Builder’s remedy was supposed to ‘Manhattanize’ the Bay Area. So where are all the houses?

The tool promised to give developers power to override local zoning — but cities are holding up projects in litigation, refusing to give up control.

For over a decade, developer Forrest Linebarger has tried to build new multifamily housing on two half-acre parcels in Los Altos Hills. The city has done all it can to stop him.

Then early last year, he employed a largely untested tool — the builder’s remedy. The provision penalizes cities that have failed to get state approval for their plans to accommodate new residential growth. Without the state’s sign-off on that plan, known as the housing element, developers can skirt local zoning codes and propose projects far taller and denser than might typically be allowed — so long as 20% of the units are rented at affordable rates to qualifying tenants.

Linebarger was among the first Bay Area developers to use the provision. His proposal: two 44-unit senior housing projects that would be a stark contrast to the multimillion-dollar homes on leafy Mora Drive.

And yet, over a year later, Linebarger’s project is still far from breaking ground. He’s not alone.

Since the beginning of 2023, at least 98 builder’s remedy projects totaling more than 13,000 units have been proposed across 18 Bay Area cities and counties that lacked state-certified housing elements, according to a Bay Area News Group survey of local officials and planning documents throughout the region. The exact number of builder’s remedy projects is unclear: The state doesn’t keep a tally, and it’s likely developers are using the rule in other cities as well.

The projects range from three towers that would loom 421 feet over a quiet Menlo Park neighborhood to 255 new apartments and homes, and a hotel, at the Mountain Winery in the hills west of Saratoga. If built, the projects would transform their communities, bringing much-needed housing to affluent cities that have most resisted new housing — and yet, none of them have gone forward.

Despite the flurry of headline-grabbing applications and the subsequent uproar from suburbanites that the builder’s remedy would “Manhattan-ize” their towns, the provision has proven to be far from a silver bullet for developers.

“In many ways, the builder’s remedy has been a godsend,” Linebarger said. “But the city is going to try to make this as expensive and long and difficult as possible.”

State officials say the Bay Area needs to add 441,000 homes by 2031 to solve a decades-long housing shortage.

Ask any housing advocate, developer or land use planner as to why no builder’s remedy projects have been yet approved, and they’ll tell you the answer is the same as why California hasn’t produced enough housing: cities aren’t giving up local control without a fight. At stake, they say, is the character of their communities. Some of the strongest opposition has come from the region’s wealthiest and Whitest enclaves.

“If an agency wants to drag its feet, there are ways to do that — and they are,” said Bryan Wenter, a land use attorney with Miller Starr Regalia, a Walnut Creek law firm working on 25 builder’s remedy projects around the state.

Cities are exploiting several legal gray areas in the law, he said, resulting in lengthy project processing and in some cases litigation slowing implementation of the builder’s remedy. In the end, though, these battles — and some of the legislation they have inspired — could end up serving to further strengthen the builder’s remedy.

“Unfortunately a lot of these projects are going to end up in lawsuits and take more time,” said Orville Power, managing partner of Mana Investments, which has builder’s remedy projects in San Jose and Gilroy. “Ultimately it should help build more housing — but it’s not going to be quick.”

An experiment in state housing law

Though the builder’s remedy has been on the books since the 1990s, the provision went untested until last year. As cities’ eight-year housing plans came due, talk of using the obscure provision began swirling on social media among academics and housing advocates. Eventually, developers caught on.

One of the first to try out the builder’s remedy was Cedar Street Partners, which applied to build affordable housing in the affluent Southern California city of La Cañada Flintridge. The city rejected the application, asserting that the builder’s remedy didn’t apply there because it had “self-certified” its housing element.

That argument has been used by a number of cities, including Los Altos Hills, which passed resolutions declaring their housing elements in compliance with state law, even though they hadn’t yet received the official sign-off from state housing regulators.

La Cañada Flintridge ended up in court against the nonprofit California Housing Defense Fund, and in March, a Los Angeles court ruled the city had to accept Cedar Street Partners’ 80-home project. Gov. Gavin Newsom, whose administration has been cracking down on cities trying to evade housing law, described the ruling as a “warning to other NIMBY jurisdictions.”

But while that loophole may be closed for now, others remain open.

In Los Altos Hills, the city may not have any say over whether Linebarger’s senior housing project is compatible with the existing zoning — but officials are trying to kill it by citing concerns that it could overwhelm the fire department, he claims. Los Altos Hills City Manager Peter Pirnejad said the city is “actively processing all received applications in a timely manner” and that builder’s remedy projects must still “adhere to applicable standards, including stringent adherence to building code requirements.”

Other applicants say they’ve had builder’s remedy applications deemed “incomplete” by a city for things as small as typos, or been required to file excessive environmental studies.

Chris Elmendorf, a UC Davis professor and expert on the law, has described the La Cañada decision as a turning point between two eras of the builder’s remedy.

In the first era, aggressive cities refused to process builder’s remedy projects arguing they had compliant housing elements, even if state regulators hadn’t greenlit them yet, and said they were thus not subject to the remedy. In the next, cities may concede they’re subject to the builder’s remedy, but will drag out such projects for years with studies and conditions of approval.

A group of California lawmakers wants to make sure that second era is short-lived. Assemblymember Buffy Wicks, an Oakland Democrat, this year proposed legislation to clear up some of the gray areas in the builder’s remedy and give the provision some guardrails.

As a perk to developers, the bill would reduce the number of affordable units that builder’s remedy projects must set aside, to 10% from 20%, making it easier for a project to pencil out financially. As a nod to housing-hesitant cities, it would also limit projects to two or three times the current zoned densities to prevent developers from proposing the mega-projects that generate the most controversy.

But some housing advocates say the builder’s remedy in its current form is already a success, even if it hasn’t generated new units yet, and that such amendments could water down the provision.

“It’s unfair to measure the success of the builder’s remedy only by construction,” said Louis Mirante, vice president of housing policy for Bay Area Council. For one thing, no legislative fix is going to solve rising labor and construction costs and high borrowing rates, which are holding up some of the projects, he said.

Beyond the economic headwinds they face, housing developers say that behind the scenes they are using the builder’s remedy to gain leverage over cities, threatening mega-projects to broker deals for scaled-down projects. By taking away developers’ ability to propose large projects, the state could take away a powerful bargaining chip, some developers say.

“We’ve had cities say, ‘We can work hard to provide you an alternative path (to approval.)’ Those discussions are a result of the new leverage that state laws have provided to housing developers,” said Gary Johnson, a partner with Acclaim Companies in Menlo Park, which has proposed two builder’s remedy projects in Palo Alto totaling 578 units.

In the upscale Marin County community of Belvedere, developer Thompson Dorfman had for years been seeking to build 40 units near the waterfront. In January, the company submitted a builder’s remedy project with 70 units, telling the city that if it didn’t proceed with the original application, it would have “no choice but to pursue the builder’s remedy project.” The city acquiesced — in January, it cleared the path for the smaller project to move forward.

“There are some people who want to see builder’s remedy projects go through, and some who believe it’s a tool to get cities to adopt compliant housing elements,” Mirante said. “For me, the most important part of the builder’s remedy is: Does it build more homes?”