San Jose spurns developers, sparking possible legal fight

San Jose is throwing down the gauntlet to developers, pushing back on applications for housing projects that attempt to get around city development standards and goals.

The city last week rejected 14 different housing proposals filed in the latter half of 2023 by developers asserting rights to build what they want where they want, under a provision of state housing law known as the builder’s remedy. The city’s actions could set up a series of legal challenges.

“It’s highly aggressive, I think it’s a really aggressive reading of the law,” Bryan Wenter, a land use attorney who represents developers with several builder’s remedy projects in the city, told San José Spotlight. “I think it’s inviting litigation.”

San Jose last week finally gained state certification for its long-term housing plans, known as a housing element, one year late. Prior to the state’s approval, developers took advantage in 2023, using the builder’s remedy to submit a bevy of new or revised housing projects across the city that bypass local zoning and development standards.

However the city is drawing a line in the sand as of June 20, 2023, the date the San Jose City Council approved the city’s housing element. Last week, city planning officials sent rejection letters to a group of developers that submitted project applications after that date, telling them their builder’s remedy proposals won’t be considered.

“When we consider our housing element, we consider it to be in substantial compliance on June 20,” Chris Burton, San Jose’s director of planning, building, and code enforcement, told San José Spotlight. “We believe those applications came in after the city was in substantial compliance with housing element law, and all those applicants have now been notified that is our position.”

Contentious battle ahead

The city’s stance seems to fly in the face of letters and memos from California’s Department of Housing and Community Development.

In a letter last year to San Jose after its June housing element submission, the department said San Jose’s plan still didn’t “substantially comply” with state standards, forcing city officials to work with the state through late last month to craft a final housing element that passed muster on Jan. 29.

The department has also said previously cities and counties do not have the authority to determine when a housing element is in substantial compliance with state law, and must get approvals from the state.

In the city’s letters to developers, officials referenced a 2007 state appeals court case ruling stemming from Gilroy, in which judges said the state housing department’s determinations are only advisory.

“It would be a matter of the court to determine what substantial compliance means,” Burton said.

For builder’s remedy projects submitted on or before June 20, 2023, Burton said the city will process those applications normally.

“We’ll work with those developers to hopefully find the best outcome for those sites, considering what the city had planned for those sites and considering what the developer is proposing,” Burton said.

Wenter said though San Jose fashions itself a pro-housing city, this choice to fight developers on remedy projects is an anti-housing stance.

He said San Jose is effectively giving “everybody the double middle finger and saying, ‘If you don’t like it, take us to court.’”

In numerous builder’s remedy applications in San Jose, developers propose dozens to hundreds of homes in areas where city officials don’t support adding housing.

But some of the greatest concerns for officials in San Jose are remedy projects demanding to significantly shrink previously approved projects, in the wake of high interest rates and construction costs as well as reduced demand for office space, such as at the San Jose Flea Market site. The developer there is proposing to cut 2,510 homes, bringing the total down to 940, in a city-designated “urban village” plan around the Berryessa BART station.

Erik Schoennauer, a land use consultant who represents the developer of the flea market site, said previously the city must honor the application for the proposal. After receiving the rejection letter from San Jose, he said nothing changes and his client will move forward with their application.

“The state has said cities cannot self-certify their housing element. The law says that as long as a city has a noncompliant housing element, builder’s remedy is applicable. These are the facts of the law,” Schoennauer told San José Spotlight. “The city can talk with any theory they want.”

He said it’s “unfortunate” steps are being taken to stop or slow down housing production.

Wenter said the choice of whether and how to pursue a legal fight against the city will be different for each project, developer and potential investors.

“The city is betting on the idea that some projects will go away, but not all of them,” Wenter said. “The argument they are making is aggressive. I think it’s incorrect, I think it should fail.”