CITY OF COSTA MESA
REGULAR CITY COUNCIL AND HOUSING AUTHORITY*
Agenda
City Council Chambers
77 Fair Drive
6:00 PMTuesday, August 4, 2026
*Note: All agency memberships are reflected in the title "Council Member" Announcement:
Pursuant to Government Code Section 54953 Mayor Stephens will be attending the meeting remotely via Zoom Webinar from Kirimu Camp located in the Serengeti National Park in Tanzania.
The City Council meetings are presented in a hybrid format, both in-person at City Hall and virtually via Zoom Webinar.
Closed Captioning is available via the Zoom option in English and Spanish.
Los subtítulos están disponibles a través de la opción Zoom en inglés y español.
TRANSLATION SERVICES AVAILABLE / SERVICIOS DE TRADUCCIÓN DISPONIBLE Please contact the City Clerk at (714) 754-5225 to request language interpreting services for City meetings. Notification at least 48 hours prior to the meeting will enable the City to make arrangements.
Favor de comunicarse con la Secretaria Municipal al (714) 754-5225 para solicitar servicios de interpretación de idioma para las juntas de la Ciudad. Se pide notificación por lo mínimo 48 horas de anticipación, esto permite que la Ciudad haga los arreglos necesarios.
Members of the public can view the City Council meetings live on COSTA MESA TV (SPECTRUM CHANNEL 3 AND AT&T U-VERSE CHANNEL 99) or
http://costamesa.granicus.com/player/camera/2?publish_id=10&redirect=true and online at youtube.com/costamesatv.
1 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
Members of the public are welcome to speak during the meeting when the Mayor opens the floor for public comment. There is no need to register in advance or complete a comment card. When it's time to comment, line up at one of the two podiums in the room and wait for your turn. Each speaker will have up to 3 minutes (or as directed) to address the City Council.
All attendees must remain seated while in the chamber until instructed by the Presiding Officer to approach and line up for public comment. To ensure safety and maintain order during the proceedings, standing or congregating in the aisles or foyer is strictly prohibited.
To maintain a respectful and orderly atmosphere during the meeting, attendees shall refrain from using horns or amplified speakers. Signs and props may be brought into the Chamber, provided they do not exceed 11 inches by 18 inches in size and do not hinder the visibility of other attendees. The possession of poles, sticks, or stakes is strictly prohibited.
Further information regarding the City's regulations on addressing the City Council and expected conduct during meetings are available at the following links.
Title 2: Administration
§ 2-61: Conduct while addressing the council.
https://ecode360.com/42609578
Title 2: Administration
§ 2-64: Disorderliness by members of the audience.
https://ecode360.com/42609598
The public may participate via the Zoom option.
Zoom Webinar:
Please click the link below to join the webinar:
https://us06web.zoom.us/j/87601417510?pwd=hXz39vxxRAaS9NUbxdYk1tNUxs7Lyc.1 Or sign into Zoom.com and “Join a Meeting”
Enter Webinar ID: 876 0141 7510/ Password: 869573
• If Zoom is not already installed on your computer, click “Download & Run Zoom” on the launch page and press “Run” when prompted by your browser. If Zoom has previously been installed on your computer, please allow a few moments for the application to launch automatically.
• Select “Join Audio via Computer.”
• The virtual conference room will open. If you receive a message reading, “Please wait for the host to start this meeting,” simply remain in the room until the meeting begins.
• During the Public Comment Period, use the “raise hand” feature located in the participants’ window and wait for city staff to announce your name and unmute your line when it is your turn to speak. Comments are limited to 3 minutes, or as otherwise directed.
2 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
Participate via telephone:
Call: 1 669 900 6833 876 0141 7510/ Password: 869573
During the Public Comment Period, press *9 to "raise your hand" and to be added to the queue to speak and wait for city staff to announce your name/phone number and press *6 to unmute your line when it is your turn to speak. Comments are limited to 3 minutes, or as otherwise directed.
Note, if you have installed a zoom update, please restart your computer before participating in the meeting.
Additionally, members of the public who wish to make a written comment on a specific agenda item, may submit a written comment via email to the City Clerk at [email protected].
Any written communications, photos, or other materials for copying and distribution to the City Council that are 10 pages or less, can be e-mailed to [email protected], submitted to the City Clerk’s Office on a flash drive, or mailed to the City Clerk’s Office. Note that records submitted by the public will not be redacted in any way and will be posted online as submitted, including any personal contact information. Comments received by 12:00 p.m. on the day of the meeting will be provided to the City Council, made available to the public, and will be part of the meeting record.
All pictures, PowerPoints, and videos submitted for display at a public meeting must be previously reviewed by staff to verify appropriateness for general audiences. No links to YouTube videos or other streaming services will be accepted, a direct video file will need to be emailed to staff prior to each meeting in order to minimize complications and to play the video without delay. The video must be one of the following formats, .mp4, .mov or .wmv. Only one file may be included per speaker for public comments, for both videos and pictures. Please e-mail to the City Clerk at [email protected] NO LATER THAN 12:00 Noon on the date of the meeting. If you do not receive confirmation from the city prior to the meeting, please call the City Clerks office at 714-754-5225.
Items submitted for the overhead screen should be 1 page and provided to the City Clerk no later than 15 minutes prior to the start of the meeting.
Please know that it is important for the City to allow public participation at this meeting. If you are unable to participate in the meeting via the processes set forth above, please contact the City Clerk at (714) 754-5225 or [email protected] and staff will attempt to accommodate you. While the City does not expect there to be any changes to the above process for participating in this meeting, if there is a change, the City will post the information as soon as possible to the City’s website.
Note regarding agenda-related documents provided to a majority of the City Council after distribution of the City Council agenda packet (GC §54957.5): Any related documents provided to a majority of the City Council after distribution of the City Council Agenda Packets will be made available for public inspection. Such documents will be posted on the city’s website and will be available at the City Clerk's office, 77 Fair Drive, Costa Mesa, CA 92626.
3 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
All cell phones and other electronic devices are to be turned off or set to vibrate. Members of the audience are requested to step outside the Council Chambers to conduct a phone conversation.
Free Wi-Fi is available in the Council Chambers during the meetings. The network username available is: CM_Council. The password is: cmcouncil1953.
As a LEED Gold Certified City, Costa Mesa is fully committed to environmental sustainability.
A minimum number of hard copies of the agenda will be available in the Council Chambers.
For your convenience, a binder of the entire agenda packet will be at the table in the foyer of the Council Chambers for viewing. Agendas and reports can be viewed on the City website at https://costamesa.legistar.com/Calendar.aspx. Las agendas y los informes se pueden ver en español en el sitio web de la Ciudad en
https://www.costamesaca.gov/trending/current-agendas/spanish-city-council-agendas.
In compliance with the Americans with Disabilities Act, Assistive Listening headphones are available and can be checked out from the City Clerk. If you need special assistance to participate in this meeting, please contact the City Clerk at (714) 754-5225. Notification at least 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting. [28 CFR 35.102.35.104 ADA Title II].
En conformidad con la Ley de Estadounidenses con Discapacidades (ADA), aparatos de asistencia están disponibles y podrán ser prestados notificando a la Secretaria Municipal. Si necesita asistencia especial para participar en esta junta, comuníquese con la oficina de la Secretaria Municipal al (714) 754-5225. Se pide dar notificación a la Ciudad por lo mínimo 48 horas de anticipación para garantizar accesibilidad razonable a la junta. [28 CFR
35.102.35.104 ADA Title II].
4 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
REGULAR MEETING OF THE CITY COUNCIL AND HOUSING AUTHORITY AUGUST 4, 2026 – 6:00 P.M.
JOHN STEPHENS
Mayor
MANUEL CHAVEZ ANDREA MARR Mayor Pro Tem - District 4 Council Member - District 3
ARLIS REYNOLDS LOREN GAMEROS Council Member - District 5 Council Member - District 2
JEFF PETTIS MIKE BULEY Council Member - District 6 Council Member - District 1
KIMBERLY HALL BARLOW CECILIA GALLARDO-DALY City Attorney City Manager
CALL TO ORDER
NATIONAL ANTHEM AND PLEDGE OF ALLEGIANCE
MOMENT OF SOLEMN EXPRESSION
[Per Council Policy 000-12, these presentations are made by community volunteers stating their own views. The City Council disclaims any intent to endorse or sponsor the views of any speaker.]
ROLL CALL
CITY ATTORNEY CLOSED SESSION REPORT
PRESENTATIONS: NONE.
PUBLIC COMMENTS – MATTERS NOT LISTED ON THE AGENDA
Comments on Presentations and Consent Calendar items may also be heard at this time. Comments are limited to 3 minutes, or as otherwise directed.
5 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
COUNCIL MEMBER COMMITTEE REPORTS, COMMENTS, AND SUGGESTIONS Each council member is limited to 3 minutes. Additional comments will be heard at the end of the meeting.
1. Council Member Reynolds
2. Council Member Pettis
3. Council Member Buley
4. Council Member Gameros
5. Council Member Marr
6. Mayor Pro Tem Chavez
7. Mayor Stephens
REPORT – CITY MANAGER
REPORT – CITY ATTORNEY
CONSENT CALENDAR
All matters listed under the Consent Calendar are considered to be routine and will be acted upon in one motion. There will be no separate discussion of these items unless members of the City Council, staff, or the public request specific items to be discussed and/or removed from the Consent Calendar for discussion.
1. PROCEDURAL WAIVER: WAIVE THE FULL READING OF ALL
ORDINANCES AND RESOLUTIONS
26-365
RECOMMENDATION:
City Council and Housing Authority approve the reading by title only and waive further reading of Ordinances and Resolutions.
2. READING FOLDER 26-366
RECOMMENDATION:
City Council receive and file Claims received by the City Clerk and authorize staff to reject any and all Claims: Tusapa Lee Laolagi, Ivin Mood, Davis Salary.
6 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
3. ADOPTION OF WARRANT RESOLUTION 26-329
RECOMMENDATION:
City Council approve Warrant Resolution No. 2758.
1. Summary Check Registration 6-11-2026
2. Summary Check Registration 6-17-2026
3. Summary Check Registration 6-26-26
4. Summary Check Registration 7-1-26
5. Summary Check Registration 7-10-26
Attachments:
4. MINUTES 26-346
RECOMMENDATION:
City Council approve the minutes of the Study Session meeting of June 9, 2026. 06-09-2026 Draft MinutesAttachments:
5. DESIGNATION OF VOTING DELEGATE FOR THE 2026 LEAGUE OF
CALIFORNIA CITIES ANNUAL CONFERENCE
26-336
RECOMMENDATION:
Staff recommends the City Council designate Mayor Pro Tem Manuel Chavez as Costa Mesa’s voting delegate for the 2026 League of California Cities Annual Conference.
6. BIENNIAL REVIEW OF CITY’S CONFLICT OF INTEREST CODE 26-337 RECOMMENDATION:
Staff recommends the City Council approve Resolution No. 2026-xx, revising the list of designated positions in the City’s Conflict of Interest Code.
1. 2026 Conflict of Interest List
2. Resolution No. 2026- XX
Attachments:
7 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
7. RESPONSE TO ORANGE COUNTY GRAND JURY REPORT-STATE
HOUSING MANDATE
26-334
RECOMMENDATION:
Staff recommends the City Council review and approve the responses to the May 27, 2026, Orange County (OC) Grand Jury Report titled, “California Housing Mandates” and authorize staff to submit the response to the presiding judge.
1. Response Letter to OC Grand Jury Report
2. OC Grand Jury Report-California Housing Mandates
Attachments:
8. APPROVAL OF AGREEMENTS FOR AMERICAN FAMILY HOUSING
AVON RIVER APARTMENTS PROJECT LOCATED AT 1400 BRISTOL
STREET
26-350
RECOMMENDATION:
Staff recommends the City Council:
1. Authorize the City Manager, or their designee, to execute all applicable agreements necessary to advance the Avon River Apartments Project, contingent upon completion of HUD requirements for receipt of Home Investment Partnership Program (HOME) funds.
2. Authorize the City Manager, or their designee, to execute a Memorandum of Agreement (MOA) with the County of Orange regarding Regional Housing Needs Allocation (RHNA) Progress Credits.
Agenda Report
1. First Amendment to Grant and Loan Agreement with
Attachments
2. Amended and Restated Promissory Note City Loan
3. Amended and Restated Subordination Agreement
4. DRAFT MOA with Costa Mesa and County
Attachments:
AT THIS TIME COUNCIL WILL ADDRESS ANY ITEMS PULLED FROM THE CONSENT
CALENDAR
------------------------------END OF CONSENT CALENDAR-------------------------------
8 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
PUBLIC HEARINGS:
(Pursuant to Resolution No. 05-55, Public Hearings begin at 7:00 p.m.)
1. INTRODUCE AND GIVE FIRST READING OF AN ORDINANCE OF
THE CITY COUNCIL OF THE CITY OF COSTA MESA CALIFORNIA
AMENDING TITLE 13 (PLANNING, ZONING, AND DEVELOPMENT) ,
OF THE COSTA MESA MUNICIPAL CODE UPDATING LAND USE
CLASSIFICATIONS FOR VARIOUS NON-RESIDENTIAL USES
INCLUDING BUT NOT LIMITED TO, PERSONAL SERVICES,
ARTISAN STUDIO, ACTIVE ENTERTAINMENT USES, EVENT
CENTERS AND ASSEMBLY USES, FITNESS USES, AND OTHER
NON-RESIDENTIAL USES AND STANDARDS- PCTY-26-0001
26-327
RECOMMENDATION:
Staff recommends the City Council:
1. Find that the proposed Zoning Code Amendment is exempt from the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15061(b)(3) and 15305; and
2. Introduce for first reading, by title only, an Ordinance approving amendments to Title 13 (Planning, Zoning and Development) of the Costa Mesa Municipal Code to update land use classifications for various non-residential uses including but not limited to, personal services, artisan studio, active entertainment uses, event centers and assembly uses, fitness uses, and other non-residential uses and standards.
Agenda Report
1. City Council Draft Ordinance
2. Exhibits A-G, Strikeout
3. Exhibits A-G, Clean
4. Planning Commission Resolution PC-2026-19
5. June 22, 2026 Planning Commission Report
6. June 22, 2026 Planning Commission Minutes
7. July 13, 2026 Planning Commission Report
8. July 13, 2026 Planning Commission Draft Minutes
9. Planning Commission Public Comments
Attachments:
9 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
2. CONTINUATION REQUEST OF THE CONSOLIDATED MASTER FEE
SCHEDULE
26-367
RECOMMENDATION:
Staff recommends the City Council open the public hearing and continue the item to the September 15, 2026, meeting, pursuant to department’s request.
OLD BUSINESS: NONE.
NEW BUSINESS:
1. PARKS AND COMMUNITY SERVICES COMMISSION ANNUAL
REPORT
26-362
RECOMMENDATION:
Staff recommends the City Council receive and file the Parks and Community Services Commission annual report, Attachment 1.
1. Parks & Community Services Commission Presentation to City Council
2. Costa Mesa Municipal Code 12-71
Attachments:
10 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
2. AWARD OF THE ON CALL SIDEWALK REPAIR PROJECT, CITY
PROJECT NO. 25-20
26-347
RECOMMENDATION:
Staff recommends the City Council:
1. Make a finding of California Environmental Quality Act (CEQA) categorical exemption pursuant to CEQA Guidelines section 15301.
2. Adopt plans, specifications, and working details for the On Call Sidewalk Repair Project, City Project No. 25-20.
3. Reject the apparent low bid submitted by Access General Contracting, Inc ., 357 North Sheridan Street, Suite 100, Corona, California 92878, as non-responsive.
4. Award a Public Works Agreement (PWA) for construction to S&H Civilworks, 6612 Columbus Avenue, Riverside, California 92504 in the amount of $237,600, and authorize an additional ten percent (10%) contingency in the amount of $23,760 as needed for any unforeseen costs related to this project.
5. Authorize the City Manager and City Clerk to execute the PWA and future amendments to the agreement within Council authorized limits.
ENVIRONMENTAL DETERMINATION:
The proposed action is exempt from the California Environmental Quality Act (CEQA). The action involves an organizational or administrative activity of government that will not result in direct or indirect physical change in the environment. In addition, the proposed action is exempt under section 15301 relating to the operation, repair, maintenance, permitting, and /or minor alteration of existing public facilities.
1. Bid Rejection Notice
2. Bid Summary
3. PWA
Attachments:
11 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
3. SIGNAL MODERNIZATION FOR SYSTEMIC SAFETY
IMPROVEMENTS, FEDERAL PROJECT NO. HSIPL- 5312(107), CITY PROJECT NO. 26-01
26-348
RECOMMENDATION:
Staff recommends the City Council:
1. Adopt plans, specifications, and working details for the Signal Modernization for Systemic Safety Improvements, Federal Project No. HSIPL-5312( 107), City Project No. 26-01, and find the project categorically exempt from the California Environmental Quality Act (CEQA).
2. Award a Public Works Agreement (PWA) for construction to Econolite Systems Inc. 1250 N Tustin Avenue, Anaheim CA 92807, in the amount of $2,709,902.68, and authorize a ten percent (10%) contingency in the amount of $270,990.27 for unforeseen costs related to the project.
3. Authorize the City Manager or designee to negotiate and approve future PWA amendment( s) to increase the total not- to-exceed compensation by up to $712,000.00 to utilize the full federal Highway Safety Improvement Program (HSIP) grant allocation.
4. Award a Professional Services Agreement (PSA) for construction management and inspection support services to C 2PM, 22601 Summerfield, Suite 2, Mission Viejo, CA 92692, in the amount of $406,084.83, and authorize a ten percent (10%) contingency in the amount of $40,608.48.
5. Authorize an appropriation of $204,000 from the Measure M 2 Fairshare (Fund 416) fund balance.
6. Authorize the City Manager and the City Clerk to execute the PWA and the PSA and any future amendments to the agreements within Council authorized limits.
ENVIRONMENTAL DETERMINATION:
The proposed project is exempt from the California Environmental Quality Act (CEQA). The project involves an organizational or administrative activity of government that will not result in direct or indirect physical change in the environment. The proposed project is categorically exempt under Section 15301 relating to the operation, repair, maintenance, permitting, and /or minor alteration of existing public facilities. A Notice of Exemption was prepared by City staff, was submitted electronically to the California Governor ’s Office of Land Use and Climate Innovation on July 21, 2025, and was physically filed and posted at the Orange County Clerk-Recorder Department on July 22, 2025.
The proposed project is categorically excluded from the National Environmental
12 REGULAR CITY COUNCIL AND HOUSING
AUTHORITY*
Agenda August 4, 2026
Policy Act (NEPA). Per the Code of Federal Regulations 23 CFR 771.117(c)(8), the installation of traffic signals and equipment where no substantial land acquisition or traffic disruption will occur are considered actions that meet the criteria for categorical exclusions from NEPA and are deemed to not have any significant environmental impacts. A Preliminary Environmental Study classifying the project as categorically excluded was submitted to the California Department of Transportation (Caltrans) on July 18, 2025. On October 23, 2025, Caltrans provided concurrence with the NEPA determination of Categorical Exclusion.
1. Bid Abstract
2. PWA
3. PSA and C2PM Proposal
Attachments:
4. AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT
FOR THE CONSTRUCTION MANAGEMENT AND INSPECTION
SUPPORT SERVICES FOR THE ADAMS AVENUE BICYCLE
FACILITY PROJECT (FROM HARBOR BOULEVARD TO FAIRVIEW
ROAD), FEDERAL PROJECT NO. STPL- 5312(108), CITY PROJECT NO. 25-11
26-351
RECOMMENDATION:
Staff recommends the City Council:
1. Approve an amendment to the Professional Services Agreement (PSA) to increase the compensation amount by $64,132.15 for a new not- to-exceed (NTE) compensation amount of $305,506.15 with Z&K Consultants, Inc ., 17130 Van Buren Blvd. #122, Riverside, CA 92504, for construction management and inspection support services for the Adams Avenue Bicycle Facility Project.
2. Authorize the City Attorney to prepare the Amendment and the City Manager and the City Clerk to execute the Amendment and any future amendments to the agreements within Council authorized limits.
ADDITIONAL COUNCIL /BOARD MEMBER COMMITTEE REPORTS, COMMENTS, AND
SUGGESTIONS
ADJOURNMENT
13 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-365 Meeting Date: 8/4/2026
TITLE:
PROCEDURAL WAIVER: WAIVE THE FULL READING OF ALL ORDINANCES AND
RESOLUTIONS
RECOMMENDATION:
City Council and Housing Authority approve the reading by title only and waive further reading of Ordinances and Resolutions.
14 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-366 Meeting Date: 8/4/2026
TITLE:
READING FOLDER
DEPARTMENT: City Manager’s Office/City Clerk’s Division RECOMMENDATION:
City Council receive and file Claims received by the City Clerk and authorize staff to reject any and all Claims: Tusapa Lee Laolagi, Ivin Mood, Davis Salary.
15 CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-329 Meeting Date: 8/4/2026
TITLE:
ADOPTION OF WARRANT RESOLUTION
DEPARTMENT: FINANCE DEPARTMENT
PRESENTED BY: MARK KHOU, BUDGET & PURCHASING MANAGER
CONTACT INFORMATION: MARK KHOU, BUDGET & PURCHASING MANAGER AT (714) 754-5241
RECOMMENDATION:
City Council approve Warrant Resolution No. 2758.
BACKGROUND:
In accordance with Section 37202 of the California Government Code, the Director of Finance or their designated representative hereby certify to the accuracy of the following demands and to the availability of funds for payment thereof.
FISCAL REVIEW:
Funding Payroll Register No. 26-12 On Cycle for $4,143,633.59 and No. 26-13 On Cycle for $4,043,574.91, and City operating expenses for $9,800,647.30.
16 17
18 19
20 21
22 23
24 25
26 27
28 29
30 31
32 33
34 35
36 37
38 39
40 41
42 43
44 45
46 47
48 49
50 51
52 53
54 55
56 57
58 59
60 61
62 63
64 65
66 67
68 69
70 71
72 73
74 75
76 77
78 79
80 81
82 83
84 85
86 87
88 89
90 91
92 93
94 95
96 97
98 99
100
101
102
103
104
105
106
107
108
109
110
111
112
113
114
115
116
117
118
119
120
121
122
123
124
125
126
127
128
129
130
131
132
133
134
135
136
137
138
139
140
141
142
143
144
145
146
147
148
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-346 Meeting Date: 8/4/2026
TITLE:
MINUTES
DEPARTMENT: City Manager’s Office/City Clerk’s Division RECOMMENDATION:
City Council approve the minutes of the Study Session meeting of June 9, 2026.
164
Minutes – Study Session Meeting June 9, 2026 Page 1 of 3
REGULAR STUDY SESSION MEETING OF THE CITY COUNCIL
JUNE 9, 2026 – MINUTES
CALL TO ORDER – The Study Session meeting was called to order by Mayor Stephens at 5:04 p.m.
ROLL CALL
Present: Council Member Buley, Council Member Gameros, Council Member Pettis, Council Member Marr, Council Member Reynolds, Mayor Pro Tem Chavez, and Mayor Stephens.
Absent: None.
STUDY SESSION ITEM:
1. PROVIDE DIRECTION TO STAFF TO EXPLORE TWO CITY BALLOT INITIATIVES
PERTAINING TO BUSINESS LICENSE REFORM AND TRANSIENT OCCUPANCY TAX
Presentation by Dr. Richard Bernard, FM3 Research, Mr. Stewart, Wildan, Ms. Jakher, Assistant to the City Manager, Ms. Reyes, Assistant City Manager, Ms. Acosta-Reyes, Finance Manager, Mr. Khou, Budget and Purchasing Manager.
Public Comments:
Ralph Taboada, Costa Mesa, clarified the Finance and Pension Advisory Committee (FiPAC) recommendation was to increase a maximum of 3% Transient Occupancy Tax (TOT) and/or TOT and Business Improvement Area (BIA), and thanked Paulette Lombardi-Fries, with Travel Costa Mesa, for her work supporting the City.
Paulette Lombari-Fries, informed the City Council that a Tourism Economic Impact Study would be conducted.
Steve Yannarell, General Manager of The Westin Costa Mesa, and Travel Costa Mesa Chair, spoke on local competition, the impacts of small increases including a reduction in occupancy, and spoke on renovating and reinvesting in the hotel.
ACTION:
City Council provided the following direction on the placement of the measure(s) on November 3, 2026, ballot:
Place both potential measures on the July 21st agenda for consideration. Do additional polling.
165
Minutes – Study Session Meeting June 9, 2026 Page 2 of 3 An analysis of the budgetary needs that would be addressed by the potential ballot measures including the Facility Needs Assessment, Pavement Management Plan, Parks Assessment and the Information Technology Strategic Plan.
Review of potential revenues from Short Term Rentals. For the TOT address the comparison to the City of Irvine’s hotel room rates and amenities, and short-term rentals within the city.
Return with a revised Business License Reform structure:
o Using a single rate of $0.50 per $1,000 in gross receipts for businesses that generate more than $500,000 in gross receipts.
o Maintaining the current business license rate for businesses that generate $500,000 or less in gross receipts.
o A maximum rate that a business would pay is $15,000.
ADJOURNMENT – Mayor Stephens adjourned the Study Session at 7:17 p.m. 166
Minutes – Study Session Meeting June 9, 2026 Page 3 of 3 Minutes adopted on this 4th day of August, 2026.
___________________________
John Stephens, Mayor
ATTEST:
___________________________
Brenda Green, City Clerk
167
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-336 Meeting Date: 8/4/2026
TITLE:
DESIGNATION OF VOTING DELEGATE FOR THE 2026 LEAGUE OF CALIFORNIA CITIES
ANNUAL CONFERENCE
DEPARTMENT: CITY MANAGER’S OFFICE/CITY CLERK DIVISION
PRESENTED BY: BRENDA GREEN, CITY CLERK
CONTACT INFORMATION: BRENDA GREEN, CITY CLERK, (714) 754-5221 RECOMMENDATION:
Staff recommends the City Council designate Mayor Pro Tem Manuel Chavez as Costa Mesa’s voting delegate for the 2026 League of California Cities Annual Conference.
BACKGROUND:
The League of California Cities 2026 Annual Conference & Expo is scheduled for September 23-25, 2026, in Anaheim, CA. An important part of the Annual Conference is the Annual Business Meeting that will be held on Friday, September 25, 2026. In order to vote at this meeting, the City Council must designate a voting delegate and up to two alternate voting delegates.
ANALYSIS:
Designating a voting delegate will allow the City to participate in the Annual Business Meeting. It is at this meeting that the League membership considers and takes action on resolutions that establish League policy throughout the coming year. Information on what resolutions will be reviewed is not available at this time.
Consistent with League Bylaws, a city’svoting delegate and up to two alternates must be designated by the City Council. A voting delegate can be either an elected or appointed official. Following City Council action, the City Clerk must submit the City’sdelegates through the online submission portal.
The voting delegates and alternates must be registered to attend the conference. The voting delegates must be present at the Business Meeting and in possession of the voting card in order to cast a vote. Transferring a voting card to a non-designated individual is not allowed. Currently, Mayor Pro Tem Manuel Chavez is registered to attend the conference.
ALTERNATIVES:
City Council may choose not to appoint a delegate and alternates; therefore, the City will not have a vote at the Annual Business Meeting.
168
File #: 26-336 Meeting Date: 8/4/2026
FISCAL REVIEW:
There is no fiscal impact associated with the request to designate the voting delegate and alternates.
LEGAL REVIEW:
The City Attorney’s Office has reviewed this report and has approved it as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item is administrative in nature.
CONCLUSION:
Staff recommends the City Council designate Mayor Pro Tem Manuel Chavez as Costa Mesa’s voting delegate for the 2026 League of California Cities Annual Conference.
169
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-337 Meeting Date: 8/4/2026
TITLE:
BIENNIAL REVIEW OF CITY’SCONFLICT OF INTEREST CODE
DEPARTMENT: CITY MANAGER’S OFFICE/CITY CLERK DIVISION
PRESENTED BY: BRENDA GREEN, CITY CLERK
CONTACT INFORMATION: BRENDA GREEN, CITY CLERK, (714) 754-5221 RECOMMENDATION:
Staff recommends the City Council approve Resolution No. 2026-xx, revising the list of designated positions in the City’s Conflict of Interest Code.
BACKGROUND:
The Political Reform Act, in Government Code section 87303, requires the City to adopt a Conflict of Interest Code that is reviewed biennially. The City’sConflict of Interest Code was last amended on September 3, 2024, by Resolution No. 24-40.
ANALYSIS:
Government Code Section 87200 designates the officials required to file statements of economic interest. The Costa Mesa officials include City Councilmembers, City Manager, City Attorney, Planning Commissioners, and Finance Director. Additionally, the City’sConflict of Interest Code must designate the positions within the City that involve the making or participation in the making of decisions that may have a material effect on any financial interest. This year, the "designated positions”have been updated to reflect positions that have been added, deleted, or undergone a title change. Resolution 2026-xx adopts the City’s Conflict of Interest Code and repeals the previous code.
ALTERNATIVES:
No alternatives have been considered, as it is mandated by state code that the Conflict of Interest Code be reviewed biennially.
FISCAL REVIEW:
There is no fiscal impact associated with this recommendation.
LEGAL REVIEW:
The City Attorney has reviewed the report and resolution and approved them as to form.
170
File #: 26-337 Meeting Date: 8/4/2026
CITY COUNCIL GOALS AND PRIORITIES:
This item is administrative in nature.
CONCLUSION:
Staff recommends the City Council approve Resolution No. 2026-xx revising the list of designated positions in the City’s Conflict of Interest Code.
171
ATTACHMENT 1
1 APPENDIX A
The term “Designated” refers to employees or officials, set forth by position or job classifications. A designated employee or official, for the purpose of this resolution, and in compliance with the City’s Conflict of Interest Code (Costa Mesa Municipal Code Section 2-401, et al.3) shall include a spouse and immediate members of the family.
Any person hired or promoted into a job classification included in this resolution shall become a designated employee for the purpose of the City’s Conflict of Interest Code without further action of the City Council. Added positions are highlighted.
DEPARTMENT/POSITION TITLES REPORTING CATEGORY
City Manager’s Office
Administrative Services Director All
Assistant City Manager All
Assistant to the City Manager All
Chief of Staff All
City Clerk All
Community Outreach Supervisor All
Deputy City Clerk All
Deputy City Manager All
Energy & Sustainability Services Manager All
Human Resources Administrator All
Human Resources Analyst All
Human Resources Manager All
Management Aide All Management Analyst All
Neighborhood Improvement Manager All
Principal Human Resources Analyst All
Public Affairs Manager All
Public Information Officer All
Real Property Manager All
Senior Code Enforcement Officer All
Senior Management Analyst All
City Attorney’s Office
Assistant City Attorney All
Deputy City Attorney All
Development Services Community Development
Department
Assistant Development Services Director
Assistant Community Development Director All
Assistant Planner All
Associate Planner All
172
ATTACHMENT 1
2 Building Inspector All
Building Official All
Building Technician I & II All
Chief of Code Enforcement Officer All
Chief of Inspection All
Chief Plans Examiner All
Code Enforcement Officer All
Combination Building Inspector All
Community Improvement Manager All
Economic & Development Services Director
Community Development Director All
Economic Development Administrator All
Grant Administrator All Management Aide All Management Analyst All Plan Check Engineer All
Plan Checker All
Plan Checker (Consultant) All
Plan Review Consultants All
Planning and Sustainable Development Manager All
Principal Planner All
Senior Code Enforcement Officer All
Senior Combo Inspector All
Senior Management Analyst All
Senior Planner All
Zoning Administrator All
Finance Department
Accounting Supervisor All
Assistant Finance Director All
Budget & Purchasing Manager All
Budget Analyst All
Buyer All
Financial Analyst All
Finance Manager All
Finance Officer All
Management Aide All
Management Analyst All
Payroll Supervisor All
Purchasing Supervisor All
Revenue Supervisor All
Senior Budget Analyst All
Senior Management Analyst All
Parks and Community Services Department
173
ATTACHMENT 1
3 Recreation Supervisor All
Fairview Park Administrator All
Management Aide All
Management Analyst All
Parks and Community Services Director All
Recreation Manager All
Senior Recreation Supervisor All
Senior Management Analyst All
Police Department
Deputy Chief of Police All
Emergency Services Manager All
Management Aide All
Management Analyst All
Police Captain All
Police Chief All
Public Affairs Manager All
Senior Management Analyst All
Telecommunications Manager All
Fire Department
Administrative Captain/PIO All
Assistant Fire Marshall All
Battalion Chief All
Code Enforcement Officer All
Assistant Fire Chief/Operations All
Emergency Services Manager All
Fire Chief All
Assistant Fire Chief/Fire Marshall All
Fire Protection Specialist All
Management Aide All
Management Analyst All
Telecommunications Manager All
Senior Management Analyst All
Information Technology Department
Cyber Security Analyst All
I.T. Manager All I.T. Project Manager All
Information Technology Director All
Management Aide All
Management Analyst All
Senior Management Analyst All
Computer Operations and Networking Supervisor All
Systems and Programming Supervisor All
174
ATTACHMENT 1
4 Public Works
Active Transportation Coordinator All Assistant City Engineer All
Assistant Engineer All
Associate Engineer All
City Engineer All
Construction Inspector All
Director of Public Works All
Deputy Director of Public Works All
Maintenance Services Manager All
Maintenance Superintendent All
Maintenance Supervisor All
Management Aide All
Management Analyst All
Transportation Services Manager All
Principal Civil Engineer All
Senior Engineer All Senior Management Analyst All
Supervisor All
Commissions
Parks & Community Services Commission All
Arts Commission All
Note: The following positions are not included in the Conflict of Interest Code as they already must file pursuant to Government Code Section 87200:
City Council Members
Planning Commissioners
City Manager
City Attorney
Finance Director
175
Resolution No. 2026-xx Page 1 of 2
RESOLUTION NO. 2026-xx
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF COSTA MESA,
CALIFORNIA, REVISING THE LIST OF DESIGNATED POSITIONS FOR THE CITY'S
CONFLICT OF INTEREST CODE
T
HE CITY COUNCIL OF THE CITY OF COSTA MESA DOES HEREBY
RESOLVE AS FOLLOWS:
WHEREAS, pursuant to the California Political Reform Act of 1974 every city is required to adopt a conflict of interest code and Costa Mesa has adopted its conflicts code, which appears in Costa Mesa Municipal Code Title 2, Chapter X; and WHEREAS, the Conflict of In terest Code contains a list of C ity officials a nd employees called "designated employees" whose positions involve the making or participation in the making of decisions that may foreseeably have a material financial effect on an economic interest of the employee; and
WHEREAS, the Conflict of Interest Code is required to be amended from time to time to incorporate new s tate law requirements and update the list of positions of designated employees;
WHEREAS, the City's Conflict of Interest Code now needs to be amended to update the list of designated positions; and
WHEREAS, the City's Conflict of Interest Code now specifies that all employees designated as filers under the City’s Conflict of Interest Code are “designated employees” for purposes of AB 1234 and, as such, are required to participate in mandatory ethics training.
