qualified urban uses, which include residential, commercial, retail, public institutional, and transit or transportation passenger facility. The term “substantially surrounded” means that “at least 75% of the perimeter of the project site adjoins, or is separated only by an improved public right-of-way from, parcels that are developed with qualified urban uses” and “[t]he remainder of the perimeter of the site adjoins, or is separated only by an improved public right-of-way from, parcels that have been designated for qualified urban uses in a zoning, community plan, or general plan for which an environmental impact report was certified.”
The new dwelling units cannot exceed an average of 1,750 net habitable square feet. SB 1123 (effective July 1, 2025) newly defines “net habitable square feet.”
The dwelling units may be constructed on fee simple ownership lots, as part of a common interest development, as part of a housing cooperative (as defined), or on land owned by a community land trust (as defined). As of July 1, 2025 (the effective date of SB 1123), a tenancy in common may also be proposed. A homeowners’ association is not required unless otherwise required under the Davis-Stirling Common Interest Development Act.
As of July 1, 2025 (the effective date of SB 1123), the proposed subdivision cannot result in any existing dwelling unit being alienable separate from the title to any other existing dwelling unit on the lot.
The lot proposed to be subdivided cannot have been previously subdivided pursuant to SB 9 or the Starter Home Revitalization Act.
The lot proposed to be subdivided cannot be subject to specified environmental conditions including habitat for protected species, wetlands, high or very high fire hazard severity zone, hazardous waste site, delineated earthquake fault zone, special flood hazard area, regulatory floodway, land dedicated for conservation in an adopted natural community conservation plan, or conservation easement (as defined and specified and subject to certain exceptions).
This criteria is similar to, but not exactly the same as, the SB 35 siting criteria under Gov. Code § 65913.4(a)(6). For example, the Starter Home Revitalization Act does not include an exception to the fire hazard severity zone prohibition where specified fire hazard mitigation measures have been adopted.
Any applicable local inclusionary affordable housing requirements must be met.
QUALIFYING PROJECTS: MULTIFAMILY ZONING DISTRICTS
In addition to the threshold requirements above, the following requirements must be met for a housing development project in a mixed-family zoning district to qualify for streamlined ministerial approval under the Starter Home Revitalization Act:
The lot proposed to be subdivided must be zoned for multifamily residential development and cannot exceed five acres.
The newly created parcels must be at least 600 square feet (unless the local agency has adopted a smaller minimum parcel size for Starter Home Revitalization Act projects).
The project cannot require the demolition or alteration of specified types of protected units including: (i) designated affordable housing (as specified); (ii) rent or sales-price controlled housing (as specified); (iii) housing occupied by tenants within five years preceding the date of the application, even if that housing has since been demolished or is no longer occupied by tenants; or (iv) housing where the tenants were evicted under the Ellis Act, which was exercised by the owner within 15 years preceding the date of the application. There is currently no natural disaster exception.
QUALIFYING PROJECTS: SINGLE-FAMILY ZONING DISTRICTS
In addition to the threshold requirements above, the following requirements must be met for a housing development project in a single-family zoning district to qualify for streamlined ministerial approval under the Starter Home Revitalization Act. Please recall that these provisions will not be operative until July 1, 2025 (the effective date of SB 1123).
The lot proposed to be subdivided must be zoned for single-family residential development and cannot exceed one and a half acres.
The lot proposed to be subdivided must be vacant, which is defined as “having no permanent structure, unless the permanent structure is abandoned and uninhabitable.” The following housing types cannot be considered “vacant”: (i) designated affordable housing (as specified); (ii) rent or sales-price controlled housing (as specified); or (iii) housing occupied by tenants within five years preceding the date of the application, even if that housing has since been demolished or is no longer occupied by tenants. There is currently no natural disaster exception.
The newly created parcels must be at least 1,200 square feet (unless the local agency has adopted a smaller minimum parcel size for Starter Home Revitalization Act projects).
The project must comply with any height limit imposed by the local agency, but that height limit cannot be less than the height allowed pursuant to the existing zoning designation applicable to the lot. Please note that this height limit may be imposed even if it would physically preclude the development of the project.
IMPLICATIONS
We expect to see a flurry of development activity under SB 1123 once that law is effective on July 1, 2025. The streamlined ministerial approval process, which must be completed within 60 days, is highly advantageous for housing developers and should result in higher density housing development projects on underutilized properties throughout the State of California. The key will be identifying qualifying properties, particularly vacant properties in single-family zoning districts.
City of Los Angeles Approves New Ordinances to Encourage Housing Development
California’s housing crisis has necessitated innovative legislative solutions at the state and local level to increase the supply of affordable housing across the state. Cities are required by state law to plan for a specified amount of new housing development in accordance with the targets set by the Regional Housing Needs Allocation (RHNA). According to the RHNA Allocation Plan, the City of Los Angeles has an allotment of 456,643 new units for the period from 2021 to 2029, which is more than five times greater than the City’s previous RHNA allotment. The City acknowledged in its 2021-2029 Housing Element that it is experiencing a severe housing crisis and would come up significantly short of its allotment based on its then-existing zoning.
As required by state law, the City designed a Housing Element Rezoning Program (Rezoning Program) to accommodate its housing allotment, which aims to increase the supply of housing across the City. The Rezoning Program includes updates to the Downtown Community Plan and the Hollywood Community Plan as well as the adoption of three related ordinances, which were approved by the Los Angeles City Council on February 7, 2025. These ordinances are referred to as the Citywide Housing Incentive Program (CHIP) Ordinance, the Housing Element Sites and Minimum Density Ordinance, and the Resident Protections Ordinance. These amendments to the Los Angeles Municipal Code are expected to benefit multi-family housing developers by streamlining review processes for project approvals and providing additional incentives for qualifying mixed-income and 100% affordable housing projects.
Some pro-housing advocates believe that the Rezoning Program is inadequate to meet the City’s housing obligations, as evidenced by a recent lawsuit filed by YIMBY Law and Californians for Homeownership against the City of Los Angeles. While the results of that litigation remain to be seen, the CHIP Ordinance does provide a helpful starting point by offering incentives and removing procedural barriers to project approval for qualifying projects across the City.
CITYWIDE HOUSING INCENTIVE PROGRAM ORDINANCE
The CHIP Ordinance includes three options for local density bonus programs, updating the City’s implementation of the State’s Density Bonus Program (DBP), adopting a Mixed-Income Incentive Program (MIIP), and creating an Affordable Housing Incentive Program (AHIP) for 100% affordable housing projects. These programs provide new incentives for qualifying mixed-income and 100% affordable housing projects with an aim towards increasing the supply of housing across the City, particularly near public transit, along major corridors, and in areas identified as Higher Opportunity Areas.
CITY’S DENSITY BONUS PROGRAM
The CHIP Ordinance revises the City’s implementation of the State DBP to align the review processes and incentives under the state and local programs. The DBP incentivizes providing affordable units by offering increased density as well as additional incentives and waivers of certain development standards for qualifying housing projects that include the requisite percentages of affordable housing units.
One upshot of the CHIP Ordinance is that it allows for increased density bonus of up to 100% in line with Assembly Bill (AB) 1287, which Governor Newsom signed into law on October 11, 2023. AB 1287 included an amendment to the State Density Bonus Law to provide an additional density bonus and incentives for qualifying projects providing moderate income units or very low-income units. Specifically, under AB 1287, a project providing the requisite percentage of affordable units can obtain the 50% maximum density bonus under the prior law as a base bonus as well as an additional density bonus up to 100% as an additional bonus in exchange for the provision of the requisite percentage of additional affordable units.
