Housing Element Implementation FAQ
Basics
What is the Regional Housing Needs Assessment (RHNA) and what is Newport Beach’s allocation?
How is the current 6th Regional Housing Needs Assessment (RHNA) Cycle different?
Background
What has the City done to push back against the Regional Housing Needs Assessment (RHNA)?
Housing Plan Clarifications
What is No Net Loss and why does it matter?
I heard other cities are just planning the minimum number units. Why can’t we do the same?
Why doesn’t the City use more accessory dwelling units (ADUs) to reduce the need for rezoning?
Consequences of Noncompliance
What are the possible penalties for not having a certified Housing Element?
Can the City simply pay fines instead of having a Certified Housing Element?
What is Builder’s Remedy and why does it matter?
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Basics
The Housing Element is an essential part of the General Plan that outlines how a city plans to meet the state-mandated Regional Housing Needs Allocation (RHNA) within its boundaries. Local governments, like the City of Newport Beach, are responsible for creating a framework that allows private developers to build the types of housing specified in the RHNA. The City must update its Housing Element in cycles every eight years. We are currently in the 6th Cycle covering the planning period from 2021-2029. The California Department of Housing and Community Development (HCD) reviews every Housing Element to ensure cities comply with state housing laws. The City of Newport Beach Housing Element was adopted by the City Council on September 13, 2022, and certified by HCD as compliant on October 5, 2022. Click here to go back to the list of questions.
What is the Regional Housing Needs Assessment (RHNA) and what is Newport Beach’s allocation?
The RHNA is a state-required process that estimates how much housing each city and county in California needs to plan for. It assigns a specific number of market rate housing units along with requirements to include a certain number of affordable units. For Newport Beach, the RHNA target is 4,845 new units for the 6th Cycle (2021-2029). Notably, 3,436 of these units must be affordable for very-low-, low-, and moderate-income households, making the RHNA target for the 6th Cycle challenging to achieve in Newport Beach where land values are high. Click here to go back to the list of questions.
How is the current 6th Regional Housing Needs Assessment (RHNA) Cycle different?
The 6th Cycle introduced new factors for determining housing needs, including the need to address overcrowded living situations and households struggling to afford their homes. To further the State’s goals of reducing vehicle miles traveled and reduced emissions, jurisdictions with public transit and job centers, such as Newport Beach, received higher allocations. New laws also require the City to provide “substantial evidence” that sites are realistically capable of being redeveloped for residential use. Additionally, the City must work to avoid clustering affordable units in low-resource areas, a principle known as Affirmatively Furthering Fair Housing (AFFH). The City must also comply with “No Net Loss,” ensuring that it always has enough sites for lower-income housing units.
This RHNA cycle brings significantly higher housing targets for Southern California compared to previous ones. For example, in the previous 5th Cycle, Newport Beach had an allocation of just five units. In contrast, the City is now tasked with 4,845 new units, while nearby cities like Costa Mesa, Huntington Beach, and Irvine have even larger allocations of 11,760, 13,368, and 23,610 units, respectively. Click here to go back to the list of questions.
It’s important to understand that the City does not build housing or require property owners to develop housing. Instead, the City must provide appropriate zoning to create opportunities for housing projects to be approved and constructed. What actually gets built depends on various factors, including the economy, interest rates, available funding for affordable housing projects, construction costs, and property owner interest.
In simple terms, the City’s role is to set zoning rules, in compliance with various state laws, that make it possible for the required number of housing units to be built during the RHNA period, which runs from 2021 to 2029. Click here to go back to the list of questions.
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What has the City done to push back against the Regional Housing Needs Assessment (RHNA)?
While the RHNA was being calculated for the Southern California region, the Newport Beach City Council developed the 2020 Housing Action Plan. This plan aimed to firmly challenge the requirements of the State.
The RHNA is set by the State Department of Housing and Community Development (HCD), which determined that the Southern California Association of Governments (SCAG) region needs a total of 1.34 million new housing units across its 197 jurisdictions. SCAG is responsible for fairly distributing these units among the cities.