BE IT RESOLVED that the Costa Mesa City Council hereby amends the list of designated positions shown on Appendix "A" with the new, revised Appendix "A" that is attached hereto and incorporated herein.
ATTACHMENT 2
176
Resolution No. 2026-xx Page 2 of 2
PASSED AND ADOPTED this 4th day of August, 2026.
_____________________________
John Stephens, Mayor
ATTEST: APPROVED AS TO FORM:
________________________ _____________________________ Brenda Green, City Clerk Kimberly Hall Barlow, City Attorney
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss
CITY OF COSTA MESA )
I, BRENDA GREEN, City Clerk of the City of Costa Mesa, DO HEREBY CERTIFY that the above and foregoing is the original of Resolution No. 2026-xx and was duly passed and adopted by the City Council of the City of Costa Mesa at a regular meeting held on the 4
th day of August, 2026, by the following roll call vote, to wit:
AYES: COUNCIL MEMBERS:
NOES: COUNCIL MEMBERS:
ABSENT: COUNCIL MEMBERS:
IN WITNESS WHEREOF, I have hereby set my hand and affixed the seal of the City of Costa Mesa this 5
th day of August, 2026.
__________________________
Brenda Green, City Clerk
177
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-334 Meeting Date: 8/4/2026
TITLE:
RESPONSE TO ORANGE COUNTY GRAND JURY REPORT-STATE HOUSING MANDATE DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT
PRESENTED BY: MELINDA DACEY, PRINCIPAL PLANNER AND ANNA MCGILL,
PLANNING MANAGER
CONTACT INFORMATION: MELINDA DACEY, PRINCIPAL PLANNER, (714) 754-5611 RECOMMENDATION:
Staff recommends the City Council review and approve the responses to the May 27, 2026, Orange County (OC) Grand Jury Report titled, “California Housing Mandates” and authorize staff to submit the response to the presiding judge.
BACKGROUND:
On May 27, 2026, the City of Costa Mesa received a copy of the 2025-2026 OC Grand Jury Report titled “California Housing Mandates” (Attachment 2). The report outlines how Housing Mandates operate in practice within Orange County, and how well-intended legislation has produced unintended consequences for cities, neighborhoods and local governance. The Grand Jury report was released to the public on May 27, 2026. California Penal Code sections 933 and 933.05 require the City Council, as governing body, to submit a response to the Presiding Judge of the Orange County Superior Court within ninety days (by August 25, 2026). Attached is a response to the Report for City Council review and approval (Attachment 1).
The Grand Jury report provides an overview of the feasibility, effectiveness and equity of current state policies, and highlights the growing disconnect between mandated housing goals and the capacity of communities to absorb them responsibly. Additionally, the report underscored the need for housing solutions that respect local conditions, restore meaningful public participation, and align development goals with infrastructure, funding and community priorities.
ANALYSIS:
The OC Grand Jury Report examined how recent statutory reforms shifted authority away from local jurisdictions toward state oversight and enforcement, reshaping the governance framework and altering the practical and legal responsibilities of cities, with respect to housing production and affordability. The report does not question whether cities must comply with state law, as they must, but rather aims to assist Orange County jurisdictions and the public in understanding the framework within which they operate and enhance the possibility of good planning practices. As part of the overall analysis, the report assessed the 6th cycle Regional Housing Needs Assessment (RHNA) process and determined key themes, including its lack of overall transparency, questionable
178
File #: 26-334 Meeting Date: 8/4/2026
process and determined key themes, including its lack of overall transparency, questionable processes for data input, methodology used to derive the RHNA allocations, overall difficulty in explaining this process, and RHNA outcomes to the broader community and elected officials.
Additionally, the report expanded upon the overall difficulties in housing production (particularly affordable housing), due to a range of factors including high construction costs, complex and competitive financing mechanisms and subsidies, and constrained existing conditions (e.g., limited available land, infrastructure constraints, and environmental factors). To this end, the Findings and Recommendations focus on these key themes and urge for greater transparency, participation, and education in the overall RHNA process.
The response letter (Attachment 1) for City Council consideration provides the statutorily required responses to both the Findings and Recommendations, with a summary of additional information, if warranted. Based upon the Grand Jury’sanalysis, a total of 22 findings and 20 recommendations were made with supporting facts. The response letter includes the City’sdraft responses to 11 of the 22 findings where City of Costa Mesa is identified in the Grand Jury’sreport (F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, and F12). Additionally, the report includes targeted recommendations for Southern California Association of Governments (SCAG), Orange County Council of Governments (OCCOG), and the 34 jurisdictions within Orange County. The City of Costa Mesa is identified in the Grand Jury’sreport for eight recommendations (R7, R8, R9, R11, R12, R14, R15 and R16). Under the relevant Findings and Recommendations, additional detail is provided, including the key City efforts to date, such as overall countywide (e.g., SCAG, OCCOG) participation efforts, Measure K, the City’s Housing Element and program efforts and Neighborhoods Where We All Belong (NWWAB). The responses are formatted to meet the requirements and instructions as required by California Penal Code section 933.05, as described in the introduction to the Grand Jury Report.
ALTERNATIVES:
The City Council may decline to approve the proposed responses. However, failure to provide responses by the August 25, 2026, deadline will result in violation of California Penal Code sections 933 and 933.05. Staff does not recommend this option. The City Council could propose modifications to the responses. Staff will incorporate City Council recommendations in the City’sresponse to the Orange County Grand Jury Report.
FISCAL REVIEW:
There is no fiscal impact associated with this action.
LEGAL REVIEW:
The City Attorney’s Office has reviewed the draft responses and approves them as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goals:
· Strengthen the public’s safety and improve the quality of life. · Diversify, stabilize and increase housing to reflect community needs.
179
File #: 26-334 Meeting Date: 8/4/2026
CONCLUSION:
Staff recommends the City Council review and approve the responses to the May 27, 2026, Orange County Grand Jury Report titled, “California Housing Mandates” and authorize staff to submit the responses to the presiding judge.
180
COMMUNITY DEVELOPMENT DEPARTMENT
77 FAIR DRIVE, POST OFFICE BOX 1200, COSTA MESA CA. 92628-1200 Building Safety Division (714) 754-5273 Community Improvement Division (714) 754-5638 Housing & Community Development (714) 754-4870 Planning Division (714) 754-5245 www.costamesaca.gov
1 | Page
August 4, 2026
The Honorable Sheila F. Hanson
Presiding Judge of the Superior Court of California, Orange County 700 West Civic Center Drive
Santa Ana, CA 92701
Subject: City of Costa Mesa Response to the Orange County Grand Jury Report:
“California Housing Mandates”
Dear Judge Hanson,
Please find below the City of Costa Mesa’s response to the Orange County Grand Jury’s Finding and Recommendations published in their May 2026 report titled “California Housing Mandates.” This information is being provided on behalf of the City of Costa Mesa in compliance with California Penal Code section 933.05.
The following is a response to the Grand Jury Findings and Recommendations as applicable to the City of Costa Mesa:
Findings:
F1. In recent years, the California Legislature has enacted an unusually large and burdensome volume of housing-related laws intended to strengthen compliance with State Housing Mandates.
City Response: The City agrees with this finding. The volume of housing-related laws enacted since 2019 has resulted in significant staff resources required to interpret and implement the laws, including educating the community and local officials. For example, during the 2025 legislative cycle, approximately 60 housing related bills were enacted. In most cases, the laws become effective in a short amount of time once they are signed into law (e.g., immediately, three months, or up to 10 months), which limited the City’s and staff ability to adapt and understand the new regulations, attend training, consider interpretations, and develop protocols to efficiently implement the laws.
ATTACHMENT 1
181
COMMUNITY DEVELOPMENT DEPARTMENT
2 | Page
F2. Housing Mandates are implemented through a RHNA process that often lacks transparency and relies on complex methodologies that are difficult for local officials and the public to understand or meaningfully challenge.
City Response: The City agrees with this finding. The Regional Housing Needs Allocation (RHNA) was incredibly complex in its approach, with methodologies that were not transparent, that were difficult for staff to understand and assist in explaining the methodology to the community and local officials. The consultation process between the Southern California Association of Governments (SCAG) and the State Department of Housing and Community Development (HCD) operated in a vacuum during the 6th Housing Element Cycle. W ith little to no transparency during the consultation process, there was no way to confirm tha t metropolitan planning organizations/councils of government throughout California were assigned a housing need that was equitable and based on an identical methodology.
The SCAG RHNA Subcommittee recognized this issue, and in June 2019 proposed a clear distinction be made between housing need 1) due to projected regional population growth and 2) due to existing housing needs. Specifically, SCAG recommended HCD utilize the Regional Transportation Plan/Sustainable Communities Strategy, known as “Connect SoCal”, growth forecast as a basis for projected housing need. The foundation for this growth forecast is local input and it represents a long-standing, credible approach which is consistent with Government Code section 65584.01.
In addition, the final SCAG RHNA methodology, adopted by the SCAG Regional Council on November 7, 2019, was introduced as a substitute motion at the Regional Council meeting. This alternative methodology was not reviewed or analyzed by jurisdictions, and it was inconsistent with the methodology that was developed through a rigorous year long process. Moreover, the final SCAG RHNA methodology was not the methodology that was reviewed and approved by the SCAG RHNA Subcommittee on October 7, 2019, that was also unanimously approved by the SCAG Community, Economic, and Human Development Policy Committee on October 21, 2019. The alternative methodology that was ultimately adopted, later known as the “Bailey methodology”, over -emphasized housing near existing and future transit facilities a nd employment centers. Finally, this resulting methodology resulted in similar sized jurisdictions, with other similar characteristics, receiving widely differing RHNA allocations . The RHNA methodology process should be transparent, interactive, and rely on feedback from jurisdictions.
F4. Meaningful participation by Orange County cities in both OCCOG and SCAG meetings is critical to ensuring that local perspectives are represented during the development and implementation of Housing Mandates policies.
182
COMMUNITY DEVELOPMENT DEPARTMENT
3 | Page
City Response: The City agrees with this finding.
F5. SCAG’s 6th Cycle RHNA assigned Orange County a questionable total of 183,861 housing units for the 2021 –2029 planning period, with higher allocations concentrated in cities with major population and employment centers.
City Response: The City agrees with this finding. As noted in the City’s response to finding F2, the 6
th Cycle RHNA process lacked transparency. It was difficult to determine the data and inputs used to arrive at R HNA methodologies, subsequent audits found errors in the model and accounting process, and it was difficult to explain this process, and data behind it, to the community and local officials.
F6. RHNA allocations are unrealistic and not attainable within the current planning cycle due to limited available land, built -out urban conditions, infrastructure constraints, environmental factors, and public health and safety requirements.
City Response: The City agrees with this finding. The RHNA continues to be a one - size-fits-all process where the methodology does not consider the characteristics or constraints associated with any individual jurisdiction.
F7. Residents in Orange County consistently express a desire for local planning decisions to reflect community priorities, including but not limited to neighborhood character, safety considerations, the environment and open-space preservation.
City Response: The City agrees with this finding.
F8. California’s regulatory construction costs (i.e. , permitting fees) present substantial challenges for private housing developers —particularly those delivering affordable units.
City Response: The City agrees with this finding. Many financial incentivizes, opportunities and sources exist at the County level. Local jurisdictions are already constrained and increasingly more constrained in subsidies, grants and other funding mechanisms they can provide and support. Additionally, private developers, including af fordable housing developers, request incentives like reductions to building code requirements, waiving of impact fees and relaxing of other code requirements to help the project from a financial standpoint. However, relaxing of these requirements is not of ten beneficial from a quality -of-life standpoint, and communities often bear the repercussions of these decisions.
Moreover, housing development is dependent on market conditions. Factors impacting market conditions include, but are not limited to, construction costs, labor costs, availability of materials, permitting fees, availability of funding/financing. 183
COMMUNITY DEVELOPMENT DEPARTMENT
4 | Page
Jurisdictions are unable to predict times of economic uncertainty, such as a recession or varying interest rates , or a large scale regional natural disaster, such as the Palisades/Altadena fires, which can drastically impact development. It is the City’s experience that density bonus projects (i.e., constructing a percentage of affordable units with market rate units in a single project) are financially feasible for both rental and ownership projects. However, feasibility depends on sales prices and rents, which are also subject to market factors. If revenues from rents and sales prices support development costs, housing is built due to the demand.
F9. The cost of constructing a single affordable housing unit in California typically ranges from approximately $500,000 to $800,000 per unit when fully complying with current state regulations. New low-income housing is generally not financially feasible without public subsidy.
City Response: The City agrees with this finding. As noted in the City response to F8, many financial incentivizes, opportunities and sources exist at the County level. Local jurisdictions are already constrained and increasingly more constrained in the subsidies, grants and other funding mechanisms they can provide and support.
Additionally, private developers, including affordable housing developers, request incentives like reductions to building code requirements, waiving of impact fees and relaxing of other code requirements to help the project from a financial standpoint.
However, relaxing of these requirements is not often beneficial from a quality -of-life standpoint, and communities often bare the repercussions of these decisions.
F10. Prior to their dissolution in 2012, redevelopment agencies served as a primary mechanism for cities and counties to finance affordable housing and related infrastructure. The loss of redevelopment has reduced cities’ ability to support construction of affordable units.
City Response: The City agrees with this finding. Medium-sized jurisdictions have populations with diverse demographics and housing needs. However, resources to address these needs continue to be limited, often paired with competitive application processes. As a result of legislation in 2012, all redevelopment agencies in the State were dissolved, which has had a profound effect on the quantity and complexity of affordable housing development in the State. Redevelopment was a tax increment financing tool that allowed cities and counties to retain a highe r share of the growth in property taxes in designated areas to invest in those areas. Over 400 cities and counties in the State used this tool. Redevelopment projects were required to allocate 20% of all tax increment for affordable housing in the communit y. On a Statewide level, over $2 billion generated on an annual basis for affordable housing was lost due to this State law change.
184
COMMUNITY DEVELOPMENT DEPARTMENT
5 | Page
Despite State legislative efforts to replace Redevelopment with Enhanced Infrastructure Financing Districts and Community Revitalization Investment Areas (CRIAs), these financing tools generate a tiny fraction of the local funding that redevelopment did previously, which is the reason why a limited number of Enhanced Infrastructure Financing Districts and only one CRIA have b een adopted over the last 15 years. The State has yet to allow a structure to replace this significant permanent source of affordable housing funding.
F11. Because public subsidy is limited and highly competitive, cities seeking to produce meaningful quantities of low-income housing must rely in part on private development incentives, often resulting in higher overall development densities and unit counts than the RHNA allocation.
City Response: The City agrees with this finding. The City of Costa Mesa c ontinues to rely on its Inclusionary Housing Ordinance and State Density Bonus Law (SDBL) to achieve lower-income housing included in residential projects. These development projects are not producing affordable housing at the densities necessary for the City to meet its RHNA allocation identified for Housing Element sites. This is due to current market factors favoring lower density townhomes rather than higher density rental projects, which diminishes the required Housing Element surplus of units and presents a no net loss risk. Market factors have a powerful effect on what housing is built and zoning changes by jurisdictions cannot single -handedly counteract a change in the market. The City would be interested to know if the data across Orange County and California shows this trend and if that is likely to continue as RHNA allocations and densities increase.
F12. The 6th Cycle RHNA methodology included numerous technical inputs pub lished by SCAG and HCD; however, these inputs were highly complex and difficult for cities to interpret or independently verify.
City Response: The City agrees with this finding. As noted in the City response for F2, the Sixth Cycle RHNA was incredibly complex in its approach. Costa Mesa wrote at least four letters to SCAG over the course of the development of the methodology and noted over the course of three months (September 2019 to November 2019) that five different methodologies were presented and reviewed. Costa Mesa expressed significant concerns about local input not being included in the methodology, and that the process should be transparent and interactive. The process was input focused and did not rely enough on feedback from jurisdictions.
Of note, jurisdictions do not have the opportunity to review the inputs utilized by HCD during the consultation process between HCD and SCAG and, therefore, are not able to provide public comment on the data points until after the release of the regional determination. Additionally, jurisdictions were not provided access to the data points 185
COMMUNITY DEVELOPMENT DEPARTMENT
6 | Page
utilized by HCD in the regional determination and had to extract them from the materials provided. This resulted in a lack of transparency and made it extremely difficult for jurisdictions to analyze and verify the various methodologies in a timely manner to provide meaningful feedback to HCD and SCAG.
Recommendations:
R7. OCCOG, all Orange County cities and the County of Orange should reassess the current dues structure , by September 30, 2026, to ensure that OCCOG has the resources necessary to effectively represent Orange County jurisdictions in SCAG processes, including RHNA methodology development and appeals. (F3, F15)
City Response: The City acknowledges that OCCOG should have necessary resources to effectively represent Orange County jurisdictions in the SCAG processes, including RHNA methodology development and appeals. This is not an action item the City of Costa Mesa can independently initiate ; however, the City is supportive of the intent of this recommendation. However, the City also emphasi zes that jurisdictions continue to face budgetary constraints, which would make it difficult to commit to increased dues to support the recommended resources.
R8. By December 31, 2026, the Orange County Board of Supervisors should partner with cities to evaluate countywide infrastructure capacity — including water, wastewater, flood control, transportation, and public -safety systems—and develop a coordinated regional plan capable of supporting the level of housing growth required under state law. (F6)
City Response: The City acknowledges this recommendation. The City prepared a comprehensive programmatic environmental impact report (PEIR) that evaluated citywide infrastructure capacity including water, wastewater, flood control, transportation, and public -safety infrastructure for the citywide rezoning effort, Neighborhoods Where We All Belong, to implement the Sixth Cycle Housing Element. Additionally, the City reached out to the local school districts to evaluate capacity impacts in the three focus areas where the majority of the residential and residential mixed -use is sited. The PEIR is not yet certified and is currently being circulated for public review but determined that there is adequate citywide infrastructure capacity to support the additional residential development, with certain identified infrastructure improvements. In some cases, residential and residential mixed-use projects would replace existing non-resi dential uses that generate more impacts. The City would cooperate in sharing the PEIR to ensure that the County would have a recent assessment of infrastructure needed to support development.
186
COMMUNITY DEVELOPMENT DEPARTMENT
7 | Page
Additionally, the 6th Housing Element Cycle will conclude in 2029, and the County of Orange may determine it to be more appropriate to initiate this project prior to the 7th Cycle RHNA.
R9. By September 30, 2026, the Orange County Board of Supervisors should strengthen its engagement with OCCOG and increase staff support to develop a shared, countywide database of potential housing sites and key development-feasibility factors. (F15)
City Response: The City partially agrees with this recommendation. The City of Costa Mesa staff attend all OCCOG Technical Advisory Committee (TAC) monthly meetings, participate in bi -annual countywide data collection requests, share information with Orange County jurisdictions through OCCOG, attend trainings related to RHNA and state law implementation. The City would support a countywide GIS database of Housing Element sites and would make shapefiles accessible for this purpose. However, this recommendation is focused on the County of Orange for implementation and not Costa Mesa.
R11. The County of Orange and each city should ensure consistent participation in SCAG and OCCOG committees by September 30, 2026, including the Technical Advisory Committee (TAC), to strengthen regional representation during RHNA -methodology development. (F3, F4, F15)
City Response: The City agrees with this recommendation and has designated staff representatives, or alternates, for all RHNA -related SCAG and OCCOG committees who actively participate in and attend the meetings.
R12. The County of Orange and each city should designate a single technical representative, by September 30, 2026, along with an alternate, for all RHNA -related SCAG and OCCOG committees to ensure continuity of participation and eliminate gaps in representation across multiple decision-making bodies. (F4)
City Response: The City agrees with this recommendation as noted in R11.
R14. By April 30, 2027, the County of Orange and each city should publish annual monitoring dashboards showing (a) entitlement pipeline conditions, (b) realistic site yield, (c) assembled funding sources for affordable units, and (d) conversion rates from planned capacity to issued permits and completed units, ensuring that County and city-determined capacity assumptions remain aligned with actual production. (F13)
City Response: This recommendation is already being implemented. Costa Mesa has an Active Development Projects map available on the City’s website that shows where projects are being constructed . In addition, the City reports housing 187
COMMUNITY DEVELOPMENT DEPARTMENT
8 | Page
production data on an annual basis to the California Department of Housing and Community Development (HCD) through the annual progress report which includes information for entitlements through to certificate of occupancy, and project funding sources, if known. Identifying project funding sources is a newer reporting requirement established by HCD during the last two annual reporting cycles . HCD publishes this data on dashboards that are already publicly accessible, that can be filtered to a specific County or local jurisdiction . In addition, Costa Mesa publishes the annual progress reports to the City’s website. Finally, when an application is submitted for review on a Housing Element site, the City must make findings that there is sufficient capacity remaining during the curren t housing element cycle, consistent with State law.
R15. By September 30, 2026, and ongoing, the County Board of Supervisors and all city councils should make a coordinated and sustained effort to educate their constituents about the RHNA process —its req uirements, its impact on local planning and community character, and the role residents can play in shaping outcomes. Public education efforts should also include guidance on how community members can effectively engage with the California Legislature and advocate for more realistic, data-driven housing policies. (F1, F7)
City Response: The City agrees with and is already implementing this recommendation. The City of Costa Mesa’s
6th Cycle Regional Housing Needs
Allocation (RHNA) represents the largest housing obligation in the City’s history; 11,760 units. Meeting this requirement was constrained by a 2016 voter- approved growth control measure (Measure Y), which presented a significant barrier to housing production, and required a citywide vote for zoning and land use changes to remove . In November 2022, voters approved City-initiated Measure K, a critical policy shift that removed this barrier by allowing changes to land use and zoning in specific commercial and industrial areas wh ile requiring robust community visioning.
In 2024-2025, the City launched a unique, people-centered planning initiative called Neighborhoods Where We All Belong (NWWAB). NWWAB is a coordinated outreach and planning effort to rezone all Measure K sites, including the Housing Element sites (which was completed on a faster pathway and approved by the City Council at their March 17, 2026, meeting). Part of the outreach effort include d explaining RHNA to the community. As part of this NWWAB planning effort, th e City is rezoning over 1,000 parcels (including Housing Element sites) to allow for residential and mixed - use development, studying the environment al impacts of over 22,000 residential units across the City through a Programmatic Environmental Impact Report ( PEIR), and zoning ordinance updated to implement a majority of the City’s Housing Element programs and comply with state law. More information can be found on the City’s NWWAB website: www.costamesaneighborhoods.com
.
188
COMMUNITY DEVELOPMENT DEPARTMENT
9 | Page
R16. By December 31, 2026, all cities should look to enhance their relationships with not - for-profit affordable housing developers to increase the opportunity to develop more affordable housing. (F8, F10, F12)
City Response: The City agree s with and is already implementing this recommendation. The City’s Housing Element identifies program 2B (Affordable Housing Development), which includes pursuing funding opportunities related to affordable housing, pursuing local partnerships with affordable housing organizations and establishing development incentives (i.e. , deferment of fees, priority processing, modified development standards, etc.) to encourage affordable housing in the City. As part of a REAP 2.0 grant awarded to the City in early 2026, consultant Interwest is assisting the City in preparing a memo that identifies all the ways in which the City is actively advancing these objectives in line with program 2B.
This memo will be available for public review as part of the NWWAB efforts, going to the City Council in fall, 2026. The City is anticipated to have completed this program as part of the NWWAB effort.
The City of Costa Mesa will continue to review and respond to issues of concern related to housing in our community. Thank you for the opportunity to respond and if you should need further information, please do not hesitate to contact Anna Mc Gill, Planning Manager , at 714-754-5609.
Sincerely,
Mayor John Stephens
City of Costa Mesa
C: Costa Mesa City Council
Cecilia Gallardo-Daly, City Manager
Carrie Tai, Community Development Director
189
California State Housing Mandates
Orange County Grand Jury 2025-2026
ATTACHMENT 2
190
California State Housing Mandates
This page left intentionally blank!
191
California State Housing Mandates
Orange County Grand Jury 2025-2026
TABLE OF CONTENTS
SUMMARY .................................................................................................................................................... 5 BACKGROUND ............................................................................................................................................ 6 REASON FOR STUDY .................................................................................................................................. 9 METHOD OF STUDY ................................................................................................................................. 10 RESEARCH ........................................................................................................................................... 10 INTERVIEWS ......................................................................................................................................... 10 OBSERVATIONS AND SITE VISITS ............................................................................................................... 10 PUBLIC FORUMS AND EVENTS .................................................................................................................. 11 GOVERNMENT MEETINGS ........................................................................................................................ 11 DOCUMENT REVIEW ............................................................................................................................... 11 CITY SURVEY ........................................................................................................................................ 11 INVESTIGATION AND ANALYSIS ............................................................................................................ 11 STATE HOUSING MANDATES AND LOCAL IMPLEMENTATION ............................................................................. 11 ENVIRONMENTAL CONTEXT AND CEQA ...................................................................................................... 13 REGIONAL HOUSING NEEDS ASSESSMENT PROCESS ..................................................................................... 15 REGIONAL HOUSING NEEDS ANALYSIS CHALLENGES .................................................................................... 17 PENALTIES FOR NOT HAVING AN HCD-APPROVED HOUSING ELEMENT ............................................................. 19 PENALTIES FOR NOT MEETING HOUSING-PLAN CONSTRUCTION GOALS ............................................................ 20 FEASIBILITY OF HOUSING MANDATE IN ORANGE COUNTY ............................................................................... 20 ONE SIZE DOES NOT FIT ALL .................................................................................................................... 22 CALIFORNIA AND ORANGE COUNTY POPULATION TRENDS .............................................................................. 23 6TH CYCLE (2021–2029) HOUSING ALLOCATIONS IN OC ............................................................................... 25 CITY CHALLENGES ................................................................................................................................. 27 7TH CYCLE (2029-2037) CONCERNS ......................................................................................................... 31 CONCLUSION ............................................................................................................................................ 32 FINDINGS ................................................................................................................................................... 34 RECOMMENDATIONS .............................................................................................................................. 36 RESPONSES CODE ..................................................................................................................................... 40 RESPONSES ................................................................................................................................................ 41 GLOSSARY AND ACRONYMS ................................................................................................................... 45 BIBLIOGRAPHY ......................................................................................................................................... 49 APPENDIX .................................................................................................................................................. 55 APPENDIX A: MAJOR HOUSING LAWS & WHAT THEY TRIED TO DO ................................................................. 55 APPENDIX B: ORANGE COUNTY HOUSING MANDATE SURVEY QUESTIONS ...................................................... 65 APPENDIX C: RESPONSIBILITIES ............................................................................................................ 65 Responsibilities of OCCOG ........................................................................................................... 65 192
California State Housing Mandates
Responsibilities of SCAG .............................................................................................................. 66 Responsibilities of HCD ................................................................................................................ 66
193
California State Housing Mandates
Orange County Grand Jury 2025-2026
SUMMARY
California’s perceived housing shortage has prompted the California Legislature to impose increasingly bureaucratic prescriptive State Housing Mandates (Housing Mandates) on local governments, with the stated goal of accelerating production across all income levels. Core frameworks such as the Housing Element and the Regional Housing Needs Allocation (RHNA) process require cities and counties to plan for significant increases in housing capacity. Many additional statutes have contributed to a streamlined development approval process and weakened local discretion with severe penalties for noncompliance. These measures are intended to overcome decades of the perceived underbuilding and restrictive zoning within cities, yet their cumulative effect has been to create unnecessary local government costs, confusion, inequity, and growing tension between state directives and local realities. All of these efforts have led to minimal housing being built.
In Orange County, a region defined by diverse cities, established neighborhoods, and distinct infrastructure constraints, as well as environmentally sensitive areas, these Housing Mandates operate as a one-size-fits-all system poorly suited to local conditions. Housing targets are derived from opaque formulas, that fail to account for land costs, land availability, funding limitations, labor shortages, construction costs, infrastructure capacity and accurate population projections. Without corresponding investments in transit, utilities, schools, parks, public safety, and affordable housing subsidies, the Housing Mandates themselves are largely impractical and difficult to achieve. In addition, because of the financial infeasibility of building low-income housing without subsidies, cities must approve developments with higher density to pay for and meet the affordable housing requirements. As a result, local cities face mounting pressure to comply with requirements that often lack economic and logistical feasibility.
The dissolution of local redevelopment agencies in 2012 eliminated a primary mechanism for financing and managing affordable housing at the local level. In response, the State layered new housing requirements through the Housing Mandates onto cities and counties without restoring comparable funding tools or infrastructure support. Although these laws are framed as solutions to homelessness and affordability, they have in fact caused unintended consequences that have not produced incremental housing production. This is primarily due to regulatory complexity, limited subsidies, and heavy reliance on private market forces. Over time, repeated legislative interventions to solve these challenges have only expanded state authority. This leaves local governments with fewer resources and diminished control.
Housing Mandates have significantly eroded local land-use authority, supplanting community-based planning with rigid, top-down rules. Residents experience a loss of 194
California State Housing Mandates
meaningful input; even as local officials remain legally responsible for compliance.
Streamlined approvals frequently bypass public hearings and local design standards, shift liability to cities, and prioritize building over neighborhood character. The practical elimination of traditional single-family zoning and the widespread upzoning of existing neighborhoods threaten longstanding community character while limiting local oversight of height, density, parking, and environmental resilience.
The Southern California Association of Governments (SCAG) determines the RHNA housing allocation for most of Southern California. Within this framework, the Orange County Council of Governments (OCCOG) serves as the County’s representative to SCAG in the RHNA process. The RHNA methodology and resulting allocations have been widely criticized as unrealistic, inequitable, and insufficiently transparent.1 OCCOG’s level of influence with SCAG is critical to regional planning outcomes.
OCCOG needs substantial funding increases to better advocate in Sacramento and within SCAG to support OC jurisdictions.
Given the significant challenges and inequitable housing allocations experienced during the current RHNA 6
th Cycle (2021-2029), it is imperative that Orange County begin strategic preparation for the upcoming 7th Cycle (2029-2037) process. Proactive planning will strengthen the County’s ability to advocate within SCAG for fair, data-driven, and achievable housing allocations in the next cycle.
This report examines how Housing Mandates operate in practice within Orange County, and how well-intended legislation has produced unintended consequences for cities, neighborhoods, and local governance. It evaluates the feasibility, effectiveness, and equity of current state policies, and highlights the growing disconnect between mandated housing goals and the capacity of communities to absorb them responsibly.
The report underscores the need for housing solutions that respect local conditions, restore meaningful public participation, and align development goals with infrastructure, funding, and community priorities.
BACKGROUND
California continues to experience some of the highest housing prices and rents in the nation, while some say housing production has not kept pace with population and employment growth
2. State policymakers have concluded that fragmented local decision-making, restrictive zoning practices, and lengthy approval processes, have
1 New-Pathways-to-Encourage-Housing-Production-Evaluating-Californias-Recent-Housing-Legislation- April-2023-Final.pdf
2 California Housing in 2025 - Advocacy - California Chamber of Commerce 195
California State Housing Mandates
Orange County Grand Jury 2025-2026
contributed to this imbalance3. In response, the California Legislature has pursued a more centralized and enforceable approach to housing policy such as Senate Bill (SB)9, SB10, SB35, SB79, SB131, SB330, and Assembly Bill (AB)1050, AB2011(see Appendix A), shifting significant authority from local jurisdictions to the State. Since 2017, the California Legislature has enacted more than one hundred housing-related bills designed to establish clearer production expectations, reduce procedural delays, and strengthen enforcement mechanisms for jurisdictions that do not comply with state housing requirements.
The Housing Element Law (Government Code 65580-65589.11), originally adopted in 1969, remains the foundation of California’s housing policy. The law requires every city and county to prepare a Housing Element as part of its General Plan that identifies how the jurisdiction will meet the housing needs of all income groups.4 The RHNA process implements these Housing Mandates by assigning each jurisdiction a specified number of housing units—categorized by income level. Compliance is tied to eligibility for state housing and transportation funding, creating substantial financial implications for the County of Orange and its 34 municipalities.
Zoning has long been a cornerstone of local government authority, guiding development, and shaping the physical form of cities.
First introduced in the late nineteenth and early twentieth centuries to address public safety concerns, zoning has since expanded into a sophisticated regulatory system governing land use, building height, setbacks, lot coverage, density, and numerous other development standards. These tools enable local governments to align growth with infrastructure capacity, environmental constraints, and long-term planning objectives, while simultaneously delivering broad public benefits. In addition to protecting public health and safety by distancing residential areas from heavy industrial activities and ensuring reliable emergency access, zoning helps preserve neighborhood character and property values. It also supports community cohesion by balancing residential, commercial, and civic uses, and guides growth in ways that correspond with available public services and facilities. Moreover, zoning plays a vital role in safeguarding environmentally sensitive areas and reducing exposure to wildfire risks, underscoring its enduring importance as a foundational instrument of urban planning.
In recent years, traditional zoning practices have been subject to increasing scrutiny.
Critics argue that low-density zoning and land-use restrictions have contributed to housing shortages, affordability challenges, socioeconomic segregation,
3 In California, statewide housing reforms brush against local resistance | Brookings 4 New-Pathways-to-Encourage-Housing-Production-Evaluating-Californias-Recent-Housing-Legislation- April-2023-Final.pdf
196
California State Housing Mandates
automobile-dependent development, and exclusionary housing patterns.5 Housing advocates, civil rights organizations, and some policymakers have cited these concerns as justification for significant state intervention and reform of local land-use authority.6 State leaders have relied on these critiques to support a series of Housing Mandates that expand the State’s role in local planning decisions. These measures prioritize increased housing production as the central response to the State’s affordability challenges. The underlying assumption is that a significant increase in supply will help reduce housing costs. However, historical data reviewed by the 25-26 Orange County Grand Jury (OCGJ) indicate that periods of high housing production in Orange County, including during the 1990s, did not consistently result in improved affordability. 7 This
suggests that housing affordability is influenced by multiple factors other than housing supply, including land values, construction costs, wages, and regional economic conditions.
The dissolution of redevelopment agencies in 2012 further altered the local housing landscape. Redevelopment agencies had served as a significant source of financing for affordable housing and community revitalization projects through tax-increment financing and state-authorized planning powers. Their elimination removed a key funding mechanism for cities and counties.8 In subsequent years, the State imposed additional Housing Mandates without restoring revenue sources, leaving jurisdictions and builders responsible for meeting expanded obligations with reduced financial capacity.