The CHIP Ordinance incorporates the additional bonus and incentives provided by AB 1287 into the City’s implementation of the State’s DBP. Like the State’s DBP, the CHIP Ordinance outlines the requisite percentages of affordable units provided for each income level. For units offered for rent, the minimum percentages of units provided for each income level to qualify for the Program are 5% very low income or 10% lower income. For units offered for sale, the minimum percentages of units are 5% very low income, 10% lower income, or 10% moderate income. The percentage of density bonus units that a project is entitled to depends on the percentage of very-low income, lower income, and moderate income (if for sale) provided. Like the State’s DBP, the maximum density bonus a project is entitled to is a 50% base bonus if it provides 15% very-low income or 24% lower income units for rent or 44% moderate income for sale. In addition, the CHIP Ordinance provides that a project may qualify for an additional bonus ranging from 20% up to 50% if the project provides the requisite percentage of very-low income or moderate-income units.
The CHIP Ordinance also provides new density bonuses and incentives for qualifying projects that provide housing for specified target populations, including senior citizens, transitional foster youth, disabled veterans, homeless persons, and lower income students.
The CHIP Ordinance updates the City’s DBP to reflect that a qualifying project may request up to four on- or off-menu incentives subject to the review process below.
Under the CHIP Ordinance, more projects will be eligible for ministerial review, avoiding uncertain and lengthy review processes, including environmental review under the California Environmental Quality Act (CEQA). The CHIP Ordinance updates the review processes for housing projects depending on the type of request under the DBP. Projects that request only the allotted number of incentives from the base incentives and menu of incentives provided in the CHIP Ordinance are entitled to a ministerial approval by the City’s Department of Building and Safety unless certain limited exceptions apply. This language in the CHIP Ordinance is consistent with the Department of City Planning’s current policy to ministerially review qualifying housing projects requesting only on-menu incentives.
The CHIP Ordinance also creates a new ministerial review process referred to as the Expanded Administrative Review (EAR) process, which applies to projects requesting public benefit options or off-menu incentives. The EAR process entails submitting an application and eligibility checklist to the Affordable Housing Services Section at the Metro/Downtown Development Services Center. The submitted documents are reviewed by the Department of City Planning to assess compliance with applicable regulations and standards. An informational public hearing may be required depending on the project or if otherwise required by the Code. Upon the Department’s determination that the proposed project complies with applicable standards and regulations, projects must be developed in keeping with the approved plans. Modifications of no more than ten percent may be permitted, but, for more extensive modifications, an applicant is required to restart the EAR process.
If the applicant requests to waive or reduce development standards, exceed the maximum density bonuses, or proceed with any other actions requiring discretionary approval, then the applicant will be required to obtain a Class 3 Conditional Use Permit, which is subject to discretionary approval by the City Planning Commission. Note that the CHIP Ordinance does not streamline other discretionary actions that may be applicable to a housing project, such as a General Plan Amendment, Zone Change, Project Review, or other discretionary action.
MIXED-INCOME INCENTIVE PROGRAM
The Housing Element identifies The Mixed-Income Incentive Program (MIIP) consists of three sub-programs designed to incentivize mixed-income housing development near public transit stops and in higher-opportunity areas: the Transit Oriented Incentive Area Program, the Opportunity Corridors Program, and the Opportunity Corridors Transition Program.
To qualify under these sub-programs, the housing project must meet the generally applicable requirements of MIIP as well as the specific requirements of the sub-program. Regardless of which program the project is applying for, the project must meet certain requirements, including providing a baseline of either four or five units depending on the program, meeting specific program requirements, reserving the requisite percentage of affordable units, and meeting applicable zoning and other requirements.
TRANSIT ORIENTED INCENTIVE AREA PROGRAM
The Transit Oriented Incentive Area (TOIA) program is intended to increase the supply of affordable housing near public transportation, particularly in areas identified as Higher Opportunity areas. Eligible projects under the Transit Oriented Incentive Area (TOIA) program are those located within the requisite distance to a major transit stop based on the criteria in the CHIP Ordinance. The TOIA program differentiates projects into particular incentive sets based on proximity to a qualified major transit stop and location within one of the City’s Opportunity Areas as identified on the California Tax Credit Allocation Committee (CTAC) Opportunity Area map. The base incentives are specified for each incentive set. Within each set, projects in Higher Opportunity Areas receive increased density and floor area ratios (FAR) compared to projects located in the Moderate or Lower Opportunity Areas within the same incentive set.
As with the City’s DBP, eligible projects qualify for up to four incentives. Compared to the City’s DBP, the TOIA program offers additional base incentives, including FAR and height, tailored to the incentive sets as well as additional on-menu incentive options. Significantly, the TOIA program allows for density increases beyond the density bonuses provided under the City’s DBP. If the property’s zoning allows for at least five units, then projects are eligible for density bonuses starting at 100% for Moderate and Lower Opportunity Areas in the T-1 incentive set and rising up to density limited only by FAR in Higher Opportunity Areas in the T-2 and T-3 incentive sets.
OPPORTUNITY CORRIDORS PROGRAM AND OPPORTUNITY CORRIDORS TRANSITION PROGRAM
The Opportunity Corridors (OC) program envisions new mid-rise affordable housing developments along major transit-served corridors within the City’s Higher Resource Areas as identified on the CTAC Area map. Like TOIA, OC differentiates projects into particular incentive sets. Like TOIA, OC offers additional base incentives, including FAR and height, and on-menu incentives compared to the City’s DBP. The base incentives are specified for each incentive set for the FAR and height. The OC program provides more generous base incentives than the TOIA program, including density limited only by floor area and increased FAR.
The Opportunity Corridors Transition (OCT) program permits low-rise housing development on properties in higher opportunity areas zoned as R2 or RD, allowing for small-scale development in low-density multi-family zones near Opportunity Corridors. The concept is that these low-rise housing developments will provide transitions between single-family houses and mid-rise multi-family apartment buildings. The OCT program differentiates by subareas based on proximity to an Opportunity Corridor as discussed above (CT-1, CT-2, and CT-3). The number of units required at each income level in order for the project to qualify for incentives depends on the OCT Incentive Area in which it is located. The program allows for between four to sixteen units depending on the subarea in which it is located. The other base incentives are also tailored to the applicable subarea but include a range of FAR and height allowances. Note that the floor area ratio incentives are determined based on the number of density bonus units. A project approved under the OCT program must also meet various performance standards, including satisfying specific requirements related to common open space and entryway standards.
AFFORDABLE HOUSING INCENTIVE PROGRAM
The Affordable Housing Incentive Program (AHIP) provides new incentives for 100% affordable housing projects in addition to the incentives offered under the State DBP. Like the MIIP programs, AHIP is intended to encourage housing development near transit and in areas identified as Higher Opportunity Areas. For example, AHIP provides additional incentives for projects located in Higher or Moderate Opportunity Areas or within a half mile of a major transit stop or very low vehicle travel area, including density limited only by floor area. AHIP also provides tailored incentives for qualifying 100% affordable housing projects citywide. Compared to the other programs in the CHIP Ordinance, AHIP provides an additional incentive for a total of up to five incentives for qualifying projects.
Additionally, AHIP adds “P” Parking zones and “PF” Public Facilities zones to the types of zones eligible for 100% affordable housing projects and covers a variety of project types, including public land projects, faith-based organization projects, and shared equity projects that provide the required percentage of restricted affordable units and meet specific ownership criteria based on the project type. Specifically, AHIP incentivizes 100% affordable housing on Public Facilities “PF” zones and on land owned by public agencies, 80-100% affordable housing on land owned by faith-based organizations, and 80-100% affordable housing on land owned by community land trusts or limited equity housing cooperatives. Under certain circumstances, these project types may be subject to the new ministerial EAR process described above.
STREAMLINED CEQA ENVIRONMENTAL REVIEW
One strategy that opponents of affordable housing projects frequently employ is leveraging the lengthy environmental review process under CEQA to delay and drive up the costs of housing projects. These delay tactics can be fatal, particularly for affordable housing projects which are often already limited by tight cost margins. Even the threat of CEQA-related delays influences whether developers and investors are willing to proceed with an affordable housing project due to uncertainties about timing and costs.
