A lawsuit filed against the city of Los Altos alleges that city staff -- and later the City Council -- illegally blocked a housing project that complied with California's new by-right housing law.

The civil suit, filed last month, contends that a proposed development in downtown Los Altos qualified for a streamlined approval process for housing projects under Senate Bill 35, legislation passed in 2017 to boost housing growth across the state. The project proposed building a mixed-use building at 40 Main St. with 15 housing units, but was shot down in April after the City Council concluded it didn't meet the criteria to skip the normal planning process.

The California Renters Legal Advocacy and Education Fund (CaRLA) caught wind of the decision and filed the lawsuit on June 12. Members of the group say that Los Altos' city leaders violated SB 35 by failing to cite an "objective" rationale for blocking the project, and likely did it to wiggle their way out of approving a project they didn't like. The suit seeks to void Los Altos' denial of the project and compel the city to approve the application.

This is one of the first lawsuits in California challenging denial of a project based on SB 35, the group's lawyers say, giving it the potential for a precedent-setting judgment.

The city of Los Altos has received a copy of the civil case but cannot comment on pending litigation, Deputy City Manager Jon Maginot said.

The project in question has a long and storied history spanning 12 years, with evolving plans proposed by property owners Ted and Jerry Sorensen that have been denied by the city multiple times. Perhaps the biggest change came in November last year, when the all-office project was scrapped in favor of a mixed-use development with 15 apartments, seeking to capitalize on a new state law that allows streamlined approval of certain housing projects.

SB 35, which took effect in January 2018, limits the ability of local governments to block housing projects that meet zoning requirements and "objective" standards, exempting them from conditional use permits and certain parking requirements. The by-right housing law was specifically aimed at cities that have used discretionary approval to stymie housing growth. In addition to following local zoning rules, projects only get to glide through the planning process if they provide enough affordable units, and two-thirds of the development must be for residential uses.

Despite the project being designed explicitly with SB 35 in mind, city planning staff in December swiftly rejected the idea that the proposal was subject to the provision of the state law. Among the reasons, staffers argue the application was incomplete; the project did not meet parking standards for the area, fell short of required two-thirds residential uses; and at five stories, was far too tall and dense to meet zoning standards for downtown Los Altos. At an appeal hearing on April 9, the City Council doubled down on the staff's determination and denied streamlined approval of the project.

Ben Libbey, a paralegal for CaRLA, said that his group caught wind of the denial and got involved in early April. While his organization is small and can't fight on behalf of every housing project, Libbey said the litigation against Los Altos has the makings of important legal precedent for a law that hasn't been in place for long.

"The law was passed, it's been used a number of times now in different municipalities and, in this case, Los Altos basically didn't really want to follow the letter of the law," Libbey said.

Among the allegations in the lawsuit, CaRLA attorneys believe that Los Altos failed to cite objective standards that the project proposal violated within a 60-day window set forth under SB 35. In the lead-up to the April 9 appeal hearing, the lawsuit claims the city dug up a handful of new standards with which the project allegedly conflicted in an "attempt to retroactively legitimize its rejection."

Whether the city's determination that the project failed to provide "adequate" access and egress to parking qualified as an objective standard used to deny the project is also being challenged.

Some of the rationale used for the city's denial of the project isn't even up for debate, Libbey said. The city of Los Altos initially disputed that residential parking spaces on the site should not be calculated as part of residential square feet of development. Melinda Coy, a senior policy specialist for the state's Housing and Community Development department, told the developer's attorney in an email April 9 in no uncertain terms that parking for residents does, in fact, count as residential use.

One of the big questions at the April 9 appeal hearing was whether 40 Main St. in Los Altos can exceed height and density limits imposed on downtown projects, double-dipping on state and local density bonuses, while simultaneously receiving streamlined approval for being in compliance with zoning standards. The project seeks to use the California State Density Bonus law to increase the size of the project by 35% in combination with a Los Altos city ordinance allowing an 11-foot height increase, bringing the height of the building up to 66 feet. The maximum height for downtown buildings is 30 feet.

Though the appeal for the project on April 9 was ostensibly about its qualifications as a SB 35 project, there was a clear undercurrent of opposition to the project's sheer size. Public speakers at the meeting decried a "tidal wave of overbuilding" that puts a damper on the quality of life in Los Altos, advocating for the quaint village feel of the downtown corridor.

Coy, in her email to the project's attorney, again indicated that state law may fall on the side of the developer. A project using the state's density bonus law or a local density bonus ordinance is still considered consistent with objective zoning standards.

Though the City Council was given a copy of the email, it's unclear whether it factored into the decision to deny the project. Councilwoman Neysa Fligor asked her colleagues to "disregard" the guidance provided by the Department of Housing and Community Development because city staff weren't able to weigh in on the answers.

Sonja Trauss, a plaintiff in the case and co-executive director of CaRLA, said the proposed project in Los Altos should be seen as an example of SB 35 working -- getting the Sorensens to convert an all-office project into a primarily residential development in the midst of a regional housing crisis. Cities have been slow to adjust to the new law, either because they are actively recalcitrant or because they can't keep up with all the changes in government code.

"I don't think that's the situation in Los Altos," Trauss said. "They know what they're doing -- they might be a small city but they're a rich city."

Though it's a pretty small housing project to launch a rousing legal defense, Trauss believes the case could be an exciting opportunity to get a judge to say the 60-day timeline under SB 35 must be enforced. It would also further signal to cities that have a history of blocking housing projects -- including wealthier suburbs on the Peninsula -- that the bevy of new and future state laws are going to make it harder to ignore the housing crisis.

"The judges and the communities have allowed them to flout the law," Trauss said. "And a lot of cities think we're still in that situation."