Schreiber v. City of L. A.

69 Cal.App.5th 549

284 Cal.Rptr.3d 587

Scott SCHREIBER et al., Plaintiffs and Appellants,

v.CITY OF LOS ANGELES, Defendant and Respondent;

Kiwi Neman et al., Real Parties in Interest and Respondents.

2d Civil No. B303642

Court of Appeal, Second District, Division 6, California.

Filed September 28, 2021

Wolf, Rifkin, Shapiro, Schulman & Rabkin, Marc E. Rohatiner, Los Angeles, and Johnny White, Irvine, for Plaintiffs and Appellants.

Best Best & Krieger, Alisha Winterswyk, Irvine, John Cotti, Los Angeles; Michael N. Feuer, City Attorney, Terry P. Kaufmann Macias, Assistant City Attorney, Amy Brothers and Yongdan Li, Deputy City Attorneys, for Defendant and Respondent City of Los Angeles.

Glaser Weil Fink Howard Avchen & Shapiro, Elisa L. Paster and Elizabeth G. Chilton, Los Angeles, for Real Parties in Interest and Respondents Kiwi Neman and 488 San Vicente LLC.

TANGEMAN, J.

The density bonus law ( Gov. Code, § 65915 )¹ requires that cities and counties allow increased building density, and grant concessions and waivers of permit requirements, in exchange for an applicant's agreement to dedicate a specified number of dwelling units to low income or very low income households. Here we hold that neither the statute nor the Los Angeles City ordinance implementing it requires the applicant to provide financial documentation to prove that the requested concessions will render the development "economically feasible."

Appellants Scott Schreiber and Jessica Sabbah-Mani appeal denial of a petition for writ of administrative mandamus challenging the City of Los Angeles's approval of a development project. Appellants contend: (1) the city abused its discretion when it approved incentives and waivers without obtaining the required financial documentation, and (2) the city's approval of the project was not supported by substantial evidence. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

Kiwi Neman and 488 San Vicente LLC (Neman) proposed a mixed-use development in the city of Los Angeles. Retail space and a residential lobby were planned for the ground floor and residential units above. Appellants reside in a single-family home nearby.

Existing zoning requirements would limit the building to three stories, a height of 45 feet in the front and 33 feet in the back, a total of 40 units, and a maximum floor area of 21,705 square feet (floor area ratio [FAR] of 1.5:1). Neman initially applied to build 53 units including five very low income units. The proposed building was 75 feet tall in seven stories, and 60,388 square feet of floor area (FAR 4.2:1). The proposal was modified in October 2017 to build 54 units including five very low income units, five moderate income units, and 59,403 square feet of floor area (FAR 4.1:1).

The original application included a Financial Feasibility Analysis prepared by RSG, Inc. ("RSG analysis"). It included estimated development costs, net operating income, and financial feasibility. It calculated the cost per unit as $1,106,847 without the requested incentives, and $487,857 with the incentives.

A January 2017 memorandum from the Department of City Planning to staff and the public discussed recent amendments to the density law, including Assembly Bill No. 2501 (2015-2016 Reg. Sess.) (Stats. 2016, ch. 758, § 1, eff. Jan. 1, 2017) ("A.B. 2501"). The memorandum stated: "The ability of a local jurisdiction to require special studies is eliminated unless they meet the provisions of state law. [¶] Financial pro-formas and third party reviews will no longer be required ...."² In response, Neman advised the city he would "not be moving forward with a pro forma [for] this project."

At the City Planning Commission (CPC) hearing, a city planner stated that as a result of A.B. 2501, "financial pro formas, or financial analyses can no longer be considered as part of the density-bonus application." A commissioner thanked her for the "[h]elpful clarification."

Following the hearing, the CPC approved the project including the requested density bonus. It also approved two "off menu" incentives (increased floor area and maximum height), and two waivers (transitional height and rear yard setback requirements). The CPC found: "The record does not contain substantial evidence that would allow the City Planning Commission to make a finding that the requested Off-Menu waivers and modifications do not result in identifiable and actual cost reduction to provide for affordable housing costs per State Law." It further found, "Granting of the off-menu requests would result in a building design or construction efficiencies that provide for affordable housing costs. The off-menu requests allow the developer to expand the building envelope so that additional affordable units can be constructed .... These incentives support the applicant's decision to set aside five dwelling units for Very Low Income households for 55 years as well as provide an additional five units for Moderate Income households."