The City’s Housing Element addresses these concerns by streamlining the environmental review process under CEQA for most new housing developments. Pursuant to CEQA, an Environmental Impact Review was approved for the City’s Housing Element, which examines a vast range of environmental impacts from the proposed housing programs, including the potential environmental impacts of housing projects expected to qualify for the programs outlined above. Thus, rather than undergoing a full CEQA review for each individual housing development utilizing these programs, housing developers are permitted to use the standardized CEQA Streamlining Checklist Form (Form CP-4089) as the environmental review document. Streamlining CEQA review significantly reduces the timeline for project approvals and removes another barrier for developers and investors considering moving forward with a housing project.
CONCLUSION
The incentives programs included in CHIP Ordinance and the streamlined CEQA environmental review process are aimed at lowering procedural barriers that steer developers and investors away from affordable housing projects. While some pro-housing advocates believe that these changes are inadequate to meet the City’s obligations under state law, these programs do provide a helpful starting point for developers trying to make affordable housing projects pencil out.
Now Effective: Builder’s Remedy 2.0
AB 1893 (Wicks) significantly modified the so-called “Builder’s Remedy” under the Housing Accountability Act (Gov. Code § 65589.5) (HAA) effective January 1, 2025.
As explained in our prior legal alert, the Builder’s Remedy applies when a local jurisdiction has not adopted an updated Housing Element in substantial compliance with State Housing Element Law (Gov. Code § 65580, et seq.), in which case the local jurisdiction cannot deny a qualifying housing development project even if it is inconsistent with the local general plan and zoning ordinance (subject to limited exceptions).
The following is a summary of the notable HAA amendments that apply to qualifying Builder’s Remedy projects under AB 1893. Please note that AB 1893 also amended other sections of the HAA.
PROJECT “GRANDFATHERING” & CONVERSIONS
AB 1893 includes the following provisions to help advance pipeline projects:
Builder’s Remedy projects with a housing development project application “deemed complete” before January 1, 2025 are “grandfathered,” meaning that the prior version of the HAA applies to the project unless the project sponsor chooses to be subject to any of the new or modified HAA provisions under AB 1893.
“Deemed complete” is defined to mean that a SB 330 preliminary application (pursuant to Gov. Code § 65941.1) has been submitted or, absent that, a complete (full) development application has been submitted (pursuant to Gov. Code § 65943).
An existing Builder’s Remedy project may be converted to an AB 1893 Builder’s Remedy project, so long as the original housing development project application is “deemed complete” before January 1, 2025 — “even if the revision results in the number of residential units or square footage of construction changing by 20 percent or more” (i.e., even if vesting under SB 330 would not otherwise be retained.) This means that under that scenario, the density of the Builder’s Remedy project could be increased or decreased to meet AB 1893 maximum and minimum density requirements (see below) without losing vesting.
Combined Projects – Potential Streamlined Ministerial Review
AB 1893 contemplates the combination of a Builder’s Remedy project with other state housing laws that provide for streamlined ministerial (i.e., no CEQA) project approval:
A Builder’s Remedy project may be combined with AB 2011, in which case it “shall be deemed to be in compliance with the residential density standards for purposes of complying with [AB 2011]” (Gov. Code § 65912.123). This means that if the Builder’s Remedy project otherwise qualifies for streamlined ministerial approval under AB 2011, non-compliance with AB 2011 minimum and maximum density requirements will be disregarded.
A Builder’s Remedy project may be combined with SB 35, in which case it “shall be deemed to be in compliance with the objective zoning standards, objective subdivision standards, and objective design review standards for purposes of complying with [SB 35]” (Gov. Code § 65913.4(a)(5)). This means that if the Builder’s Remedy project otherwise qualifies for streamlined ministerial approval under SB 35, non-compliance with objective local standards will be disregarded. Please refer to our prior legal alertfor information about SB 35, which was recently amended by SB 423 (Wiener).
Reduced Affordability Requirements
AB 1893 modifies on-site affordability requirements for Builder’s Remedy projects as follows:
Reduces the affordability requirement for mixed-income Builder’s Remedy projects from 20% lower income to 13% lower income, 10% very low-income, or 7% extremely low-income (as each is defined).
Requires compliance with local affordable housing requirements that, as of January 1, 2024, required a greater percentage of affordable units or a deeper level of affordability, unless compliance would render the project infeasible – pursuant to written findings by the local agency supported by a preponderance of evidence. This creates a high threshold for the local agency and if a “reasonable person” could find otherwise, “the project shall not be required to comply with that requirement.”
Caps the local affordable housing requirement, if any, to a maximum of 20% and where 20% is required, the required income level cannot be deeper than lower income.
Eliminates the affordability requirement for Builder’s Remedy projects consisting of 10 units or fewer (excluding any density bonus units) if the project site is smaller than one acre and the project proposes at least 10 dwelling units per acre.
Requires the affordable units to be affordable for 45 years (rental) or 55 years (ownership) and have a comparable bedroom and bathroom count as the market rate units.
Mixed-Use Projects
AB 1893 allows for a wider variety of mixed-use housing development projects:
Recall that under prior law, at least two-thirds of the project square footage must be designated for residential use to qualify as a “housing development project” under the HAA. That requirement has been reduced to 50% for projects proposing at least 500 net new residential units, so long as no portion of the project would be designated for use as a hotel, motel, bed and breakfast inn, or other transient lodging (except for a residential hotel, as defined in Health and Safety Code § 50519) (collectively, “Transient Lodging”).
That requirement has also been reduced to 50% for qualifying projects involving the demolition of existing non-residential use(s) on the site, as specified. Transient Lodging would also be prohibited under that scenario.
Recall that the HAA definition for a “housing development project” is cross-referenced in AB 2011, so these amendments will also benefit mixed-use AB 2011 projects.
Maximum Density
AB 1893 newly imposes the greater of the following density maximums for Builder’s Remedy projects — prior to any density bonus under the State Density Bonus Law:
50% greater than the minimum density deemed appropriate to accommodate housing for the local jurisdiction pursuant to Gov. Code § 65583.2(c)(3)(B) (e.g., 30 dwelling units per acre in a metropolitan jurisdiction, which translates to 45 dwelling units per acre).
Three times the density allowed by the general plan, zoning ordinance, or state law (whichever is greater).
The density specified for the project site in the Housing Element.
35 additional units per acre if the project site is within one-half mile of a “major transit stop” or is a “very low vehicle travel area” or a “high or highest resource census tract” (as each is defined).
Minimum Density
AB 1893 newly imposes the following density minimums for Builder’s Remedy projects:
On sites that have a minimum density requirement and are located within ½ mile of a “commuter rail station” or a “heavy rail station” (as each is defined), the residential density of the project must not be less than the minimum residential density required on the site.
On all other sites that have a minimum density requirement, the residential density of the project must not be less than the lower of: (i) the local agency’s minimum residential density; or (ii) 50% of the minimum residential density deemed appropriate to accommodate housing for the jurisdiction, as specified in Gov. Code § 65583.2(c)(3)(B) (e.g., 30 dwelling units per acre in a metropolitan jurisdiction, which translates to 15 dwelling units per acre).
Density Bonus Projects
AB 1893 includes provisions that pertain to Builder’s Remedy projects that also utilize the State Density Bonus Law:
A Builder’s Remedy project that is also a density bonus project will qualify for two additional incentives/concessions.
The local agency must grant a density bonus based on the number of dwelling units “proposed and allowable” under the Builder’s Remedy (see above).