The current generation of State Housing Mandates (6th Cycle) reflects multiple statewide policy objectives. Early legislative proposals referenced a goal of constructing approximately 3.5 million new housing units; later that figure was reduced to approximately 2.5 million units.9 Despite these goals, statewide production continues to fall short of identified need. To address this, state housing legislation has emphasized increased zoning density, reduced discretionary review, expanded ministerial approval pathways, strengthened density bonus incentives, and increased requirements for jurisdictions to facilitate affordable housing in lieu of government subsidies. Additional measures focus on locating new housing near employment centers and transit corridors to reduce commute times and greenhouse gas emissions.
10 5 National Low Income Housing Coalition - Land Use Restrictions and Affordable Housing 6 Fixing California’s housing shortage requires new policy and new politics - Berkeley Economy & Society Initiative
7 Court Agrees Anaheim Violated State Law. Decision is a Big Win for Fair Housing in California | California Department of Housing and Community Development 8 California Post-RDA Affordable Housing Developer Survey: Analysis of Results - San Francisco Fed 9 New-Pathways-to-Encourage-Housing-Production-Evaluating-Californias-Recent-Housing-Legislation- April-2023-Final.pdf
10 California State Senate Recent Legislative Actions
197
California State Housing Mandates
Orange County Grand Jury 2025-2026
Collectively, these policies mark a significant shift in California’s approach to land-use governance. While intended to address housing shortages and affordability concerns, they have also raised questions regarding feasibility, infrastructure capacity, public engagement, and the long-term effects on established communities. These issues are particularly relevant in Orange County, where many cities are fully built out, constrained by environmental concerns, geography, and infrastructure limitations, and seeking to balance statutory obligations with community priorities and public expectations. The impact on Orange County and its 34 cities in meeting these Housing Mandates deserves intense scrutiny.
REASON FOR STUDY
The expansion of Housing Mandates has provoked public awareness and challenged local governments. Media coverage has grown, reflecting divergent viewpoints regarding the Housing Mandates’ effectiveness, equity, and long-term consequences.
Cities across Orange County have responded in a variety of ways, adopting compliance strategies that differ widely in breadth, transparency, and community engagement.
Residents have expressed a similarly broad range of perspectives, from support for expanded housing opportunities to concerns regarding neighborhood impacts, infrastructure strain, loss of local control, and limitations on public participation in land-use decision-making.
Housing Mandates have the potential to significantly reshape the character of Orange County Communities.
Beyond requiring increased zoning density and higher residential densities, the Housing Mandates influence demographic patterns, neighborhood character, transportation systems, public services, and environmental concern. Local jurisdictions must absorb these impacts without corresponding state investment in infrastructure, affordable housing subsidies, or restoration of tools previously used to manage growth, such as redevelopment agency financing.
Given these conditions, this report attempts to evaluate both the intended and unintended consequences of Housing Mandates as they are applied within Orange County. It will identify where state requirements may conflict with local capacity and community needs and assess how recent legislative changes have shifted the balance between state authority and local governance. In addition, this report seeks to establish a strategic framework for influencing future housing allocations within SCAG by strengthening the role and effectiveness of OCCOG as we move into the next planning phase.
198
California State Housing Mandates
METHOD OF STUDY
In conducting this study, the OCGJ employed a multi-method approach designed to gather information from a broad range of governmental, professional, construction industry, and community perspectives. The methodology included research, interviews, observational site visits, document review, surveys, and participation in relevant public forums. This comprehensive approach allowed the OCGJ to evaluate how Housing Mandates are interpreted, implemented, and experienced across Orange County jurisdictions.
Research
The OCGJ conducted extensive background research using publicly available sources, including:
• Governmental and agency websites
• Online news and media sources
• Local and Community news outlets
Interviews
The OCGJ conducted interviews with representatives from the following organizations and groups:
• City leadership from multiple Orange County cities
• Sitting and former city officials
• Orange County Council of Governments (OCCOG)
• Orange County Public Works – Development Services
• Orange County Housing & Community Development
• Local housing program administrators
• American Institute of Certified Planners (AICP) – housing specialists • Private-sector builders and development professionals Observations and Site Visits
OCGJ members conducted guided site visits and observations of housing and mixed-use developments, including:
Multiple retail and housing developments (market rate, affordable and low income) in:
• Huntington Beach
• Midway City
• Anaheim
• Santa Ana
• Westminster
• Irvine
199
California State Housing Mandates
Orange County Grand Jury 2025-2026
• San Juan Capistrano
Public Forums and Events
The Members of the OCGJ attended:
• The 2025 Chapman Economic Forecast
• Newport Beach Community Forum
• Foothills Neighborhood Association Town Hall
Government Meetings
The Members of the OCGJ attended:
• Orange County Board of Supervisors
• Orange County Council of Governments (OCCOG)
• Technical Advisory Committee (TAC), a subcommittee of OCCOG • Monitored City Council meeting within the County
Document Review
• Complaints and correspondence submitted by Orange County residents. • Community Development Records from applicable jurisdictions City Survey
The OCGJ developed and distributed written survey questions to Orange County cities to gather information concerning:
• Housing Element compliance strategies
• Local responses to Housing Mandates
• Community engagement processes
• Infrastructure and resource constraints
INVESTIGATION AND ANALYSIS
State Housing Mandates and Local Implementation
The Housings Mandates, through the laws approved by the California Legislature, have pursued a more centralized and enforceable approach to housing policy (Appendix A), shifting significant authority from local jurisdictions to the State. Since 2017, the California Legislature has enacted more than one hundred housing related bills, designed to establish clearer production expectations, reduce procedural delays, and strengthen enforcement mechanisms for jurisdictions that do not comply with state housing requirements.
200
California State Housing Mandates
California’s housing statutes are not aspirational guidelines; they carry the force of law and impose affirmative legal obligations on local jurisdictions. Cities are therefore required to plan for, accommodate, and in many cases, approve housing development consistent with Housing Mandates, regardless of local political preferences, historic planning practices or public consensus.
According to California State policy guidance, the Housing Mandates are intended to address decades of housing underproduction that state policymakers identify as contributing to rising housing costs, overcrowding, displacement, reduced economic mobility and a lack of affordable housing.
11 From the State’s perspective, reliance on
regional and local discretion has not consistently generated housing at levels necessary to improve affordability, particularly for lower and moderate-income households.12 In response, the California Legislature and HCD have adopted a compliance driven model designed to ensure that every jurisdiction contributes to meeting statewide housing needs.
Orange County cities differ significantly. Th OCGJ’s investigation focused on areas where the state’s rapidly evolving legislative requirements conflicted with local zoning practices, infrastructure constraints, and past practices. It also examined how recent statutory reforms shifted authority away from local jurisdictions toward state oversight and enforcement, reshaping the governance methodology and altering both the practical and legal responsibilities of cities.
Within this context, this report does not question whether cities must comply with state housing law—they must—but rather this report’s objective is to assist Orange County jurisdictions and the public in understanding the framework within which they operate and enhance the possibility of good planning practices and design. During interviews, city officials and builders described to the OCGJ the benefits of citizen engagement, proactive and early coordination on planning, realistic site inventories, and timely engagement with state agencies to avoid punitive actions.
Public communication and civic education is essential. Several Orange County cities reported undertaking efforts to engage residents and explain how the Housing Mandates affect local decision-making authority, including reductions in traditional zoning discretion. Transparent public outreach was identified as an important practice for maintaining community trust and managing expectations in an era of constrained local control.
Through interviews, document review, site observations, and comparative analysis, several key themes emerged and are expanded on below:
11 Statewide Housing Plan
12 California Legislative Analyst's Office - California Housing 201
California State Housing Mandates
Orange County Grand Jury 2025-2026
• Environmental Context and CEQA
• RHNA Process
• RHNA Challenges
• Penalties of Not Having an Approved HCA Housing Element • Penalties for Not meeting Approved Housing Plan
• Feasibility of Housing Mandate in Orange County
• One Size Does Not Fit All
• California and OC Population Trends
• 6th Cycle Housing Allocations in OC
• City Challenges
• 7th Cycle Concerns
Environmental Context and CEQA
In 1970, California enacted the California Environmental Quality Act (CEQA) with broad legislative support. These are the broad body of environment laws that attempt to protect California’s environment13. Its core purpose is to ensure that state and local government agencies identify and publicly disclose the environmental impacts of proposed projects before approving them.14 Importantly, CEQA does not prohibit development; it ensures development is done responsibly, with environmental protections, public notice, and accountability. It has played a key role in shaping California’s environmental standards for over five decades. Yet recent housing laws are chipping away at these hard-won environmental protections and may put our environment at risk.
Over time, the California Legislature has adopted amendments intended to streamline housing projects. Several interviewees asserted that recent statutes—including A130 and SB131—have the effect of narrowing CEQA’s environmental review for qualifying housing projects by expanding ministerial or exempt pathways15. Before CEQA and the Federal Clean Air Act, Southern California experienced severe air pollution, with the region enduring over 200 days each year of unhealthy ozone levels.16 In the 1970s, this led to frequent smog alerts and restrictions on outdoor activity for vulnerable residents17. Longtime residents recall this period as one when smog was so persistent it regularly obscured visibility and affected daily life. Today, air quality in Southern California is dramatically improved, with far fewer unhealthy-air days due to decades of
13 PPIC Statewide Survey: Californians and the Environment - Public Policy Institute of California 14 South Coast Air Quality Management District - CEQA
15 California Lawmakers Approve Major Overhaul of Landmark Environmental Law | KQED 16 How Los Angeles Began to Put its Smoggy Days Behind | History & Society | PBS SoCal 17 Los Angeles Historical Air Quality Analysis: AQI, PM, CO, SO2, NO2, O3 202
California State Housing Mandates
CEQA measures that have collectively transformed the air basin and made local conditions significantly cleaner and healthier than during the smog-filled 1970’s.18
A smoggy aerial view of downtown Los Angeles in January 1975.
Polling in California consistently shows strong public support for environmental protection, though some surveys also indicate support for regulatory changes aimed at increasing housing production and lowering costs.19
Recent laws have made it simpler to construct housing by scaling back environmental controls.20 While this may accelerate development, it also threatens to weaken important environmental protections that California has relied on for decades. And importantly, there is no guarantee that these streamlined projects will provide affordable homes or meaningfully improve the housing crisis.
18 How Los Angeles Began to Put its Smoggy Days Behind | History & Society | PBS SoCal 19 PPIC Statewide Survey: Californians and the Environment - Public Policy Institute of California 20 In California, statewide housing reforms brush against local resistance | Brookings 203
California State Housing Mandates
Orange County Grand Jury 2025-2026
Regional Housing Needs Assessment Process
RHNA is the State mandated process that determines the number of new housing units across various income levels that each city and county must plan for each 8-year cycle.21 It requires local governments to zone adequate land to meet projected regional housing needs.22 RHNA is implemented through the HCD whose mission statement emphasizes safe, affordable homes and sustainable communities.23 The RHNA process begins with HCD’s review of household growth projections to estimate future housing needs by region. The California Department of Finance shares demographic projections with regional planning bodies known as Councils of Governments (COGs). These projections form the basis for RHNA determinations among California regions, and each COG then develops suballocations for counties and cities within its jurisdiction. Each city is required to update a Housing Element as part of its General Plan, describing objectives, programs, and housing sites consistent with RHNA goals. In recent years, the California Legislature has enacted statutes expanding HCD’s authority in reviewing and enforcing RHNA related plans. 24 SCAG is the largest COG in the State which includes Imperial, Los Angeles, Orange, Riverside, San Bernardino, and Ventura Counties. SCAG represents 197 jurisdictions across more than 38,000 square miles. SCAG develops RHNA allocations for its member jurisdictions and also engages at the state level on issues relevant to regional planning, including housing legislation.25
OCCOG, established as a joint power’s agency in 1996, serves as a representative of Orange County to SCAG on RHNA planning (and other issues, i.e., transportation). The organization emphasizes collaboration, transparency, and consistent advocacy to ensure Orange County’s interests are effectively represented in regional planning, areas where the OCGJ has identified deficiencies.
26 OCCOG’s charter describes it as a voluntary advisory association of local governments seeking sub regional and regional planning, coordination, and technical assistance on issues of mutual concern. OCCOG has an Executive Director and minimal staff. A member of the Orange County Board of Supervisors serves on the OCCOG Board and is the SCAG representative for the County of Orange.27
21 California Housing Element Law Explained – Legal Clarity 22 The California State of Real Estate - Realtor.com Economic Research 23 Welcome to HCD! | California Department of Housing and Community Development 24 Enforcement Authority | California Department of Housing and Community Development 25 About us | Southern California Association of Governments 26 Orange County Council of Governments
27 Orange County Council of Governments
204
California State Housing Mandates
SCAG adopted its 6th Cycle housing allocation plan for the period of October 2021 through October 2029. The plan assigns 1,341,827 additional housing units across the SCAG region—which includes most of Southern California—and distributes those units among cities and unincorporated areas, including those in Orange County. 28 Stakeholders reported that the 6th Cycle methodology resulted in a significant housing unit increase compared with the 5th Cycle allocation to SCAG of 411,953 units; representing approximately a 300% increase. The dramatic increase prompted the municipalities to request reviews and appeals of their assigned housing requirements.
In response, HCD cited multiple reasons for the regional increases including unit overcrowding, affordability indicators, the ongoing effects of previously unbuilt housing units during the 2008 recession and the statutory adjustment factors under California Government Code § 65584.01 (statutory formula)29
28 Southern California COG Regional Housing Need Determination 29 Southern California COG Regional Housing Need Determination 205
California State Housing Mandates
Orange County Grand Jury 2025-2026
Summarized are the five objectives that the COGs (i.e. SCAG) must further in their allocation methodology (Gov. Code § 65584(d)):30
• Increasing the housing supply and the mix of housing types, tenure, and affordability in all cities and counties within the region in an equitable manner, resulting in allocations for low and very low-income households, and providing for extremely low and acutely low-income allocations within the range prescribed by statute
• Promoting infill development and socioeconomic equity, protecting environmental and agricultural resources, encouraging efficient development patterns, and achieving greenhouse gas reduction targets pursuant to Government Code section 65080.
• Improving the intraregional relationship between jobs and housing, including balance between low wage jobs and housing affordable to low wage workers. • Allocating a lower proportion of housing need to an income category where a jurisdiction already has a disproportionately high share of households in that category relative to the countywide distribution.
• Affirmatively furthering fair housing.
These objectives are intended to support more economically diverse communities by assigning housing to high resource, job rich areas and by encouraging infill development while protecting environmental resources (CEQA). 31 RHNA assigns
targets to each jurisdiction by income category. For the 6th Cycle, the four income categories are: Very Low (≤ 50% of county median income), Low (50–80%), Moderate (80–120%), and Above Moderate (≥ 120%)32. Through HCD and RHNA, California instructs and enforces compliance with specific housing targets.
Regional Housing Needs Analysis Challenges
The cities’ leadership in Orange County offered multiple critiques of RHNA, including:
(1) allocation methodology at SCAG does not reflect local housing need, (2) concerns of fairness in allocation across jurisdictions, (3) the appeal process to SCAG by local governments were consistently denied, and (4) assigned housing goals do not consistently translate into actual permitting, especially for lower income households.33 HCD has stated that RHNA goals should not be interpreted as a production forecast but
30 California Department of Housing and Community Development | 31 The 5 Statutory Objectives of the RHNA Methodology
32 State Housing Law Program | California Department of Housing and Community Development 33 Best Practices for Allocating & Evaluating RHNA
206
California State Housing Mandates
as a planning objective.34 Even with this planning objective, Orange County jurisdictions reported significant operational and fiscal challenges associated with implementation.
Jurisdictions described resource constraints that affect their ability to implement the Housing Mandates consistent with legislative intent, including staffing limitations, the need for specialized consultant support, and budget constraints. Several cities characterized RHNA determination and compliance as complex and costly. Some cities reported spending hundreds of thousands of dollars (sometimes reaching close to $1,000,000) to meet the reporting mandate. Taxpayer money spent on planning does not directly result in the construction of housing units.
Interviewees also reported that SCAG’s approved methodology is complex and difficult for elected officials to communicate their housing allocation and ultimate Housing Element to their constituents. HCD and SCAG should take steps to improve the RHNA processes, including enhancing communication transparency and simplifying data driven methodologies. Additionally, recognizing the compliance costs to taxpayers cannot be left unaddressed even as the 7th Cycle planning is currently underway.
In October 2021, the California State Joint Legislative Audit Committee approved an emergency audit of HCD’s regional determination process, citing limited public visibility of calculation methods and a need for independent review.35 Further, the audit identified errors in certain data calculations and raised concerns36. The California State Auditor subsequently issued findings that criticized aspects of HCD’s methodology indicating potential inflation of requirements by a substantial number of housing units. 37 Some of the cited errors included the use of very outdated and inaccurate vacancy factor rates38. One report even suggests base information used was from the 1980’s39.
Others reported that HCD relied on population projections that differed from California Department of Finance forecasts, which generally show relatively modest long-term growth, and instead used assumptions that resulted in significantly higher projected housing needs.40 HCD’s response, to the California State Auditor, and on their website, acknowledged there was room for improvement and addressed the allocation criticisms in very general terms but did not mention that the numbers had been or would be corrected.
41 34 New-Pathways-to-Encourage-Housing-Production-Evaluating-Californias-Recent-Housing-Legislation- April-2023-Final.pdf
35 California Auditor Report 2021-125
36 California Auditor Report 2021-125
37 More Homes, Hardly Any Population Growth—So Why Is California Still So Expensive? 38 CA Auditor Bashes State’s Mandated Housing Numbers, Says Process Is Flawed, Lacks Oversight 39 CA Auditor Bashes State’s Mandated Housing Numbers, Says Process Is Flawed, Lacks Oversight 40 Court: 'Regional Housing Need' Determinations Aren’t Judicially Reviewable - Davis Vanguard 41 California State Auditor - Report 2021-125 Recommendation 3 Responses 207
California State Housing Mandates
Orange County Grand Jury 2025-2026
Separately, in June 2021, OCCOG, on behalf of the Orange County cities, filed a judicial challenge to HCD’s regional housing determination, arguing that HCD failed to follow statutory requirements in developing the RHNA allocation.42 The trial court dismissed the petition in November 2021, and the Second District Court of Appeal affirmed that dismissal in July 2023, holding that neither OCCOG nor its member cities could challenge HCD’s methodology.
43 On August 24, 2023, the OCCOG Board authorized
counsel to petition the California Supreme Court for review, but the Court denied the petition on October 11, 2023, effectively ending OCCOG’s legal challenge.44 During the 6th Cycle process, SCAG received 48 appeals from cities challenging their housing allocation within their 45-day appeal period. After SCAGs review, they quickly denied 47 of them.45 This demonstrates limited jurisdictional influence over the allocation and appeal process. This series of rulings confirms that HCD’s statutory authority has been upheld by the courts, and that any changes sought by local jurisdictions may be addressed better through the legislative process rather than litigation.
Penalties for Not Having an HCD-Approved Housing Element A city that fails to obtain certification of its Housing Element from the HCD is considered out of compliance with state Housing Element Law and becomes subject to a range of escalating enforcement actions.
46 HCD’s Housing Accountability Unit (HAU) has
authority to initiate enforcement, including referral to the California Attorney General for legal action when a jurisdiction does not meet statutory planning requirements. 47 When
a city is out of compliance, it can be exposed to severe statutory penalties, such as lawsuits by the Attorney General or outside entities, court-imposed fines ranging from $10,000 to $600,000 per month, and court orders that may mandate project approvals, require rezoning, suspend a city’s authority to issue building permits, or even strip the city council of land-use authority until compliance is achieved. 48 The most concerning and widely known consequence of noncompliance is the Builder’s Remedy, which restricts a city’s ability to deny qualifying housing projects even when they conflict with the city’s General Plan or zoning rules.49 Under this provision, developers may propose larger, denser projects that bypass local zoning controls if at least 20% of the units are affordable to low-income households or if the project is 100%
42 OCCOG Press Release HCD
43 Orange Cnty. Council of Gov'ts. v. Velasquez - vLex United States 44 Orange County Council of Governments
45 Orange County Council of Governments
46 Analysis Finds Davis Not on Track to Meet Housing Requirements without Approval of Two Voter Projects - Davis Vanguard
4747 Analysis Finds Davis Not on Track to Meet Housing Requirements without Approval of Two Voter Projects - Davis Vanguard
48 Housing Open Data Tools | California Department of Housing and Community Development 49 “Builder's Remedy" Reform Bill Approved by Governor Newsom | Allen Matkins 208
California State Housing Mandates
moderate-income.50 Cities without a compliant Housing Element lose their ability to regulate these projects through their typical zoning constraints unless they can demonstrate specific, adverse health or safety impacts.51 Additional consequences include loss of access to key state funding sources and being placed on a shorter four-year Housing Element update cycle rather than the standard eight-year schedule.52 As of this writing, some Orange County cities—such as Huntington Beach and Seal Beach—have not yet obtained certification of their Housing Elements for the 6th Cycle or have been subject to enforcement actions related to noncompliance, while others, such as Costa Mesa, have only achieved compliance after delays and state intervention.53
Penalties for Not Meeting Housing-Plan Construction Goals While RHNA production targets are planning requirements, not actual construction mandates – cities may face meaningful consequences if they fail to implement the programs and rezoning commitments included in their certified Housing Elements.
HCD’s HAU monitors compliance with both Housing Element commitments and state housing laws, and violations may prompt enforcement letters, monitoring actions, or legal referrals to the Attorney General.
54 Courts have shown a willingness to override
local discretion when a city’s failure to implement its Housing Element prevents the jurisdiction from accommodating its assigned RHNA allocation.55 In some cases, courts may mandate rezoning, invalidate local development restrictions, or require approval of specific projects to ensure that adequate housing capacity is created.56 Feasibility of Housing Mandate in Orange County
The feasibility of California’s Housing Mandates in Orange County raises significant practical concerns. HCD, during the 6th Cycle, has allocated 183,161 housing units to Orange County to be constructed by 2029 with 30% being considered ‘affordable’.
However, according to the US Census Bureau, Orange County is only producing an average of 5,000 units a year over the past 5 years.57 Clearly this is a dilemma for the County. While it is relatively easy for the California Legislature to pass ambitious housing laws, the actual construction of these units is far more challenging. The Housing Mandates may be well-intentioned but translating them into real-world development is complex, due to constraints in land availability and costs, infrastructure
50 Builder's Remedy Primer
51 The Builder's Remedy and Housing Elements
52 Housing Elements | California Department of Housing and Community Development 53 Appeals Court Orders Huntington Beach to Comply with State Housing Law - Davis Vanguard 54 Enforcement Process | California Department of Housing and Community Development 55 Appeals Court Orders Huntington Beach to Comply with State Housing Law - Davis Vanguard 56 Appeals Court Orders Huntington Beach to Comply with State Housing Law - Davis Vanguard 57 Index of /programs-surveys/popest/tables
209
California State Housing Mandates
Orange County Grand Jury 2025-2026
capacity, high construction and labor costs, community acceptance, and capital formation.
Capital formation for housing development in Orange County faces significant challenges. The cost of capital remains high, and the long timeline required to entitle, build, and eventually generate revenue increases financial risk for developers.
Interest-rate volatility further complicates financing, affecting both equity investment and construction loan terms. At the same time, affordable housing projects often struggle to qualify for limited government subsidies, leaving many developments financially infeasible. These pressures are intensified in Orange County, which has some of the highest land and construction costs in California, making lower-income housing especially difficult to deliver without substantial public support. 58 59 60 61
Most parts of Orange County are already built out, leaving limited land available for new development. Substantial portions of the remaining undeveloped areas are further constrained by coastal regulations, floodplains, wildfire-prone zones, steep hillsides, protected open space, and other environmentally sensitive lands. These physical and regulatory barriers significantly reduce the amount of land that can realistically be developed. At the same time, the County faces substantial infrastructure limitations— including constraints on water and sewer systems, road capacity and traffic circulation, parking availability, schools, parks and recreation space, transit corridors, and even utilities such as electricity and natural gas. Taken together, these constraints sharply limit how much additional housing can be accommodated, even when zoning or Housing Mandates call for higher densities.
High construction costs remain a major obstacle to new housing production, driven by escalating prices for essential building materials such as lumber, steel, concrete, and electrical components. Persistent labor shortages across skilled trades further compound these costs, as limited labor supply leads to higher wages and project delays. Appliance costs have also risen significantly, especially for energy-efficient or higher-end models now commonly required by building codes or market expectations.
Additionally, the desired level of luxury or finish, such as premium flooring, countertops, fixtures, and community amenities, can substantially increase overall project budgets, making even modest housing developments expensive to deliver.
Reports indicate it cost approximately $500,000 to $800,000 to build a one-bedroom low-income rental unit in Orange County. Low Income units require rental subsidies.
58 Turner Center UC Berkeley Development Math
59 Interest Rates Impact Construction Project Funding
60 CHP State Housing Needs Report
61 The High Cost of Producing Multifamily Housing in California: Evidence and Policy Recommendations | RAND
210
California State Housing Mandates
With declining federal, state, and local funding subsidies, it is difficult to build affordable housing. Developer interest therefore is focused on market rate housing production.
In short, Housing Mandates are legally binding, yet remain extraordinarily difficult for many cities to achieve. While While RHNA serves a key role as a planning tool, requiring cities to zone for additional housing and align local policies with statewide objectives, meeting the full scale of assigned housing targets, especially for lower-income households, is often unrealistic without sustained public funding, expanded infrastructure, and ongoing State support. In practice, the Housing Mandates alone do not produce homes. Achieving HCD/SCAG goals in Orange County ultimately depends on market-responsive policies, and complementary funding strategies. It is not simply higher numerical requirements or punitive measures.
In practice, Housing Mandates alone do not build homes.
One Size Does Not Fit All
California’s statewide Housing Mandates are intended to address a persistent and perceived shortage of housing.62 However, the OCGJ found that the uniform statutory framework governing the RHNA process can function as a blunt instrument when applied across jurisdictions with widely differing conditions. City leadership consistently noted that a one-size-fits-all approach may not fully account for the unique character, environmental, infrastructural, economic, demographic, and geographic circumstances facing individual communities.
Several stakeholders noted that the RHNA process does not adequately differentiate among jurisdictions with varying levels of infrastructure capacity, longstanding physical or environmental constraints, or distinct development patterns. In particular, it fails to account for older, largely built-out cities—such as Garden Grove, Westminster, La Habra, and Fountain Valley, where available land is minimal and new housing can occur primarily through infill development. In these contexts, construction is typically more complex and costly, further challenging feasibility. As a result, some local governments face disproportionate burdens in accommodating housing allocations that do not fully reflect on-the-ground constraints and local conditions.
The OCGJ notes that perspectives on this issue varied considerably. Interviewees from fast-growing or infrastructure-rich areas were more likely to support uniform standards, arguing that consistent requirements prevent jurisdictions from avoiding their fair share of housing obligations. Others expressed the view that Housing Mandates are necessary to overcome decades of underproduction and local resistance to growth.
62 California Department of Housing and Community Development | California Department of Housing and Community Development
211
California State Housing Mandates
Orange County Grand Jury 2025-2026
Ultimately, comments on the adequacy and fairness of California’s uniform approach depended heavily on local context and a jurisdiction’s capacity to absorb additional housing.
Data source: Cities’ responses to the 2526 Grand Jury’s survey California and Orange County Population Trends
Over the past three decades, California has undergone a profound demographic shift.
After more than a century of rapid population expansion (growing from under 20 million in 1970 to nearly 40 million by 2020) the State’s growth has slowed dramatically, and in recent years has turned negative.
63 According to the Public Policy Institute of California, California lost 322,000 residents between July 2020 and July 2022 due largely to emigration, declining births, and reduced immigration.64 And although modest growth resumed between 2022 and 2025, the overall trend remains flat and well below historical norms. As previously noted, this validates the California State Auditor’s criticism of HCD, and its projections based on population.
63 CSUF - Center for Demographic Research
64 California's Population - Public Policy Institute of California 212
California State Housing Mandates
Source Orange County Register 65
Historically, one of California’s fastest-growing regions, Orange County, exhibits similar trajectories – population stagnation and decline. The U.S. Census Bureau has documented recent population decreases, noting that Orange County's long-standing growth pattern began to reverse in the early 2020’s due in part, to an aging population, and reduced international migration and increased outmigration.66 These trends challenge long-held assumptions about continuous growth in Orange County and suggest that future planning should incorporate demographic stabilization rather than expansion.
Despite these emerging realities, population projections used during the 6th Cycle (2021–2029) relied on pre-pandemic models that assumed continued growth.67 HCD’s 6th Cycle regional determination began with population forecasts from the Department of Finance and applied upward adjustments for overcrowding, cost burden, and vacancy— factors that significantly inflated the region’s housing need calculation. However, by 2020–2025, many of these underlying drivers shifted in the opposite direction as
65 Infographic: Are people leaving California? Here’s what the numbers show us – Orange County Register
66 Infographic: Are people leaving California? Here’s what the numbers show us – Orange County Register
67 Presentation: Overview of Regional Growth Forecasting, Modeling Task Force May 25, 2022 Meeting 213
California State Housing Mandates
Orange County Grand Jury 2025-2026
California entered a period of population decline, raising questions about the accuracy of the assumptions embedded in the 6th Cycle projections. SCAG has acknowledged concerns from stakeholders regarding the appropriateness of the population and household growth assumptions used during the 6th Cycle and has initiated discussions with HCD to reform the methodology.68
Looking ahead to the 7th Cycle, California’s demographic outlook is markedly different from the 6th Cycle. The Department of Finance’s newest long-range projections (2024 baseline) show significantly slower statewide and county-level growth through 2070, with some regions, including Orange County, projected to experience prolonged stagnation or decline.69 These updated projections, combined with post-2020 population losses, underscore the necessity for HCD and SCAG to recalibrate their methodologies so that the next RHNA Cycle reflects a more accurate and data-driven assessment of true housing need. Without incorporating the State’s new demographic trajectory, RHNA risks overestimating future household growth and imposing planning obligations disconnected from both California’s and Orange County’s actual population realities.
Data source: Orange County Progress Report 2025
Notes: This chart includes only cities, who responded to the 2526 Grand Jury’s survey. 6th Cycle (2021–2029) Housing Allocations in OC
California’s Housing Element Law requires every city and county to plan for its share of regional housing need. For the 6th Cycle (October 2021–October 2029), SCAG
68 PowerPoint Template for SCAG Presentations
69 Projections | California Department of Finance
214
California State Housing Mandates
assigned the Orange County subregion a total of 183,861 housing units, allocated across four income categories: Very Low, Low, Moderate, and Above Moderate.70 While RHNA establishes the minimum number of units each jurisdiction must plan for, this OCGJ finds that cities seeking to meaningfully expand affordable housing production must adopt local housing targets that exceed their RHNA assignment. This is largely because the cost of constructing deed-restricted affordable units—often approaching $700,000 per unit—is rarely economically feasible without substantial public subsidy, layered financing, and other creative development strategies. As a result, cities increasingly rely on density bonus incentives, allowing developers to build additional market-rate units in exchange for providing affordable units, to help close funding gaps and meet lower-income housing obligations.
The RHNA process begins with the HCD determining the amount of housing needed for each region, including affordability levels, and continues with a regional agency (here, SCAG) dividing that need among counties and cities. SCAG’s final 6th Cycle plan assigns Orange County jurisdictions a combined 183,861 total units for 2021–2029.71 SCAG’s allocation plan further distributes Orange County’s total to each city (and to the County’s unincorporated area). The largest allocations go to major employment and population centers, with substantial totals assigned to, among others:
City Units City Units
Irvine 23,610 Huntington Beach 13,368
Garden Grove 19,168 Costa Mesa 11,760
Anaheim 17,453 OC Unincorporated 10,340
These totals reflect the regional policy judgment—guided by state objectives—that jurisdictions must plan for additional housing capacity across income categories.
In summary, RHNA 6th Cycle allocations establish minimum planning obligations, but they do not, by themselves, overcome the structural feasibility barriers that constrain low-income housing delivery. This higher target is justified by (1) the anticipated attrition between zoning capacity and constructed projects, and (2) the necessity of leveraging private development to be incentivized to build affordable housing in a market where restricted rents cannot reliably support new construction without layered public assistance.
70 Regional Housing Needs Assessment | Southern California Association of Governments 71 Regional Housing Needs Assessment | Southern California Association of Governments 215
California State Housing Mandates
Orange County Grand Jury 2025-2026
City Challenges
California’s increasingly prescriptive Housing Mandates have placed substantial pressure on local governments in Orange County, requiring cities to plan for significantly higher levels of housing capacity. The cumulative effect has been added local government costs, uncertainty in interpreting evolving state requirements, inequities among jurisdictions, and escalating tension between state directives and the longstanding expectation of local control over planning and zoning.
While the State has articulated policy goals and methodology behind its Housing Mandates, the top-down framework often overlooks the essential role of local communities in electing officials to ensure that planning and zoning decisions reflect the values and priorities of the electorate—the very reason most cities incorporated in the first place. This disconnect has contributed to considerable tension, community frustration, and political instability in many Orange County cities, not to mention the constituents’ lack of confidence that their elected officials are representing their interests.
To successfully meet the requirement of the Housing Mandates cities must file a Housing Element with HCD every eight years to meet the aggressive targets being mandated. Many local cities lack the internal expertise and staff time to draft such housing submissions and thus must hire costly external consultants to prepare appropriate legal documents. As previously noted, the costs to cities have been between $100,000 and over $1,000,000 for some of the larger cities. With 34 cities in Orange County and the County also required to provide a housing plan, the administrative costs are in the millions of dollars just to comply. With many local cities having budgetary challenges, this administrative burden is just another unfunded liability. These taxpayer dollars are spent to comply with the law and have no commensurate direct beneficial outcome for the community.
In Orange County, the Housing Mandates have substantially narrowed local land use discretion while increasing administrative, legal, and compliance risks for cities.
Although framed as a planning requirement, the Housing Mandates have expanded residential density and embedded enforceable state oversight into what were traditionally local planning functions. As a result, compliance and enforcement mechanisms have begun to reshape municipal governance and materially influenced developmental patterns across the county. The result of these impacts in Orange County includes but are not limited to the following:
• Reduced local land-use authority
• Administrative and staffing burdens
• Financial expense
• Infrastructure limitations
216
California State Housing Mandates
• Increased legal exposure
• Political and community conflict
• Unfair RHNA housing allocations across the cities
Each city in Orange County has had a variety of challenges based upon differences in geography, fiscal capacity, land availability, funding availability, development interest and conditions, local policy decisions and community responses. The impact of the Housing Mandates has had dramatic impacts and cannot be ignored.
For example:
Anaheim: As the largest (population) city in Orange County, Anaheim has a strong fiscal base, including significant tourist-based revenue, and has already permitted and constructed a large number of housing units especially in light of their massive OC Vibe residential, retail and entertainment district. This is not to say, however, that they do not have their challenges with developers pushing to increase density within Anaheim Hills and the City’s concern of density and building into a designated high-fire risk area. Due to its population of over 300,000, unlike most Orange County cities, Anaheim does have access to state and federal dollars, to assist in meeting the affordable housing requirements.
