New Commune DTLA, LLC v. City of Redondo Beach
On October 10, 2025, the California Court of Appeals, Second Appellate District (“Court”), issued its decision in New Commune DTLA, LLC v. City of Redondo Beach, ruling that the City of Redondo Beach’s (“City”) 6th Cycle Housing Element (“Housing Element”) failed to satisfy the requirements of the State Housing Element Law (“HEL”). In reversing the trial court, the Court held that the City’s use of an optional residential overlay zone (“Overlay”) to satisfy its regional housing needs allocation (“RHNA”) failed to comply with Government Code section 65583.2(h)(2) on two independent grounds. First, the Overlay failed to satisfy the mandatory minimum density requirement of 20 residential units per acre, because sites within the City’s housing inventory were permitted to be redeveloped without any housing. Second, the Overlay failed to satisfy a separate requirement designed to ensure sites included within a housing inventory cannot be redeveloped without a minimum percentage of residential. The Court also found that one of the sites within the Housing Element was not properly identified as a developable site during the cycle period due to contractual restrictions.
While the direct result of the case is the invalidation of the Redondo Beach Housing Element, the case clarifies the requirements applicable to housing elements throughout the state, and may provide opportunities for additional residential development in other jurisdictions.
Rutan & Tucker, LLP attorneys Peter Howell and Erik Leggio represented New Commune DTLA and Leonid Pustilnikov in their challenge to the Housing Element.
Legal and Factual Background
As part of the housing element process, the Department of Housing and Community Development (“HCD”), in consultation with regional councils of government, provides local governments with a needs assessment referred to as a “regional housing needs allocation” (“RHNA”), and allocates regional housing need among local governments in the region. A jurisdiction’s share of the RHNA is separated into four income levels: very-low, low, moderate, and above-moderate.
Each jurisdiction must adopt a housing element which includes (among other things) a housing inventory that identifies sites available to meet the locality’s housing need for each income level. Such inventory may include both vacant sites and sites having a “realistic and demonstrated potential for redevelopment during the planning period.”
When it is necessary to rezone sites to accommodate a city’s lower income housing obligation, the HEL requires certain minimum requirements be met. As relevant here, Government Code section 65583.2(h)(2) requires both: (1) that sites rezoned to satisfy a municipality’s low-income housing obligation meet “minimum density and development standards,” including, for cities like Redondo Beach, a minimum density of 20 units per acre; and (2) that at least 50 percent of such obligation be accommodated on sites designated exclusively for residential use, unless they are mixed-use sites that allow 100 percent residential use and require that residential use occupy at least 50 percent of the total floor area of a mixed-use project.
In July 2022, the City adopted the Housing Element, which was thereafter certified by HCD in September 2022. In order to satisfy the City’s lower income housing allocation, the Housing Element relied on a proposed residential Overlay placed over six commercial and industrial areas spanning dozens of parcels. Importantly, the Overlay did not require any redevelopment to include housing. Rather, a property owner within the Overlay could elect to rely on the base zoning to build an entirely commercial or industrial project, with no housing.
The City’s Overlay Fails to Comply with the Minimum Density Requirement
The Court found that the City’s Overlay failed to require the mandatory minimum density of 20 units per acre because the underlying commercial and industrial zoning permits development with zero residential units. Relying in part on the Fifth District’s previous decision in Martinez v. City of Clovis (2023) 90 Cal.App.5th 193, the Court found that “section 65583.2(h) is unambiguous and imposes a mandatory minimum density requirement.” Specifically, the Court held that the statute’s plain language provides that relevant sites “shall be zoned with the minimum density and development standards” and “shall be at least 20 units per acre” in suburban jurisdictions like the City.
The City’s Overlay Zone Fails to Require Minimum Amounts of Residential Development
The Court also found that the City’s Overlay approach failed to satisfy a separate requirement of Section 65583.2(h)(2), specifically, that:
At least 50 percent of the very low and low-income housing need shall be accommodated on sites designated for residential use and for which nonresidential uses or mixed uses are not permitted, except that a city or county may accommodate all of the very low and low-income housing need on sites designated for mixed use if those sites allow 100 percent residential use and require that residential use occupy 50 percent of the total floor area of a mixed-use project.
The Court explained that the City had failed to satisfy the “default” requirement to accommodate 50 percent of its lower income housing need on sites designated exclusively for residential use, since the Overlay did not prohibit nonresidential uses. Nor did the Overlay qualify for the “mixed-use exception,” since it failed to meet the requirement that residential use occupy no less than 50 percent of a project on designated sites.
The court found that this failure was an independent basis for invalidating the City’s housing element.
Vons Site was Improperly Identified as a Developable Site
Lastly, the Court found that a site currently leased by a Vons grocery store was improperly included in the City’s housing inventory. The HEL requires cities to consider “the extent to which existing uses may constitute an impediment to additional residential development” and “any existing leases or other contracts that would perpetuate the existing use or prevent redevelopment of the site for additional residential development.” (§ 65583.2, subd. (g)(1).) Further, when a city (such as Redondo Beach) uses nonvacant sites to satisfy more than 50 percent of the lower income housing need, cities must “demonstrate that the existing use . . . does not constitute an impediment to additional residential development during the period covered by the housing element.” (Id., subd. (g)(2).) With regard to the Vons site, the Court found that the current lease on the property provided Vons with “sole and absolute discretion” to withhold consent to changes to the parking areas that the Housing Element contemplated would be redeveloped with housing. In other words, Vons has the absolute right to veto the development of housing on the site. Therefore, because there was no evidence that Vons would consent to the development of such housing, the site was improperly included in the Housing Element.
If you would like to discuss this ruling and its implications further, please contact Rutan attorneys Peter Howell and/or Erik Leggio at phowell@rutan.com and eleggio@rutan.com.