The State Density Bonus Law does not specifically address extremely low-income units, which may be provided to satisfy AB 1893 affordability requirements (see above). Accordingly, AB 1893 provides that: (i) all on-site affordable units (including extremely low-income units) must be counted as affordable units in determining whether the project qualifies for a density bonus and; (ii) projects with extremely low-income units will be eligible for the same density bonus benefits provided to a project that dedicates three percentage points more units to very low-income households.
Industrial Use Proximity Prohibition
AB 1893 newly prohibits Builder’s Remedy projects on a project site that abuts a site where more than one-third of the square footage on the site has been used within the past three years by a “heavy industrial use” or a “Title V industrial use” (as each is defined in Gov. Code § 65913.16). Notably, this prohibition does not apply to the project site itself.
Local Requirements
AB 1893 specifically authorizes a local agency to require a Builder’s Remedy project to comply with local objective, quantifiable, written development standards, conditions, and policies (collectively, Local Requirements), subject to the following limitations:
Local Requirements must not render the project infeasible, and the local agency will bear the burden of proof in making that finding.
Local Requirements must not involve “personal or subjective judgement by a public official and [must be] uniformly verifiable by reference to an external and uniform benchmark or criterion….”
Local Requirements must be based on the general plan designation and zoning classification that allow the density and unit type “proposed by the applicant,” which is defined to mean “the plans and designs as submitted by the applicant, including, but not limited to, density, unit size, unit type, site plan, building massing, floor area ratio, amenity areas, open space, parking, and ancillary commercial uses.”
Local Requirements may be modified via incentives/concessions, waivers/reductions of development standards and/or reduced parking ratios authorized under the State Density Bonus Law.
The local agency cannot “preclude” a Builder’s Remedy project that meets applicable Local Requirements, as modified pursuant to the State Density Bonus Law (where applicable), “from being constructed as proposed by the applicant.”
Local Agency Restrictions
AB 1893 provides that a qualifying Builder’s Remedy project:
Shall not require a general plan amendment, specific plan amendment, rezoning, or other legislative approval.
Shall not require any approval or permit not generally required of a project of the same type and density.
Shall be deemed consistent, compliant and in conformity with an applicable plan, program, policy, ordinance, standard, requirement, redevelopment plan and implementing instruments (or other similar provision) for all purposes and shall not be considered or treated as a nonconforming lot, use, or structure for any purposes.
Shall not be subject to any additional Local Requirements (e.g., increased fees) based on utilization of the Builder’s Remedy.
New Developer Protections
AB 1893 provides that disapproval of a qualifying housing development project (including but not limited to a qualifying Builder’s Remedy project) by a local agency also includes any instance where the local agency “[f]ails to cease a course of conduct undertaken for an improper purpose, such as to harass or to cause unnecessary delay or needless increase in the cost of the proposed housing development project, that effectively disapproves the proposed housing development without taking final administrative action” if specified conditions are met (which pertain to notice by the applicant and findings made by the local agency if it disagrees).
Recall that a local agency cannot disapprove a qualifying housing development project unless it makes specified findings based on a preponderance of the evidence in the record. (Gov. Code § 65589.5(d).) Therefore, this new provision would make it easier for project sponsors to prove that a local agency stalling for the purpose of suspending a disfavored housing development project has violated the HAA.
See AB 1893 (Gov. Code § 65589.5(h)(6)) for additional grounds which constitute disapproval of a housing development project under the HAA, which includes amendments under AB 1413 (Ting).
IMPLICATIONS
AB 1893 is an attempt to modernize the Builder’s Remedy by providing clarity to developers, local jurisdictions, and courts to avoid the “legal limbo” described by Attorney General Rob Bonta. As part of that compromise, specified requirements will be imposed on Builder’s Remedy projects, including a new “cap” on residential density where no codified limit currently exists. In return, the clarifications made by AB 1893 and the reduced affordability requirement for mixed-income projects could help prompt additional Builder’s Remedy projects in jurisdictions that have failed to comply with State Housing Element Law.
There are still opportunities to utilize the Builder’s Remedy. According to HCD, as of the date of this article, over 100 local jurisdictions are still out of compliance with State Housing Element Law and subject to the Builder’s Remedy. Furthermore, local jurisdictions with a certified Housing Element could become subject to the Builder’s Remedy in the future if rezoning required pursuant to the Housing Element’s schedule of actions is not completed by the applicable deadline. Under that scenario, HCD may seek to revoke Housing Element certification. That deadline has already passed for many jurisdictions but for others (where the Housing Element was timely certified) we expect to see HCD enforcement activity in early 2026 (three years after the applicable Housing Element certification date) pursuant to Gov. Code § 65583(c)(1)(A).
COMPANION BILL – AB 1886
AB 1886 (Alvarez) became effective on January 1, 2025 and will also help facilitate Builder’s Remedy projects by making the following clarifying amendments to existing law:
A local jurisdiction cannot “self-certify” its Housing Element. AB 1886 ratifies a prior HCD determination, which provides that HCD will consider an “adopted” Housing Element to be an initial draft because “a jurisdiction does not have the authority to determine that its adopted element is in substantial compliance but may provide reasoning why HCD should make a finding of substantial compliance.”
A Housing Element will be deemed substantially compliant with State Housing Element Law when: (i) the Housing Element has been adopted by the local jurisdiction and; (ii) the local jurisdiction has received an affirmative determination of substantial compliance from HCD or a court of competent jurisdiction.
Housing Element compliance status is determined at the time the SB 330 preliminary application (pursuant to Gov. Code § 65941.1) is submitted for the Builder’s Remedy project, which is consistent with HCD’s prior determination that the Builder’s Remedy is vested on that filing date. If a SB 330 preliminary application is not submitted, then the compliance status will be determined when a complete (full) development application is filed for the Builder’s Remedy project (pursuant to Gov. Code § 65943).
Please see our prior legal alert for more information about the Builder’s Remedy lawsuit that appears to be the impetus for the clarifying amendments under AB 1886.
Challenging the Industrial Exodus: Legal Lessons from Santa Ana’s Planning Reboot
The City of Santa Ana (City) has recently undertaken an ambitious — and highly controversial — effort to reshape the landscape of its historically industrial-centric Transit Zoning Code (TZC) district. Through the adoption of a development moratorium and the introduction of Zoning Ordinance Amendment (ZOA) No. 2024-02 (the Zoning Code Update), the City has sought to restrict, phase out, and ultimately eliminate industrial uses within the TZC area. Together, these legislative tools illustrate a growing trend among municipalities to leverage interim ordinances and zoning amendments as instruments of long-range planning, often to the detriment of long-established industrial users. Similar efforts have been pursued in recent years by a number of other Southern California cities – including Pomona, Redlands, Rialto, Pico Rivera, Rancho Cucamonga, and Lynwood – through the use of zoning overlays, targeted use restrictions, and industrial moratoria. This list is not exhaustive, but reflects a broader regional shift in policy toward phasing out legacy industrial activity.
This article examines the legal underpinnings of the City’s approach, with particular focus on the statutory limits governing moratoria, the erosion of legal nonconforming rights under the Zoning Code Update, and the vested rights framework that enabled certain property owners to successfully defend against overreach. For landowners, developers, and practitioners across California, the City of Santa Ana case study offers timely insights into the risks — and opportunities — of navigating land use regulations in a shifting policy landscape.
DEVELOPMENT MORATORIA AS PLANNING TOOLS AND THEIR LEGAL LIMITS
A growing trend has emerged among Southern California municipalities: the use of moratoria to freeze industrial development while more permanent land use regulations are drafted and baked into existing zoning codes. Many cities have expressed concern that their industrial zoning codes — often decades old — are no longer equipped to address the intensity, scale, and externalities associated with modern warehousing and logistics operations. Often styled as temporary “pauses,” these moratoria are increasingly being deployed to sidestep political or procedural delays in controversial rezonings. The City’s approach is emblematic of this shift.
