California sues Elk Grove over housing project for homeless

When developers in the California city of Elk Grove pitched two new housing projects last year, the proposals appeared to have much in common: Both would build new housing in a quaint section of the city affectionately known as “Old Town" for its attractive stretch of historic buildings.

One project was for people who could afford to purchase homes at the market rate in a state with some of the most expensive home prices in the nation. The other project was for people who were homeless. City officials approved the market rate project. But the homeless project has stalled as officials in the growing suburb of Sacramento argued it was not eligible to be fast-tracked under a 2017 state housing law.

Monday, California Attorney General Rob Bonta and Gov. Gavin Newsom's administration jointly sued the Elk Grove, arguing city officials broke the law by denying the project and accusing them of discriminating against low income families.

The lawsuit escalates a conflict between the state and local governments over how many housing projects cities should approve, and how fast they should build them. California, the nation's most populous state, needs to build 2.5 million homes by 2030 to keep up with demand, according to the California Department of Housing and Community Development. But the state only averages about 125,000 new homes per year, almost two-thirds shy of what's needed.

Newsom, a Democrat with potential presidential aspirations, and Bonta — a potential candidate for governor in 2026 — have been aggressively monitoring local enforcement of state housing laws. Last year, Newsom briefly withheld $1 billion in funding from local governments because he was unhappy with their plans to reduce homelessness. In March, the state sued the city of Huntington Beach and accused its leaders of ignoring state housing laws requiring them to build 13,000 new homes over the next eight years.

Monday's lawsuit was different in that the dispute is over a single 67-unit apartment complex, signaling how far state officials are willing to go.

“That can seem small, but every time we say no to housing we make homelessness worse in California,” said Megan Kirkeby, deputy director for housing policy development for the California Department of Housing and Community Development.

Elk Grove Mayor Bobbie Singh-Allen said the city did not reject the project for people currently without homes, it simply ruled it was not eligible to be fast-tracked under a 2017 California housing law. Karen Hallock, an attorney for the project's developers, disputes that, saying the city flatly denied the project.

Singh-Allen said the city is “doing its part to support affordable housing,” noting more than 1,100 new affordable housing units are in some stage of development there.

“The City of Elk Grove is not a bad actor,” she said.

The dispute centers on the Oak Rose Apartments, a development proposed by Excelerate Housing Group, an affordable housing company based in Long Beach. The project would include 66 permanent apartments for people who are experiencing homelessness, plus one for a manager. It would include on-site support services, such mental health counseling, job placement and substance abuse help.

A state law law passed in 2017 says if a city does not build enough new housing to meet state-approved goals, then developers can build projects without going through the local government’s normal approval process. Developers would still need to follow some rules, including a city's housing standards.

The Elk Grove Planning Commission denied Excelerate's project last year because they said having residences on the first floor violated the city's standard for that part of town. Attorney General Bonta argues those standards are not objective, noting the city approved a separate project for the same neighborhood that included market-rate housing on the first floor.

“It's clear this project was denied because of the intended residents,” Bonta said. “The main difference between the two projects is that one creates fewer homes at a higher price, the other creates more homes that are more affordable.”

Singh-Allen said the market-rate project the city approved went through a different review process that gives the city more discretion over when to apply its standards.

The state's 2017 housing law is set to expire at the end of 2025, though the Democratic-controlled Legislature is debating whether to make it permanent. State Sen. Scott Wiener is leading the effort, noting the law has resulted in about 18,000 new housing units since it was passed. But the bill faces strong opposition from some labor unions because it would not require a certain percentage of the construction workers to have completed a state approved apprenticeship program.

“We are trying to take the politics out of housing approvals,” Wiener said. “When housing is approved that meets all of our standards, you get your permit and you don't become a political football. That's called good government.”