Appellants filed a petition for writ of administrative mandamus. They alleged the CPC misinterpreted the density bonus law, and its findings were not supported by the evidence. ( Code Civ. Proc., § 1094.5.) The trial court denied the petition.

DISCUSSION

We independently review questions of statutory interpretation. ( Hartnett v. San Diego County Office of Education (2017) 18 Cal.App.5th 510, 517, 227 Cal.Rptr.3d 81.) The density bonus law "shall be interpreted liberally in favor of producing the maximum number of total housing units." ( § 65915, subd. (r).)

In reviewing an administrative determination, the trial court determines whether the agency "has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence." ( Code Civ. Proc., § 1094.5, subd. (b).) "An appellate court independently determines whether the agency prejudicially abused its discretion by failing to proceed in the manner required by law, such as by failing to comply with required procedures, applying an incorrect legal standard, or committing some other error of law." ( Pedro v. City of Los Angeles (2014) 229 Cal.App.4th 87, 99, 176 Cal.Rptr.3d 777.)

Density bonus law

The density bonus law requires that cities and counties allow increased building density for development projects that dedicate at least ten percent of the dwelling units to low income households, or at least five percent to very low income households, for a period of 55 years or longer. ( § 65915, subds. (b), (c)(1)(A).) The amount of density increase is based on the percentage of low or very low income units. ( § 65915, subd. (f).) Section 65915 also requires that the city or county grant incentives or concessions (subds. (d), (k)) and waivers or reductions of development standards (subds. (e), (o)(1)). As required by subdivision (a)(1) of section 65915, the city adopted an ordinance to implement the statute. (Los Angeles Municipal Code (LAMC), section 12.22.A.25 ("the ordinance").)

Appellants do not contend that the city erred in granting the density bonus . The city was required to grant it because the developer agreed to dedicate the required percentage of units to affordable housing. ( Friends of Lagoon Valley v. City of Vacaville (2007) 154 Cal.App.4th 807, 825, 65 Cal.Rptr.3d 251.) Section 65915 does not require an applicant to provide financial information to support an application for a density bonus.

Appellants instead contend that section 65915 requires that applicants submit certain financial information to support a request for incentives and waivers . We conclude that the city's ordinance, which requires an applicant to submit information to show the incentives are needed to make the project "economically feasible ," conflicts with the statute and is preempted.

Financial requirement for incentives

"Concession" and "incentive" are synonymous in the statute. ( § 65915, subd. (k).) As defined, they include "[a] reduction in site development standards or a modification of zoning code requirements or architectural design requirements ... that results in identifiable and actual cost reductions, to provide for affordable housing costs ." ( § 65915, subd. (k)(1), italics added.)

The applicant, however, is not required to establish that cost reductions will result. Instead, "[t]he city ... shall bear the burden of proof for the denial of a requested concession or incentive." ( § 65915, subd. (d)(4).) Subdivision (d)(1) provides that the city "shall grant the concession or incentive requested by the applicant unless the city ... makes a written finding, based upon substantial evidence, of any of the following:

"(A) The concession or incentive does not result in identifiable and actual cost reductions, consistent with subdivision (k), to provide for affordable housing costs ....

"(B) The concession or incentive would have a specific, adverse impact ... upon public health and safety or the physical environment or on any real property that is listed in the California Register of Historical Resources ....

"(C) The concession or incentive would be contrary to state or federal law."

The ordinance includes a parallel provision requiring approval of incentives unless the city finds exception (A) or (B), above. (LAMC, § 12.22.A.25(g)(2)(i)c.) It provides a "Menu of Incentives" available to developers. (LAMC, § 12.22.A.25(f).) It also permits "off-menu" incentives, with a more stringent application process than menu incentives. (LAMC, § 12.22.A.25 (g)(3).)

By requiring the city to grant incentives unless it makes particular findings, the statute places the burden of proof on the city to overcome the presumption that incentives will result in cost reductions. (See Pinnacle Museum Tower Assn. v. Pinnacle Market Development (US), LLC (2012) 55...