In April 2024, the City adopted Urgency Ordinance No. NS-3063, establishing an immediate 45-day moratorium on industrial use approvals in the TZC area. The urgency measure term was initially extended to April 15, 2025 via the City’s adoption of Ordinance No. NS-3064, ostensibly to provide the City with time to “alleviate conditions” associated with industrial impacts on surrounding neighborhoods. Yet, in practice, the moratorium functioned less as a temporary regulatory pause and more as a de facto blanket ban on industrial activity blocking even ministerial permits for minor tenant improvements and routine facility upgrades for existing facilities. In some jurisdictions, such as Pomona, staff went even further — interpreting local moratoria as grounds to withhold business licenses altogether, compounding the regulatory chilling effect.
While cities are authorized by State law to impose interim ordinances under California Gov. Code § 65858, that authority is narrowly tailored. Subsection (a) requires a city to make express findings that “there is a current and immediate threat to the public health, safety, or welfare,” and that the approval of certain land uses “would result in that threat to public health, safety, or welfare.” These findings must be supported by specific and demonstrable facts, not merely policy preferences or speculative concerns. Notably, establishing a moratorium requires a higher approval threshold (a four-fifths vote), yet many cities routinely adopt moratoriums without adequately substantiated findings meeting this elevated standard.
Moreover, Gov. Code § 65858(c) limits extensions (moratoria may be in place for up to a maximum of two years) of interim ordinances to cases where the city adopts “new findings” evidencing continued urgency. Courts have interpreted this to mean that local governments may not simply recycle generalized concerns from the original ordinance; instead, they must produce fresh and substantial evidence justifying continued restrictions. As one court observed, the power to adopt moratoria “must not be used as a subterfuge to accomplish through interim action what would otherwise require permanent legislation subject to full procedural safeguards.” (See San Diego Gas & Electric Co. v. City of Carlsbad (1998) 64 Cal.App.4th 785, 792.)
The City’s blanket application of its moratorium — even to longstanding industrial businesses performing non-expansion work — ultimately tested the boundaries of lawful urgency regulation. In practice, we have observed in multiple jurisdictions that planning and building department staff frequently misapply moratoria by freezing all permit activity, regardless of whether a proposed action would establish a new industrial use or expand or intensify an existing one. This overreach leads to delays for purely ministerial work, such as tenant improvements, equipment upgrades, or basic maintenance for long-standing businesses, even when no land use intensification is proposed.
Such was the case for Adams Iron Co., whose long-operating facility at 811 N. Poinsettia Street was denied a ministerial permit for internal dust collection upgrades during the moratorium period. Allen Matkins submitted a formal letter to the City Attorney on September 4, 2024, later covered by various media outlets, arguing that the City’s refusal to issue the permit violated Adams Iron’s vested rights under California law. The letter cited long-standing case law, including Avco Community Developers, Inc. v. South Coast Regional Com. (1976) 17 Cal.3d 785, and emphasized that Adams Iron had expended significant resources in reliance on existing zoning and permits. The City’s blanket denial, we argued, was not only unsupported by the moratorium’s express terms but also exposed the City to potential liability for unconstitutional takings and inverse condemnation.
Ultimately, the City relented. Adams Iron received its permit — one of the few granted during the moratorium — illustrating how careful legal positioning and a clear articulation of vested rights can successfully overcome unlawful regulatory applications.
This episode illustrates a broader caution: moratoria are not planning shortcuts. They are statutory tools of last resort, meant to address genuine emergencies — not a means for incrementally phasing out disfavored uses without going through appropriate legislative processes.
REZONING AND THE EROSION OF NONCONFORMING RIGHTS
While the moratorium temporarily paused industrial activity in the City’s TZC area, the City simultaneously moved to make such restrictions permanent through a sweeping legislative overhaul. Specifically, the City initiated the Zoning Code Update, consisting of Zoning Ordinance Amendment (ZOA) No. 2024-02 and Amendment Application (AA) No. 2024-03. These measures proposed major revisions to permitted land uses, nonconforming use regulations, and operational standards within the TZC.
The centerpiece of the Zoning Code Update is a dramatic reclassification of large swaths of formerly industrially zoned land — including M1 (Light Industrial) and M2 (Heavy Industrial) designations — into a newly created “Urban Neighborhood” zoning. Industrial uses are no longer permitted under the Urban Neighborhood zoning designation and existing industrial businesses (including standard warehousing) are reclassified as legal nonconforming uses, subject to heightened scrutiny and eventual phase-out.
Among the most concerning features of the Zoning Code Update were:
Amortization provisions allowing the City to forcibly terminate nonconforming uses after an undefined “reasonable” period.
Transfer restrictions that prohibit the continuation of a nonconforming use upon sale or lease to a new operator, effectively undermining financing, succession planning, and property value.
Operational standards that retroactively impose new noise, environmental, and performance obligations on existing businesses.
These mechanisms pose an existential threat to industrial operators. As California courts have long recognized, the right to continue a legal nonconforming use is a “vested right that runs with the land” (Edmonds v. County of Los Angeles (1953) 40 Cal.2d 642). By conditioning continued operation on an arbitrary amortization timeline or restricting successor use rights, the Zoning Code Update risked unlawfully extinguishing these protected interests.
Equally problematic was the City’s attempt to justify the Zoning Code Update by relying on its Transit Zoning Code Environmental Impact Report (EIR No. 2006-02), certified in 2010. That EIR was prepared 15 years ago and does not evaluate the displacement, cumulative socioeconomic, or environmental impacts of a wholesale elimination of industrial land uses. Nevertheless, the City merely prepared an addendum to that EIR, claiming that the proposed changes fell within the scope of prior review under CEQA Guidelines section 15162.
Allen Matkins, on behalf of multiple affected property owners — including Adams Iron — submitted formal comment letters, provided public testimony, and engaged in direct negotiation with City staff to raise legal concerns with the procedural and substantive adequacy of the EIR addendum and the substantive legal risks embedded in the Zoning Code Update.
While these advocacy efforts did not halt the Zoning Code Update entirely, they produced meaningful improvements. The City ultimately incorporated several clarifying provisions and exceptions in response to public comments — including a more flexible approach to abandonment determinations, refined amortization language, and narrowly tailored allowances for specific industrial sites. These changes significantly reduced the burden on our clients and preserved key operational rights.
With the City Council scheduled to vote on final adoption of the Zoning Code Update on May 5, 2025, continued attention is warranted. The City’s approach illustrates the increasing use of comprehensive rezoning as a policy tool to phase out disfavored uses. For industrial property owners, it also underscores the importance of early engagement, robust legal analysis, and clear documentation of vested rights when facing existential regulatory change.
TERMINATION OF THE MORATORIUM AND LESSONS LEARNED
Faced with vocal opposition and detailed legal scrutiny, the City Council surprisingly allowed the moratorium to expire on April 15, 2025, after failing to achieve the required statutorily required four-fifths vote for extension. This termination represented a significant legal victory, validating the arguments advanced by businesses and highlighting the necessity for municipal transparency and statutory adherence.
City Council recently adopted the permanent Zoning Code Update for the Transit Zoning Code (TZC) area on June 3, 2025, after introducing several last-minute amendments during the public hearing. We are actively assisting clients in navigating the newly enacted regulations, interpreting their impacts, and developing strategies to protect vested rights and maintain operational continuity.
Looking forward, the City is now in the initial stages of stakeholder outreach and drafting a broader Comprehensive Zoning Code Update. Unlike the TZC update, this forthcoming comprehensive revision will affect zoning citywide, impacting property owners and businesses throughout Santa Ana. Businesses and property owners should proactively engage in this planning process, clearly document and assert their vested rights, and remain prepared to leverage precise legal arguments grounded in statutory compliance and constitutional protections. Continued vigilance will be essential to successfully navigating these extensive zoning reforms.