Costa Mesa: Costa Mesa is one of only three Orange County cities still without a compliant Housing Element. Its continued effort to defend local regulations on sober living homes—rules that HCD does not formally recognize—has already cost the city access to certain state low-income housing funding. The situation worsened when one of the City’s largest developers withdrew all of his properties from Costa Mesa’s Housing Element inventory, slashing projected housing capacity from roughly 17,000 units to the bare minimum of about 11,750 units needed to meet state requirements.72 This leaves the City with virtually no buffer to achieve compliance.
Fountain Valley: Fountain Valley is largely built out, with approximately 90% of its land already utilized. Limited available land and constrained financing capacity present major hurdles in Fountain Valley ever being able to meet the state requirements.
Huntington Beach: Huntington Beach has adopted a totally different strategy to address the Housing Mandates. They have aggressively pursued litigation in an effort as a "charter city" to preserve local land-use authority. This approach has resulted in substantial legal costs and financial exposure for the City for noncompliance. The City’s
72 Planning Commission Bombshell: Housing Element Update Crisis in Costa Mesa 217
California State Housing Mandates
Orange County Grand Jury 2025-2026
legal challenges have all been denied including a final appeal to the US Supreme Court.73 Consequences for non-compliance are pending.
Irvine: Irvine's response to the Housing Mandates differs from other Orange County cities. Being very progressive with available land currently under development, and two major developers active, the master planned community of Irvine has substantial flexibility. They have submitted to the State committing to build 56,000 additional units even though their allocation is approximately 26,000 units, the highest in Orange County. The original vision of Irvine being a residential community with commercial and residential balance runs the risk of being seriously eroded with high density apartments being vigorously constructed. This suggests Irvine might ultimately be more of an urban versus suburban community in the future. Residents are starting to be concerned as to the impact on traffic, parks, and schools. Furthermore, the current City council's recent move to rezone past open space commitments has created voter activism and resistance.
Newport Beach: Newport Beach has faced difficulty implementing the Housing Mandates due the concerns regarding community character, coastal constraints, and local values, contributing to resistance to higher density residential development. While elected officials worked hard at engaging and educating the community on the Housing Mandates, as development projects started to come on-line, major public resistance ensued. A recent ballot initiative was just approved to push back on the City's approved Housing Element.
74 Mission Viejo: In March 2026, hundreds of Mission Viejo residents rallied in opposition to a proposed expansion of the Vista Del Lago apartment complex off Marguerite Parkway. The developer’s plan called for demolishing 68 existing units and replacing them with 418 new units, resulting in a net increase of 350 units, as well as constructing a new parking structure. The expansion would bring the total number of units on the 33-acre property to 958 units, dramatically increasing density in an area surrounded primarily by single-family homes.
After hours of heated public testimony and debate, the City Council voted 3–2 to advance the project. A majority of councilmembers stated they felt they had no choice but to approve the development due to the Housing Mandates, which require cities to zone and plan for significantly higher housing densities regardless of local neighborhood opposition.
75 73 Attorney General Bonta Celebrates U.S. Supreme Court’s Denial of Huntington Beach’s Challenge to State Housing Laws | State of California - Department of Justice - Office of the Attorney General 74 Newport Beach may dump state mandate as residents prep to vote on plan for far fewer housing units | LAist
75 Editorial: Mission Viejo’s needless angst over apartments – Orange County Register 218
California State Housing Mandates
San Juan Capistrano: Due to its historical significance and geographic characteristics, the City has been challenged to meet the Housing Mandates. It is a tale of two communities – residents of great wealth and a large lower socioeconomic population requiring the need for more affordable housing. To date, City leadership appear to have built partnerships with low-income developers to build projects that maintain the community’s heritage and meet the needs of the City. As high-end development takes place, a "fee in lieu" is assessed that generates funds for affordable housing. Superb planning and design have led to across-the-board community support for well designed, low-income redevelopment projects completed or underway.
Santa Ana: Santa Ana is already considered by HCDs’ RHNA process to be a densely populated, lower socioeconomic community, and it has the lowest housing target in Orange County with only 3,137 units. Like Anaheim due to its population size, it has access to more federal and state housing dollars to meet its low-income housing compliance obligations.
The County of Orange: The County also has a RHNA requirement for its unincorporated areas. The County struggled to obtain certification of its Housing Element in 2025; it required multiple revisions due to the nature of small pockets of unincorporated areas it serves. Its largest development area in South Orange County, Rancho Mission Viejo of over 6,000 acres was entitled by the County before the Housing Mandates became law – few were affordable units. In addition, the largest track of undeveloped land is owned by the Federal Government (Cleveland National Forest) and not available for development.
The impacts of the Housing Mandates have disrupted governance and local control. In some communities it has created fierce resistance. The loss of local control impacts the traditions and norms within many Orange County cities. Community heritage, rightly or wrongly, is being seriously eroded.
The one-size-fits-all Housing Mandates has serious repercussions economically and politically only now coming into focus for the voters of Orange County as the implementation goes forward.
Community political activism has increased as housing projects move from approval to construction, but this engagement is often narrowly focused on individual developments rather than broader policy impacts. Cities should take a more proactive role in engaging residents in a comprehensive discussion about how RHNA implementation is affecting neighborhood character, infrastructure, and social cohesion. In addition, local elected officials have a responsibility to clearly communicate how state
-directed housing policies, originating in
Sacramento, shape local land-use decisions and limit municipal discretion. 219
California State Housing Mandates
Orange County Grand Jury 2025-2026
7th Cycle (2029-2037) Concerns
The 7th Cycle of the RHNA planning process has already started, addressing the period from 2029-2037. The OCGJ identified significant concerns related to transparency, data integrity, governance, and Orange County’s ability to competitively represent itself within the broader SCAG region. These concerns stem from documented issues in the 6th Cycle, particularly the lack of clarity of the allocation methodology, the complexity of the decision-making structure, and inadequate procedural safeguards to ensure that Orange County’s unique conditions are fully acknowledged.
The 6th Cycle methodology relied on numerous questionable inputs—including projected population, transit accessibility, job growth, vacancy adjustments, cost burden, and subjective social equity factors—derived from HCD and SCAG’s adopted methodology.76 These inputs were published but remained difficult for local jurisdictions to interpret due to their subjectivity, complexity and technical nature and the failure of HCD to clearly identify their methodology.77
Given these findings, Orange County cities face a recurring risk, because the statewide RHNA determination feeds directly into SCAG allocations, any methodological deficiencies at the state level immediately cascade into subregional planning and ultimately influence the allocations assigned to Orange County jurisdictions.
Experiences from the 6
th Cycle highlight several issues that continue to shape Orange County’s concerns heading into the 7th Cycle. The previous allocation process was marked by complexity, questionable data, late-stage modifications, and an overall lack of transparency. For example, SCAG’s 6th Cycle allocation was adopted in March 2021 and then modified only a few months later78, fueling confusion about how final numbers were determined. The process felt unfair to many local jurisdictions because the appeals window was extremely compressed, the methodology was difficult to replicate, and the relationship between data inputs—such as overcrowding, cost burden, or future transit accessibility—and final allocations was not easily understood. The appeals process was also futile and was not open to cities concerns.
Governance also played a role. SCAG and OCCOG rely on a large network of committees, working groups, and advisory bodies, which ensures broad participation but diffuses responsibility. With so many entities involved, accountability for data accuracy, timely inputs, and interpretation of the methodology becomes fragmented, making it difficult for any single entity to ensure the process is both rigorous and transparent.
76 SCAG Final RHNA Methodology, March 5, 2020
77 Best Practices for Allocating & Evaluating RHNA
78 Regional Housing Needs Assessment | Southern California Association of Governments 220
California State Housing Mandates
The upcoming 7th Cycle is expected to be even more data-intensive.79 New state guidance calls for clearer and more prescriptive methodology factors, improved appeals procedures, new income categories, and stronger alignment with greenhouse-gas and transportation planning.80 Transit definitions are also being standardized statewide, meaning all Orange County Transportation Authority (OCTA) transit routes, frequencies, and hub locations must be fully validated and published early in the process. Without early coordination, the County risks being disadvantaged compared with regions that already have well-organized transit datasets.
Transparency remains a central concern. Orange County jurisdictions need access to all datasets used to calculate their allocations, ranging from growth projections to transit accessibility metrics, and must be able to replicate the calculations that lead to their assigned numbers. The California State Auditor has previously flagged gaps in how HCD documented its factors, reinforcing the need for a system that jurisdictions can audit and verify.
CONCLUSION
“We shape our buildings; thereafter they shape us.” (Winston Churchill) Housing Mandates and the RHNA allocation process are highly consequential for Orange County jurisdictions, particularly because the construction of low-income housing is rarely feasible without substantial subsidy. Interviewees consistently reported that funding streams to support deed-restricted housing remain limited, leaving cities responsible for planning large numbers of units that may never be financially viable without additional state or federal assistance. This gap between planning obligations and realistic development capacity has heightened local concern about the fairness and practicality of the current RHNA framework not to mention wasted tax dollars.
Against this backdrop, a recurring theme in interviews was the need for stronger regional coordination. Per the Joint Powers Agreement, OCCOG members pay dues to support operations, based on a 2009 adopted formula tied partly to each city’s share of the county population. However, dues have not been adjusted in many years, leading several stakeholders to question whether current funding levels adequately support OCCOG’s ability to coordinate subregional planning, respond to SCAG, and represent Orange County interests on matters as significant as RHNA. SCAG likewise uses population factors in its own dues structure, meaning jurisdictions with growing populations carry greater financial responsibility. Stakeholders noted that the overall
79 California’s Housing Future 2040: The Next Regional Housing Needs Allocation | California Department of Housing and Community Development
80 California’s Housing Future 2040: The Next Regional Housing Needs Allocation | California Department of Housing and Community Development
221
California State Housing Mandates
Orange County Grand Jury 2025-2026
resource base may still be insufficient for the level of technical engagement required.
Many jurisdictions expressed that increased support for OCCOG, both financial and participatory, would improve transparency around RHNA inputs and allow for more robust review of the assumptions that drive housing allocations.
The OCGJ believes that OCCOG is an underutilized regional asset that could play a significantly larger role in promoting equity, transparency, and public understanding of the RHNA process. Interviewees emphasized that consistent, proactive participation by city and county representatives in OCCOG and SCAG meetings is critical, especially early in the methodology-setting phase, when data inputs, assumptions, and distribution formulas are still in development. Without regular engagement, jurisdictions risk losing opportunities to influence decisions that later become binding obligations. Several interviewees suggested that cities consider enhancing their financial contributions so OCCOG can expand its analytical capacity, conduct independent research, and engage more effectively in SCAG’s technical and policy committees and at the state level.
As work begins on the 7
th Cycle, the need for collaboration is more urgent than ever.
Cities cannot afford to be passive observers. Even if cities cannot directly change the final numbers issued by HCD or SCAG, their active involvement is essential to ensuring that Orange County’s unique circumstances are understood and represented.
Meaningful engagement can also help jurisdictions align their local planning strategies, clarify shared concerns, and coordinate responses to proposed methodological changes before they become final. A more empowered and better-resourced OCCOG would strengthen Orange County’s collective voice, improve regional planning outcomes, and ensure local governments are not navigating the California’s housing requirements in isolation.
Finally, the OCGJ notes that collaboration must extend beyond government agencies to the residents they serve. As Sacramento lawmakers continue to enact significant housing legislation, much of it with direct consequences for zoning, density, local control and neighborhood character development standards, the public must be informed and involved. Cities, working through OCCOG and SCAG, have an important role in educating residents about new laws, explaining their local impacts, and encouraging constituents to register their views with State Representatives. Improving public awareness not only strengthens transparency and trust but also ensures that community perspectives are included in shaping future housing policy.
By working together, jurisdictions, regional agencies, and the public, Orange County can more effectively navigate the challenges of Housing Mandates and advocate for a clearer, more equitable, and more locally responsive RHNA process.
222
California State Housing Mandates
FINDINGS
In accordance with California Penal Code §933 and §933.05, the 2025-2026 Orange County Grand Jury requires (or, as noted, requests) responses from each agency and city affected by the “Findings” presented in this section. Responses are to be submitted to the Presiding Judge of the Superior Court.
Based on its investigation “California Housing Mandates” the 2025-2026 Orange County Grand Jury has arrived at 22 findings as follows:
F1 In recent years, the California Legislature has enacted an unusually large and burdensome volume of housing-related laws intended to strengthen compliance with State Housing Mandates.
F2 Housing Mandates are implemented through a RHNA process that often lacks transparency and relies on complex methodologies that are difficult for local officials and the public to understand or meaningfully challenge.
F3 OCCOG coordinates RHNA regional planning in partnership with the SCAG for Orange County. OCCOG lacks adequate influence with SCAG.
F4 Meaningful participation by Orange County cities in both OCCOG and SCAG meetings is critical to ensuring that local perspectives are represented during the development and implementation of Housing Mandates policies.
F5 SCAG’s 6
th Cycle RHNA assigned Orange County a questionable total of 183,861 housing units for the 2021–2029 planning period, with higher allocations concentrated in cities with major population and employment centers.
F6 RHNA allocations are unrealistic and not attainable within the current planning cycle due to limited available land, built-out urban conditions, infrastructure constraints, environmental factors, and public health and safety requirements.
F7 Residents in Orange County consistently express a desire for local planning decisions to reflect community priorities, including but not limited to neighborhood character, safety considerations, the environment and open-space preservation.
F8 California’s regulatory construction costs (i.e. permitting fees) present substantial challenges for private housing developers—particularly those delivering affordable units.
223
California State Housing Mandates
Orange County Grand Jury 2025-2026
F9 The cost of constructing a single affordable housing unit in California typically ranges from approximately $500,000 to $800,000 per unit when fully complying with current state regulations. New low-income housing is generally not financially feasible without public subsidy.
F10 Prior to their dissolution in 2012, redevelopment agencies served as a primary mechanism for cities and counties to finance affordable housing and related infrastructure. The loss of redevelopment has reduced cities’ ability to support construction of affordable units.
F11 Because public subsidy is limited and highly competitive, cities seeking to produce meaningful quantities of low-income housing must rely in part on private development incentives, often resulting in higher overall development densities and unit counts than the RHNA allocation.
F12 The 6th Cycle RHNA methodology included numerous technical inputs published by SCAG and HCD; however, these inputs were highly complex and difficult for cities to interpret or independently verify.
F13 The California State Auditor’s 2022 review found significant deficiencies in HCD’s regional determination process—including inadequate documentation, data-entry errors, and insufficient justification for key assumptions—raising concerns that similar issues may affect the 7 th Cycle
process.
F14 OCCOG’s current resources and organizational structure are insufficient to fully advocate for Orange County jurisdictions during RHNA methodology development, especially when compared with larger or more heavily resourced regional councils of governments that also influence SCAG.
F15 Demands on HCD are anticipated to materially alter methodology for the 7th Cycle, but Orange County jurisdictions have not yet received clear guidance on how these allocations will be translated into SCAG policy or local impacts.
F16 The reliance on transit accessibility as a major RHNA consideration requires high-quality, early-released datasets from OCTA; however, these datasets are not currently consolidated or formally adopted for use in the 7th Cycle methodology.
F17 The large number of committees, subcommittees, and advisory groups involved in SCAG and OCCOG’s RHNA processes promotes broad participation but diffuses accountability, making it difficult to determine who is responsible for specific analytic inputs or process decisions. 224
California State Housing Mandates
F18 The City of Huntington Beach has been unsuccessful in its attempts to contest Housing Mandates. To date, Huntington Beach lacks an approved General Plan Housing Element related to RHNA Allocation.
F19 The City of Irvine has been progressive in submitting a housing plan that calls for twice the number of units mandated (56,000). However, this threatens the historical nature of a master plan community with substantial infrastructure challenges.
F20 Cities and other stakeholders encounter difficulty explaining RHNA outcomes to elected officials and the public due to a lack of clear, consolidated documentation describing how allocation decisions are derived from the underlying data.
F21 The absence of a clearly articulated and easily understandable description of the RHNA allocation algorithm contributes to perceptions that discretionary or political considerations may influence outcomes, even when allocations are made in compliance with state housing laws.
F22 Improved transparency and communication regarding RHNA methodology would enhance public confidence in the process and reduce misunderstandings among member jurisdictions.
RECOMMENDATIONS
In accordance with California Penal Code §933 and §933.05, the 2025-2026 Orange County Grand Jury requires (or, as noted, requests) responses from each agency and city affected by the “Recommendations” presented in this section. Responses are to be submitted to the Presiding Judge of the Superior Court.
Based on its investigation described herein, the 2025-2026 Orange County Grand Jury makes the following 20 recommendations:
R1 OCCOG should expand its technical-assistance and training programs, by September 30, 2026, to ensure that all Orange County jurisdictions understand RHNA methodology, statutory obligations, and the implications of noncompliance. (F1, F2, F3, F4)
R2 OCCOG should coordinate a countywide review of sites identified in local Housing Elements, by December 31, 2026, to evaluate whether each site meets state requirements for realistic capacity and development feasibility, supported by a standardized, version-controlled change log. (F3, F4) 225
California State Housing Mandates
Orange County Grand Jury 2025-2026
R3 OCCOG should develop and publish a comprehensive RHNA Inputs Catalog, by April 30, 2027, prior to drafting the 7th Cycle methodology, documenting all datasets used, their sources, methodological assumptions, and a version-controlled record of changes. (F3, F4) R4 OCCOG should create a public-facing RHNA Accountability Dashboard, by April 30, 2027, displaying deadlines, responsible agencies, dataset readiness, and upcoming SCAG decision points, to ensure transparency and timely action by jurisdictions. (F16)
R5 OCCOG should request that SCAG and HCD, by December 31, 2026, provide written guidance explaining how HCD’s recommendations will be applied in shaping the 7th Cycle RHNA methodology so that jurisdictions can prepare proactively. (F16)
R6 OCCOG should convene a 7th Cycle Technical Working Group, by December 31, 2026, composed of planners, data analysts, and transit experts to pre-evaluate methodology scenarios and deliver unified, countywide recommendations to SCAG. (F3, F6, F15)
R7 OCCOG, all Orange County cities and the County of Orange should reassess the current dues structure, by September 30, 2026, to ensure that OCCOG has the resources necessary to effectively represent Orange County jurisdictions in SCAG processes, including RHNA methodology development and appeals. (F3, F15)
R8 By December 31, 2026, the Orange County Board of Supervisors should partner with cities to evaluate countywide infrastructure capacity— including water, wastewater, flood control, transportation, and public-safety systems—and develop a coordinated regional plan capable of supporting the level of housing growth required under state law. (F6) R9 By September 30, 2026, the Orange County Board of Supervisors should strengthen its engagement with OCCOG and increase staff support to develop a shared, countywide database of potential housing sites and key development-feasibility factors. (F15)
R10 By June 30, 2027, the Orange County Board of Supervisors should evaluate whether the County should pursue its own independent Metropolitan Planning Organization (MPO) designation for purposes of regional housing planning. (F5, F6, F7, F15)
226
California State Housing Mandates
R11 The County of Orange and each city should ensure consistent participation in SCAG and OCCOG committees by September 30, 2026, including the Technical Advisory Committee (TAC), to strengthen regional representation during RHNA-methodology development. (F3, F4, F15) R12 The County of Orange and each city should designate a single technical representative, by September 30, 2026, along with an alternate, for all RHNA-related SCAG and OCCOG committees to ensure continuity of participation and eliminate gaps in representation across multiple decision-making bodies. (F4)
R13 OCTA should provide an official, data-frozen countywide transit dataset (GTFS + GIS), by September 30, 2026, to meet OCCOG’s analytical needs for 7th Cycle RHNA planning. (F17)
R14 By April 30, 2027, the County of Orange and each city should publish annual monitoring dashboards showing (a) entitlement pipeline conditions, (b) realistic site yield, (c) assembled funding sources for affordable units, and (d) conversion rates from planned capacity to issued permits and completed units, ensuring that County and city-determined capacity assumptions remain aligned with actual production. (F13) R15 By September 30, 2026, and ongoing, the County Board of Supervisors and all city councils should make a coordinated and sustained effort to educate their constituents about the RHNA process—its requirements, its impact on local planning and community character, and the role residents can play in shaping outcomes. Public education efforts should also include guidance on how community members can effectively engage with the California Legislature and advocate for more realistic, data-driven housing policies. (F1, F7)
R16 By December 31, 2026, all cities should look to enhance their relationships with not-for-profit affordable housing developers to increase the opportunity to develop more affordable housing. (F8, F10, F12) R17 By September 1, 2026, the City of Huntington Beach should evaluate submitting an appropriate Housing Element to reduce potential exposure to HCD penalties. (F18)
R18 By September 1, 2026, the City of Irvine should ascertain the level of community support for its housing element submission and its impact on the character of its master plan. (F19)
227
California State Housing Mandates
Orange County Grand Jury 2025-2026
R19 By September 1, 2026, SCAG should conduct a formal review of its RHNA allocation methodology and clearly document, in understandable language, the inputs, assumptions, weighting, and decision points used in the allocation algorithm. This documentation should be publicly released and designed to improve transparency, reduce perceptions of political influence, and enhance public understanding of how allocations are determined. (F21)
R20 By September 1, 2026, SCAG should revise its RHNA appeals process to improve procedural transparency and responsiveness by clearly defining appeal criteria, documenting staff analyses and recommendations, providing written explanations for appeal decisions, and ensuring jurisdictions have meaningful opportunities to present and respond to staff findings. (F22)
228
California State Housing Mandates
RESPONSES CODE
The following excerpts from California Penal Code provide the requirements for public agencies to respond to the Findings and Recommendations of this Grand Jury’s report:
Penal Code §933
(c) No later than 90 days after the grand jury submits a final report on the operations of any public agency subject to its reviewing authority, the governing body of the public agency shall comment to the presiding judge of the superior court on the findings and recommendations pertaining to matters under the control of the governing body, and every elected county officer or agency head for which the grand jury has responsibility pursuant to Section 914.1 shall comment within 60 days to the presiding judge of the superior court, with an information copy sent to the board of supervisors, on the findings and recommendations pertaining to matters under the control of that county officer or agency head and any agency or agencies which that officer or agency head supervises or controls. In any city and county, the mayor shall also comment on the findings and recommendations. All these comments and reports shall forthwith be submitted to the presiding judge of the superior court who impaneled the grand jury. A copy of all responses to grand jury reports shall be placed on file with the clerk of the public agency and the office of the county clerk, or the mayor when applicable, and shall remain on file in those offices. One copy shall be placed on file with the applicable grand jury final report by, and in the control of the currently impaneled grand jury, where it shall be maintained for a minimum of five years.
Penal Code §933.05.
(a) For purposes of subdivision (b) of Section 933, as to each grand jury finding, the responding person or entity shall indicate one of the following:
(1) The respondent agrees with the finding.
(2) The respondent disagrees wholly or partially with the finding; in which case the response shall specify the portion of the finding that is disputed and shall include an explanation of the reasons therefor.
(b) For purposes of subdivision (b) of Section 933, as to each grand jury recommendation, the responding person or entity shall report one of the following actions:
(1) The recommendation has been implemented, with a summary regarding the implemented action.
(2) The recommendation has not yet been implemented, but will be implemented in the future, with a timeframe for implementation.
(3) The recommendation requires further analysis, with an explanation and the scope and parameters of an analysis or study, and a timeframe for the matter to be prepared for discussion by the officer or head of the agency or department being investigated or reviewed, including the governing body of 229
California State Housing Mandates
Orange County Grand Jury 2025-2026
the public agency when applicable. This timeframe shall not exceed six months from the date of publication of the grand jury report. (4) The recommendation will not be implemented because it is not warranted or is not reasonable, with an explanation therefor.
(c) However, if a finding or recommendation of the grand jury addresses budgetary or personnel matters of a county agency or department headed by an elected officer, both the agency or department head and the board of supervisors shall respond if requested by the grand jury, but the response of the board of supervisors shall address only those budgetary or personnel matters over which it has some decision- making authority. The response of the elected agency or department head shall address all aspects of the findings or recommendations affecting his or her agency or department.
RESPONSES
The Orange County Grand Jury requires (or, as noted, requests) the following responses:
OCCOG 90 Day Response Required
Findings F3, F4, F5, F12, F13, F14, F15, F17
Recommendations R1, R2, R3, R4, R5, R6, R7, R9, R11, R13
County of Orange, 90 Day Response Required
Board of Supervisors
Findings F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations R7, R8, R9, R10, R11, R12, R14, R15, R16
OCTA 90 Day Response Required
Findings F16
Recommendations R13
SCAG 90 Day Response Required
Findings F3, F4, F5, F12, F13, F14, F15, F17, F20, F21, F22 Recommendations R5, R11, R19, R20
City of Aliso Viejo 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Anaheim 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Brea 90 Day Response Required
230
California State Housing Mandates
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Buena Park 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Costa Mesa 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Cypress 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Dana Point 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Fountain Valley 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Fullerton 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Garden Grove 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Huntington Beach 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12, F18 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16, R17
City of Irvine 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12, F19 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16, R18
City of La Habra 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of La Palma 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
231
California State Housing Mandates
Orange County Grand Jury 2025-2026
City of Laguna Beach 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Laguna Hills 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Laguna Niguel 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Laguna Woods 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Lake Forest 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Los Alamitos 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Mission Viejo 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Newport Beach 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Orange 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Placentia 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Rancho Santa Margarita 90 Day Response Required Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
232
California State Housing Mandates
City of San Clemente 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of San Juan Capistrano 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Santa Ana 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Seal Beach 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Stanton 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Tustin 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Villa Park 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Westminster 90 Day Response Requested
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
City of Yorba Linda 90 Day Response Required
Findings: F1, F2, F4, F5, F6, F7, F8, F9, F10, F11, F12 Recommendations: R7, R8, R9, R11, R12, R14, R15, R16
233
California State Housing Mandates
Orange County Grand Jury 2025-2026
GLOSSARY AND ACRONYMS
ADU Accessory Dwelling Unit (ADU) is a secondary, independent housing unit located on the same lot as a primary residence. ADUs are sometimes called granny flats, in-law units, casitas, or backyard homes.
Builder’s
Remedy
Builder’s Remedy is a provision in California’s Housing Accountability Act (HAA) that limits a city or county’s ability to deny certain housing projects when the jurisdiction does not have a State-compliant Housing Element.
Charter City Charter City is a city governed by its own locally adopted charter rather than solely by California general law. Under the California Constitution, charter cities have greater authority over municipal affairs, including land use and zoning. However, this authority may be limited when the State determines that a matter, such as housing, is of statewide concern and subject to state law.
COG Council of Governments (COG) is a regional planning body made up of elected officials from cities and counties within a defined geographic area.
Deed-Restricted Deed-Restricted refers to a property that is subject to legally recorded limitations or conditions placed on its use, occupancy, or resale. In the housing context, deed restrictions are commonly used to ensure long-term affordability by limiting resale prices, rental rates, or eligible occupants based on income thresholds for a specified period, often several decades or longer.
Deed-in-Lieu Deed-in-Lieu (of foreclosure) is a voluntary transaction in which a property owner transfers ownership of a property to a lender to satisfy a mortgage debt and avoid foreclosure. While commonly used in the private lending context, the term may appear in discussions of property disposition, distressed assets, or redevelopment-related transactions.
Density Bonus
Incentives
Density Bonus Incentives are benefitting that California law (primarily Government Code § 65915) provides to housing developers in exchange for including affordable housing units within a residential or mixed-use project. These incentives make it easier and financially feasible to build affordable housing by allowing developers flexibility beyond local zoning limits.
Equity
Component
Equity Component is the requirement that housing need to be allocated in a way that promotes socioeconomic equity, reduces 234
California State Housing Mandates
segregation, and balances disproportionate household income distributions across jurisdictions.
Fee-in-Lieu Fee-in-Lieu refers to a payment made as an alternative to fulfilling a low income housing requirements.
Federal Clean
Air Act
Federal Clean Air Act (CAA) is the primary U.S. federal law that regulates air pollution to protect public health and the environment. It authorizes the federal government, principally the U.S. Environmental Protection Agency (EPA), to set and enforce standards that limit harmful air pollutants from industrial facilities, power plants, and motor vehicles.
GIS Geographic Information System (GIS) is a type of software and data system used to map, analyze, and visualize geographic information.
Examples: ArcGIS, QGIS which integrates layers of spatial information such as: Parcels, Zoning maps, Transit lines (often imported from GTFS), Flood zones, Environmental constraints, Income and demographic data, RHNA site inventories.
Grand Jury Grand Jury (GJ) is a legal body empowered to conduct official proceedings to investigate potential criminal conduct and determine whether criminal charges should be brought.
Green State Green State generally refers to a government or jurisdiction, often a U.S. state, that prioritizes environmental protection, sustainability policies, and climate-focused governance. The term is descriptive, not legal.
GTFS General Transit Feed Specification (GTFS) is a standardized, machine-readable data format used to describe public transit systems, including Bus routes, Rail lines, Station and stop locations, Service schedules.
General Plan In California, a city General Plan is a comprehensive, long-term policy document that serves as the legal and policy foundation for all local land-use and development decisions within a city. Adopted by the city council pursuant to California Government Code § 65300 et seq., the General Plan expresses the community’s vision for physical development and conservation over time and guides zoning, public investment, and regulatory actions.
HAU Housing Accountability Unit (HAU) is a specialized enforcement and oversight unit within the California Department of Housing and Community Development created to ensure local governments comply with state housing and homelessness laws and to hold 235
California State Housing Mandates
Orange County Grand Jury 2025-2026
jurisdictions accountable for meeting their Husing Element commitments.
HCD Housing and Community Development (HCD) is California state agency responsible for housing policy, building standards, and the administration of affordable housing and community development programs. It operates under the California Business, Consumer Services and Housing Agency (BCSH).
Housing
Element Law
(65580-65589.11)
Housing Element Law is California’s foundational land-use law requiring every city and county to plan for the housing needs of all economic segments of the community. It is part of each jurisdiction’s General Plan and must be regularly updated on a state-mandated cycle.
Joint Powers
Authority
A Joint Powers Authority (JPA) is a legal structure used in California (and some other states) that allows two or more public agencies to jointly exercise their powers through a separate, shared entity.
Layered
Financing
Layered Financing (sometimes called capital stacking) is a funding approach in which a project—most commonly a real estate or affordable housing development—is financed through multiple sources of capital, each with different requirements, risk levels, repayment terms, and priorities.
Ministerial
approval
Ministerial approvals are a type of land-use or development approval in which a government agency must issue the permit automatically once an application meets all the objective, pre-established standards. Because the approval is non-discretionary, officials do not exercise judgment or interpretation, hold public hearings, or evaluate subjective criteria such as neighborhood character or compatibility.
MPO Metropolitan Planning Organization (MPO) is a regional transportation-planning agency required by federal law in every urbanized area with 50,000 or more people.
OCGJ Orange County Grand Jury (OCGJ) refers 2025-2026 Orange County Grand Jury.
OCTA Orange County Transportation Authority (OCTA) is the county transportation planning commission, responsible for funding and implementing transit and capital projects for a balanced and sustainable transportation system.
RHNA Regional Housing Needs Allocations (RHNA) works with the California Department of Housing & Community Development (HCD) to allocate each jurisdiction’s share of required housing across income levels. 236
California State Housing Mandates
RTP Regional Transportation Plans (RTP) are utilized to coordinate regional transportation, land-use planning, and climate-related planning (e.g., reducing vehicle miles traveled). Data, forecasts, and long-range planning. They provide demographic forecasts, economic analyses, and collaborative regional policies.
State Housing
Mandates
State Housing Mandates (Housing Mandates) are legal requirements specifically the Housing Element Law in California, obligating local governments (cities/counites) to adopt plans facilitating the construction of housing across all income levels. These mandates require compliance with Regional Housing Needs Allocation (RNHA) targets forcing localities to zone for rather than necessarily build.
SCS In California, a Sustainable Communities Strategy (SCS) is a regional land-use, housing, and transportation planning framework prepared by a Metropolitan Planning Organization as part of its Regional Transportation Plan. Required by Senate Bill 375 (2008), the SCS is designed to integrate transportation investments, housing patterns, and land-use policies in a way that reduces greenhouse gas emissions from passenger vehicles while supporting economic development and public health.
Vacancy Factor
Rates
Vacancy Factor Rates refer to the percentage of housing units within a defined geographic area that are assumed to be vacant at any given time. In state housing planning, vacancy rates are used as an analytical adjustment to account for normal turnover in the housing market and to ensure availability for new households. Assumed vacancy rates directly affect housing need calculations and can influence required housing production targets.
5th Cycle,
6th Cycle,
7th Cycle
The 5th, 6th, and 7th Cycles refer to sequential eight-year planning periods of the Regional Housing Needs Allocation (RHNA) process mandated by California housing law.
• The 5th Cycle generally covered the period from 2013 to 2021 (with timing varying by region).
• The 6th Cycle generally covers the period from 2021 to 2029 and includes significantly higher housing allocations statewide. • The 7th Cycle will be the next allocation period following the 6th Cycle and is expected to further shape long-term housing planning requirements for cities and counties.
Each cycle establishes projected housing needs that jurisdictions must plan for through their Housing Elements.
237
California State Housing Mandates
Orange County Grand Jury 2025-2026
BIBLIOGRAPHY
ABAG. “The “Builder’s Remedy” and Housing Elements”. Association of Bay Area Governments – Technical Assistance for Local Planning Housing, accessed on May 14, 2026. The Builder's Remedy and Housing Elements
Alameldin, Muhammad. “California Housing Laws That Go into Effect in 2025”. Terner Center for Housing Innovation – UC Berkeley, October 29, 2024. California Housing Laws That Go into Effect in 2025 - Terner Center
Biesiada, Noah. “CA Auditor Bashes State’s Mandated Housing Numbers, Says Process Is Flawed, Lacks Oversight”. Voice of OC, April 25, 2022. CA Auditor Bashes State’s Mandated Housing Numbers, Says Process Is Flawed, Lacks Oversight Biesiada, Noah. “Huntington Beach Reignites Fight Against State Housing Law”. Voice of OC, January 11, 2024. Huntington Beach Reignites Fight Against State Housing Law Biesiada, Noah. “How Are Orange County’s Cities Doing At Building Affordable Housing?”. Voice of OC, April 2, 2024. How Are Orange County’s Cities Doing At Building Affordable Housing?
