California Cities Are Evading State Mandates To Build More Housing, Lawsuits Claim

Pro-housing groups have filed a set of lawsuits accusing three California cities of unfairly blocking more housing development near transit.

The lawsuits from the nonprofit Californians for Homeownership accuse San Diego, San Francisco, and Montebello of putting up barriers that contravene Senate Bill 79, the state's law pushing dense residential development near transit.

The group, which is financially backed by the California Association of Realtors, said the suit aims to compel the three cities to pick up the pace of approving new projects.

The suit comes amid Gov. Gavin Newsom's campaign to enforce more dense housing statewide to help the state tamp down its skyrocketing housing costs. Newsom has gone as far as to sue localities that put up barriers to additional affordable housing.

But the three cities in question have misinterpreted the law or used other restrictions to get around it, CAR president Tamara Suminski said in a statement.

“Cities throughout California must play by the same set of rules established by our Legislature for the development of housing,” Suminski said. “Through these new lawsuits, Californians for Homeownership continues to play a vital role in addressing housing affordability through impact litigation.”

The state-by-state housing affordability report card from Realtor.com® has given California an F for the past two years. Newsom has since turned his attention to building more housing in the state, especially more dense housing in areas that have previously resisted it. Candidates to succeed Newsom have also cited local resistance to homebuilding.

The housing group, with the California Housing Defense Fund, filed three separate lawsuits in the home counties of each city. Each lawsuit accused the city of different strategies to create exclusions or legal restrictions that block housing development, said Matthew Gelfand, the nonprofit's in-house litigator.

3 cities, 3 lawsuits

In San Diego, the suit says the city is claiming an exemption that lets it exclude many sites near the San Diego Trolley because they have inadequate walking paths. San Diego's Office of the City Attorney declined to comment.

"State law does not allow cities to use their own failure to provide or maintain sidewalks as a basis for limiting transit-oriented development," the organization said in a statement, adding San Diego has also published "inconsistent and erroneous maps" that are difficult to understand.

In San Francisco, the group says the city is exempting some areas for development by designating them “industrial employment hubs.” Nonprofit YIMBY Law is also a part of that lawsuit, alleging that the city isn't complying with California's density bonus laws.

“We will review the complaint and respond in court," city spokesperson Jen Kwart said.

And Montebello enacted a moratorium on development in June with its Ordinance No. 2495. That act violates several laws, the suit states, including a law from 2019 meant to stop moratoriums on housing development.

The city didn't respond to a request for comment. The ordinance states that it's necessary to pause the enactment of SB79 because Montebello is already formulating its own transit-oriented development plan.

“The Legislature has included strong local control provisions in this law, allowing cities to adjust the state policy to better fit the needs of their communities,” Gelfand said. “We are committed to ensuring that cities strictly comply with these provisions in adopting local transit-oriented development policies.”

Litigating housing

Californians for Homeownership is a group created and funded by the California Realtors and other donors. The group is "devoted to using legal tools to address California's housing crisis," according to a mission statement.

The group is no stranger to suing cities over laws blocking housing. In recent years it's sued 10 other California cities. It accused Beverly Hills, Laguna Beach, Claremont, and others of avoiding a state requirement to plan for more dense housing. And it says it is in "pre-litigation discussions" with other cities throughout the state. Some of those will also mean lawsuits, the group said.

The new lawsuits come as the larger National Association of Realtors® has taken a stance on other housing laws, including through the courts. NAR is the second-largest lobbying organization by spending in DC, spending $54 million in 2024, according to nonprofit campaign finance tracker OpenSecrets.

NAR also said this week it would seek to intervene in a lawsuit to oppose a proposed rent-control law that could go before voters in Washington, DC. It previously spoke out against another rent-control ballot initiative in Massachusetts that did not advance.

“NAR's involvement reflects its broader advocacy for policies that increase housing supply, support responsible investment, and protect property rights,” Shannon McGahn, NAR executive vice president and chief advocacy officer, said of the rent control measure.