PRACTICAL IMPLICATIONS AND FORWARD–LOOKING GUIDANCE
The City of Santa Ana’s recent experiences offer critical insights:
Municipalities must strictly adhere to statutory standards: Property owners should scrutinize local governments’ “findings” supporting urgency ordinances, challenging vague or insufficient evidence.
Documentation of vested rights is crucial: Clear records demonstrating continued use and permits become essential to asserting constitutional and statutory rights against municipal overreach.
CEQA compliance matters: Advocating against reliance on outdated EIRs ensures legally adequate environmental review and protects against arbitrary zoning amendments.
In navigating similar municipal strategies elsewhere, proactive and assertive legal engagement remains critical. As municipalities increasingly adopt aggressive planning tools, particularly those targeting industrial uses, businesses and property owners must remain informed and strategically prepared to defend their vested rights.
Texas and Arizona Progress Toward Class VI UIC Primacy While Louisiana Primacy Survives Judicial Review
Last month saw several developments in the U.S. Environmental Protection Agency’s (EPA) ongoing efforts to authorize states to implement Class VI of the federal Underground Injection Control (UIC) program under the Safe Drinking Water Act (SDWA) for geologic sequestration of carbon. This push toward state primacy is an important development for the rapidly growing carbon capture and sequestration (CCS) industry, for which Class VI permits are the critical construction and operating permit. Currently, there are 62 CCS projects – including many with multiple wells – with permit applications pending with EPA. Project proponents anticipate that permitting will be faster if administered by the state instead of EPA. The latest developments last month include: (1) EPA’s proposal to grant primacy to Arizona; (2) EPA’s proposal to grant primacy to Texas; (3) a federal court decision rejecting a challenge to EPA’s earlier grant of primacy to Louisiana; and (4) an ongoing challenge to West Virginia’s recently granted primacy.
Arizona
On May 19, 2025, the US Environmental Protection Agency (EPA) published a federal notice of proposed rulemaking (NPRM) to grant primacy to Arizona for all well classes under the federal UIC program, including Class VI. 90 Fed. Reg. 21264 (May 19, 2025). Unlike other states that have sought Class VI primacy thus far, Arizona is unique in not currently having primacy over any UIC well classes. If finalized, EPA’s proposal would give Arizona Department of Environmental Quality (ADEQ) authority to regulate all underground injection of carbon dioxide for long-term geological sequestration within Arizona’s jurisdiction, excluding Indian lands. There has never been a Class VI permit issued in Arizona, and there are no pending Class VI permit applications in the state at this time. EPA will hold one virtual public hearing on June 25, 2025, on the proposed grant of primacy to Arizona during the comment period, which ends on July 3, 2025. Based on recent precedent from West Virginia’s Class VI primacy, we expect the final grant of primacy to be issued within a few months.
Texas
As we previously reported, on June 9, 2025, EPA issued a proposal to give Texas primacy over the Class VI program. EPA is taking public comment on the proposal through July 31, 2025, and will hold a public hearing on July 24, 2025. A final rule granting Class VI primacy for Texas is expected in Fall 2025.
When EPA issues final rules, Arizona and Texas would become the fifth and sixth states with primacy over Class VI wells, joining North Dakota (granted primacy in 2018), Wyoming (2020), Louisiana (2023), and West Virginia (2025). Meanwhile, other states’ Class VI primacy grants are facing lawsuits, including Louisiana and West Virginia.
Louisiana
On May 21, 2025, the United States Court of Appeals for the Fifth Circuit rejected the petition for review of the final rule granting Louisiana Class VI authorization by three environmental organizations, who asserted that EPA’s approval of Louisiana’s primacy did not follow proper procedure and that the transfer liability could potentially lead to environmental harm. Deep South Center for Environmental Justice v. EPA, No. 24-60084, 2025 WL 1452098 (5th Cir. 2025). The Fifth Circuit found that the ENGOs did not have standing to challenge the final rule granting primacy for Louisiana. This decision may signal that it will be challenging for opponents to successfully challenge EPA’s decision to grant Class VI primacy.
West Virginia
EPA is also currently facing a challenge to its Class VI primacy grant to West Virginia in the Fourth Circuit Court of Appeals. Petition for Review, West Virginia Surface Owners’ Rights Organization v. Zeldin, No. 25-1384 (4th Cir. filed Apr. 11, 2025). The challenge is based on concerns that there may not be sufficient resources or expertise available to properly regulate the wells. Briefing on the case is scheduled to begin next month.
Ultimately, EPA’s Class VI primacy grants to both Louisiana and West Virginia are likely to be upheld. This marks a continuation of the administration’s cooperative federalism approach to accelerating grants of primacy. As more states take primacy in issuing Class VI permits, project proponents anticipate that the Class VI permitting process will move more quickly, allowing more projects to move forward.
*Manasvini Venkatesh is not a lawyer.
Texas on My Mind: New Bills from the 2025 Legislative Session Affecting Contractors in the Lone Star State
With the recent conclusion of the biannual sprint that is the Texas Legislative session, Gov. Greg Abbott has started signing bills, including two that affect the construction industry: one in the area of construction defect claims on public buildings/public works projects and the second regarding the ability for parties to assign construction trust fund claims.
Accrual Date for Construction Defect Claims on Public Buildings/Public Works
HB 1922 was signed by Abbott on June 20, 2025, amending Texas Government Code Chapter 2272, which covers claims by governmental entities against contractors, subcontractors, suppliers, or design professionals for construction defects on public buildings or public works projects.
Under Chapter 2272, before a governmental entity can bring a construction defect claim, they must provide each party the governmental entity has a contract with for the design or construction of the affected building/public work with a written report by certified mail, return receipt requested, that (1) identifies the specific construction defect on which the claim is based; (2) describes the present physical conditions of the affected structure; and (3) describes any modification, maintenance, or repairs to the affected structure made by the governmental entity or others since the affected structure was initially occupied or used. A contractor who receives such a report then has five days to provide a copy of the report to each subcontractor retained on the construction of the affected structure whose work is subject to the claim.
HB 1922, which takes effect on September 1, 2025, amends Chapter 2272 to establish that a governmental entity’s construction defect claim under Chapter 2272 accrues on the date the governmental entity’s required report is postmarked by the U.S. Postal Service. HB 1922 goes on to state that for all other purposes, including the date of an occurrence under an applicable insurance policy and the date a cause of action accrues for purposes of determining whether the action is barred by a statute of limitations or repose, the date of the accrual of those causes of action is unaffected by HB 1922.
Practically, HB 1922’s intent is clarification of the accrual date for claims between governmental entities and contractors to avoid confusion, inconsistency, and disputes regarding when the government’s construction defect claim accrued. However, HB 1922’s adoption should not affect parties’ practice regarding notice to insurers, whether a claim by a governmental entity is barred by the statute of repose, or the applicable accrual date for claims arising out of the governmental entity’s defect claim between contractors, subcontractors, and suppliers (defense/indemnity/contribution, etc.).
Assignment of Trust Fund Claims
Texas Property Code Chapter 162, otherwise known as the Texas Construction Trust Fund Act, gives downstream parties, such as subcontractors and suppliers, the ability to assert claims against an upstream party, such as a general contractor, who receives payment from an owner on a construction project, and then wrongfully retains, uses, or disburses those funds without fully paying its obligations to the downstream subcontractor or supplier.
SB 841, which also takes effect on September 1, 2025, was drafted to address scenarios where general contractors received payment from an owner, passed that payment along to a first-tier subcontractor, and then that first-tier subcontractor failed to pay second-tier subcontractors or suppliers. Prior to SB 841, a general contractor in that situation could not pursue the wrongfully withheld trust funds under the Texas Construction Trust Fund Act, as that act only granted a cause of action to parties that did not receive payment.
