Encinitas settles ‘density bonus’ lawsuit

The city of Encinitas will pay $200,000 in attorneys’ fees and rescind policies that sought to shrink the size of “density bonus” projects, according to a recent settlement agreement.

A divided Encinitas City Council voted 3-2 in closed session last week to adopt the settlement, reversing council action taken last summer.

In October, the Building Industry Association filed a lawsuit accusing Encinitas of violating state density bonus law. In general, the law lets developers build more homes on a property than city zoning allows, and in exchange, at least one of the homes must be reserved for low-income individuals.

Last summer, the council required that affordable homes in density bonus developments be at least 75 percent of the size of their market rate counterparts. And density bonus developers had to provide fiscal documentation when seeking reductions in development standards, the council decided.

Those changes came about in response to residents who argued the overstuffed developments are ruining neighborhoods.

“We had no chance of winning the lawsuit,” said Deputy Mayor Catherine Blakespear this week. She was elected in November, after the council altered the density bonus policies.

“The changes were not in compliance with the law.”

Going forward, Blakespear said the council could accomplish many of its goals by rewriting its density bonus ordinance with requirements that will stand up to legal scrutiny. For instance, she stated it’s illegal to demand specific size requirements for affordable units, but it’s legally OK to say they must be comparable in size to market rate units.

Blakespear said the settlement did achieve one major community goal: The city will be able to “round down” a density bonus calculation, decreasing the number of homes in the developments.

Blakespear added it was unfair to taxpayers to continue wasting money over the lawsuit.

Councilmembers Tony Kranz and Lisa Shaffer joined Blakespear in approving the settlement. Mayor Kristin Gaspar and Councilman Mark Muir voted against it.

Muir said the settlement doesn’t provide any kind of resolution. Of particular concern, it doesn’t protect the city against future litigation from the Building Industry Association or others over density bonus, he added.

He also took issue with the city paying the Building Industry Association’s legal bills, which came to $200,000, as per the settlement. In return, the association agreed to drop all current claims.

“Theoretically, the Building Industry Association could take the $200,000 they just made off us and turn around and sue us for rounding down,” Muir said.

Muir added the community has been vocal in wanting to alter the density bonus law to lessen the impact on neighborhoods.

“Across the board, I heard the community say, ‘We want to take this challenge on,’” Muir stated.

Along with paying the Building Industry Association $200,000, the city racked up $150,000 in legal fees.

Borre Winckel, president and chief executive officer of the Building Industry Association, said in a statement that the litigation was “foremost about compliance with state law.”

Winckel added San Diego County housing costs are high in large part because of local government regulations.

“The city will need to adopt housing policies that make the provision of affordable housing a reality,” Winckel wrote. “This is achieved by making all housing options more affordable to build.”

Resident Bill Butler, who has rallied opposition to the Desert Rose density bonus project in Olivenhain, said he understands the need for affordable housing. But, he added, most of the extra homes granted under density bonus rules are typically sold at market rate, rather than reserved as affordable units.

“I don’t think the reality is matching the intent of the law,” Butler said.

Butler also stated if the lawsuit was indeed unwinnable, it’s puzzling that the city’s legal counsel didn’t arrive at that conclusion earlier.

“I would have hoped the attorney they hired would have said a long time ago, ‘You can’t do this,’” Butler said. “That would have saved everyone a lot of time, energy and money.”

Under the settlement, the rounding-down calculation won’t apply to six density bonus projects that were in the works when the council approved the changes last summer. The six projects will result in 68 units, but if they had fallen under the rounding-down method, it would have been 63.

The addresses of those developments: 378 Fulvia Street, 560 Requeza Street, 720 Balour Drive, 556 Union Street, 764 and 782 Leucadia Blvd. and 1412 MacKinnon Ave.