Biesiada, Noah. “Irvine Grapples With Nearly 60,000 New Housing Unites in General Plan Proposal”. Voice of OC, May 21, 2024. Irvine Grapples With Nearly 60,000 New Housing Units in General Plan Proposal
Biesiada, Noah. “Federal Appeals Court Slaps Down Huntington Beach’s Anti Housing Lawsuit”. Voice of OC, October 30, 2024. Federal Appeals Court Slaps Down Huntington Beach’s Anti Housing Lawsuit
Bonta, Rob. “Attorney General Bonta Celebrates U.S. Supreme Court’s Denial of Huntington Beach’s Challenge to State Housing Laws”. State of California – Department of Justice, February 23, 2026. Attorney General Bonta Celebrates U.S. Supreme Court’s Denial of Huntington Beach’s Challenge to State Housing Laws | State of California - Department of Justice - Office of the Attorney General Business issues and Legislative Guide. “Leading the Way to a More Prosperous California”. Advocacy, accessed on May 14, 2026. California Housing in 2025 - Advocacy - California Chamber of Commerce
CA DOF. “Population Projections (Baseline 2024)”. State of California Department of Finance, accessed on May 14, 2026. Projections | California Department of Finance CALCOG. “What Regions Do”. California Association of Councils of Governments, 2026. Home - California Association of Councils of Governments 238
California State Housing Mandates
CALCOG. “Housing Implementation Programs Exchange”. California Association of Councils of Governments, accessed in January 2026. Housing Exchange - California Association of Councils of Governments
California Department of Housing and Community Development. “Home Page”.
California HCD, 2026. California Department of Housing and Community Development | California Department of Housing and Community Development California Department of Housing and Community Development. “State Housing Law Program”. California HCD, 2026. State Housing Law Program | California Department of Housing and Community Development
California Department of Housing and Community Development. “California Reaches Settlement with City of Fullerton over Violations of Housing Element Law”. California HCD, January 18, 2024. California Reaches Settlement with City of Fullerton over Violations of Housing Element Law | California Department of Housing and Community Development
California Government Code §65584.01(b). California Government Code section 65584.01 (2025)
California State Senate. “Recent Legislative Actions to Increase Housing production in California”. Shou Senate California Government, February 2025. California State Senate Recent Legislative Actions
Case-Law. “Orange Cnty. Council of Gov’ts. v. Velasquez”. vlex, accessed on May 14, 2026. Orange Cnty. Council of Gov'ts. v. Velasquez - vLex United States CDHC. “A Home for Every Californian”, Statewide Housing Plan, accessed on May 14, 2026. Statewide Housing Plan
CDHCD. “California’s Housing Future 2040: The Next Regional Housing Needs Allocation”. California Department of Housing and Community Development, accessed on May 14, 2026. California’s Housing Future 2040: The Next Regional Housing Needs Allocation | California Department of Housing and Community Development CDHCD. “Enforcement Authority”. California Department of Housing and Community Development, accessed on May 14, 2026. Enforcement Authority | California Department of Housing and Community Development
CDHCD. “Housing Open Data Tools”. California Department of Housing and Community Development, accessed on May 14, 2026. Housing Open Data Tools | California Department of Housing and Community Development
Center for Demographic Research. “Orange County Progress Report”. Cal State Fullerton, April 9, 2026. products | CSUF - Center for Demographic Research 239
California State Housing Mandates
Orange County Grand Jury 2025-2026
Chase, Caroline Guibert. ““Builder’s Remedy” Reform Bill Approved by Governor Newsom”. Allen Matkins, September 19, 2024. “Builder's Remedy" Reform Bill Approved by Governor Newsom | Allen Matkins
Chief Financial Officer. “FY 2024-2025 Adopted Budget with NCC Summary”. County of Orange, 2024-2025. FY 2024-25 Final Budget Summary
Christopher, Ben. “Gavin Newsom signs law overhauling local zoning to build more housing”. Cal Matters, October 10, 2025. New California law overrules local zoning to boost housing - CalMatters
Christopher, Ben. (2025, September 28). Why the housing shortage is so hard to quantify. Los Angeles Times (Sunday). PressReader.com | Why the housing shortage is so hard to quantify
Conte, Allaire. “California Added More Homes Than People – but Buyers and Renters Still Aren’t Getting Relief”. realtor.com, April 17, 2026. More Homes, Hardly Any Population Growth—So Why Is California Still So Expensive? Elmendorf, Christopher S. “A Primer on California’s “Builder Remedy” for Housing- Element Noncompliance”. UCDavid School of Law, March 29, 2022. Builder's Remedy Primer
Espinoza, Pablo “Court Agrees Anaheim Violated State Law. Decision is a Big Win for Fair Housing in California”. California Department of Housing and Community Development, February 2, 2024. Court Agrees Anaheim Violated State Law. Decision is a Big Win for Fair Housing in California | California Department of Housing and Community Development
Farzan, Yusra. “Irvine considers waiving affordable housing requirements for developer in land swap deal”. LAist, December 8, 2025. Irvine considers waiving affordable housing requirements for developer in land swap deal | LAist Farzan, Yusra. “Major OC developer can skip affordable housing requirements after Irvine land swap approval”. LAist, December 11, 2025. Major OC developer can skip affordable housing requirements after Irvine land swap approval | LAist FRBSF, “California Post-RDA Affordable Housing Developer Survey: Analysis of Results”. Federal Reserve Bank of San Francisco, accessed on May 14, 2026.
California Post-RDA Affordable Housing Developer Survey: Analysis of Results - San Francisco Fed
Fulton, Bill. “New Pathways to Encourage Housing Production: A Review of California’s Recent Housing Legislation”. Terner Center for Housing Innovation – UC Berkeley, April 240
California State Housing Mandates
2023. New-Pathways-to-Encourage-Housing-Production-Evaluating-Californias- Recent-Housing-Legislation-April-2023-Final.pdf
Fulton, William. “Steps Local Governments Can Take to Unlock More Housing: Lessons from San Diego”. Terner Center for Housing Innovation – UC Berkeley, October 8, 2025. Steps Local Governments Can Take to Unlock More Housing: Lessons from San Diego - Terner Center
Garcia, David. “Making It Pencil: The Math Behind Housing Development (2023 Update)”. Terne Center for Housing Innovation – UC Berkeley, December 2023. Turner Center UC Berkeley Development Math
Goertzen, Jeff and Lansner, Jonathan. (2026, April 4) Infographic: Are people leaving California? Here’s what the numbers show us. The Orange County Register, online.
Infographic: Are people leaving California? Here’s what the numbers show us – Orange County Register
Greenwald, David. “Court: ‘Regional Housing Need’ Determinations Aren’t Judicially Reviewable”. Vanguard News Group, July 28, 2023. Court: 'Regional Housing Need' Determinations Aren’t Judicially Reviewable - Davis Vanguard Hale, Danielle and others. “The California State of Real State”. realtor.com, January 29, 2026. The California State of Real Estate - Realtor.com Economic Research Hicks, Angelina. “San Juan Capistrano With Mandated Housing Numbers”. Voice of OC, August 26, 2025. San Juan Capistrano Grapples With Mandated Housing Numbers Johnson, Hans and Mejia, Marisol Cuellar and McGhee, Eric. “California’s Population”.
PPIC, January 2026. California's Population - Public Policy Institute of California Johnson, Nikie and Collins, Jeff. (2021, January 31). Report Card: California cities, counties failing again on affordable housing goals. The Orange County Register, online.
Report card: California cities, counties failing again on affordable housing goals – Orange County Register
Julia Gill and Schuetz, Jenny. “In California, statewide housing reforms brush against local resistance”. Brookings, June 28, 2023. In California, statewide housing reforms brush against local resistance | Brookings
LegalClarity California. “California Housing Element Law Explained”. Search LegalClarity, December 14, 2025. California Housing Element Law Explained – Legal Clarity
LegiScan LLC. “California Legislature | 2025-2026 | Regular Session”. LigiScan – Bringing People to the Process, 2025-2026. California Legislature | 2025-2026 | Regular Session | LegiScan
241
California State Housing Mandates
Orange County Grand Jury 2025-2026
Mazzella, Danielle M. “California Affordable Housing Needs Report 2025”. California Housing Partnership, 2025. CHP State Housing Needs Report McDonald, Cynthia. “Planning Commission Meeting Bombshell!”. Costa Mesa First, February 13. Planning Commission Bombshell: Housing Element Update Crisis in Costa Mesa
Metcalf, Ben. “Testimony to the Select Committee on Housing Construction Innovation”.
Terner Center for Housing Innovation – UC Berkeley, January 6, 2026. Testimony to the Select Committee on Housing Construction Innovation - Terner Center Newsom, Garvin. “Final Regional Housing Need Assessment”. State of California – Department of Housing and Community Development, October 15, 2019. Southern California COG Regional Housing Need Determination
OCCOC. “Press Release June 1, 2021”. Orange County Council of Governments, June 1, 2021. OCCOG Press Release HCD
OCCOG. “We lead Orange County’s subregional planning”. Orange County Council of Governments, accessed in January 2026. Orange County Council of Governments Orange County Community. “Orange County Community Indicators - 25th Anniversary Report”. Orange County Business Council, 2024-2025. 1-150.
CommnityIndicators24_digital.pdf
Osterberg, Annelise. “Best Practices for Allocating and Evaluating RHNA”. Goldman School of UC, Spring 2020. Best Practices for Allocating & Evaluating RHNA Press Release. “California State Auditor Releases Scathing Report on RNA Process, Report Finds Housing Goals are Not Supported by Evidence”. Voice of OC, April 8, 2022. California State Auditor Releases Scathing Report on RHNA Process, Report Finds Housing Goals are Not Supported by Evidence
SCAG. “About Us”. Southern California Association of Governments, accessed on January 14, 2026. About us | Southern California Association of Governments SCAG. “Regional Housing Needs Assessment”. Southern California Association of Governments, accessed in January 2026. Regional Housing Needs Assessment | Southern California Association of Governments
South Coast AQMD. “Frequently Asked CEQA Questions”. South Coast Air Quality Management District, accessed on May 14, 2026. South Coast Air Quality Management District - CEQA
Tilden, Michael S. “Regional Housing Needs Assessments”. Auditor of the State of California, March 17, 2022. Report 2021-125
242
California State Housing Mandates
The Editorial Board (2026, March 11). Editorial: Mission Viejo’s needless angst over apartments. The Orange County Register, online. Editorial: Mission Viejo’s needless angst over apartments – Orange County Register
Trachtman, Samuel. “Fixing California’s housing shortage requires new policy and new politics”. BESI – Berkeley Economy & Society Initiative, April 22, 2025. Fixing California’s housing shortage requires new policy and new politics - Berkeley Economy & Society Initiative
Uhler, Brian. “LAO Housing Publications”. Legislative Analyst’s Office – The California Legislature’s Nonpartisan Fiscal and Policy Advisor, accessed on May 14, 2026.
California Legislative Analyst's Office - California Housing United States Census Bureau. “Parent Directory”. United States Government, accessed in April 2026. Index of /programs-surveys/popest/tables Varian, Ethan. (2023, June 25). Nuclear option’? Supersized housing projects are planned for Bay Area’s wealthiest cities. Is one coming to your neighborhood? The Mercury News, online. Is a supersized housing project coming to your Bay Area neighborhood?
Ward, Jason M. and Schlake, Luke. “The High Cost of Producing Multifamily Housing in California”. Rand, April 2, 2025. The High Cost of Producing Multifamily Housing in California: Evidence and Policy Recommendations | RAND
2024 Advocates Guide. “Land Use Restrictions and Affordable Housing”. National Low Income Housing Coalition, accessed on May 14, 2026. National Low Income Housing Coalition - Land Use Restrictions and Affordable Housing
243
California State Housing Mandates
Orange County Grand Jury 2025-2026
APPENDIX
APPENDIX A: Major Housing Laws & What They Tried to Do81 Surplus Land Act (1968; strengthened by AB 1486 in 2019) Problem addressed: Local agencies often disposed of valuable public land without prioritizing affordable housing.
Solution: The Surplus Land Act requires local agencies to offer surplus sites to affordable housing developers first; AB 1486 (2019) expanded who must comply, added reporting, and created enforceable penalties. HCD now issues binding guidelines and may impose fines.
Role: A siting tool that converts public land near jobs/transit into affordable housing at scale (HCD reports thousands of units proposed/approved under SLA).
Housing Element Law & RHNA (1969; RHNA made mandatory by 1980 AB 2853; repeatedly strengthened)
Problem addressed: Cities historically under-planned for growth or zoned exclusionary, constraining supply across income levels.
Solution: Every city/county must adopt an 8-year Housing Element showing adequate, zoned sites to meet its RHNA allocation by income tier; HCD issues regional need determinations and certifies elements. Enforcement has tightened (HCD’s Housing Accountability Unit; fines; referrals to the AG).
Role: The spine of California housing policy—other laws (HAA, SB 35, SB 330, AFFH) enforce or operationalize these plans.
Density Bonus Law (1979; expanded often, incl. AB 1287 in 2023) Problem addressed: Mixed-income projects often do not pencil without zoning flexibility.
Solution: Grants extra units, incentives/waivers, and reduced parking in exchange for deed- restricted affordable homes; AB 1287 (2023) added a “stackable” bonus on top of the 50% base, enabling up to ~100% bonus with additional very-low/moderate units.
Role: A ubiquitous feasibility lever to deliver affordability in market-rate projects.
Housing Accountability Act (HAA) (1982; strengthened 2017–2019) Problem addressed: Cities used subjective discretion (e.g., “neighborhood character”) to deny otherwise compliant housing.
Solution: Limits denial, density reduction, or infeasible conditions for projects meeting objective standards, unless the city makes specific, evidence-based health/safety findings. 2017–2019 updates raised the burden of proof, added fees/attorney’s fees, and clarified “objective standards.” Role: A litigation-backed guardrail ensuring code-compliant housing moves forward—the State’s classic “anti-NIMBY” tool.
Redevelopment Agencies (RDAs): Termination and Loss of Local Affordable Housing Funds (2011–2012)
Problem addressed (pre-2012): RDAs used tax-increment financing with a 20% housing set-aside to fund affordable housing; the State later sought budget relief.
Solution: The Legislature passed ABx1 26 (2011); the California Supreme Court affirmed dissolution
81 Housing Statutes were summarized Microsoft Co-Pilot May 2025 version 244
California State Housing Mandates
effective Feb 1, 2012, shifting property-tax increment, and creating successor agencies to wind down obligations.
Role: Ended a major local funding stream, increasing reliance on density bonus, public land, tax credits, and state programs.
SB 375 (2008) & SB 743 (2013; statewide VMT implementation 2020) Problem addressed: Sprawl drove VMT and GHGs; CEQA’s Level of Service (LOS) metric discouraged infill.
Solution: SB 375 requires Sustainable Communities Strategies (SCS) aligning land use and transportation to cut GHGs; SB 743 replaced LOS with VMT in CEQA, favoring infill and multimodal access, with statewide implementation by 2020.
Role: Climate + housing siting framework; housing near jobs/transit faces fewer CEQA hurdles than sprawl.
ADUs (2016–2025 waves): Legalizing “Gentle Density”
Problem addressed: Single-family-only rules and local barriers (parking, minimums) impeded backyard cottages/garage conversions near jobs.
Solution: Successive bills created 60-day ministerial approval, broad parking relief, and standardized rules; HCD’s 2025 ADU Handbook consolidates guidance and updates.
Role: A distributed, lower-cost production engine—large, scalable homeowner-led supply statewide.
HCD Law §16884.01 (2017): Establishes Housing Element Compliance Consequences and State Enforcement Authority
Problem addressed: For decades, many cities and counties failed to adopt or maintain HCD-compliant Housing Elements, resulting in chronic under-production of housing, exclusionary zoning practices, and resistance to RHNA obligations. Prior housing law lacked clear, enforceable consequences for noncompliance, allowing jurisdictions to delay, obstruct, or ignore housing planning requirements with minimal risk. This undermined statewide housing policy, fair housing objectives, and public accountability.
Solution: HCD Law §16884.01 clarifies and operationalizes the legal consequences of H ousing Element non-compliance, explicitly linking failure to adopt or implement a compliant H ousing Element to loss of local land-use discretion and enhanced state oversight. The law affirms HCD’s authority to make formal findings of noncompliance and triggers statutory remedies under related housing laws, including limits on down-zoning, exposure to the Housing Accountability Act, and eligibility for “builder’s remedy” projects when required conditions are met. It strengthens the enforceability of Housing Element Law by making compliance legally consequential rather than aspirational.
Role: A state enforcement backbone for California’s housing planning system, §16884.01 functions as a compliance-triggering provision that gives real effect to RHNA and Housing Element Law. It shifts housing policy from a negotiation-based model to a rule-of-law framework, ensuring that local governments that refuse to plan for housing face predictable, uniform consequences while compliant jurisdictions retain local control. The statute is central to California’s modern “Yes In My Backyard” enforcement regime.
SB 35 (2017): Streamlined Ministerial Approval
Problem addressed: Lengthy discretionary review and CEQA litigation stalled production, especially where jurisdictions lagged RHNA.
Solution: Creates a ministerial (CEQA-exempt) pathway in cities not meeting RHNA progress for qualifying infill projects that meet objective standards, affordability, and labor provisions; HCD issued binding guidelines.
245
California State Housing Mandates
Orange County Grand Jury 2025-2026
Role: A fast lane that translates zoning into approvals within 90–180 days; HCD publishes which jurisdictions are subject.
AB 686 (2018): Affirmatively Furthering Fair Housing (AFFH) Problem addressed: Persistent segregation and unequal access to opportunity despite fair-housing statutes.
Solution: Requires all public agencies to affirmatively further fair housing and adds new Housing Element duties (analysis of segregation, access to opportunity, displacement risk, equitable siting).
Role: Embeds civil-rights obligations into RHNA/Housing Elements, pushing lower-income housing into high-opportunity areas.
SB 330 (2019; extended by SB 8 to 2030): Housing Crisis Act Problem addressed: Moving goalposts (new subjective standards), downzoning, unlimited hearings, and loss of protected units increased entitlement risk.
Solution: Freezes new subjective design rules, caps hearings, creates preliminary application vesting, and requires replacement/relocation when protected units are impacted.
Role: Stabilizes entitlements, preserves capacity, and protects renters.
SB 9 (2021): Duplexes & Urban Lot Splits
Problem addressed: Large single-family parcels constrained capacity; owners lacked simple legal paths to add units.
Solution: Requires ministerial approval of up to two units on most single-family lots and allows urban lot splits (with guardrails). Implementation and litigation have been mixed, but SB 9 continues to operate statewide.
Role: Incremental densification in high-opportunity areas (uptake has been modest vs. ADUs).
SB 10 (2021): Local Rezoning for “Missing Middle” Housing Problem addressed: CEQA-exposed rezonings and voter-approved limits made modest upzoning slow and risky.
Solution: Voluntary tool letting cities zone up to 10 units/parcel on transit-rich or urban infill sites with the rezoning action itself exempt from CEQA; may override local initiative restrictions with a 2/3 council vote.
Role: A local-option upzoning mechanism; note it does not streamline the project approvals that follow.
AB 2011 (2022): Affordable Housing and High Road Jobs Act Problem addressed: Vast commercially-zoned land sat underused while housing faced discretionary review and CEQA.
Solution: Creates ministerial, CEQA-exempt approvals for qualifying multifamily on commercial corridors via two paths: 100% affordable or mixed-income meeting corridor, site, and labor standards. Effective July 1, 2023.
Role: A production-focused pathway converting retail/office/parking sites into housing statewide.
SB 6 (2022): Middle Class Housing Act (Companion to AB 2011) Problem addressed: Housing often not allowed on commercial parcels absent a rezoning.
Solution: Allows residential use in many commercial zones (by right as a permitted use) with labor standards; not ministerial/CEQA-exempt on its own (but can combine with other tools). Effective July 1, 2023.
Role: Opens more sites to housing when AB 2011 is not available.
246
California State Housing Mandates
AB 2097 (2022): Eliminating Parking Minimums Near Transit Problem addressed: Mandatory parking minimums near transit raised costs and reduced housing feasibility.
Solution: Prohibits minimum parking requirements for most projects within ½ mile of a major transit stop (with narrow exceptions); HCD issued a 2025 Technical Advisory for implementation.
Role: Lowers costs and removes a common barrier to infill housing.
SB 423 (2023): Extends & Expands SB 35 Through 2036
Problem addressed: SB 35’s 2026 sunset and exclusions (e.g., much of the Coastal Zone) limited reach; many cities still failed RHNA or lacked certified elements.
Solution: Extends SB 35 to 2036, applies streamlining to more jurisdictions and sites (incl. parts of the Coastal Zone), ties eligibility to Housing-Element compliance, and updates affordability/labor standards; allows DGS to administer on State-owned land.
Role: A statewide production accelerator, making the SB 35 fast lane broader and longer-lived.
SB 131 + AB 130 (2025): CEQA & Housing Streamlining (Budget Trailer Bills) Problem addressed: Infill housing still faced CEQA delays, litigation risk, and inconsistent timelines.
Solution: Establishes new CEQA exemptions for qualifying infill housing (e.g., up to 20 acres, or 5 acres for builder’s-remedy sites), streamlined review, and—via the broader package—a temporary freeze on code updates to improve predictability. Effective June 30, 2025.
Role: A modernized CEQA framework that complements HAA/SB 330/SB 35 to speed compliant housing.
Builder’s Remedy under HAA (codified/updated 2024–2025) Problem addressed: Some cities delayed or adopted non-compliant Housing Elements to preserve restrictive zoning.
Solution: AB 1893 (2024) and AB 1886 (2024) formalize and clarify the Builder’s Remedy: where a jurisdiction lacks a certified element, qualifying projects with required affordability may proceed (with new standards and protections effective Jan 1, 2025).
Role: A blunt enforcement backstop—if a city does not plan properly, it loses discretion to reject compliant affordable projects.
SB 79 (2025): Overrides Local Zoning to Enable Higher-Density Housing Near Transit Problem addressed: Local zoning caps on height and density near transit stops prevented production of transit-oriented housing even in regions with extensive rail and bus networks.
Solution: Preempts local zoning within ½ mile of qualifying transit stops to legalize multi -story multifamily housing, allowing substantially greater height and density. Creates a statewide TOD framework that can be combined with SB 35, SB 330, the Housing Accountability Act, and the State Density Bonus Law to streamline approvals at lower affordability thresholds.
Role: A land-use preemption tool establishing “as-of-right” higher density near transit so state streamlining laws (e.g., SB 35) can actually deliver buildable transit-oriented projects. It operationalizes California’s TOD objectives and supports pro-housing production goals.
AB 507 (2025): Establishes Adaptive Reuse as Use-by-Right With Streamlined Approval Problem addressed: High commercial vacancy rates and slow, discretionary local approval processes made it difficult to convert underutilized office/retail buildings into housing—despite acute statewide housing shortages.
247
California State Housing Mandates
Orange County Grand Jury 2025-2026
Solution: Declares adaptive reuse a use-by-right in all zones except non-residential industrial areas and provides ministerial, streamlined approval for eligible projects in existing buildings (generally <50 years old or meeting historic-preservation requirements). Requires income-restricted units (e.g., 8% very low + 5% extremely low, or 15% lower-income for rentals) and allows mixed-use conversions if ≥50% of floor area is residential. Waives parking for portions of buildings without existing on-site parking.
Role: A conversion-focused production tool enabling rapid, CEQA-bypassed adaptive reuse of commercial buildings into housing. Pairs with local incentive programs (e.g., tax-increment-funded Adaptive Reuse Investment Funds starting FY 26-27) to subsidize affordability and unlock large-scale urban reuse.
AB 648 (2025): Exempts Community College Housing from Local Zoning Problem addressed: Community college districts (CCDs) face severe barriers building student, faculty, and staff housing because local zoning ordinances—unlike UC/CSU—block or delay projects, worsening housing insecurity for the 2M+ community college students, over half of whom experience housing instability.
Solution: Exempts CCD-built student, faculty/staff, and university housing projects on CCD-owned or leased property from local city/county zoning regulations. Requires certain projects with faculty/staff units to include extremely low- and lower-income affordable units. Declares the exemption a matter of statewide concern applying to all cities, including charter cities.
Role: A state-level preemption tool enabling rapid production of student and workforce housing on community college land, eliminating local zoning barriers and aligning CCD authority with UC/CSU to address student homelessness and workforce affordability.
AB 1021 (2025): Expands and Streamlines Workforce Housing on School District Property Problem addressed: High housing costs prevent school districts from recruiting and retaining teachers and staff; thousands of acres of school-owned land remain underutilized due to zoning barriers, procedural hurdles, and limits on allowable uses.
Solution: Revises and expands the law deeming workforce housing an allowable use on any property owned by a local educational agency (LEA). Requires qualifying projects (≥10 units) to prioritize renting to school employees and the public under a set hierarchy, with a majority of units deed-restricted for lower- or moderate-income households. Applies Housing Accountability Act protections, enables density bonuses, and extends the program to 2036.
Role: A major workforce-housing production tool that cuts red tape, activates school district land for affordable educator housing, and strengthens school staffing stability—particularly in high-need communities where housing costs drive turnover.
AB 253 (2025): Creates a Private Pathway to Speed Up Residential Permit Plan -Checking Problem addressed: Local building departments often take more than 30 days to complete residential plan checks, creating permitting backlogs that slow housing production, increase project costs, and leave small-scale infill projects stalled.
Solution: Establishes the California Residential Private Permitting Review Act, requiring cities/counties to publish residential permit fee schedules and provide applicants with estimated plan -check timelines. If the estimated timeframe exceeds 30 business days (or if no determination is provided within 30 days), applicants may hire a licensed private professional (“private professional provider”) to perform the plan check. Applies to 1–10 unit projects ≤40 ft tall and allows private reviewers to certify compliance via affidavit.
248
California State Housing Mandates
Role: A post-entitlement acceleration tool that cuts through municipal bottlenecks by letting homeowners and builders use certified private reviewers, moving small-scale housing through permitting faster while maintaining local agency oversight.
AB 1308 (2025): Imposes an Inspection “Shot Clock” and Allows Private Inspectors Problem addressed: Unpredictable and months-long delays in final inspections—framing, electrical, plumbing, final occupancy sign-off—prevent newly built or renovated homes from being occupied, increasing holding costs and slowing the delivery of small-scale housing.
Solution: Requires local building departments to conduct inspections for 1–10-unit projects (≤40 ft) within 10 business days after receiving notice of completion. If the estimated inspection window exceeds 30 days—or no inspection occurs within 30 days—applicants may hire a licensed private professional inspector to complete the inspection and submit an affidavit attesting to code compliance. Also requires cities/counties to post residential permit fee schedules.
Role: A post-entitlement enforcement and delivery tool that ensures housing is not delayed at the final inspection stage. Speeds up occupancy, adds accountability to local inspection offices, and allows builders to default to vetted third-party inspectors when jurisdictions are too slow.
AB 712 (2025): Strengthens Enforcement of State Housing Laws Against Noncompliant Cities Problem addressed: Local agencies routinely delay, obstruct, or illegally deny housing projects despite state housing reform laws; enforcement is weak, costly for applicants, and slow, enabling jurisdictions to continue violating State Mandates without consequence.
Solution: Creates a robust enforcement framework requiring courts to award attorney’s fees and costs to prevailing housing applicants and to impose mandatory fines on violating local agencies. Extends statutes of limitation by 60 days when applicants issue a notice of intent to sue, and bars agencies from requiring applicants to indemnify them for litigation arising from the agency’s own violations. Defines “housing reform law” broadly to cover laws protecting housing applicants or limiting local discretion.
Role: A statewide compliance tool that finally gives housing applicants meaningful remedies—and gives local governments financial and legal consequences for ignoring state housing law, thereby enabling real enforcement of the State’s pro-housing framework.
SB 808 (2025): Fast-Tracks Judicial Review of Housing Permit Denials Problem addressed: Cities continue denying compliant housing projects, forcing applicants into a slow judicial review process where litigation delays—often lasting years—kill projects, escalate costs, or allow permits to expire.
Solution: Establishes an expedited writ-of-mandate process for housing permit denials. Requires:
• Local agencies to compile and certify the administrative record within 15 days. • Courts to set hearings within 45 days and issue decisions within 30 days of submission (or 75 days from filing, whichever comes first).
• Priority scheduling for appeals.
Allows the applicant, Attorney General, or HCD to file the petition; authorizes temporary judicial assignments to meet deadlines.
Role: A litigation-acceleration tool that prevents local agencies from using procedural delay to kill housing projects, ensuring that California housing laws have immediate, enforceable consequences.
Complements AB 712 by enforcing housing rights on the judicial side.
249
California State Housing Mandates
Orange County Grand Jury 2025-2026
SB 786 (2025): Clarifies Housing Element Law and Strengthens Court Remedies Against Noncompliant Cities
Problem addressed: Conflicts between General Plan elements, vague housing-element rules, and slow litigation processes create uncertainty for cities, courts, and developers—leading to delays, stalled rezoning, and litigation bottlenecks that block housing production.
Solution: Establishes clear hierarchy rules: when General Plan elements conflict—including quantified development standards—the most recently adopted, HCD-certified Housing Element controls. Tightens judicial timelines in Housing-Element challenges:
• Limits continuances to 60 days,
• Requires temporary relief whenever continuances occur, • Requires HCD to conduct substantial-compliance reviews when local jurisdictions miss required Housing-Element deadlines,
• Extends rezoning compliance timelines to 120 days and mandates sanctions if jurisdictions fail to comply.
Applies general-plan challenge rules to charter cities.
Role: A statewide governance-and-compliance tool ensuring that Housing Elements actually function as the controlling document, reducing litigation gamesmanship, and compelling jurisdictions to implement rezoning and Housing-Element obligations on enforceable timelines. Complements AB 712 and SB 808 as part of the Attorney General’s statewide enforcement strategy.
SB 340 (2025): Expands Emergency Shelter Requirements in Housing Elements Problem addressed: Emergency shelter planning requirements were outdated and limited, failing to reflect modern shelter models (e.g., navigation centers, recuperative care) and the full range of onsite supportive services needed for effective homelessness response.
Solution: Updates the definition of “emergency shelter” to require housing with supportive services (not minimal services) and requires Housing Elements to account for all onsite services consistent with written, objective standards. Imposes new obligations on cities/counties in shelter planning and broadens the Emergency Housing and Assistance Program definition.
Role: A homelessness-response modernization tool ensuring jurisdictions plan realistically for service- rich shelter models within their Housing Elements and zoning designations.
AB 610 (2025): Requires Disclosure of New Local Governmental Constraints in Housing Elements Problem addressed: Cities and counties were adopting new land-use constraints (fees, ordinances, zoning rules) during Housing-Element cycles without disclosure, undermining RHNA compliance and increasing barriers to housing production.
Solution: Requires a governmental constraints disclosure statement in each H ousing Element (7th Cycle onward), identifying all new or amended constraints adopted since the last Housing Element. Prohibits adoption of new constraints unless they were disclosed and the jurisdiction has completed all required programs to remove past constraints (except when mandated by state/federal law). Applies to charter cities.
Role: A transparency and anti-backsliding tool ensuring local governments cannot quietly increase barriers to housing once RHNA obligations are set.
AB 670 (2025): Allows Converted Affordable Units to Count Toward RHNA Reporting Problem addressed: Cities lacked credit in their Annual Progress Reports (APRs) for preserving or converting multifamily buildings into long-term deed-restricted affordable housing, despite this being a major preservation strategy.
250
California State Housing Mandates
Solution: Expands APR reporting starting in 2027 to allow units converted to affordable housing—with 55-year covenants for low, very low, extremely low, or acutely low income households—to count toward a jurisdiction’s RHNA-creditable progress, if they meet specified criteria. Includes detailed new reporting requirements for demolitions, replacement units, and affordable conversions.
Role: A preservation-credit tool aligning RHNA reporting with long-term affordable housing conversion strategies, encouraging cities to preserve expiring-affordability stock.
AB 726 (2025): Allows Cities to Count Substantial Rehabilitation of Affordable Units in APRs Problem addressed: Deeply affordable older units (often 15+ years old) need major rehabilitation but cities receive zero RHNA/APR credit for investing in repairs—causing cities to prioritize new construction instead of preserving aging stock.
Solution: Allows jurisdictions to include substantially rehabilitated deed-restricted affordable units (≥15 years old, ≤45% AMI average affordability, ≥$60k local investment per unit) in APRs. These units cannot be counted toward eligibility for streamlining under SB 35. Updates references to the Office of Land Use and Climate Innovation.
Role: A preservation-incentive tool enabling cities to earn APR credit for rehabilitating deeply affordable units, helping maintain long-term housing quality and prevent affordable-stock losses.
AB 1275 (2025): Extends RHNA Timelines and Aligns Housing Needs with Transportation Plans Problem addressed: Regional Housing Needs Determinations (RHND) were rushed due to tight timelines (2-year lead time), leading to disputes, insufficient data review, and disconnects between transportation planning and housing allocations.
Solution: Extends RHND timeline from 2 to 3 years before a Housing-Element update (with special rules for 2027–2029 cycles), requires earlier consultation between HCD and councils of governments (COGs), and mandates that RHNA methodology be informed by Sustainable Communities Strategy (SCS) patterns in regional transportation plans. Strengthens integration of job-housing balance, mobility patterns, and fair housing objectives.
Role: A regional-planning alignment tool ensuring RHNA allocations better reflect transportation, climate, and job-housing realities, improving the planning accuracy of future housing cycles.
SB 233 (2025): Requires Earlier State–Regional Consultation for RHNA Determinations Problem addressed: During prior RHNA cycles, HCD provided regional housing need numbers too late (26-month timeline), leaving councils of governments (COGs) and cities with insufficient time to plan, contributing to widespread late Housing-Element adoption.
Solution: Requires HCD to meet and consult with each COG at least 38 months before a Housing-Element revision (one year earlier than prior law), with special rules for the 7 th Cycle. Ensures
earlier agreement on RHNA assumptions, methodologies, and data inputs.
Role: A regional-planning coordination tool that expands the planning window for local governments, reducing delays, improving RHNA accuracy, and increasing likelihood of timely Housing-Element compliance.
AB 920 (2025): Requires Centralized Online Portals for Housing Permit Applications Problem addressed: Local permitting processes were opaque, slow, and inconsistent across cities; applicants could not easily track housing development permits, resulting in delays, confusion, and high administrative burdens.
Solution: Requires cities/counties with populations ≥150,000 to create a centralized online application portal for housing development projects, allowing electronic submissions and real -time status tracking. 251
California State Housing Mandates
Orange County Grand Jury 2025-2026
Jurisdictions may delay implementation until 2030 only if they begin procurement by 2028. Applies to charter cities.
Role: A statewide digital-permit modernization tool that increases transparency, reduces processing delays, and standardizes how applicants navigate housing approvals.
SB 358 (2025): Reduces Traffic Impact Fees for Transit-Oriented Housing Problem addressed: Traffic impact fees—often 20% of project cost—were applied using outdated auto-trip assumptions, inflating costs for infill and transit-oriented housing that generates fewer vehicle trips.