With the adoption of SB 841, the Texas Construction Trust Fund Act has been amended to allow a second-tier subcontractor with a trust fund claim against a first-tier subcontractor to assign that claim to a general contractor or other party on the construction project.
SB 841 specifies that for the assignment to be enforceable it must:
Be made in writing not earlier than the date the assignee (general contractor in our scenario) has paid the beneficiary (second-tier subcontractor in our scenario) in good and sufficient funds for the assignment;
Not be made as part of the beneficiary’s (second-tier subcontractor) construction contract;
Make sure the assignee (general contractor in our scenario) is a beneficiary, trustee, or property owner under the construction contract with which the trust funds are paid (i.e., the assignee cannot be a stranger/outsider to the construction project); and
Provide written notice of the assignment to the property owner and the contractor on the project no later than the seventh day after the assignment is made.
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Getting to the “Gist” of it: Understanding Contract vs. Tort Claims against Design Professionals and Construction Contractors
In Trustees of Boston University v. Clough, Harbour & Associates LLP, No. SJC-13685, slip op. (April 16, 2025), the SJC issued an important opinion on the application of the statute of repose that relates to indemnification claims arising out of the “design, planning, construction or general administration of an improvement to real property” and places an outside limit on such claims to six years “after the earlier of the dates of: (1) the opening of the improvement to use; or (2) substantial completion of the improvement and the taking of possession for occupancy by the owner.” G.L. c. 260, §2B.
Given the length of time which construction, architectural, or engineering issues may take to come to light, the decision is important for both drafting indemnification agreement generally and understanding available remedies against design professionals and analyzing risk.
Background
The factual background was largely undisputed: Boston University (BU) engaged Clough, Harbour & Associates LLP (CHA) to serve as architect for a new synthetic turf field at the university. After work finished, Boston University alleged that CHA improperly designed the field and it was unusable. The contract between Boston University and CHA contained an indemnity provision: “To the fullest extent permitted by law, [CHA] shall indemnify . . . [the university] . . . from and against any and all . . . expenses, including, but not limited to, reasonable attorney’s fees, to the extent caused . . . by the negligence of [CHA].” After more than six years passed, Boston University sought reimbursement from CHA for the damages incurred. When CHA declined, BU brought suit seeking enforcement of the indemnification provisions.
Legal Issue
CHA moved for summary judgment on the basis that the tort statute of repose, G. L. c. 260, § 2B, which eliminates a cause of action in tort six years after the opening of an improvement to real estate. The Superior Court agreed and awarded CHA summary judgment.
Taking the case on direct appellate review, the SJC grappled with the question of whether a contractual claim for indemnification for alleged negligence amounted to a tort claim (subject to the tort statute of repose) or a contractual claim (specifically exempted from the tort statute of repose). The Court held that BU’s claim was based on CHA’s breach of the contractual indemnity provision, not on tortious behavior and, therefore, the claim was not barred by the tort statute of repose. The Court’s reasoning was as follows:
First, the SJC noted that courts should look to the “gist of the action” and that a party’s own classification of its cause of action is not dispositive. Hendrickson v. Sears, 365 Mass. 83, 85 (1974) (party may not “escape the consequences of [the tort] statute of repose . . . merely by labelling the claim as contractual”).
Second, the SJC explained what it deemed to be a “key” difference between contract and tort actions: whether the standard of performance is set by the defendants’ promises [contractual], rather than imposed by law [tort]. Bridgwood v. A.J. Wood Constr., Inc., 480 Mass. 349, 355 (2018). Even though the indemnification provision at issue incorporated a negligence standard, the SJC ruled that CHA’s liability was based on its contractual promise to indemnify, not on common law negligence.
“CHA’s duty to indemnify the university for CHA’s negligence is not one imposed by law; rather, it is a promise to which CHA freely and intelligently chose to be bound.” Slip op. at 9. This decision serves as guidance that (1) an express written indemnity provision will likely be given effect and will impose contractual duties on an indemnitor rather than common law negligence duties and (2) that with respect to indemnification claims against contractors, designers and engineers, the protection afforded by the statute of repose will not apply.
Be Aware of Liability for Prevailing Wage Requirements, Which Can be Significant!
A recent case filed in the United States District Court for the Eastern District of Pennsylvania, Lipinski and Taboola v. North-East Deck & Steel Supply, Civ Action No. 5:25-cv-1467, should remind all contractors and sub-contractors working on public works projects funded by federal or state funds of the potential for significant liability for failing to pay required prevailing wages and improperly handling wage and hour issues. The plaintiffs, two crane operators, filed suit on behalf of themselves and a class of employees against their employer, claiming that the employer misclassified workers to avoid paying premium wage rates. They also claimed that their employer paid the fringe benefit portion of their wages as though they were independent contractors, thereby avoiding paying the employer’s portion of payroll taxes. The complaint alleges as well that employees were not compensated for time spent performing pre-shift safety inspections in violation of the Fair Labor Standards Act, 29 USC §201 et seq.
Many public works contracts are funded, in whole or in part, by federal, state, or local funds. These projects could be subject to federal of state prevailing wage laws, such as the federal Davis-Bacon Act or, as in the case noted above, a state statute like the Pennsylvania Prevailing Wage Act, 43 P.S. § 165-1, et seq. These prevailing wage statutes generally require employers to properly classify employees according to the actual work they are performing and to pay the prevailing wage rates and fringe benefits for those classifications.
Some state statutes, like the Pennsylvania Prevailing Wage Act, provide for the aggrieved employee or group of employees to file their own lawsuits to seek redress for underpayments. They can seek liquidated damages, as well as attorneys’ fees and interest, using class action complaints. Also, while the federal Davis Bacon Act does not provide a similar direct right to institute a lawsuit, employees can file claims with the Department of Labor, or employees can bring claims under the False Claims Act for an employer’s falsification of certified payroll reports in some cases. Creative plaintiffs have also asserted claims for breach of contract or failure to pay all wages due under a state wage and hour law.
All of this means that employers who work on publicly funded projects must pay particular attention to employee classification and pay issues. Given that an employer can potentially be liable for significant damages, including backpay, penalties, pre-judgment interest, reasonable attorneys’ fees and costs, it is critical to properly classify workers to ensure that they are paid required prevailing wages under federal or state law. In addition, any employer classifying workers as independent contractors should closely examine the nature of the work performed. Finally, employers must be careful to timely pay employees for all compensable work they perform on the project and to submit accurate certified payroll reports reflecting such payments.
U.S. Senate Proposes Changes to ITC and PTC
The United States Senate Committee on Finance this afternoon released draft text of its version of the “One Big Beautiful Bill,” which is available here. Although we are continuing to review the draft legislation, at a high level the bill would initiate a phasedown of the investment tax credit under Section 48E of the Code (ITC) and production tax credit under Section 45Y of the Code (PTC) applicable to solar and wind facilities based on when construction begins.
Solar and wind facilities would be eligible for the full ITC or PTC, as applicable, if construction begins in 2025.
If construction begins in 2026, such facilities would be eligible for 60 percent of the otherwise available ITC or PTC.
If construction begins in 2027, such facilities would be eligible for 20 percent of the otherwise available ITC or PTC.
Thereafter, such facilities would not be eligible for the ITC or PTC.
For other types of eligible facilities, the draft legislation would adopt a phasedown of the ITC (including for storage facilities) and PTC beginning in 2033, which is not a material deviation from current law.
This is draft legislation only, it has not been enacted into law, and there may be further changes to the legislation before enactment.
URS v BDW [2025]: Supreme Court Confirms Consultants’ Duty to Developers for Historic Defects
Summary
The UK Supreme Court’s (Court) decision in URS Corporation Ltd v BDW Trading Ltd [2025] UKSC 21 resolves key questions around the recoverability of remediation costs where the developer no longer owns the property and has no enforceable legal liability to leaseholders at the time of the works.