Once the allocation was drafted, the City filed a 33-page appeal, which was ultimately denied by SCAG’s regional council. At the same time, the City worked on a legislative approach by trying to change state law sending letters opposing harmful legislation and supporting beneficial ones.
Regional groups, such as the Orange County Council of Governments (OCCOG), which includes the City, also filed lawsuits against the state regarding the RHNA process, but these efforts did not lead to any significant results. Click here to go back to the list of questions.
The City made significant efforts to inform the community about the state mandate and its planning efforts for compliance.
Starting in 2019, the City appointed five community members to the General Plan Update Steering Committee (GPUSC). From 2019 to 2021, the GPUSC held 13 public meetings and partnered with City staff to conduct 12 public workshops. These workshops aimed to inform the community about the Housing Element’s requirements and discuss strategies for meeting the RHNA allocation. To spread the word, the City created a website, published advertisements in both print and online newspapers, and included information in utility bills, among other outreach efforts.
To ensure a transparent housing strategy that would meet the City’s RHNA allocation, the City Council appointed nine community members to the Housing Element Update Advisory Committee (HEUAC). This committee followed the Brown Act, meaning meetings were open to the public with agendas and minutes available. Each member had expertise in housing development, including designers, developers of both affordable and market-rate housing, and an affordable housing finance professional. The HEUAC met 13 times between 2020 and 2021, while the Planning Commission and City Council met 2 and 9 times, respectively. In total, the City held 50 public meetings to discuss the creation and adoption of the Housing Element.
More details on the community outreach effort can be found in Appendix C of the Housing Element, here. Click here to go back to the list of questions.
The City’s Charter Section 423 states that its provisions “shall not apply if state or federal law precludes a vote of the voters on the amendment.”
During the City Council meeting on July 23, 2024, the City Council reviewed evidence presented and determined that a public vote under Charter Section 423 was precluded since state law requires the City to adopt and implement the Housing Element. Related to housing, there has been recent court decisions that make it evident state law preempts the City’s local charter. Additionally, Charter Section 423 was described in Section 3 (Housing Constraints, Resources, and Affirmatively Furthering Fair Housing) of the 6th Cycle Housing Element as a constraint on implementation of the Housing Element and possibly violative of the City’s obligation to affirmatively further fair housing. Furthermore, the 6th Cycle Housing Element implementation must be in effect by February 2025 to avoid significant penalties and loss of local control mandated by state law. These penalties include allowing housing projects to bypass local zoning rules, losing permitting authority, losing eligibility for state and regional funding, facing financial penalties of up to $600,000 per month, increased monitoring from the new Housing Accountability Unit of HCD, possible court control, and increased exposure to public and private lawsuits.
The City’s adoption of the amendments related to the Housing Element without a Charter Section 423 vote helps to ensure the City’s implementation of the 6th Cycle Housing Element in compliance with state law. Click here to go back to the list of questions.
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The RHNA allocation of 4,845 new housing units includes 3,436 units that must be affordable for very-low-, low-, and moderate-income households. The City can take credit for units that are being developed, projected accessory dwelling unit (ADU) production, and sites from the 5th Cycle that were already rezoned for residential use. After applying these credits, the City still needs to plan for 2,707 new units that are affordable to very-low-, low-, and moderate-income households. This means that while the City’s current housing projects can offset all the market-rate units, they only cover a small part of the affordable units.
The City can’t just plan for 2,707 new affordable units, because that would assume all future projects would be 100% affordable, which is not realistic based on previous development experiences. Additionally, the State Department of Housing and Community Development (HCD) would not approve a plan based solely on the assumption of 100%-affordable projects.
To address this, the City’s Housing Plan includes a buffer of extra units, allowing for market-rate units to help support and subsidize the creation of affordable housing. Click here to go back to the list of questions.
What is No Net Loss and why does it matter?
State law requires the City to follow the “No Net Loss” rule when implementing the Housing Element. This means the City must always have enough sites available to support housing development at all levels of affordability.