Solution: Reforms the Mitigation Fee Act to:
• Require at least 50% fee reductions for qualifying transit-oriented housing, • Update eligibility criteria (parking maximums, proximity to ≥3 amenities, transit-priority locations), • Require fee-denial findings to be supported by substantial evidence, • Remove outdated convenience-retail requirements and proportional-fee provisions.
Role: A cost-reduction and TOD-incentive tool that aligns traffic fees with actual impacts, supporting infill and climate-oriented housing production.
AB 752 (2025): Makes Child Daycare Centers in Multifamily Housing a Use-by-Right Problem addressed: Cities treated daycare centers co-located with multifamily housing as commercial uses—triggering zoning barriers, business license fees, CEQA review, and inconsistent local requirements, reducing childcare capacity near where families live.
Solution: Makes daycare centers co-located with multifamily housing or community amenities a residential use by right; prohibits business license fees; exempts such centers from CEQA; bars stricter standards on them than those applied to the co-located housing or amenity. Maintains all California licensing and safety requirements.
Role: A childcare-access and land-use integration tool that reduces barriers to collocated daycare centers, supporting housing-adjacent amenities and family-serving communities.
SB 415 (2025): Refines Statewide Warehouse & Logistics Development Standards (Not a housing production bill but affects land-use and zoning environments related to freight-adjacent communities.)
Problem addressed: AB 98 (2024) established statewide warehouse standards but included ambiguous definitions and inconsistent requirements, creating confusion for local governments, developers, and environmental-justice communities in logistics-heavy regions.
Solution: SB 415 clarifies key definitions (“logistics use development,” “sensitive receptor”), narrows exemptions, updates siting and truck-route standards, refines buffer requirements, and ensures 21st-century warehouses meet applicable sustainable-design standards at permit issuance. Also clarifies where warehouse concentration regions apply.
Role: A land-use-governance and environmental-mitigation tool improving clarity and enforceability of statewide logistics-facility regulations—reducing conflicts between freight operations, housing, and community health.
AB 98 (2024–2025): Establishes Statewide Design, Siting & Environmental Standards for Logistics Facilities
Problem addressed: Warehouse and logistics developments—especially in the Inland Empire—were producing severe air-quality, noise, traffic, and public-health impacts on nearby residential areas, schools, and other sensitive receptors, while local regulations were inconsistent or ineffective. 252
California State Housing Mandates
Solution: Creates California’s first statewide design, siting, and operational standards for logistics facilities, including:
• Mandatory buffers (500–900 feet) from sensitive receptors, • Truck-route and loading-bay orientation requirements, • Anti-idling measures and cold-storage plug-ins,
• Title 24–level building efficiency standards (solar, EV-readiness), • 2:1 replacement requirement for recently occupied affordable units demolished, • Applicability to large new facilities and expansions ≥20% of floor area.
Compliance required for applications submitted after Sept. 30, 2024, with most standards fully effective Jan. 1, 2026.
Role: A statewide environmental-mitigation and freight-land-use tool aimed at protecting communities while aligning logistics growth with sustainability and public-health goals. AB 98 is foundational to later cleanup legislation (SB 415).
AB 1007 (2025): Cuts Responsible-Agency Permit Deadlines in Half Problem addressed: Even after cities approved housing projects, state and regional “responsible agencies” (e.g., air districts, water boards) could take months to issue secondary permits, causing ballooning timelines and costs. Shot-clocks for these agencies (90 days) were much longer than those for lead agencies.
Solution: Amends the Permit Streamlining Act to require responsible agencies to approve/disapprove residential, mixed-use, supportive, or farmworker housing permits within 45 days of project approval or application completeness—cutting the prior 90-day deadline in half. Applies statewide, including charter cities.
Role: A permitting-acceleration tool ensuring faster post-entitlement approvals and reducing interagency delays that frequently stall housing construction.
AB 1050 (2025): Allows Removal of Private Covenants Blocking Housing on Commercial Properties
Problem addressed: Commercial parcels often have old CC&Rs and reciprocal easement agreements (REAs) that prohibit residential uses or limit density, preventing commercial-to-housing adaptive-reuse projects—even when allowed under State housing laws like AB 2011.
Solution: Expands existing restrictive-covenant-modification law (previously limited to affordable housing) to all qualifying housing developments located on commercial sites, allowing developers to:
• Invalidate covenants that restrict residential use, density, unit count, or occupancy, • Apply the process to REAs as well as CC&Rs,
• Record a Restrictive Covenant Modification Document after county counsel review.
Does not authorize projects inconsistent with state housing laws.
Role: A statewide barrier-removal tool enabling adaptive reuse of commercial corridors and shopping centers into housing by preempting private land-use restrictions.
SB 92 (2025): Closes Loopholes in the Density Bonus Law for Mixed-Use Projects Problem addressed: Developers exploited the Density Bonus Law to exceed commercial FAR and build oversized hotel-heavy or visitor-serving mixed-use projects with minimal housing (e.g., San Diego “Project Vela”).
Solution: Reforms Density Bonus Law by:
• Limiting commercial FAR increases under DBL to ≤2.5× base zoning, • Prohibiting incentives/waivers for transient lodging (hotels, motels, B&Bs) except residential hotels,
253
California State Housing Mandates
Orange County Grand Jury 2025-2026
• Requiring ≥2/3 of mixed-use square footage to be residential to qualify, • Maintaining full affordability thresholds for bonus eligibility.
Effective Jan. 1, 2026 (with grandfathering for pre-application projects).
Role: A guardrail tool ensuring Density Bonus Law is used to build actual housing—not oversized hotel or commercial space leveraged through affordable-unit “tokenism.”
AB 87 (2025): Prevents Density Bonus Incentives for Hotel Components of Mixed-Use Projects Problem addressed: Developers were using DBL concessions (height, FAR, parking waivers) to benefit hotel components of mixed-use projects, diluting the State’s housing incentives and enabling visitor-serving developments that undermined local zoning.
Solution: Clarifies that DBL incentives may not be applied to hotel/motel/visitor-serving portions of a mixed-use project. Makes parallel conforming amendments to align with SB 92 if both bills are enacted.
Applies statewide, including charter cities.
Role: A housing-priority tool reinforcing that density bonuses are for residential production—not for hospitality or tourism development.
APPENDIX B: Orange County Housing Mandate Survey Questions Q1 What is your city’s 6th-cycle RHNA allocation, and does your Housing Element plan exceed that number? If so, by how much, and what factors influenced the decision to exceed the allocation? Q2 If the RHNA mandate were not in place, how would your housing plan differ? Would it still meet the demand for low-income housing?
Q3 What strategies has your city used to inform and engage residents about the state housing mandate? How do you measure the effectiveness of these outreach efforts? Q4 What are the implications of recent state legislation on R-1 single-family zoning for your city’s land-use policies and community character?
Q5 What are the most significant challenges your city faces in meeting RHNA requirements? In what ways has OCCOG supported your efforts to overcome these challenges? Q6 Do you anticipate achieving your approved Housing Element goals by the end of the 6th cycle in 2030? What factors will most influence your success or shortfall? Q7 What additional information would you like to provide us regarding this topic?
APPENDIX C: Responsibilities
Responsibilities of OCCOG
Mission Statement:
The Orange County Council of Governments (OCCOG) convenes jurisdictions throughout Orange County to collaboratively address land use, housing, mobility, energy, air quality, and water issues, and to ensure that Orange County is effectively represented in regional and state decision-making. Through sound governance, impartial analysis, and regional coordination, OCCOG delivers value to its member agencies and the residents of Orange County.
Core Responsibilities:
1. Sub-Regional Planning and Coordination
a. Serves as Orange County’s official sub-regional planning organization within the six-county SCAG region.
254
California State Housing Mandates
b. Leads the preparation of required regional and sub-regional planning documents that allow Orange County jurisdictions to compete for state and federal funding. [occog.com], [occog.com]
2. Regional Representation and Advocacy
a. Ensures Orange County’s interests are represented in regional policy development by coordinating the county’s representation on the SCAG Regional Council and committees. b. Works to align countywide perspectives on policy issues affecting transportation, housing, sustainability, and infrastructure.
3. Housing, Transportation, and Sustainable Communities Planning a. Supports housing and transportation planning coordination, including RHNA -related activities and implementation discussions.
b. May serve as the lead agency for a sub-regional Sustainable Communities Strategy if Orange County elects to pursue one under SB 375, consistent with SCAG’s Regional Transportation Plan.
4. Technical Analysis, Studies, and Data Support
a. Conducts countywide and sub-regional studies, prepares technical reports, and provides data-driven analysis to support policymaking by member agencies. b. Develops best-practice guidance (e.g., Complete Streets, mobility and infrastructure tools) for voluntary adoption by cities and the County.
5. Intergovernmental Collaboration and Consensus-Building a. Functions as a forum for cooperation among cities, the County, and special districts on issues of shared concern.
b. Facilitates coordination on funding strategies, infrastructure planning, and policy alignment without supplanting local land-use authority.
82 Responsibilities of SCAG
Mission Statement
The Southern California Association of Governments (SCAG) serves as the regional planning agency for Southern California, coordinating among local, regional, state, and federal partners to advance transportation, housing, land-use, and environmental planning that supports sustainable growth, economic vitality, social equity, and improved quality of life for the region’s diverse communities.
SCAG’s mission is to lead collaborative regional planning by developing and implementing integrated transportation, housing, and sustainability strategies; allocating regional housing needs; ensuring compliance with state and federal planning requirements; and providing data, technical assistance, and policy guidance to its member jurisdictions to address Southern California’s long-term growth challenges.83
Responsibilities of HCD
Mission Statement (Primary)
The California Department of Housing and Community Development (HCD) works to ensure safe, affordable, and sustainable housing opportunities for Californians by administering housing programs,
82 Orange County Council of Governments
83 Home | Southern California Association of Governments 255
California State Housing Mandates
Orange County Grand Jury 2025-2026
shaping statewide housing policy, and enforcing housing laws to promote equity, environmental quality, and community stability across the state.
HCD’s mission is to lead and implement California’s housing policy by determining regional housing needs, reviewing and enforcing Housing Element compliance, administering state and federal housing funds, and holding local jurisdictions accountable for fulfilling their obligations under state housing law. 84
84 California Department of Housing and Community Development 256
CITY OF COSTA MESA
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
File #: 26-350 Meeting Date: 8/4/2026
TITLE:
APPROVAL OF AGREEMENTS FOR AMERICAN FAMILY HOUSING AVON RIVER APARTMENTS PROJECT LOCATED AT 1400 BRISTOL STREET
DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT / ADVANCED
PLANNING AND HOUSING DIVISION
PRESENTED BY: NANCY SA, GRANT ADMINISTRATOR AND ANNA MCGILL,
PLANNING MANAGER
CONTACT INFORMATION: NANCY SA, GRANT ADMINISTRATOR (714) 754-5678 RECOMMENDATION:
Staff recommends the City Council:
1. Authorize the City Manager, or their designee, to execute all applicable agreements necessary to advance the Avon River Apartments Project, contingent upon completion of HUD requirements for receipt of Home Investment Partnership Program (HOME) funds.
2. Authorize the City Manager, or their designee, to execute a Memorandum of Agreement (MOA) with the County of Orange regarding Regional Housing Needs Allocation (RHNA) Progress Credits.
257
City of Costa Mesa
Agenda Report
77 Fair Drive
Costa Mesa, CA 92626
Item #: 26-350 Meeting Date: 8/04/2026
TITLE: APPROVAL OF AGREEMENTS FOR AMERICAN FAMILY HOUSING AVON RIVER APARTMENTS PROJECT LOCATED AT 1400 BRISTOL STREET
DEPARTMENT: COMMUNITY DEVELOPMENT DEPARTMENT / ADVANCED PLANNING
AND HOUSING DIVISION
PRESENTED BY: NANCY SA, GRANT ADMINISTRATOR AND ANNA MCGILL, PLANNING
MANAGER
CONTACT INFORMATION: NANCY SA, GRANT ADMINISTRATOR (714) 754-5678
RECOMMENDATION:
Staff recommends the City Council:
1. Authorize the City Manager, or their designee, to execute all applicable agreements necessary to advance the Avon River Apartments Project, contingent upon completion of HUD requirements for receipt of Home Investment Partnership Program (HOME) funds.
2. Authorize the City Manager, or their designee, to execute a Memorandum of Agreement (MOA) with the County of Orange regarding Regional Housing Needs Allocation (RHNA) Progress Credits.
BACKGROUND:
On June 20, 2023, the City Council approved funding commitments of $2,500,000 in Low - and Moderate-Income Housing Asset Funds (LMIHAF) and $1,500,000 in ARPA funds to American Family Housing (AFH) for the conversion of the Travelodge North Motel under the State’s Homekey Round 3 program. The project, now called Avon River Apartments, is a 78‑ unit affordable housing development that will serve 76 extremely low‑income households and include 2 manager units.
• June 20, 2023, Agenda Report and Attachments:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=6264203&GUID=E6ABBEB9- 279B-41F0-A414-0E1D2CB82D9B
On August 12, 2025, the City issued a Request for Proposals (RFP) for $1.5 million in HOME Investment Partnership Program funds. Two proposals were received; AFH submitted a request for critical gap financing for the Avon River Apartments project. On March 17, 2026, the City Council approved an allocation of $350,000 in HOME funds to AFH, contingent upon completion of the NEPA environmental review and the HOME Subsidy Layering Review.
258
Item #: 26-350 Meeting Date: 8/04/2026
• March 17, 2026, Agenda Report and Attachments:
https://costamesa.legistar.com/LegislationDetail.aspx?ID=7949566&GUID=4649235E-D457- 408E-BA5B-A2B28425D4A5
AFH also applied for the County of Orange’s 2026 Supportive Housing Notice of Funding Availability (NOFA) and was awarded $4,100,000 for the Avon River Apartments project. As a condition of the County’s award, AFH must obtain City approval of a RHNA credit‑sharing MOA and a subordination agreement.
Construction of the Avon River Apartments project is approximately 96% complete. AFH estimates completing construction and receiving the Certificate of Occupancy in late summer 2026, with tenant move-ins occurring shortly thereafter. The additional funding mentioned above will allow AFH to complete the project.
ANALYSIS:
One of the goals of the Costa Mesa City Council is to diversi fy, stabilize, and increase housing to reflect community needs. While the City boasts a comprehensive system of care for those experiencing and at -risk of homelessness, one of the few remaining gaps is the availability of permanent affordable housing coupled with intensive wrap- around services, known as Permanent Supportive Housing (PSH). AFH’s project would add 76 units of PSH and 2 Manager Units, for a total of 78 units.
The County’s loan amount will not be released until the City approves both the subordination agreement and the RHNA credit ‑sharing MOA. Although the City is still completing its HUD environmental review and subsidy layering review, staff is presenting these items now to avoid delays that could affect timely completion of the project and allow AFH to continue with construction.
City Grant and Loan Agreement
The City executed a Grant and Loan Agreement with AFH in 2025 for the LMIHAF and ARPA commitments. Staff recommends authorizing the City Manager to execute an amendment to include the additional HOME funding, contingent upon HUD’s required environmental and subsidy layering reviews. The City’s amended and restated loan document and promissory notes are included as Attachments 1 and 2, respectively.
The County’s award also requires a subordination agreement naming the City’s loan as subordinate.
This means the City’s mortgage liens would be subordinate to the County’s senior mortgage and, i n the event of default, the County’s lien would be addressed first. The agreement to subordinate to County loans is included as Attachment 3.
RHNA Credit Share
Under the County’s 2026 NOFA, developments receiving County funds must include RHNA credit sharing. For this project, the County requests credit for 23 extremely low‑income units.
The City’s RHNA allocation for the 2021–2029 Housing Element is 11,760 units. Cities typically must plan for a 15% buffer (1,764 units), resulting in a planning target o f at least 13,524 units. Following City Council action on March 17, 2026, to remove 17 sites from the City’s Housing Element, the City 259
Item #: 26-350 Meeting Date: 8/04/2026
made no net loss findings and is identifying additional sites to accommodate its RHNA capacity. The City has already reported the 78 PSH units from Avon River Apartments in its 2025 Housing Element Annual Progress Report. Reducing the City’s credit by 23 units prior to the City re- establishing adequate RHNA capacity and obtaining Housing Element certification would further jeopardize the City’s ability to maintain substantial compliance with State housing requirements.
To support AFH’s ability to secure essential gap financing, the City and County have drafted an MOA specifying that RHNA credit sharing will occur only after the City demonstrates adequate capacity to meet its RHNA allocation and buffer through its Housing Element revision process and is able to obtain Housing Element certification. The draft MOA is included as Attachment 4.
Typically, RHNA Progress Credit is granted in the jurisdiction within which the housing development project is located. However, in this case, the County funding is a critical element of achieving the residential units at all, so sharing RHNA credit with the County enables the units to be created.
ALTERNATIVES:
The City Council may choose not to approve the requested agreements. If the MOA and subordination agreement are not approved, AFH will be unable to draw down County funds, resulting in the Avon River Apartments project lacking the gap financing necessary to complete construction.
FISCAL REVIEW:
There is no fiscal impact to the City’s General Fund. The funds from LMIHAF and ARPA committed to the project were previously approved by City Council and the funding sources approved are restricted sources that can only be used for low- and moderate- income affordable housing opportunities.
LEGAL REVIEW:
The City Attorney’s office has reviewed this report and approved it as to form.
CITY COUNCIL GOALS AND PRIORITIES:
This item supports the following City Council Goal:
• Diversity, Stabilize and Increase Housing to Reflect Community Needs
CONCLUSION:
Staff recommends the City Council:
1. Authorize the City Manager, or their designee, to execute a Memorandum of Agreement (MOA) with the County of Orange regarding Regional Housing Needs Allocation (RHNA) Progress Credits.
2. Authorize the City Manager, or their designee, to execute all applicable agreements necessary to advance the Avon River Apartments Project, contingent upon completion of HUD requirements for receipt of Home Investment Partnership Program (HOME) funds.
260
DEED OF TRUST
Page S-1
2211\08\5050003.2
FIRST AMENDMENT TO
AFFORDABLE HOUSING
GRANT AND LOAN AGREEMENT
by and between
CITY OF COSTA MESA,
a California municipal corporation
and
AM
ERICAN FAMILY HOUSING,
a California nonprofit, public benefit corporation
1 400 BRISTOL PROJECT
1400 Bristol Street
Costa Mesa, California
ATTACHMENT 1
261
2 FIRST AMENDMENT TO
AFFORDABLE HOUSING GRANT AND LOAN AGREEMENT
This FIRST AMENDMENT TO AFFORDABLE HOUSING GRANT AND LOAN AGREEMENT (“First Amendment”) is made and entered into on _______________________, 2026, by and between the CITY OF COSTA MESA, a California municipal corporation (“City”), and AMERICAN FAMILY HOUSING, a California nonprofit , public benefit corporation (“Developer”).
RECITALS
A. On February 28, 2025, the City and Developer entered into that certain Affordable Housing Grant and Loan Agreement (“Original Agreement”).
B. In conjunction with the execution of the Original Agreement, the County of Orange (“County”) acquired the buildings and related structures located at 1400 Bristol Street, Costa Mesa California (“Property”) and leased the Property to Developer.
C. The Original Agreement provided, among other things, for the City providing a grant and loan to Developer who would rehabilitate, construct and operate seventy -six (76) affordable units (“Affordable Units”) for households experiencing homelessness or who are at risk of homelessness (as defined in Part 578.3 of Title 24 of the Code of Federal Regulations), who are impacted by the COVID -19 pandemic, and who earn thirty percent (30%) or less of the Area Median Income (AMI), plus supportive facilities and two unrestricted Manager’s Units (collectively, “Project”).
D. The City provided financial assistance to Developer in the form of a loan in an amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) from the Housing Authority of the City of Costa Mesa ’s Low to Moderate Income Housing Asset Fund (“City Loan”) and a grant of City ARPA funding in an amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000) (“ARPA Grant” or “City Grant”).
E. Concurrently with the Original Agreement, Developer executed several other documents in favor of the City in connection with the Project, which included, among other things, a Promissory Note, Deed of Trust, and Joint Regulatory Agreement. The Deed of Trust , dated February 28, 2025, and recorded on February 28, 2025, as Instrument No. 2025000068071 in the Official Records of Orange County, California, secured the Original Agreement, the Promissory Note, Joint Regulatory Agreement and other Project related documents.
F. Developer has requested additional financing from the City of the development of the Project. The City has agreed to loan to Developer an additional Three Hundred Fifty Thousand Dollars ($350,000) from the City’s HOME Investment Partnership Funds . With these additional funds, the total amount of financial assistance from the City will be Four Million Three Hundred Fifty Thousand Dollars ($4,350,000).
262
3 G. The Parties now desire to amend the Original Agreement to provide for the terms associated with the additional loan, including, among other things, HOME regulations, change in the percentage of residual receipts, a new promissory note and deed of trust.
NOW, THEREFORE, the Parties amend the Original Agreement as follows:
1. Section G of the Recitals, is hereby amended in its entirety and replaced wit h the following:
“G. Developer has requested assistance from the City and Authority in order to assist Developer to lease, rehabilitate, manage and maintain the Project as long-term affordable housing at an Affordable Rent throughout the Affordability Period, as set forth in more detail in this Agreement and the Regulatory Agreement. The City and Authority desire to assist Developer by providing financial assistance to Developer in the form of a loan of in an amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000) from the Authority’s LMIHAF fund (“City Loan”), a loan in the amount of Three Hundred Fifty Thousand Dollars ($350,000) from the City’s HOME I nvestment Partnership Funds (“HOME Loan”) and a grant of City ARPA funding in an amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000) (“ARPA Grant” or “City Grant”).
The City Loan, HOME Loan and the City Grant are being utilized by Developer to finance the development of the Property, as well as the eligible construction costs associated with completing the Project. The permitted income levels of the tenants of each Qualified Housing Unit and the permissible rents to be charged for t enancy and occupancy of each Qualified Housing Unit are set forth in this Agreement in order to ensure compliance with the HOME Program and the requirements of the HSC and ARPA.”
2. Section J of the Recitals, is hereby amended in its entirety and replaced with the following:
“J. With the City Loan, HOME Loan, and ARPA Grant, the Project will be subject to this Agreement, the Regulatory Agreement, and other associated documents and requirements as set forth in this Agreement.”
3. Section 1.2, of the Definitions, is hereby amended in its entirety and replaced with the following:
“Section 1.2 “Affordability Period” shall mean the duration of the affordable housing requirements and other covenants of and as required by this Agreement and as set forth in the Regulatory Agreement. The Affordability Period shall be the earlier of: (a) fifty-five (55) years from the date the Notice of Affordability Restrictions is issued by City and caused to be recorded in the Official Records against the Property; or (b) if not able to be determined, fifty -seven (57) years after the date of this Agreement. The Affordability Period is comprised of two periods: (a) the HOME Compliance Period, which is also referred to as the “First Affordability Period ,” and (b) tha t portion of the Affordability Period which follows the First Affordability Period, which portion is also referred to and defined herein as the “Second Affordability Period,” so long as the cumulative number of years for the Affordability Period is fifty-five (55) years.” 263
4 4. Section 1.5, of the Definitions, is hereby amended in its entirety and replaced with the following:
“1.5 “Agreement” shall mean this Affordable Housing Grant and Loan Agreement and First Amendment between City and Developer, including all Attachments, exhibits and other documents attached hereto.”
5. Section 1.15, of the Definitions, is hereby amended in its entirety and replaced with the following:
“1.17 “City Deed of Trust” shall mean a deed of trust securing the City Note and other obligations of Developer hereunder substantially in the form of Attachment No. 7, attached hereto and fully incorporated herein by this reference. The City Deed of Trust shall be a fourth mortgage deed of trust, subordinate only to a loan or loans issued by an approved lender. Developer has been awarded a Twenty -Nine Million Dollars ($29,000,000) Homekey Award (“Homekey”). Developer also obtained certain loans from the County of Orange in the total amount of Ten Million Eight Hundred Eighty- One Thousand Five Hundred and Twenty Dollars ($10,881,520) (“County Loan”), a loan from the City of Newport Beach in the amount of Three Million Two Hundred Sixty- Two Thousand Five Hundred Dollars ($3,262,500), and deferred development fees in the amount of One Million Thirty Thousand Six Hundred and Nine Dollars ($1,030,609). The County Loan shall be known as the “Primary Loan.” In the event Developer were to obtain a new loan or funding that is not approved by or otherwise permitted under this Agreement without the prior written consent of the City, the City Note and City Deed of Trust shall not be subordinated and shall be and remain a senior lien and encumbrance against the Property and Project, subordinate only to the Regulatory Agreement.”
6. Section 1.42, of the Definitions, is hereby amended in its entirety and replaced with the following:
“Prescribed Rent Levels” shall mean, based upon the most restrictive requirements of all Project funding sources, for the seventy- six (76) Affordable Units, Affordable Rent calculated at no more than thirty percent (30%) of AMI (HCD rents). Further, the City is designating one (1) studio and one (1) one-bedroom unit as floating Low HOME units at Low HOME rents; however, HCD rents are more restrictive and shall apply.”
7. Sections 1.58 HOME Deed of Trust , 1.59 HOME Loan , 1.60 HOME Note, 1.61 HOME Compliance and First Affordability and 1.62 Second Affordability Period are added to the Definitions as follows:
“1.58 “HOME Deed of Trust” shall mean a deed of trust securing the HOM E Note and other obligations of Developer hereunder substantially in the form of Attachment No. 7A, attached hereto and fully incorporated herein by this reference. The HOME Deed of Trust shall be a fifth mortgage deed of trust, subordinate only to a loan or loans issued by the approved lenders shown in Section 2.9 below. In the event Developer were to obtain a new loan or funding that is not approved by or otherwise permitted under this Agreement without the prior written consent of the City, the HOME Note and HOME Deed of Trust shall not be subordinated and shall be and remain a senior lien and encumbrance against the Property and Project, subordinate only to the Regulatory Agreement. 264
5 1.59 “HOME Loan” shall mean and consist of the financial assistance of Three Hundred and Fifty Thousand Dollars ($ 350,000) sourced solely from the City’s HOME funds, as more particularly provided in Section 2.2. The HOME Loan is evidenced by the HOME Note and is secured by the HOME Deed of Trust.
1.60 “ HOME Note” shall mean the promissory note, substantially in the form of Attachment No. 6A attached hereto and fully incorporated herein by this reference, which evidences the HOME Loan consisting of HOME funds.”
1.61 “HOME Compliance Period” and “First Affordability Period” means the period of time commencing upon the date the first unit is rented to a Qualified Household and ending on the twentieth (20th) anniversary of the issuance of the final certificate of occupancy for the Project by the City. As defined herein, the Second Affordability Period commences at the end of the HOME Compliance Period and ends on the fifty-fifth (55th) anniversary of the recordation in the Official Records of the Notice of Affordability Restrictions. The end of the HOME Compliance Period in no manner affects the fifty-five (55) year Affordability Period under this Agreement and the Regulatory Agreement.
1.62 “Second Affordability Period” shall mean the period commencing at the end of First Affordability Period and ending on the date that is the fifty- fifth (55th) anniversary of the date the recordation in the Official Records of the Notice of Affordability Restrictions, subject to and so long as the cumulative number of years that comprise the Affordability Period is fifty -five (55) years under this Agreement, the Regulatory Agreement, and other Project Documents.”
8. Article 2, Financing, Section 2.2, City Loan, is hereby amended in its entirety and replaced with the following:
“2.2 City Loan and HOME Loan. The City hereby agrees to loan to Developer and Developer hereby agrees to borrow from the City the sum of up to Two Million Five Hundred Thousand Dollars ($2,500,000) (“ City Loan”) of LMIHAF, and Three Hundred Fifty Thousand Dollars ($350,000) of HOME funds, subject to the terms and conditions set forth in this Agreement, and subject further to the terms and conditions set forth within the Project Documents, including the City Note, City Loan, Deed of Trust, the HOME Note, HOME Loan, HOME Deed of Trust, and Regulatory Agreement.
Combined, the ARPA Grant, City Loan and HOME Loan (“City Funds”) represent a total contribution by the City of Four Million Three Hundred Fifty Thousand Dollars ($4,350,000).
2.2.1 City Note , City Deed of Trust , HOME Note and HOME Deed of Trust. The City Loan and HOME Loan shall be evidenced by the City Note and HOME Note, respectively, and secured by the City Deed of Trust and HOME Deed of Trust, which shall be recorded against the Property in the Official Records of the County in a position junior and subordinate to the lenders set forth in Section 2.9.
2.2.2 Terms of City Note and HOME Note . The City Note and HOME Note shall be for a term commencing upon the date of initial disbursement of funds at 265
6 Closing and continuing for a period of fifty-five (55) years after the date of recordation of the Release of Construction Covenants (“Maturity Date”). The City Note and HOME Note shall bear simple in terest at the rate of three percent (3%) per annum from the date of disbursement of the City Funds. Commencing the calendar year immediately after the recordation of the Release of Construction Covenants and annually on or before June 1 of each succeeding year, Developer shall make annual payments to City allocable from City’s share of Residual Receipts, until the Maturity Date. On the Maturity Date of the City Note and HOME Note, all principal and interest shall be due in full by Developer to C ity (without regard to Residual Receipts calculation).
a. The City Note and HOME Note shall be repaid through an annual Residual Receipts calculation based on operation of the Project. The City Note and HOME Note shall be payable from the City’s Proportionate Share of fifty percent (50%) of Residual Receipts , which is anticipated to be collectively nine and eighty- eight thousandths percent (9.088%), for the Project until the City Note and HOME Notes have been paid in full, but all amounts due, including the full principal amount principal and any and all accrued interest, shall be due and payable in full on the Maturity Date.
Developer shall make annual payments on the City Loan and HOME Loan payable from the City’s Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipated to be collectively nine and eighty-eight thousandths percent (9.088%), received from operation of the Project until the City Loan and the HOME Loan matures and full payment, principal and any accrued and unpaid interest, is due on the City Loan and HOME Loan as set forth in the their respective Notes. In the event that the City’s Proportionate Share of fifty percent (50%) of Residual Receipts , is insufficient to provide for payment of the entire annual interest payment due under the City Note and the HOME Note, then such unpaid interest (referred to as the “past -due interest amount”) shall begin to accrue interest from the date on which such interest payment was due at the interest rate applicable to outstanding principal under the City Note and the HOME Note . The next annual payment shall be increased by the amount of the past -due interest amount plus interest accrued thereon. All past -due interest amounts shall continue to accrue interest until all such amounts and accrued interest thereon have been paid to City.
b. The City Note and the HOME Note shall be accelerated and due in full in the event Developer refinances to take cash out or transfers the Project or any part thereof (but excluding residential leases to tenants and Permitted Transfers), without prior written approval of the City, and the City Note and HOME Note shall be paid in full from Refinancing Net Proceeds, if any, immediatel y upon any refinancing of the Project (or any part thereof) or as applicable from Transfer Net Proceeds (excluding Permitted Transfers), if any, immediately upon any transfer in whole or in part of the Project (excluding residential leases to tenants). The terms of the City Loan and HOME Loan are more particularly described in the City Note and HOME Note, respectively.
c. Notwithstanding any provision to the contrary, the
determination of Residual Receipts, in accordance with the documents evidencing the 266
7 County Loan and the Ground Lease, shall be deemed to comply with and satisfy the requirements to determine Residual Receipts under this Agreement.
2.2.3 Security for City Loan and HOME Loan. The City Loan shall be secured by the City Deed of Trust , Attachment No. 7, which Deed of Trust has been recorded in the O fficial Records of Orange County, California on February 28, 2025, as Instrument No. 2025-000068071. The HOME Loan shall be secured by the HOME Deed of Trust, Attachment No. 7A, which shall be recorded against the Leasehold Interest in the Property in the Official Records of the County in fifth lien position.
2.2.4 Request for Notice of Default. The City hereby requests that a copy of any notice of default and that a copy of any notice of sale hereunder be mailed to it at the address set forth in Section 10.2 of this Agreement . City shall record a Request for Notice of Default in the O fficial Records of Orange County, California, in a form similar to the Request for Notice of Default attached hereto as Attachment No. 8.
2.2.4. Consent Required for Assignment and Assumption. Except for Permitted Transfers and other Transfers permitted pursuant to Article 8 below, the City Note and HOME Note shall not be assignable or assumable by any successor or assignee of Developer without the prior written consent of City, which consent may be withheld in the sole and absolute discretion of the City Manager.”
9. Article 2, Financing, Section 2.4, Permissible Use of City Loan and ARPA Grant; Eligible Expenses, is hereby amended in its entirety and replaced with the following:
“2.4 Permissible Use of City Loan, HOME Loan and ARPA Grant; Eligible Expenses .
Pursuant to all of the terms and conditions of this Agreement, Developer shall be permitted to use the City Loan, HOME Loan and ARPA Grant proceeds only for the Eligible Expenses that are actually and reasonably incurred by Developer and approved by the City (such approval not to be unreasonably withheld or delayed), and for no other purpose, consistent with the ARPA requirements and HOME regulations, terms, conditions, and eligible uses. The proceeds of the City Loan, HOME Loan and ARPA Grant shall not be used for Project reserve accounts, monitoring, or servicing and origination fees, or for expenditures incurred more than one year after the issuance of the Release of Construction Covenants.”
10. Article 2, Financing, Section 2.9, Additional Financing, is hereby amended i n its entirety and replaced with the following:
2.9 Additional Financing.
2.9.1 Sources of Financing. Developer and City anticipate the following funding sources to be obtained by Developer and utilized in addition to the City Loan, HOME Loan and ARPA Grant for the Rehabilitation and operation of the Project. The final sources and amounts of funding for the Project as well as the final cost estimates with respect to the Rehabilitation and operation of the Project shall be set forth in the Final Budget. 267
8 a. Homekey award in the amount of Twenty- Nine Million Dollars ($29,000,000).
b. Developer will enter into loans with the County of Orange in an approximate combined original principal amount of Ten Million Eight Hundred Eighty- One Thousand Five Hundred and Twenty Dollars ($10,881,520). c. Developer will enter into a loan with the City of Newport Beach in the amount of Three Million Two Hundred Sixty- Two Thousand Five Hundred Dollars ($3,262,500).
d. Developer will be obtaining a CalOptima Health grant in the amount of Nine Hundred Eighty-One Thousand Six Hundred and Sixty Dollars ($981,660). e. Developer will be receiving One Million Thirty Thousand Six Hundred and Nine Dollars ($1,030,609) in deferred developer fees.