The Court affirmed that, under English law, a professional consultant may owe a duty of care in tort to a developer client, even where that client has divested its interest in the property and is not subject to a third-party claim. It rejected arguments that BDW’s remediation works were voluntarily incurred and therefore not recoverable.
The ruling will be of significant interest to consultants, developers, insurers, lenders and those operating in the construction sector more broadly. For developers, the case highlights that reputational risk, potential personal injury liability and wider safety obligations may justify remediation, even without third-party claims or ownership. For purchasers and real estate investors, it underscores the importance of factoring latent defect risks into due diligence, as sale or transfer does not necessarily shield against tortious liability.
Background
BDW Trading Ltd (BDW), a major UK developer, engaged URS Corporation Ltd (URS) to provide structural engineering designs for two high-rise residential developments. Following safety reviews in 2019, serious structural defects were discovered. Although BDW no longer owned the properties, it carried out extensive remedial works and brought a negligence claim against URS to recover the costs.
At the time of the works, potential claims by leaseholders under the Defective Premises Act 1972 (DPA) appeared time-barred under the standard six-year limitation period. The Building Safety Act 2022 (BSA), which came into force later, retrospectively extended this period to 30 years, reviving interest in previously time-barred potential claims.
Ground 1: Was BDW’s Remediation “Voluntary” and Irrecoverable?
As BDW had no enforceable liability to leaseholders under the DPA at the time of the works, URS argued that BDW’s losses were voluntarily incurred and therefore outside the scope of URS’ duty of care.
The Court disagreed. It held that while BDW’s DPA liability was time-barred, it remained a continuing legal obligation. BDW still faced potential personal injury claims, which were not time-barred, as well as significant reputational and moral pressure to act. The Court found that BDW had no realistic alternative but to undertake the remediation.
The costs were foreseeable, reasonable and within the scope of URS’ duty of care. This finding is especially relevant for consultants (and their insurers); even where contractual limitation periods have passed, tortious duties may survive, particularly where public safety is at issue.
Ground 2: Relevance of Section 135 of the BSA
The Court confirmed that section 135 of the BSA, which retrospectively extends the limitation period under the DPA to 30 years, was relevant even though BDW’s claim was brought in tort and for contribution, rather than directly under the DPA.
Section 135 applies where the potential for the enforcement of DPA liability forms part of the legal reasoning for another claim, for example, to rebut an argument that remediation was voluntary or that there was no liability for the same damage in a contribution claim context. As a result, BDW’s DPA liability was revived, and there was no limitation bar in place when the costs were incurred.
The Court clarified that section 135 does not preclude a trial judge from considering whether the remedial works were reasonable as a matter of causation or mitigation.
For professionals, the retrospective effect of the BSA significantly increases the exposure window, particularly in tort and contribution claims revived by the (now) longer limitation period under the DPA.
Ground 3: Are Developers Owed Duties Under the DPA?
The Court confirmed that a developer like BDW can be owed a duty under section 1 of the DPA by professionals such as URS. The duty is owed to any person, including a developer, to whose “order” the dwelling is being built.
URS argued that the DPA intended to protect consumers, like individual purchasers, not commercial developers. They also argued that it was anomalous for a developer to owe and be owed the same duty. The Court rejected both arguments.
The Court held that consumer protection would be better served by a broad interpretation of the duty. If a purchaser were to bring a DPA claim against a developer for defective work, and the developer had commissioned that work from a third party, it would be entirely appropriate for the developer to be owed a corresponding duty by that third party. This would ensure the developer could seek redress from the party which had caused the defect and that purchasers would not be left without recourse, particularly in the event of a developer’s insolvency.
The Court dismissed the suggestion that a party cannot owe and be owed the same duty. There is no logical inconsistency as duties under the DPA can run through the chain of responsibility without being circular.
Ground 4: Can a Contribution Claim Arise Without a Third-Party Claim?
The Court held that BDW did not need to be sued by leaseholders in order to claim contribution from URS under the Civil Liability (Contribution) Act 1978.
It was sufficient that BDW:
Faced potential liability for the same damage; and
Had made a payment in kind by undertaking the remedial works as compensation.
Thus, a contribution claim may arise from proactive remediation, taken to mitigate foreseeable liability, without waiting for third-party proceedings. For developers, this decision supports early resolution of defects and may open recovery routes even before formal claims materialise.
Conclusion
With the BSA marking a decisive policy shift towards stronger accountability, this decision confirms that developers who act responsibly to address serious defects can expect greater support from the courts. Significantly, liability for unsafe work can survive divestment and time-bars and cannot easily be avoided by pointing to the absence of formal claims. Construction professionals should expect increased scrutiny of historic projects and prepare for a risk environment where legal responsibility can persist long after practical completion, especially where safety is concerned.
Not All Construction Performance Bonds Are Created Equally
The Oklahoma Supreme Court has rejected a contractor’s performance bond claim due to the lack of adequate notice to the subcontractor’s surety (see Flintco LLC v. Total Installation Management Specialists, Inc., No. 120,100 (Okla. May 28, 2025)). The case involves the construction of three student housing buildings on the campus of Oklahoma State in Stillwater. During construction the flooring subcontractor fell behind schedule. The general contractor communicated its concerns to the subcontractor but not to the subcontractor’s surety. The general contractor ultimately decided to supplement the flooring subcontractor’s work but did so without first giving notice of the subcontractor’s default to the subcontractor’s surety. Five weeks after supplementing the subcontractor’s work, the general contractor gave notice to the subcontractor’s surety that it was making a claim on the subcontractor’s performance bond for costs incurred supplementing the subcontractor’s work. The trial court ruled in favor of the general contractor, but the Oklahoma Court of Civil Appeals reversed, concluding that the bond required the contractor to provide prior notice of default to the surety as a mandatory condition precedent to recovery of supplementation costs. The Oklahoma Supreme Court agreed with that conclusion.
In reaching that decision, the Supreme Court helpfully clarified the different types of performance bonds, which are not all created equally:
In the construction industry, various types of bonds are commonly included under the heading of “performance bond” including: 1) the traditional performance bond; 2) the indemnity bond; 3) the completion bond; and 4) the manuscript bond. Each of these bonds has as its objective the protection of the obligee against contractor default. Under an indemnity bond, the surety’s performance obligation is limited to reimbursing the obligee for the costs of completion of the project, but generally does not expressly give the surety the right to cure a default by takeover and completion. Under a completion bond, the surety’s performance obligation is generally limited to the single option of taking over the work and completing the contract at the sole expense of the surety. The manuscript bond combines performance, completion, and indemnity obligations, and is often tailored and negotiated in projects where large owners are intent on shifting to the surety and contractor as much risk as possible.
The Bond involved in the present case is a traditional performance bond, modeled after a standardized contract form developed and published by the American Institute of Architects (AIA) — the A311 Performance Bond. This type of bond form provides several performance options to the surety, including remedying the default or arranging for performance. These options contemplate that the surety has a variety of choices, such as assisting the principal contractor with labor or materials or engaging a replacement contractor to complete the work. The Bond also permits the obligee, after reasonable notice to the surety, to arrange for performance of the work, in which case the surety is required to provide financial compensation for the cost of completing the project.
The Flintco court recognized a split of authority among courts interpreting similar performance bonds based on the AIA A-311 form. While some courts have concluded that prior notice to the surety is indeed a condition precedent to recovery, others have disagreed. Applying traditional rules of contract interpretation, the Flintco court ruled that the performance bond at issue did require prior notice to the surety as a condition precedent to recovery of supplementation costs. Having failed to give prior notice to the surety, the contractor’s performance bond claim was rejected.
A copy of the court’s decision is available here. It is a good reminder to pay close attention to the wording of your bonds, which are not all created equally but can have differing notice requirements and provide different forms of relief.
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