For example, if the City plans for 150 units on a site, including 30 units that are affordable to low-income households, and a developer is approved for a project with 150 units but only 15 of those are affordable, then the City must account for the difference of 15 low-income units on another site. If there isn’t a “buffer” to accommodate these 15 low-income units, the City has to rezone another site to prevent losing those units. This rezoning must occur within an accelerated deadline of six months (180 days) or the City’s Housing Element would fall out of compliance with state law opening up the City to enforcement and penalties. In general, it takes at minimum one year to process a rezoning in the City and approximately two years for sites with the Coastal Zone. Therefore, it’s unlikely the City could meet the accelerated rezoning deadline imposed by the state should No Net Loss be triggered.
The law also prevents the City from denying a housing development application on the basis that approval of the development would trigger the No Net Loss requirements of identifying and rezoning additional sites to accommodate the remaining RHNA.
By including a buffer in the City’s housing plan, the City can ensure compliance status is maintained throughout the eight-year planning period and help ensure that housing projects are focused in the five key areas planned for development, rather than spreading them out into villages or lower-density neighborhoods. Click here to go back to the list of questions.
I heard other cities are just planning the minimum number units. Why can’t we do the same?
Cities that do not have a buffer or do not always have enough units planned for all income levels will have to rezone for more housing units. And if these Cities do not rezone for the housing units within the required 180 days, then they can lose their compliance approval with HCD, fall out of compliance with state law, and thus be subject to enforcement an penalties described above. Click here to go back to the list of questions.
The State Density Bonus Law allows projects that meet certain affordability criteria to receive a bonus of additional density. The use of this law is voluntary and developers can utilize it or not. While this law can enable developers to effectively double the allowable density on a project site, the reality is that the highest density bonus approved in the City so far has been 50%. The average range of recently approved density bonus projects is between 20% and 30%. Projects may also still be submitted and approved without any affordable units, which means there would be no bonus units provided under state law. As such, it is unrealistic to assume the City is planning for double the 8,174 new units because the Density Bonus Law is an incentive, not a requirement. The City has seen projects not utilize density bonus as well as utilize the incentive. Click here to go back to the list of questions.
Why doesn’t the City use more accessory dwelling units (ADUs) to reduce the need for rezoning?
Initially, the City aimed to include 1,000 new ADUs in the Housing Plan. However, the State Department of Housing and Community Development (HCD) rejected this plan and required a smaller number of ADUs. The City then adjusted the planned number from 1,000 to 240. The City has prepared a comprehensive ADU website (newportbeachadu.org) to help educate property owners of the benefits of ADU construction and the incentives and resources available. Click here to go back to the list of questions.
No, the State requires the City’s plan to follow the goal of Affirmatively Furthering Fair Housing (AFFH). This means the City must spread housing units throughout its limits and cannot concentrate them in one area or in areas with low resources. Click here to go back to the list of questions.
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Several cities have taken legal action against the State regarding their Housing Elements; however, these cases rarely result in favorable outcomes for the cities involved. Indeed, courts have consistently ruled that cities must follow state law.
Moreover, over the last few years, the State has been increasingly asserting control over local land use decisions, making the risks of non-compliance with state law more severe. Most recently, on September 19, 2024, Governor Newsom signed AB 1893 and AB 1886 into law, significantly strengthening builder’s rights and diminishing a local agency’s authority under the law for failing to comply with state law Housing Element requirements. Additionally, with the upcoming implementation of SB 1037, effective January 1, 2025 fines may be imposed more quickly by subjecting local jurisdictions to a civil penalty of between $10,000 and $50,000 per month, in addition to the imposition of other remedies and fines authorized under existing law, for failure to comply with state law.
Thus, maintaining a certified compliant Housing Element is essential for the City to preserve its local control. If the City fails to keep a certified Housing Element, several serious ramifications could arise, including:
- Builder’s Remedy: This legal provision arises from the Housing Accountability Act and allows builders to bypass local zoning and planning rules when a jurisdiction’s Housing Element is out of compliance. This means they can construct higher-density housing on any lots regardless of zoning, giving the City limited control over the project's design or size. For instance, in Santa Monica, a developer proposed tall apartment towers adjacent to single-family homes, and similar situations are occurring in Orange County cities like Orange and La Habra. On September 19, 2024, Governor Newsom signed AB 1893 and AB 1886 into law, significantly strengthening builder’s rights and diminishing a local agency’s authority under the law. See “What is Builder’s Remedy and why does it matter?” below.