11. Article 7, ARPA Language is hereby amended in its entirety and replaced with the following:
“A RTICLE 7. ARPA LANGUAGE AND HOME REGULATIONS”
“7.1 ARPA Requirements. Developer, in the performance of this Agreement and as a sub-recipients of ARPA funds, as well as all of its contractors, consultants and subcontractors, must comply with the following:
a. Developer, and any and all of its contractors, consultants and subcontractors, must ensure that they do not deny benefits, services or otherwise discriminate on the basis of race, color, national origin (including limited English proficiency), disability, age, or sex (including sexual orientation and gender identity) in accordance with Title VI of the Civil Rights Act of 1964, Public Law 88- 352, 42 U.S.C. 2000d-1 et seq., and the Department’s implementing regulations, 31 CFR part 22; Section 504 of the Rehabilitation Act of 1973 (Section 504), Public Law 93 -112, as amended by Public Law 93-516, 29 U.S.C. 794; Title IX of the Education Amendments of 1972 (Ti tle IX), 20 U.S.C. 1681 et seq., and the Department’s implementing regulations, 31 CFR part 28; Age Discrimination Act of 1975, Public Law 94- 135, 42 U.S.C. 6101 et seq., and the Department implementing regulations at 31 CFR part 23. Developer will be required to submit data showing compliance with the above.
b. The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards found at 2 CFR Part 200 Appendix II. c. The Clean Air Act (42 U.S.C. 7401 et seq.) and the Federal Water Pollution Control Act (33 U.S.C. 1251et seq.) and all applicable standards, orders, or regulations. d. The Byrd Anti -Lobbying Amendment (31 U.S.C. 1352) regulations regarding restrictions on lobbying and required certificates. 268
9 e. Section 2 CFR 200.323 regarding Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (EPA guidelines at 40 CFR Part 247.
f. Section 200.322 of 2 CFR 200.322, Domestic preferences for procurements.
7.2 HOME Program. Because the City HOME Loan to Developer will be provided with HOME Program funds, Developer shall carry out the rehabilitation of the Housing Units and the operation of the Project in conformity with all requirements of the HOME Program to the extent applicable to the Project. In the event Developer desires to change the affordable housing or maintenance requirements for the Property from the specific requirements set forth in this Agreement in order to comply with a subsequently enacted amendment to the HOME Program, Developer shall notify the City in writing of such proposed change and the amendment related thereto at least thirty (30) days prior to implementing such change. In the event the City disapproves of such change and Developer’s inter pretation of the amendment related thereto, the City shall notify Developer of its disapproval in writing and the parties shall seek clarification from the appropriate HUD Field Office. Only if HUD concurs with Developer’s interpretation of the HOME Program shall Developer be permitted to implement the proposed change.
7. 3 Federal Funding. Due to the source of funding for the HOME Loan from HOME Program funds and the ARPA Grant from the Coronavirus State and Local Fiscal Recovery American Rescue Plan Act Funding, 31 CFR Part 35 funds, which funds are a federal revenue source, Developer shall comply with all applicable federal law and including, without limitation, the following "Federal Program Limitations":
7.3.1 Property Standards. Developer agrees to ensure that rehabilitation of the Project will comply with all applicable requirements of the HOME Program regulations, including 24 CFR §92.251, including, but not limited to, the following requirements:
a. The Project and all Housing Units and common areas at the Property shall meet all applicable State and local codes, ordinances, and zoning requirements, including all applicable requirements set forth in the Costa Mesa Municipal Code and all applicable State and local residential and building codes. The Project and all Housing Units and common areas at the Property must meet all such applicable requirements upon Project completion.
b. The Project and all Housing Units and common areas at the Property shall also meet the requirements described in paragraphs (i) through (iv) as follows:
(i) The Project and all Housing Units and common areas at the Property shall meet the accessibility requirements of 24 CFR part 8, which implements Section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 794), and Titles II and III of the Americans with Disabilities Act (42 U.S.C. 12131- 12189) implemented at 28 CFR parts 35 and 36, as applicable. Covered multifamily dwellings, as defined at 24 CFR 100.201, 269
10 must also meet any applicable design and construction requirements at 24 CFR 100.205, which implements the Fair Housing Act (42 U.S.C. 3601-3619). (ii) Where relevant, the Project must be constructed to mitigate the impact of potential disasters (e.g., earthquakes, hurricanes, flooding, and wildfires), in accordance with State and local codes, ordinances , or other State and local requirements, or such other requirements as HUD may establish.
(iii) The material subcontracts and the Rehabilitation Plans must describe the construction work to be undertaken in adequate detail so that City can conduct inspections in accordance with the HOME Regulations. Developer shall also provide written cost estimates for construction for City’s review; City shall determine whether such cost estimates are reasonable.
(iv) Developer shall permit and facilitate progre ss and final inspections of the Rehabilitation by City to ensure that work is done in accordance with the applicable codes, the contract(s), subcontracts, Scope of Rehabilitation and approved construction plans.
c. City has established property standards for rental housing (“City Property Standards”), which standards include all inspectable items and inspectable areas specified by HUD based on the HUD physical inspection procedures (Uniform Physical Condition Standards (UPCS)) prescribed by HUD pursuant to 24 CFR 5.705. Developer shall ensure that the Project, including all Housing Units and common areas at the Property, shall comply with City’s Property Standards throughout the Affordability Period. In accordance with City’s Property Standards, Developer shall maintain the Project, including all Housing Units and common areas at the Property: (i) as decent, safe, and sanitary housing in good repair, (ii) free of all health and safety defects and all life -threatening deficiencies, and (iii) in compliance with the lead-based paint regulations and requirements in 24 CFR Part 35.
d. In accordance with the HOME Regulations, City shall undertake ongoing inspections of the Project in accordance with §92.504(d). City has developed written inspection procedur es and procedures for ensuring that timely corrective and remedial actions are taken by Developer to address identified deficiencies.
7.3.2 Handicapped Accessibility . Developer shall comply with, as and to the extent applicable, (a) Section 504 of the Rehabilitation Act of 1973, and implementing regulations at 24 CFR Part 8 Subpart C governing accessibility of projects assisted with federal funds; and (b) the Americans with Disabilities Act of 1990, and implementing regulations at 28 CFR Part 35–36 in order to provide handicapped accessibility to the extent readily achievable; and (c) the Uniform Federal Accessibility Standards (UFAS) pursuant to the Architectural Barriers Act of 1968, 42 U.S.C. 4151-4157, as amended.
7.3.3 Use of Debarred, Suspended, or Ineligible Participants . Developer shall comply with the provisions of 24 CFR Part 24 relating to the employment, engagement of 270
11 services, awarding of contracts, or funding of any contractor or subcontractor during any period of debarment, suspension, or placement in ineligibility status. Developer, each subcontractor, and any other contractors or subcontractors or agents of Developer (subject to compliance with 24 C FR Part 135) shall have provided to City the certification in appendix B of 24 CFR Part 24 that neither it nor its principals is presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation from this Project, and City shall be responsible for determining whether each contractor has been debarred.
7.3.4 Maintenance of Drug- Free Workplace. Developer shall certify that Developer will provide a drug-free workplace in accordance with 2 CFR Part 2429.
7.3.5 Lead-Based Paint. City, as a recipient of federal funds, has modified and conformed all of its federally funded housing programs to the Lead- Based Paint (LBP) Poisoning Prevention Act, Title X of the 1992 Housing and Community Development Act, 42 U .S.C. §4800, et seq., specifically §§4821 4846, and the implementing regulations thereto. In this regard, Developer shall comply with all applicable federal requirements relating to lead-based paint. On December 28, 2021, Partner Engineering and Science, Inc. submitted to Developer a Limited Asbestos & Lead-Based Paint Survey Report identifying the presence of LBP at the Property, as well as steps that must be taken to mitigate potential hazards.
7.3.6 Affirmative Marketing. Affirmative marketing steps consist of actions to provide information and otherwise attract eligible persons in the housing market area to the available housing without regard to race, color, national origin, sex, religion, familial status, or disability. Developer shall adopt and im plement affirmative marketing procedures and requirements at the Property in accordance with Section 92.351 of the HOME Regulations.
7.3.7 Nondiscrimination, Equal Opportunity and Fair Housing. Developer shall carry out the Project and perform its obligations under this Agreement in compliance with all of the federal laws and regulations regarding nondiscrimination equal opportunity and fair housing described in 24 CFR 92.350 and 24 CFR 5.105.
7.3.8 Energy Conservation Standards . As applicable to the Project, Developer shall cause the Property to meet the cost -effective energy conservation and effectiveness standards in 24 CFR 965 and 24 CFR 990.185.
7.3.9 Displacement and Relocation. Developer acknowledges and agrees that, pursuant to Federal Program Limitations and consistent with the other goals and objectives of that part and pursuant to a Relocation Plan, City must ensure that it has taken all reasonable steps to minimize the displacement of persons as a result of the Rehabilitation work. Furthermore, to the extent feasible, and subject to the tenant screening criteria set forth in the Management Plan, residential tenants must be provided a reasonable opportunity to lease and oc cupy a suitable, decent, safe, sanitary and affordable Housing Unit at the Property or comparable outside property upon completion of the Construction 271
12 work. Developer shall cause all Relocation of tenants and occupants of the Property to be conducted in accordance with the Relocation Laws and all Federal Program Limitations, including 24 CFR 92.353. Developer further agrees to cooperate with City in meeting the requirements of the Federal Program Limitations and shall take all actions and measures reasonably required by the Director (or his or her duly authorized representative) in connection therewith.
7.3.10 Requests for Disbursements of Funds . Developer may not request disbursements of HOME Loan funds hereunder until the funds are needed for payment of eligible costs of the Project. The amount of each request shall be limited to the amount needed for the acquisition of the Property and the Rehabilitation as set forth in the Final Budget and to be paid in installments as set forth in Section 2.5.
7.3.11 Eligible Costs. Developer shall only use HOME Program funds to pay costs defined as “eligible costs” under Federal Program Limitations.
7.3.12 Records and Reports . Developer shall maintain and from time to time submit to City such records, reports and information as the Director may reasonably require in order to permit City to meet the recordkeeping and reporting requirements required of them under 24 CFR 92.508. Without limiting the following, Developer shall maintain records and submit annual r eports as required by this Agreement and Exhibit C to the Regulatory Agreement.
7.3.13 Conflict of Interest. Developer shall comply with and be bound by the conflict of interest provisions set forth at 24 CFR 92.356(f). No owner, developer, or sponsor of a project assisted with HOME funds (or officer, employee, agent, elected or appointed official, or consultant of the owner, developer, or sponsor or immediate family member or immediate family member of an officer, employee, agent, elected or appointed official, or consultant of the owner, developer, or sponsor) whether private, for -profit or nonprofit (including a community housing development organization (CHDO) when acting as an owner, developer, or sponsor) may occupy a HOME-assisted affordable housing unit in a project during the required period of affordability specified in § 92.252(e) or §
92.254(a)(4). This provision does not apply to an individual who receives HOME funds to acquire or rehabilitate his or her principal residence or to an employee or agent of the owner or developer of a rental housing project who occupies a housing unit as the project manager or maintenance worker.
7.3.14 Conflicts between and among Federal Program Limitations and State or Local Law. If and to the extent applica ble for any source of federal revenue expended to implement the Project and in the event of any conflict or inconsistency between applicable Federal Program Limitations and/or and State or local law, then the more stringent requirement(s) shall control.
7.3.15 Layering Review. Developer acknowledges that a layering review will be performed in accordance with Federal Program Limitations. In connection with such review Developer acknowledges and agrees it shall be required to represent and certify to 272
13 City that no government assistance other than the City Loan, the additional financing included in Section 2.9.1, the welfare exemption under California Revenue and Taxation Code Section 214(g), and the HAP Contract assistance has been obtained or is contemplated to be obtained for the acquisition, Rehabilitation and operation of the Property. If such layering review is conducted, Developer agrees to notify City in the event that it applies for or proposes to use governmental funds, other than as listed in the previous sentence, for the Property or the Project.
7.4. Section 3 Compliance. Developer agrees to comply with and to cause each and all of its contractors and subcontractors and any and all or agents of Developer or any Affiliate of Developer to comply with the requirements of Section 3 of the Housing and Urban Development Act of 1968, as amended, 12 U.S.C. §1701u, and the implementing regulations at 24 CFR Part 75, in connection with the construction of the Project to the extent applicable. D eveloper shall submit to City each subcontract with appropriate provisions providing for the Rehabilitation of the Project in conformance with the terms of this Agreement, including the Section 3 Clause.
7.4.1 Section 3 Checklist . City has prepared a Section 3 “checklist” and other forms related to Section 3 compliance, attached hereto as Attachment No. 14 and fully incorporated by this reference; and as provided by City to Developer, and its contractor(s) or subcontractor(s), if any, and as applicable , such forms shall be utilized in all contracts and subcontracts to which Section 3 applies. Developer hereby acknowledges and agrees to take all responsibility for compliance with all Section 3 Clause federal requirements as to Developer, and each and all of its contractors and subcontractors, and other agents.
Developer shall provide or cause to be provided to each and all of its contractors and subcontractors and other agents the checklist for compliance with the Section 3 Clause federal requirements p rovided by City, to obtain from Developer and each and all of its contractors and subcontractors, and other agents all applicable items, documents, and other evidence of compliance with the items, actions, and other provisions within the checklist, and to submit all such completed Section 3 Clause documentation and proof of compliance to the Director. To the extent applicable, Developer shall comply and/or cause compliance with all Section 3 Clause requirements for the Project. For example, when and if Developer or its contractor(s) hire(s) full time employees, rather than volunteer labor or materials, Section 3 is applicable and all disclosure and reporting requirements apply.
7.5. Violence Against Women Act (VAWA). Developer agrees to comply with the core statutory protections of VAWA that prohibit denial or termination of assistance or eviction solely because an applicant or tenant is a victim of domestic violence, dating violence, sexual assault, or stalking became applicable upon enactment of VAWA 2013 on March 7, 2013. Compliance with the VAWA regulatory requirements under § 24 CFR 92.359 and § 24 CFR part 5, subpart L, are required for any rental housing project for which the date of the HOME funding commitment is on or after December 16, 2016. For HOME-assisted rental housing, the requirements shall apply to the owner of the housing for the duration of the affordability period.
273
14 7.5.1. Violence Against Women Act (VAWA) Bifurcation of lease requirements:
For the purposes of this part, the following requirements shall apply in place of the requirements at § 24 CFR 5.2009(b) . If a family living in a HOME -assisted rental unit separates under § 24 CFR 5.2009(a), the remaining tenant(s) may remain in the HOME - assisted unit.
7.5.2. V iolence Against Women Act (VAWA) Emergency Transfer plan: The Developer must develop and implement an emergency transfer plan and must make the determination of whether a tenant qualifies under the plan. The plan must meet the requirements in § 24 CFR 5.2005(e), as supplemented by this section.
7.6 F
ees: Project owners are prohibited from charging fees that are not customarily charged in rental housing such as laundry room access fees, and other fees. However, rental project owners may charge reasonable application fees to prospective tenants may charge parking fees to tenants only if such fees are customary for rental housing projects in the neighborhood; and may charge fees for services such as bus transportation or meals, as long as such services are voluntary.”
12. Attachments 4 and 5 hereby amended in their entirety and replaced with the new Attachments 4 and 5 attached hereto and incorporated herein by reference.
13. New Attachments 6A, 7A and 14, attached hereto and incorporated herein by reference, are hereby added to the Original Agreement.
Signatures on following page.
274
15 IN WITNESS WHEREOF, City and Developer have executed this First Amendment to Affordable Housing Grant and Loan Agreement as of the date set forth above.
“CITY”
CITY OF COSTA MESA,
a California municipal corporation
By: ____________________________ Date: ___________________________ City Manager
ATTEST:
By:_____________________________ Date: ____________________________ City Clerk
APPROVED AS TO FORM:
By:_____________________________ Date: ____________________________ City Attorney
“DEVELOPER”
AMERICAN FAMILY HOUSING,
a California nonprofit, public benefit corporation
By: ______________________________ Date:_____________________________ Name: Myles Anthony Peinemann II
Title: Chief Executive Officer
275
16 ATTACHMENT NO. 4
PROJECT BUDGET
276
17 1400 Bristol
Construction Development Budget
277
18 ATTACHMENT NO. 5
DEVELOPER’S PRO FORMA
278
19 279
20 280
21 281
22 282
23 283
24 284
25 285
26 286
27 287
28 288
29 ATTACHMENT 6A
HOME NOTE
289
30 PROMISSORY NOTE SECURED BY
GROUND LEASEHOLD DEED OF TRUST
$350,000.00 Costa Mesa, California July ____ 2026
FOR VALUE RECEIVED, AMERICAN FAMILY HOUSING, a California non - profit, public benefit corporation) (“Developer”), promises to pay to the CITY OF COSTA MESA, a California municipal corporation (“City”), at its offices at City Hall, 77 Fair Drive, Costa Mesa, California 92626, or at such other place as City may from time to time designate in writing, (a) the principal sum of Three Hundred Fifty Thousand Dollars ($350,000.00) (or so much of the proceeds as have been disbursed by City to Developer) from the HOME Partnership Investment Funds pursuant to the Agreement (defined below) but in no event to exceed Three Hundred Fifty Thousand Dollars ($350,000.00) (“Note Amount”); and (b) all costs and expenses payable hereunder.
RECITALS
A. This Promissory Note Secured by Ground Leasehold Deed of Trust (“Note”) is made pursuant to that certain First Amendment to Affordable Housing Grant and Loan, dated concurrently herewith, which amends that Affordable Housing Grant and Loan dated February 28, 2025, by and between Developer and City ( collectively, the “Agreement”) in relation to the property located at 1400 Bristol Street , Costa Mesa , California, Assessor’s Parcel Number 439 - 312-12.
B. Developer has, concurrently with this Note, executed an Amend ed and Restated Promissory Note Secured by Ground Leasehold Deed of Trust in favor of the City in connection with a LMIFAF loan given by the City (“City Note”).
C. Capitalized terms used in this Note shall have the meaning set forth in the Agreement, unless expressly otherwise defined herein.
NOW, THEREFORE, for good valuable consideration, receipt of which is hereby acknowledged, Developer agrees as follows:
1. Agreement. The principal sums hereunder have been and are being loaned by City to Developer in accordance with and pursuant to the Agreement, which is a public record on file in the office of the City Clerk. The proceeds of the HOME Loan shall be disbursed only to pay for the items and in accordance with the disbursement procedures, and the terms and conditions set forth in the Agreement. The Agreement is incorporated herein and made a part hereof to the same extent and with the same force and effect as if fully set forth herein. In the event of any inconsistencies between the terms of this Note a nd the terms of the Agreement or any other document related to the Note Amount, the terms of this Note shall prevail. (a) A default by Developer under any of the provisions of the Agreement, the HOME Deed of Trust of even date herewith, or any of the other Project Documents shall, after the 290
31 expiration of the applicable cure period(s) under the respective agreement, be a default hereunder, and a default hereunder after applicable cure periods shall be a default under the Project Documents.
2. Interest. Interest at the rate of three percent (3%) shall accrue on the Note Amount, except as set forth in Section 10 hereof as to the Default Rate, which Default Rate shall begin to accrue upon an Event of Default by Developer as set forth herein and in the Agreement.
3. Term; Payment Obligations . This Note shall be for a term that commences on the date of initial disbursement of funds at Closing and continues for a period of fifty- five (55) years after the recordation of the Notice of Affordability Restrictions (as defined in the Agreement) (“Maturity Date”).
(a) This Note shall be repaid through an annual Residual Receipts calculation based on operation of the Project, except (i) in the Event of Default by Developer, or (ii) on the Maturity Date, in which case, (i) or (ii), the outstanding balance of this Note is due in full immediately without regard to Residual Receipts.
(b) Commencing on or before June 1 after the calendar year in which the date of recordation of the Notice of Affordability Restrictions occurs and on the 90 th day of each succeeding calendar year, Developer shall make cause to be prepared and submitted to the City its Annual Financial Statement, including the Residual Receipts Report evidencing Developer’s calculation of Residual Receipts.
(c) Commencing upon June 1 after the calendar year in which the date of recordation of the Notice of Affordability Restrictions occurs, Developer shall make annual payments on this Note and the City Note sourced from the City’s Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipated to be collectively nine and eighty- eight thousandths percent (9.0 88%), and which amount shall be allocated and remitted to City. Each annual payment by Developer to City of the City’s Proportionate Share of Residual Receipts shall be credited by City to pay down the outstanding balance of this Note and the City Note. (i) The annual payments by Developer to the City of the City’s Proportionate Share of Residual Receipts shall continue until full repayment of this Note. (ii) In all events upon the earlier to occur of (A) the Maturity Date or (B) the Event of Default by De veloper and acceleration of this Note, if it were to occur, the outstanding balance, if any, shall be due immediately and paid in full by Developer to City without regard to Residual Receipts.
(d) Notwithstanding the allocation of Residual Receipts, the full Note Amount may be accelerated as set forth in Section 10 below.
291
32 4. Calculation of Residual Receipts in Connection with Note Repayment. (a) Residual Receipts Report; Allocation and Remittance of Residual Receipts. Developer agrees to calculate, allocate and remit Residual Receipts in accordance with the Agreement and provide to City the Annual Financial Statement and Residual Receipts Report evidencing the same.
(i) After the calendar year in which the date of recordation of the Notice of Affordability Restrictions occurs and annually on or before June 1 of each succeeding calendar Year until the Maturity Date, Developer shall make annual payments to City of the City’s Proportionate Share of fifty percent (50%) of Residual Receipts, which is anticipa ted to be collectively nine and eighty-eight thousandths percent (9.088%), (which includes this Note and the City Note), if any and when due, as set forth below and in the Agreement. (ii) On the first to occur of (A) HOME Loan Maturity Date, or (B) acceleration of this Note due to Developer’s Event of Default, the outstanding principal amount (plus accrued interest, if any) shall be due in full by Developer to City, all without regard to Residual Receipts calculation.
(iii) In addition, subject to the terms of the Agreement, this Note shall be paid from Refinancing Net Proceeds or from the Transfer Net Proceeds in the applicable percentages stated in the Agreement.
(iv) Notwithstanding the foregoing, the full Note Amount may be accelerated as set forth in Section 10 below.
5. Consent Required for Assignment and Assumption. Except for Transfers permitted pursuant to Article 8 of the Agreement, this Note shall not be assignable or assumable by any successor or assignee of Developer without the prior written consent of City, which consent may be withheld in the sole and absolute discretion of the City Manager (or if the City Manager elects in his or her discretion to present such request to the City Council.)
6. Form of Payments . All amounts due hereunder are payable in immediately available funds and lawful monies of the United States of America.
7. Application of Payments. All payments shall be applied (a) first, to costs and fees owing hereunder, (b) second, to the payment of accrued interest , (c) third, to the payment of principal, and (d) fourth, and if applicable, the accrual and payment of Default Rate of interest in the event of Default as defined and described in Section 10 below.
8. Prepayment. At any time, Developer may prepay in whol e or in part the outstanding principal balance under this Note, together with all accrued interest, if any, and unpaid fees, costs and expenses, if any, payable hereunder, without penalty or premium. In the event of prepayment by Developer, the Regulatory Agreement, in particular the covenants with respect to affordable housing for Extremely Low-Income Households during the Affordability Period as set 292
33 forth in the Agreement and the Regulatory Agreement, shall remain intact, and shall be unaffected by the prepayment of this Note by Developer.
9. Security. This Note and all amounts payable hereunder are secured by the HOME Deed of Trust of even date herewith executed by Developer in favor of City, which HOME Deed of Trust shall only be subordinate to: (a) the Regulatory Agreement of record as the senior encumbrance, and (b) those certain deeds of trust executed by Developer, as borrower, in favor Primary Lenders, and (c) such other encumbrances approved by the City in writing in its sole discretion. The terms of the HOME Deed of Trust are incorporated herein and made a part hereof to the same extent and with the same force and effect as if fully set forth herein. A default under any of the provisions of the HOME Deed of Trust shall be a default hereunder, a nd a default hereunder shall be a default under the HOME Deed of Trust. (a) Subordinate Note. The indebtedness evidenced by this Note is and shall be subordinate in right of payment to the prior payment in full of the indebtedness evidenced by a promissory note for the Primary Loans executed by Developer, as set forth in the Agreement.
10. Acceleration and Other Remedies. If elected by City pursuant to the following sentence, the entire balance due under this Note shall be paid to City upon the earlier of an Event of Default, including without limitation: (i) the uncured default of Developer under this Note, the Agreement, Regulatory Agreement, HOME Deed of Trust, or other of the Project Documents, in each case, after delivery of notice and expiration of the applicable cure period provided in the respective agreement or instrument; or (ii) the sale, lease or other transfer or conveyance (other than the permitted rentals and other transfers and/or conveyances expressly permitted under the Agreement) of all or any part of the Project, or any interest therein (individually or collectively a “Transfer”), without the prior written consent of City in accordance with the Agreement, in each case, after delivery of notice and expiration of the applicable cure period provided in the applicable Project Document.
(a) Upon the occurrence and during the continuance of an Event of Default, the Note Amount, and all outstanding amounts due under this Note (and the Agreement, the HOME Deed of Trust and other Project Documents) shall accrue interest at the default rate of ten percent (10%) per annum, based on a calendar year (360 days) and charged on the basis of the actual number of days elapsed (“Default Rate”).
(b) In addition, upon and during the continuance of an Event of Default, City may, at City’s option, declare the outstanding principal amount of this Note, together with the then accrued and unpaid interest, if any, all sums secured by the HOME Deed of Trust, and other charges, if any, due under applicable Project Documents; such sums shall be due and payable immediately upon such declaration, and Default Rate shall immediately become and be due and payable without demand or notice, all as further set forth in the HOME Deed of Trust. All costs of collection, including, but not limited to, reasonable attorneys’ fees, consulting fees, and all expenses incurred in connection with protection of, or realization on, the security for this Note, may be added to the principal hereunder, and shall accrue interest at the Default Rate as provided herein.
293
34 (c) City shall at all times have the right to proceed against any portion of the security for this Note in such order and in such manner as City may consider appropriate, without waiving any rights with respect to any of the sec urity. Any delay or omission on the part of City in exercising any right hereunder, under the Agreement, the Project Documents or under the HOME Deed of Trust shall not operate as a waiver of such right, or of any other right. No single or partial exerci se of any right or remedy hereunder or under the Agreement, the Project Documents, the HOME Deed of Trust or any other document or agreement shall preclude other or further exercises thereof, or the exercise of any other right or remedy. The acceptance of payment of any sum payable hereunder, or part thereof, after the due date of such payment shall not be a waiver of City’s right to either require prompt payment when due of all other sums payable hereunder or to declare an Event of Default for failure to make prompt or complete payment.
11. Waivers. Except to the extent notice is required under any of the Project Documents, Developer and all endorsers, guarantors and sureties hereof jointly and severally waive presentment, demand, notice of protest and nonpayment, notice of default or delinquency, notice of acceleration, notice of costs, expenses or leases or interest thereon, notice of dishonor, diligence in collection or in proceeding against any of the rights or interests in or to any and all property securing this Note, and the benefit of any exemption under any homestead exemption laws, if applicable. Developer expressly agrees that this Note or any payment hereunder may be extended from time to time at City’s sole discretion and that City may accep t security in consideration for any such extension or release any security for this Note at its sole discretion all without in any way affecting the liability of Developer. No extension of time for payment of this Note made by agreement by City with any person now or hereafter liable for the payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Developer under this Note, either in whole or in part. The obligations of Developer under this Note shall be absolute and Developer waives any and all rights to offset, deduct or withhold any payments or charges due under this Note for any reasons whatsoever. No previous waiver and no failure or delay by City in acting with respect to the terms of this Note or the HOME Deed of Trust shall constitute a waiver of any breach, default, or failure or condition under this Note, the Deed of Trust or the obligations secured thereby. A waiver of any term of this Note, the HOME Deed of Trust or any of the obligations sec ured thereby must be made in writing and shall be limited to the express written terms of such waiver.
12. Consents. Developer and all endorsers, guarantors and sureties consent to: (a) any renewal, extension or modification (whether one or more, and subject to the terms and provisions of the Agreement relating to modification, extension, and/or amendment) of the terms of the Agreement as such terms relate to this Note or the terms or time of payment under this Note, (b) the release or surrender or exchange or substitution of all or any part of the security, whether real or personal, or direct or indirect, for the payment hereof to the extent requested or approved by Developer, (c) the granting of any other indulgences to Developer, and (d) the taking or releasing of other or additional parties primarily or contingently liable hereunder. Except as otherwise set forth above, any such renewal, extension, modification, release, surrender, exchange or substitution may be made without notice to Developer or to any endorser, guarantor or surety hereof, and without affecting the liability of said parties hereunder. 294
35 13. Successors and Assigns. Whenever “City” is referred to in this Note, such reference shall be deemed to include City and its successors and assigns , including, without limitation, any subsequent assignee or holder of this Note. All covenants, provisions and agreements by or on behalf of Developer, and on behalf of any makers, endorsers, guarantors and sureties hereof which are contained herein shall inure to the benefit of City and its successors and assigns. City may, at its option, assign its right to receive payment under this Note without necessity of obtaining the consent of Developer. Whenever “Developer” is referred to in this Note, such ref erence shall be deemed to include American Family Housing, a California nonprofit, public benefit corporation, and its approved successors and assigns, including, without limitation, any approved subsequent assignee or obligor of this Note, if such approval is given in accordance with the Agreement. In no event shall Developer assign or transfer any portion of this Note without the prior express written consent of City, except as permitted in the Agreement.
14. Usury. It is the intention of Developer and City to conform strictly to the Interest Law, as defined below, applicable to this loan transaction. Accordingly, it is agreed that notwithstanding any provision to the contrary in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, the aggregate of all interest and any other charges or consideration constituting interest under the applicable Interest Law that is taken, reserved, contracted for, charged or received under this Note, or under any of the other aforesaid agreements or otherwise in connection with this loan transaction, shall under no circumstances exceed the maximum amount of interest allowed by the Interest Law applicable to this loan transaction. If any excess of interest in such respect is provided for in this Note, or in any of the documents securing payment hereof or otherwise relating hereto, then, in such event:
(a) the provisions of this paragraph shall govern and control; (b) neither Developer nor Developer’s heirs, legal representatives, success ors or assigns shall be obligated to pay the amount of such interest to the extent that it is in excess of the maximum amount of interest allowed by the Interest Law applicable to this loan transaction; (c) any excess shall be deemed canceled automatically and, if theretofore paid, shall be credited on this Note by City or, if this Note shall have been paid in full, refunded to Developer; and
(d) the effective rate of interest shall be automatically subject to reduction to the Maximum Legal Rate of Interest (as defined below), allowed under such Interest Law, as now or hereafter construed by courts of appropriate jurisdiction. To the extent permitted by the Interest Law applicable to this loan transaction, all sums paid or agreed to be paid to City for the use, forbearance or detention of the indebtedness evidenced hereby shall be amortized, prorated, allocated and spread throughout the full term of this Note. For purposes of this Note, “Interest Law” shall mean any present or future law of the State of California, the United States of America, or any other jurisdiction which has application to the interest and other charges under this Note.
The “Maximum Legal Rate of Interest” shall mean the maximum rate of interest that City may from time to time charge Developer, and under which Developer would have no claim or defense of usury under the Interest Law.
295
36 15. Costs of Enforcement. Developer agrees to pay upon demand all reasonable costs and expenses, including attorneys’ fees, expert witness fees, and costs of suit (including appeals), incurred by City to enforce the terms hereof. In addition to the foregoing award of attorneys’ fees, City shall be entitled to its reasonable attorneys’ fees incurred in any post -judgment proceedings to enforce any judgment in connection with this Note. This provision is separate and several and shall survive the merger of this provision into any judgment.
16. Miscellaneous. Time is of the essence hereof. If this Note is now, or hereafter shall be, signed by more than one pa rty or person, it shall be the joint and several obligations of such parties or persons (including, without limitation, all makers, endorsers, guarantors and sureties), and shall be binding upon such parties and upon their respective successors and assigns.
This Note shall be governed by and construed under the laws of the State of California. Developer irrevocably and unconditionally submits to the jurisdiction of the Superior Court of the State of California for the County of Orange or the United States District Court of the Central District of California, as City hereof may deem appropriate, in connection with any legal action or proceeding arising out of or relating to this Note. Developer also waives any objection regarding personal or in rem jurisdiction or venue to the extent such action is filed in the above -referenced courts. In the event of a conflict between the provisions of this Note and the Agreement, this Note shall control.
17. Non-Recourse Obligation. In the Event of Default under the te rms of this Note, the sole recourse of City therefor shall be Developer’s interest in the Property and the Project and Developer and Affiliates shall not be personally liable for the payment of any obligations under this Agreement; provided, however, that the foregoing shall not in any way affect any rights City may have hereunder, or any right of City to recover or collect funds, damages or costs (including without limitation reasonable attorneys’ fees and costs) incurred by City as a result of fraud, intentional misrepresentation or bad faith waste, and/or any costs and expenses incurred by City in connection therewith (including without limitation reasonable attorneys’ fees and costs).
IN WITNESS WHEREOF , Developer has caused this Promissory Note Secured by Ground Leasehold Deed of Trust executed on the date first set forth above.
DEVELOPER:
AMERICAN FAMILY HOUSING,
a California nonprofit, public benefit corporation
By: ______________________________
Myles Anthony Peinemann II
Chief Executive Officer
296
37 ATTACHMENT NO. 7A
HOME DEED OF TRUST
297
38 Recording Requested By and
When Recorded Mail To:
City of Costa Mesa
77 Fair Drive
Costa Mesa, California 92626
Attention: City Clerk
APN: 439-312-12
(Space above for Recorder’s use.)
This document is exempt from payment of recording
fees per Government Code §§ 6103 and
27383.
GROUND LEASEHOLD
DEED OF TRUST AND ASSIGNMENT OF RENTS
HOME FUNDS
This GROUND LEASEHOLD DEED OF TRUST AND ASSIGNMENT OF RENTS, HOME FUNDS (“Deed of Trust”) is dated as of _________, 202 6 and duly executed AMERICAN FAMILY HOUSING , a California nonprofit, public benefit corporation (“Trustor`”), as trustor, whose address is 15161 Jackson Street, Midway City, California 92655, in favor of COMMONWEALTH LAND TITLE INSURANCE COMPANY (“Trustee”), as trustee, for the benefit of the CITY OF COSTA MESA, a California municipal corporation (“Beneficiary”), as beneficiary, whose address is 77 Fair Drive, Costa Mesa, California 92626.
Each capitalized term used herein and not otherwise defined herein shall have the meaning given such term in that certain Affordable Housing Grant and Loan Agreement (“Agreement”), which is an unrecorded contract as defined in Section 2.1(b), below. Any capitalized terms not defined therein shall have the respective meanings set forth therefor in the Agreement. A copy of the Agreement is on file with the Beneficiary as a public record.
