The city of Encinitas is defending itself against a lawsuit over its updated policies for enforcing the state’s density bonus law for developers, and could soon be facing further legal action about the issue.

Meanwhile, the lack of state approval of a housing element plan that rezones sites to allow for increased housing development has also drawn legal scrutiny from the building industry.

In July, the Encinitas City Council amended its policies for implementing the density bonus law, which allows developers to build more units on a property than typically allowed by agreeing to build at least one affordable unit.

The more affordable units a developer proposes building, the larger the density bonus, which is also increased when projects are slated to include units for very low-income tenants.

The council’s action came in response to concerns from residents that the projects approved under the law were producing few affordable units and did not fit in with local neighborhoods’ character.

Last month, the Building Industry Association of San Diego sued the city in Superior Court, alleging that its new policies violate state law.

Two of the council’s changes affect the calculation of a property’s base density, a figure that helps determine the number of additional units that a developer can build.

One revision called for the city to round down base density calculations that end up as a fractional unit, while another prevents floodplains and other types of typically non-developable land from being used in the calculation.

The rounding change came despite the city’s director of planning and building, Jeff Murphy, stating in a March memo to the council that for the past five years the city had been rounding up density calculations with fractions to comply with an update to the bonus law.

The council is also now requiring that any affordable units in a density bonus project must be at least 75 percent of the average size of market-rate units or include 1,500 square feet of living space, whichever is greater.

A minimum of three bedrooms, two bathrooms and a two-car garage is also mandated.

The policy revisions were effective immediately and applied to any projects not permitted or holding vested rights.

The BIA believes Encinitas is making the changes to try to put a halt to all density bonus projects in the city, said Michael McSweeney, the BIA’s senior public policy adviser.

“The intent of the state law is to provide incentives for affordable housing to be produced, and the city is doing everything it can to crush the incentives,” McSweeney said. “In our view, that violates state law.”

The BIA wants the court to order the city to rescind its updated density bonus policies and comply with state law.

The city has decided to fight the suit and filed its initial response Friday.

Among the defenses in the response, the city alleges the BIA failed to exhaust all administrative remedies before taking legal action and that by its conduct it is barred from the relief it seeks in its complaint.

City Attorney Glenn Sabine did not respond to a request for comment.

Mayor Kristin Gaspar and City Councilwoman Teresa Barth, one of the leaders of the push for the revised housing policies, declined to comment due to the pending suit. Murphy also declined to comment on the suit.

McSweeney said the BIA is also concerned about what impact the city’s policy changes will have on the density bonus projects in the queue.

Murphy acknowledged that some of the eight active projects are likely to be affected by the city’s new rules, such as the rounding down provision, which he said could potentially result in the proposed developments seeing their plans reduced by one or two units.

More legal action

There may soon be another party challenging the city’s revised density bonus policies.

Attorney Marco Gonzalez, representing the developer behind the 16-home Desert Rose project, said he will likely take legal action to clarify whether the project would be affected by the changes.

Gonzalez said the action could take the form of either filing a new suit against the city or joining the BIA’s lawsuit.

Woodridge Farms Estates LLC’s density bonus project calls for the homes to built on land that currently features a horse boarding and training facility.

Gonzalez said one of the constructed units would be affordable and there would also be an in-lieu payment for another such unit.

The project is already tied up in litigation.

A neighborhood group called Save Desert Rose, represented by attorney Everett DeLano, sued the city and developer over the council’s approval of the project in the Olivenhain neighborhood in 2013.

Superior Court Judge Judith Hayes ruled in Save Desert Rose’s favor in April that the project's approval should be rescinded.

Hayes determined there was enough evidence that the project may have an adverse effect on the environment such that the council should have prepared an environmental impact report prior to approval, rather than deciding one was not required.

Gonzalez filed a notice of appeal of Hayes’ decision on behalf of Woodridge Farms Estates in late June, which stays Hayes’ decision.

No housing element

The legal issues surrounding the city’s density bonus law policies come in the midst of the city’s efforts to update the housing element of its general plan.

A community’s state-required housing element must have zoning that allows for a community to meet its share of the Regional Housing Needs Allocation, which is based on projected population growth and other trends.

The housing element also helps communities plan to accommodate a variety of housing types and can reduce the time and cost of housing production for developers, said Glen Campora, an assistant deputy director with the state Department of Housing and Community Development.

Encinitas has not had a housing element approved by the state since 1992, a fact the BIA highlights in its lawsuit.

The housing element that will cover the period through the end of 2020 was supposed to have been approved last year.

The BIA argues in its suit that the city’s recent actions are making it less likely to meet its regional housing allocation. It is requesting the court order Encinitas to update its housing element so that it complies with state law.

Murphy, the Encinitas planning director, said the city plans to bring an updated housing element to voters in 2016.

The city does not have the zoning to meet the housing obligations for lower-income levels and must find sites to accommodate 1,283 additional units.

The city recently started a process to solicit public feedback online that will help inform the plan; the website is Athomeinencinitas.info.

Residents can highlight on a map which sites they would like to see rezoned to allow for housing development and what type of housing they would like to see there.

The information will later be presented to the council and Planning Commission to consider as the process moves forward.

“We are giving options to the community to help decide where and how development will occur,” said Murphy, who assumed his position last year. “We are pretty excited about the approach we are taking and it is one I haven’t heard of other jurisdictions using.”

Murphy acknowledged that there are consequences to the city not having an approved housing element, including missing out on hundreds of thousands of dollars in grants from the San Diego Association of Governments that could fund infrastructure improvements.

Campora said Encinitas also has had units that were not planned for in the last eight-year cycle added to its unit need this cycle.

Carlsbad is the only other jurisdiction that is part of SANDAG’s regional housing allocation group that lacks an approved housing element.

David de Cordova, Carlsbad’s principal planner, said a draft housing element has received positive reviews from the state and he is hopeful a final plan will be approved in early 2015.

The push to move forward with a new housing element in Encinitas also comes not long after voters there approved Proposition A in a special election last year.

The growth control initiative limits city building heights to the lower of two stories or 30 feet.

The approved initiative also requires a public vote when a zoning change will increase a property’s density or the intensity of allowed development, such as providing for an increase in the number of housing units that could be developed.

That is why the housing element is going to the ballot.

Murphy said the city is considering allowing properties that have their zoning changed as part of the housing plan update to feature three-story structures if projects include a residential component.

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