- Loss of Local Control Over Land Use: Without a certified compliant Housing Element, the City risks losing control over land development and may even lose its ability to issue building permits for any construction. In Beverly Hills, for example, the State intervened and halted the issuance of all building permits except permits for new affordable housing, affecting everything from minor kitchen remodels to new residences. Click here to go back to the list of questions.
What are the possible penalties for not having a certified Housing Element?
The State Department of Housing and Community Development (HCD) has established a Housing Accountability Unit (HAU) that actively enforces state housing element law. While not exhaustive, here are some potential penalties if a city fails to comply or lacks a certified Housing Element:
- Moratorium on Building Permits. This prevents local jurisdictions from issuing any building permits for construction. This has already been enacted in cities like Beverly Hills and Encinitas.
- Public Litigation with the State Attorney General’s Office. This can result in costly and unnecessary legal battles. Notably, litigation has impacted cities such as Fullerton and Huntington Beach.
- Loss of State Grant Funding. The City currently benefits from vital grant funding for infrastructure projects. A noncompliant status would disqualify the City from receiving these funds.
- Substantial Monthly Fines. Fines can reach up to $600,000 per month at the discretion of the State Attorney General. These financial penalties are expected to intensify, especially with the upcoming implementation of SB 1037, effective January 1, 2025. SB 1037 seeks to impose fines more quickly by subjecting local jurisdictions to a civil penalty of between $10,000 and $50,000 per month, for each violation, accrued from the date of the violation until the date the violation is cured; all costs associated with investigating and prosecuting the action; and any other relief the court may deem appropriate. Additionally, the bill clarifies that the remedies provided in this bill do not preclude the imposition of other remedies and fines authorized under existing law. Click here to go back to the list of questions.
Can the City simply pay fines instead of having a Certified Housing Element?
No, fines cannot be considered an “in-lieu” fee to opt out of the mandate. They are just one of the penalties for cities without a certified compliant Housing Element. Click here to go back to the list of questions.
What is Builder’s Remedy and why does it matter?
Builder’s Remedy is a law that allows builders to bypass many local land use regulations if a city does not have a certified compliant Housing Element. This shifts power to developers, giving them opportunities to construct more residential units and larger buildings on sites not currently zoned for such use.
This law was designed to compel cities to meet state housing goals. If a city fails to comply with state housing element law, builders can utilize Builder’s Remedy to secure project approvals, even if the city would typically deny them. Once this rule is in effect, the city has limited ability to halt these projects.
While the Builder’s Remedy law has been around since 1990, it only recently gained attention when several cities and towns throughout the State did not meet the deadlines for 6th Housing Element cycle. Hundreds of Builder’s Remedy applications have been filed across the State, although the number of approved projects is more limited.
Recent legislation—AB 1893 and AB 1886—signed on September 19, 2024, aimed to strengthen and simplify the Builder’s Remedy law, encouraging greater use by developers. Key aspects of these bills include:
- Reducing the minimum affordability requirement from 20% to between 13% and 7%, making projects in Newport Beach significantly more financially viable.
- Eliminating the affordability requirement for projects with fewer than 10 units, making this an attractive option for developers to redevelop residential, commercial, and recreational lots within established lower-density neighborhoods and villages such as Corona del Mar, Newport Heights, Mariner’s Mile, and the Balboa Peninsula.
- Allowing up to three times the maximum density allowed by the General Plan, enabling higher density than previously permitted.
- Offering additional density bonus incentives, which allow developers to waive certain limitations to create affordable housing units.
- Allowing existing projects to convert to Builder’s Remedy status, disrupting local control and removing the City’s review process.
- Clarifying application timing for Builder’s Remedy— even a single day of noncompliance can enable a Builder’s Remedy application.
- Establishing narrow criteria for disapproval, making it difficult to deny Builder’s Remedy projects.
- Imposing penalties for project delays, requiring the City to act swiftly in reviewing submissions under Builder’s Remedy. Click here to go back to the list of questions.