ARTICLE I
GRANT OF SECURITY
1.1 Grant of Security. FOR GOOD AND VALUABLE CONSIDERATION, including the indebtedness herein recited and the trust herein created, the receipt and adequacy of which are hereby acknowledged, Trustor hereby irrevocably grants, transfers and assigns to Trustee, 298
39 IN TRUST, WITH POWER OF SALE, AND RIGHT OF ENTRY AND POSSESSION, for the benefit and security of Beneficiary, all rights, titles, interests, estates, powers and privileges that Trustor now has or may hereafter acquire in or to the following property and interests therein (collectively, the “Property”):
(a) That certain real property located at 1400 Bristol Street, Costa Mesa California, Assessor’s Parcel Number 439 -312-12 (“Land” or “Property”), as more particularly described in the Legal Description attached hereto as Exh ibit A, and incorporated herein by reference;
(b) All buildings and other improvements now or hereafter located on the Land, including, but not limited to, the Fixtures (as defined below) and any and all other equipment, machinery, appliances and other art icles attached to such buildings and other improvements (collectively, the “Improvements”);
(c) All fixtures (collectively, the “Fixtures”) now or hereafter located on, attached to, installed in or used in connection with the Land and the Improvements, inc luding all awnings, boilers, furnaces, pipes, plumbing, elevators, cleaning, call and sprinkler systems, fire extinguishing machinery and equipment, water tanks, heating, ventilating, air conditioning and air cooling machinery and equipment, gas and electr ic machinery and equipment, and other equipment, machinery and appliances and other fixtures of every kind and nature; (d) All rights, rights-of-way, easements, licenses, profits, privileges, tenements, hereditaments and appurtenances now owned or hereafte r acquired by Trustor and used in connection with the Land and the Improvements or as a means of access to either or both; (e) All of Trustor’s right, title and interest now owned or hereafter acquired, in and to any land lying within the right-of-way of any street, open or proposed, adjoining the Land, and any and all sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Land and Improvements;
(f) All oil, gas and other mineral rights in or relating to the Land, and all royalty, leasehold and other rights of Trustor in or relating thereto; (g) All water, water rights and riparian rights (including, without limitation, shares of stock evidencing the same) in or relating to the Land; (h) All leases and subleases relating to all or any part of the Land and the Improvements or any interest therein, now or hereafter existing or entered into, including all deposits, advance rentals and other payments of a similar nature but not including the Rents, as defined and separately assigned in Article 4;
(i) All options to purchase or lease all or any part of the Land or Improvements or any interest therein (and any greater estate in the Land or Improvements now owned or hereafter acquired pursuant thereto); and
299
40 (j) All other estates, easements, licenses, interests, rights, titles, claims or demands, both in law and in equity, which Trustor now has or may hereafter acquire in the Land and the Improvements, including, without limitation, (1) any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of all or any part of the Property, including any award resulting from a change of grade of streets and any award for severance damages, and (2) any and all proceeds of any insurance covering the Property.
ARTICLE II
SECURED OBLIGATIONS
2.1 Secured Obligations. This Deed of Trust, and the lien created hereby, is made for the purpose of securing the following obligations (collectively, the “Secured Obligations”):
(a) the payment and performance by Trustor of all indebtedness and other obligations evidenced by that certain Promissory Note Secured by Ground Leasehold Deed of Trust (“Note”) dated of even date herewith, made by Trustor to the order of Beneficiary, in the original principal amount of Three Hundred Fifty Thousand Dollars ($350,000.00) together with interest on such indebtedness and costs of enforcement according to the terms of the Note; (b) the payment and performance of all indebtedness and each and every promise, agreement, covenant, and obligation of Trustor to Beneficiary contained in (i) that certain unrecorded Affordable Housing Grant and Loan Agreement dated February 28, 2025, between Beneficiary and Trustor, as amended by that First Amendment to Affordable Housing Grant and Loan Agreement dated concurrently herewith ( collectively “Agreement”), (ii) that certain Joint Regulatory Agreement dated February 28, 2025, by and between the City of Newport Beach, Beneficiary and Trustor and recorded against the Property on February 28, 2025, as instrument no. 2025000068064, in the Official Records of Orange County as a senior, non-subordinate encumbrance, (iii) this Deed of Trust, and (v) the other “Project Documents” (as defined in the Agreement), whether or not the total amount thereof may exceed the face amount of the Note, shall be secured hereby to the same extent as though said Agreement, Regulatory Agreement, Note, and other Project Documents were fully incorporated in this Deed of Trust; (c) the payment and performance of all indebtedness and other obligations of Beneficiary, or its successors or assigns, when such indebtedness and obligations are contained in a document which recites that the obligations thereunder are secured by this Deed of Trust; (d) the payment by Trustor of all amounts advanced by or on behalf of Beneficiary or Trustee to improve, protect or preserve the Property or the security of this Deed of Trust, with interest thereon as provided herein; and
(e) the payment and performance of all amendments, modifications, extensions, renewals and replacements of or for any of the foregoing (including, without limitation, (i) amendments or modifications of the required principal payment dates or interest payment dates, or both, as the case may be, accelerating or deferring such interest payment dates in whole or in part, or (ii) amendments, modifications, extensions or renewals at a different rate of interest), 300
41 whether or not any such amendment, modification, extension, renewal or replacement is evidenced by a new or additional promissory note or other document.
ARTICLE III
COVENANTS
3.1 Payment of Secured Obligations. Trustor shall pay and perform the Secured Obligations when due.
3.2 M aintenance, Repair, Alterations . Trustor shall maintain and preserve the Property in good condition and repair, reasonable wear and tear excepted; Trustor, except upon the prior written consent of Beneficiary, and except as expressly contemplated and aut horized under the Agreement, shall not remove, demolish or materially alter any of the Improvements, other than to make repairs in the ordinary course of business of a non-structural nature which serve to preserve or increase the value of the Property; Tru stor shall complete promptly and in a good and workmanlike manner any Improvement which may be now or hereafter constructed on the Land, shall promptly restore in like manner any Improvement which may be damaged or destroyed thereon from any cause whatsoever, and shall pay when due all claims for labor performed and materials furnished therefor; Trustor shall comply with all laws, ordinances, rules, regulations, orders, covenants, conditions, restrictions and “Permitted Encumbrances” (as hereinafter defined) now or hereafter affecting the Property, or any part thereof, or the conduct or operation of Trustor’s business; Trustor shall not commit, suffer or permit any act to be done in, upon or to all or any part of the Property in violation of any such laws, ordinances, rules, regulations, orders, covenants, conditions or Permitted Encumbrances now or hereafter affecting the Property; Trustor shall not commit or permit any waste or deterioration of the Property, and shall keep and maintain abutting grounds, sidewalks, roads, parking and landscape areas in good and neat order and repair; Trustor shall not take any commercially unreasonable action, which if taken would increase in any way the risk of fire or other hazard occurring to or affecting the Property or which otherwise would impair the security of Beneficiary in the Property; Trustor shall comply with the provisions of all leases, if any, constituting a portion of the Property; Trustor shall not abandon the Property or any portion thereof or leave the Property unprotected, unguarded, vacant or deserted; Trustor shall not initiate, join in or consent to any change in any zoning ordinance, general plan, specific plan, private restrictive covenant or other public or private restriction limiting the uses which may be made of the Property by Trustor or by the owner thereof without the prior written consent of Beneficiary; Trustor shall secure and maintain in full force and effect all permits necessary for the use, occupancy and operation of the Property; except as otherwise prohibited or restricted by the Project Documents, or any of them, Trustor shall do any and all other acts which may be reasonably necessary to protect or preserve the value of the Property and the rights of Trustee and Beneficiary with respect thereto.
3.3 I
nsurance . Trustor shall at all times maintain in full force and effect, at Trustor’s sole cost and expense, policies of insurance in form, substance, amounts and with companies as required by the Agreement. In the event of any damage or destruction to the Property, all insurance proceeds shall be applied in accordance with the terms and provisions of the Agreement or, in the absence thereof, as required by law.
301
42 3.4 Condemnation and Other Awards. Upon learning of the condemnation or other taking for public or quasi -public use of, or of the institution or the threatened institution of any proceeding for the condemnation or other taking for public or quasi -public use of, all or any part of the Property, Trustor shall promptly notify Beneficiary and Trustee of such fact. Subject to the requirements under Primary Loan documents, Trustor shall take all actions reasonably required by Beneficiary or Trustee in connection therewith to defend (using counsel reasonably acceptable to Beneficiary) and protect the interests of Trustor, Beneficiary and/or Trustee in the Property. At Beneficiary’s option, Beneficiary or Trustor may be the nominal party in such proceeding but in any event Beneficiary shall be entitled, without regard to the adequacy of its security, to participate in and to control its own defense and any settlement affecting the Beneficiary’s interest in the Property and to be represented therein by counsel of its choice. Subject to the requirements under the Primary Loan documents, Trustor hereby assigns to Beneficiary, as security for the Secured Obligations, all compensation, awards, damages and other amounts payable to Trustor in connection with any condemnation or other taking of all or any part of the Property for public or semi-public use (including, but not limited to, the proceeds of any settlement, regardless of whether or not condemnation or other taking proceedings are instituted in connection therewith).
Upon receipt, subject to the requirements under Primary Loan documents, Trustor shall immediately deliver all such compensation, awards, damages and other amounts to Beneficiary.
All such proceeds shall first be applied to reimburse Beneficiary and Trustee for all costs and expenses, including reasonable attorneys’ fees, incurred in connection with the collection of such award or settlement. The balance of such award or settlement shall be applied as required by law.
Application or release of such proceeds as provided herein shall not cure or waive any default or notice of default hereunder or invalidate any act done pursuant to such notice.
3.5 T
axes and Impositions. Trustor shall be responsible to and shall pay, prior to delinquency, all of the following (collectively, the “Impositions”): (i) all general and special real property taxes and assessments imposed on the Property; and (ii) all other taxes and assessments and charges of every kind that are assessed upon the Property and that create or may create a lien upon the Property (or upon any personal property or fixtures used in connection with the Property), including non-governmental levies and assessments pursuant to applicable covenants, conditions or restrictions. If permitted by law, Trustor may pay any Imposition in installments (together with any accrued interest).
(a) R
ight to Contest. Trustor shall not be required to pay any Imposition so long as (a) the validity of such Imposition is being actively contested in good faith and by appropriate proceedings, and (b) either (i) Trustor has demonstrated to Beneficiary’ s reasonable satisfaction that leaving such Imposition unpaid pending the outcome of such proceedings could not result in conveyance of any parcel in satisfaction of such Imposition or otherwise impair Beneficiary’s interests under the Project Documents, or (ii) Trustor has furnished Beneficiary with a bond or other security satisfactory to Beneficiary in an amount not less than 120% of the applicable claim (including interest and penalties).
(b) E vidence of Payment . Upon demand by the Beneficiary from time to time, Trustor shall deliver to the Beneficiary within thirty (30) days following the due date of any Imposition, evidence of payment of said Imposition reasonably satisfactory to the Beneficiary, 302
43 unless Trustor is contesting the imposition in conformi ty with Section 3.5(a). In addition, upon demand by Beneficiary from time to time, Trustor shall furnish to Beneficiary a tax reporting service for the Property of a type and duration, and with a company, reasonably satisfactory to Beneficiary.
3.6 Utilities. Except to the extent paid directly by tenants, Trustor shall promptly pay all gas, electricity, water, sewer and other utility charges which are incurred for the benefit of the Property or which may become a lien against the Property and all other assessments and other charges of a similar nature, public or private, relating to the Property or any portion thereof, regardless of whether or not any such charge is or may become a lien thereon.
3.7 L
iens . Trustor shall not cause, incur, suffer or permit to exist or become effective any lien, encumbrance or charge upon all or any part of the Property or any interest therein (except for permitted liens, encumbrances and charges as shown on Beneficiary’s title insurance policy).
Trustor shall pay and promptly discharge, at Trustor’s sole cost and expense, all liens, encumbrances and charges upon all or any part of the Property or any interest therein. If Trustor shall fail to remove and discharge any such lien, encumbrance or charge, then, in addition to any other right or remedy of Beneficiary, Beneficiary may, but shall not be obligated to, discharge the same, without notice to or demand on Trustor, and without inquiring into the validity of such lien, encumbrance or charge or the existence of any defense or offset thereto, either by paying the amount claimed to be due, or by procuring the discharge of such lien, encumbrance or charge by depositing in a court a bond or the amount claimed or otherwise giving security for such claim, or in any other manner permitted or required by law. The Trustor shall, within twenty (20) days after demand therefor by Beneficiary (together with sufficient evidence substantiating such expenditures by Beneficiary), pay to Beneficiary an amount equal to all costs and expenses incurred by Beneficiary in connection with the exercise by Beneficiary of the foregoing right to discharge any such lien, encumbrance or charge, together with interest thereon from the date of such expenditure until paid at the “Default Rate” of ten percent (10%) per annum (as defined and further described in the Note.)
3.8 S
ale or Lease of Property . Except for any Commercial Lease and as otherwise permitted under the Agreement, Trustor shall not sell, lease or otherwise transfer all or any part of the Property or any interest therein without the prior written consent of Beneficiary.
3.9 I
nspections . Beneficiary, Trustee and their respective agents, representatives and employees, are each authorized, upon notice reasonable under the circumstances (which may be written or oral) and subject to the rights of tenants of the Property, to enter at any time upon any part of the Property during normal business hours for the purpose of inspecting the same and for the purpose of performing any of the rights and obligations under the law that Beneficiary and/or Trustee are authorized to perform hereunder or under the terms of any of the Project Documents.
Such entry by the Beneficiary shall be upon 72- hours’ prior notice, and shall be undertaken at Beneficiary’s expense, with Beneficiary holding harmless the Trustor from any claims or injuries which occur in connection with the exercise of the Beneficiary’s rights pursuant to this Section 3.9.
The rights of Beneficiary to enter and inspect pursuant to this Section 3.9 are in addition to and do not limit City’s rights to conduct building inspections. 303
44 3.10 Defense of Actions. Trustor, at no cost or expense to Beneficiary or Trustee, shall appear in and defend any action or proceeding purporting to affect the security of this Deed of Trust, any of the other Project Documents, all or any part of the Property or any interest therein, any additional or other security for the obligations secured hereby, or the interests, rights, powers or duties of Beneficiary or Trustee hereunder, provided that Trustee or Beneficiary shall have first tendered the defense to Trustor. If Beneficiary or Trustee elects to become a party to such action or proceeding, or is made a party thereto, Trustor shall indemnify, defend and hold Trustee and Beneficiary harmless from all liability, damage, cost and expense incurred by Trustee and Beneficiary, or either of them, by reason of such action or proceeding (including, without limitation, reasonable attorneys’ fees and expenses), whether or not such action or proceeding is prosecuted to judgment or decision.
3.11 P
rotection of Security. If Trustor fails to make any payment or to do any act as and in the manner provided in this Deed of Trust or any of the other Project Documents, Beneficiary and/or Trustee, each in its own discretion, without obligation so to do, without further notice or demand, and without releasing Trustor from any obligation, may make or do the same in such manner and to such extent as either may reasonably deem necessary to protect the security of this Deed of Trust. In connection therewith (without limiting their general powers), Beneficiary and Trustee shall each have and are hereby given the right, but not the obligation and subject to the terms and conditions set forth herein: (i) to enter upon and take possession of the Property; (ii) to make additions, alterations, repairs and improvements to the Property which in the judgment of either may be necessary or proper to keep the Property in good condition and repair; (iii) to appear and participate in any action or proceeding affecting or which may affect the security hereof or the rights or powers of Beneficiary or Trustee; (iv) to pay, purchase, contest or compromise any encumbrance, claim, charge, lien or debt which in the judgment of either may affect or appears to affect the security of this Deed of Trust or may be, or to appear to be, prior or superior hereto; and (v) in exercising such powers, to pay all necessary or appropriate costs and expenses and employ necessary or desirable consultants.
3.12 B
eneficiary’s Powers . Without affecting the liability of Trustor or any other person liable for the payment of any obligation herein mentioned, and without affecting the lien or charge of this Deed of Trust upon any portion of the Property not then or theretofore released as security for the full amount of all Secured Obligations, Beneficiary may, from time to time and without notice (i) release any person so liable, (ii) extend the maturity or alter any of the terms of any such obligation (provided, however, that the consent of Trustor shall be required with respect to the extension or alteration of any unpaid obligation of Trustor to Beneficiary), (iii) waive any provision contained herein or grant other indulgences, (iv) release or reconvey, or cause to be released or reconveyed at any time at Beneficiary’s option any parcel, a portion or all of the Property, (v) take or release any other or additional security for any obligation herein mentioned, or (vi) make compositions or other arrangements with debtors in relation thereto. By accepting payment or performance of any obligation secured by this Deed of Trust after the payment or performance thereof is due or after the filing of a notice of default and election to sell, Beneficiary shall not have thereby waived its right to require prompt payment and performance, when due, of all other obligations secured hereby, or to declare a default for failure so to pay or perform, or to proceed with the sale under any notice of default and election to sell theretofore given by 304
45 Beneficiary, or with respect to any unpaid balance of the indebtedness secured hereby. The acceptance by Beneficiary of any sum in an amount less than the sum then due shall not constitute a waiver of the obligation of Trustor to pay the entire sum then due.
3.13 Costs, Fees and Expenses. Upon the occurrence of an Event of Default and following any applicable notice and cure period, Trustor shall pay, on demand, all costs, fees, expenses, advances, charges, losses and liabilities paid or incurred by Beneficiary and/or Trustee under or in connection with this Deed of Trust, the enforcement of this Deed of Trust, the collection of the Secured Obligations, and/or the exercise of any right, power, privilege or remedy given Beneficiary and/or Trustee under this Deed of Trust, including, (a) foreclosure fees, trustee’s fees and expenses, receiver’s fees and expenses and trustee’s sale guaranty premiums, (b) costs and expenses paid or incurred by Beneficiary and/or Trustee and/or any receiver appointed under this Deed of Trust in connection with the operation, maintenance, management, protection, preservation, collection, sale or other liquidation of the Property, (c) advances made by Beneficiary and/or Trustee to complete or partially construct all or any part of any improvements which may have been commenced on the Land or otherwise to protect the security of this Deed of Trust, (d) costs of evidence of title, costs of surveys and costs of appraisals, and (e) the fees, costs and expenses of attorneys, accountants and other consultants; together with interest thereon from the date of expenditure until so paid at the Default Rate.
ARTICLE IV
ASSIGNMENT OF RENTS, ISSUES AND PROFITS
4.1 Assignment of Rents, Issues and Profits. While this Deed of Trust is outstanding, Trustor hereby absolutely and irrevocably assigns and transfers to Beneficiary all of its right, title and interest in and to all rents, issues, profits, royalties, income and other proceeds and similar benefits derived from the Property (collectively, the “Rents”), and hereby gives to and confers upon Beneficiary the right, power and authority to collect such Rents. Until the reconveyance of this Deed of Trust, Trustor irrevocably appoints Beneficiary its true and lawful attorney-in-fact, at the option of Beneficiary, at any time and from time to time, to demand, receive and enforce payment, to give receipts, releases and satisfactions, and to sue, in its name or in the name of Trustor, for all Rents, and to apply the same to the obligations secured hereby; provided, however, that Trustor shall have a license to collect Rents (but not more than one month in advance unless the written approval of Beneficiary has first been obtained), and to retain and enjoy the same, so long as an Event of Default shall not have occurred hereunder and be continuing. The assignment of the Rents in this Article 4 is intended to be an absolute assignment from Trustor to Beneficiary and not merely the passing of a security interest.
4.2 C
olle ction Upon Default. Upon the occurrence and during the continuance of an Event of Default hereunder following any applicable notice and cure period, Trustor’s license to collect the Rents shall automatically terminate and Beneficiary may, at any time with out notice, either in person, by agent or by a receiver appointed by a court, and without regard to the adequacy of any security for the obligations hereby secured, enter upon and take possession of the Property, or any part thereof, and, with or without taking possession of the Property or any part thereof, in its own name sue for or otherwise collect such Rents (including those past due and unpaid, and all 305
46 prepaid Rents and all other monies which may have been or may hereafter be deposited with Trustor by any lessee or tenant of Trustor to secure the payment of any Rent or for any services thereafter to be rendered by Trustor or any other obligation of any tenant to Trustor arising under any lease, and Trustor agrees that, upon the occurrence of any Event of Default hereunder, Trustor shall promptly deliver all Rents and other monies to Beneficiary), and Beneficiary may apply the same, less costs and expenses of operation and collection, including, without limitation, attorneys’ fees, whether or not suit is brought or prosecuted to judgment, upon any indebtedness or obligation of Trustor secured hereby, and in such order as Beneficiary may determine notwithstanding that said indebtedness or the performance of said obligation may not then be due. The collection of Rents, or the entering upon and taking possession of the Property, or the application of Rents as provided above, shall not cure or waive any default or notice of default hereunder or invalidate any act performed in response to such default or pursuant to such notice of default or be deemed or construed to make Beneficiary a mortgagee-in-possession of all or any part of the Property.
ARTICLE V
REMEDIES UPON DEFAULT
5.1 Events of Default . The term “Event of Default” is defined in the Agreement and includes without limitation the occurrence of any of the following events or conditions hereunder:
5.1.1 Trustor shall fail to pay any amount owing under the Note when due, and such failure is not cured within ten (10) days after Beneficiary gives Trustor notice of such failure;
5.1.2 Trustor shall fail to observe or perform any other obligation contained in this Deed of Trust, and such failure is not cured within thirty (30) days after Beneficiary gives Trustor notice of such failure; provided that, if cure cannot reasonably be effected within such 30- day period, such failure shall not be an Event of Default so long as Borrower promptly (in any event, within thirty (30) days after receipt of such notice) commences cure, and thereafter diligently prosecutes such cure to completion;
5.1.3 The occurrence of an “Event of Default” under the Agreement, the Regulatory Agreement, the Note, or other Project Documents;
5.1.4 A default under any other document or agreement secured hereby, subject to any applicable cure period; or
5.1.5 City exercises City’s right to cure a default by Developer under the Primary Loan or other financing senior to the City Loan and Developer does not reimburse City for the cost to cure such default within ten (10) days following written demand for payment from City.
5.2 Acceleration Upon Default; Additional Remedies. Upon the occurrence and during the continuance of an Event of Default, Beneficiary may, at its opti on, terminate its obligations under the Project Documents and declare all Secured Obligations to be immediately due and payable without any presentment, demand, protest or further notice of any kind; and whether or not Beneficiary exercises said option, Beneficiary may:
306
47 5.2.1 Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court and without regard to the adequacy of its security, enter upon and take possession of the Property, or any part thereof, in its own name or in the name of Trustee, and do any acts which it deems necessary or desirable to complete the construction of the Improvements on the Land, to preserve the value, marketability or rentability of the Property, or part thereof or interest therein, increase the income therefrom or protect the security hereof and, with or without taking possession of the Property, sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collection including attorneys’ fees, upon any Secured Obligations, all in such order as Beneficiary may determine. The entering upon and taking possession of the Property, the collection of such Rents and the application thereof as aforesaid , shall not cure or waive any default or notice of default hereunder or invalidate any act done in response to such default or pursuant to such notice of default and, notwithstanding the continuance in possession by Trustee, Beneficiary or a receiver of all or any portion of the Property or the collection, receipt and application of any of the Rents, the Trustee or Beneficiary shall be entitled to exercise every right provided for in any of the Project Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale;
5.2.2 Commence an action to foreclose this Deed of Trust as a mortgage, appoint a receiver, or specifically enforce any of the covenants contained herein;
5.2.3 Deliver to Trustee a written declaration of default and demand for sale, and a written notice of default and election to cause Trustor’s interest in the Property to be sold, which notice Trustee or Beneficiary shall cause to be duly filed for record in the official records of the County in which the Property are located;
5.2.4 Exercise any and/or all of the rights and remedies available to a secured party under the California Uniform Commercial Code in such order and in such manner as Beneficiary, in its sole discretion, may determine (including, without limitation, requiring Trustor to assemble the collateral and make the collateral available to Beneficiary at a reasonably convenient location); provided, however, that the expenses of retaking, holding, preparing for sale or the like as provided thereunder shall include reasonable attorneys’ fees and other expenses of Beneficiary and Trustee and shall be additionally secured by this Deed of Trust; and/or
5.2.5 Exercise all other rights and remedies provided herein, in any Project Document or other document or agreement now or hereafter securing all or any portion of the obligations secured hereby, or provided by law or in equity.
5.3 Foreclosure By Power of Sale.
5.3.1 Should Beneficiary elect to foreclose by exercise of the power of sale herein contained, Beneficiary shall notify Trustee and shall deposit with Trustee this Deed of Trust and the Note and such receipts and evidence of expenditures made and secured hereby as Trustee may require.
307
48 5.3.2 Upon receipt of notice from Beneficiary, Trustee shall cause to be recorded, published and delivered to Trustor such notice of default and election to sell as is then required by law. Trustee shall, without demand on Trustor, after lapse of such time as may then be required by law and after recordation of such notice of default and after notice of sale having been given as required by law, sell the Property at the time and place of sale fixed by it in said notice of sale, either as a whole, or in separate lots or parcels or items and in such order as Beneficiary may direct Trustee so to do, at public auction to the highest bidder for cash in lawful money of the United States of America payable at the time of sale. Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any person, including, without limitation, Trustor, Trustee or Beneficiary, may purchase at such sale.
5.3.3 After deducting all fees, costs and expenses incurred by Beneficiary or Trustee in connection with such sale, including costs of evidence of title, Beneficiary shall apply the proceeds of sale in the following priority, to payment of (i) first, all amounts expended under the terms hereof, not then repaid, with accrued interest at the Default Rate; (ii) second, all other Secured Obligations; and (iii) the remainder, if any, to the person or persons legally entitled thereto.
5.3.4 Subject to applicable law, Trustee may postpone the sale of all or any portion of the Property by public announcement at the time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale.
5.3.5 A sale of less than the whole of the Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein; and subsequent sales may be made hereunder until all obligations secured hereby have been satisfied, or the entire Property sold, without defect or irregularity.
5.4 Appointment of Receiver. Upon the occurrence of an Event of Default under this Deed of Trust, Beneficiary, as a matter of right and without notice to Trustor or anyone claiming under Trustor, and without regard to the then value of the Property or the interest of Trustor therein, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of the Property, and Trustor hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Beneficiary in case of entry as provided herein and shall continue as such and exercise all such powers until the date of confirmation of sale of the Property unless such receivership is sooner terminated.
5.5 A
pplication of Funds After Default. Except as otherwise herein provided, upon the occurrence of an Event of Default hereunder, Beneficiary may, at any time without notice, apply any or all sums or amounts received and held by Beneficiary to pay insurance premiums, Impositions, or either of them, or as rents or income of the Property, or as insurance or condemnation proceeds, and all other sums or amounts received by Beneficiary from or on account 308
49 of Trustor or the Property, or otherwise, upon any Secured Obligation, in such manner and order as Beneficiary may elect, notwithstanding that such Secured Obligation may not yet be due. The receipt, use or application of any such sum or amount shall not be construed to affect the maturity of any indebtedness secured by this Deed of Trust, or any of the rights or powers of Beneficiary or Trustee under the terms of the Project Documents, or any of the obligations of Trustor or any guarantor under the Project Documents; or to cure or waive any default or notice of default under any of the Project Documents; or to invalidate any act of Trustee or Beneficiary.
5.6 Remedies Not Exclusive. Trustee and Beneficiary, and each of them, shall be entitled to enforce payment and performance of any indebtedness or obligation secured hereby and to exercise all rights and powers under this Deed of Trust or under any Project Document or other agreement or any law now or hereafter in force, notwithstanding som e or all of the said indebtedness and obligations secured hereby may now or hereafter be otherwise secured, whether by guaranty, mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance of this Deed of Trust nor its enforcement whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manner affect Trustee’s or Beneficiary’s right to realize upon or enforce any other security now or hereafter held by Trustee or Beneficiary, it being agreed that Trustee and Beneficiary, and each of them, shall be entitled to enforce this Deed of Trust and any other security for the obligations hereby secured now or hereafter held by Beneficiary or Trustee in such order and manner as they may in their absolute discretion determine.
No remedy herein conferred upon or reserved to Trustee or Beneficiary is intended to be exclusive of any other remedy herein, or granted to Beneficiary under any other agreement, or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or granted to Beneficiary under any other agreement, or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Pr oject Documents to the Trustee or Beneficiary or to which either of them may be otherwise entitled may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Trustee or Beneficiary, and either of them may pursue inconsistent remedies.
Trustor may be joined in any action brought by Beneficiary to foreclose under or otherwise enforce this Deed of Trust.
5.7 R
equest for Notice of Default. Trustor hereby requests that a copy of any notice of default and that a copy of any notice of sale hereunder be mailed to it at the address set forth in the first paragraph of this Deed of Trust.
ARTICLE VI
MISCELLANEOUS
6.1 Amendments . This instrument cannot be waived, modified, discharged or terminated orally, but only by an instrument in writing signed by the party against whom enforcement of any waiver, modification, discharge or termination is sought.
6.2 Wai
vers . Trustor waives, to the extent permitted by law, (i) the benefit of all laws now existing or that may hereafter be enacted providing for any appraisement before sale of any portion of the Property, and, whether now existing or hereafter arising or created, (ii) all rights of 309
50 valuation, appraisement, stay of execution, notice of election to mature or declare due the whole of the secured indebtedness and marshaling in the event of foreclosure of the liens hereby created, and (iii) all rights and remedies which Trustor may have or be able to assert by reason of the laws of the State of California pertaining to the rights and remedies of sureties: provided, however, nothing contained herein shall be deemed to be a waiver of Trustor’s rights under Section 2924, 2924b and 2924c of the California Civil Code, or under Sections 580a or 726 of the California Code of Civil Procedure.
6.3 Statements by Trustor. Trustor shall, within twenty (20) days after notice thereof from Beneficiary, deliver to Beneficiary a written statement setting forth the amounts Trustor understands to be unpaid and secured by this Deed of Trust and stating whether any offset or defense exists against such amounts.
6.4 S
tatements by Beneficiary . For any statement or accounting requested by Trustor or any other entitled person pursuant to Section 2943 or Section 2954 of the California Civil Code or pursuant to any other provision of applicable law, or for any other document or instrument furnished to Trustor by Beneficiary, Beneficiary may charge the maximum amount permitted by law at the time of the request therefor, or if there be no such maximum, then in accordance with Beneficiary’s customary charges therefor or the actual cost to Beneficiary therefor, whichever is greater.
6.5 R
econveyance by Trustee. Upon written request of Beneficiary stating that all obligations under the Note have been paid and fully performed, and upon surrender by Beneficiary of this Deed of Trust and the Note to Trustee for cancellation and retention and upon payment by Trustor of Trustee’s fees and the costs and expenses of executing and recording any requested reconveyance, Trustee shall reconvey to the person or persons legally entitled thereto, without warranty, any portion of the Property then held hereunder. The recitals in any such reconveyance of any matter or fact shall be conclusive proof of the truthfulness thereof. The grantee in any such reconveyance may be described as “the person or persons legally entitled thereto.”
6.6 N
otices . All notices, demands, approvals and other communications provided for herein shall be in writing and shall be personally delivered, delivered by reputable overnight courier service or mailed by United States mail, as certified or registered material, return receipt requested, postage prepaid, to the appropriate party at the address set forth in the first paragraph of this Deed of Trust. Addresses for notice may be changed from time to time by written notice to all other parties. All communications shall be effective when actually received: provided, however, that non-receipt of any communication as the result of a change of address of which the pending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication.
6.7 A
cceptance by Trustee. Trustee accepts this trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law.
6.8 H eadings . Article and Section headings are included in this Deed of Trust for convenience of reference only and shall not be used in construing this Deed of Trust. 310
51 6.9 Severability. Every provision of this Deed of Trust is intended to be severable. In the event any provision hereof is declared to be illegal, invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction, such illegality, invalidity or unenforceability shall not affect the legality, validity or enforceability of the remaining provisions hereof, which provisions shall remain binding and enforceable.
6.10 S
ubrogation. To the extent that proceeds of the Note are used, either directly or indirectly, to pay any outstanding lien, charge or prior encumbrance against the Property, Beneficiary shall be subrogated to any and all rights and liens held by any owner or holder of such outstanding liens, charges and prior encumbrances, irrespective of whether such liens, charges or encumbrances are released.
6.11 G
overning Law. This Deed of Trust shall be governed by, and construed in accordance with, the laws of the State of California.
6.12 S tatute of Limitations . The right to plead, use or assert any statute of limitations as a plea, defense or bar of any kind, or for any purpose, to any obligation secured hereby, or to any complaint or other pleading or proceeding filed, instituted or maintained for the purpose of enforcing this Deed of Trust or any rights hereunder, is hereby waived by Trustor to the full extent permitted by law.
6.13 I nterpretation. In this Deed of Trust the singular shall include the plural and the masculine shall include the feminine and neuter and vice versa, if the context so requires; and the word “person” shall include corporation, partnership or other form of association. Any reference in this Deed of Trust to any document, instrument or agreement creating or evidencing an obligation secured hereby shall include such document, instrument or agreement both as originally executed and as it may from time to time be modified.
6.14 T
rust Irrevocable . The trust created hereby is irrevocable by Trustor. All amounts payable by Trustor pursuant to this Deed of Trust shall be paid without notice (except where notice is expressly required), demand, counterclaim, setoff, deduction or defense and without abatement, suspension, deferment, diminution or reduction. Trustor hereby waives all rights now or hereafter conferred by statute or otherwise to any abatement, suspension, deferment, diminution or reduction of any amount secured hereby and payable by Trustor to Beneficiary or Trustee.
6.15 F
urther Assurances. Trustor agrees to do or cause to be done such further acts and things and to execute and deliver or to cause to be executed and delivered such additional assignments, agreements, powers and instruments, as Beneficiary or Trustee may reasonably require to correct any defect, error or omission in this Deed of Trust or the execution or acknowledgment of this Deed of Trust, to subject to the lien of this Deed of Trust any of Trustor’s property covered or intended to be covered hereby, to perfect and maintain such lien, to keep valid and effective the charges and lien hereof, to carry into effect the purposes of this Deed of Trust or to better assure and confirm to Beneficiary or Trustee their respective rights, powers and remedies hereunder.
311
52 6.16 Trustee’s Powers. At any time, and from time to time, without liability therefor and without notice, upon written request of Beneficiary and presentation of this Deed of Trust and the note secured hereby for endorsement, and without affecting the personal liability of any person for payment of the indebtedness or the performance of any other obligation secured hereby or the effect of this Deed of Trust upon the remainder of the Property, Trustee may (i) reconvey all or any part of the Property, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, or (iv) join in any extension agreement, agreement subordinating the lien or charge hereof, or other agreement or instrument relating hereto or to all or any part of the Property.
6.17 S
ubstitution of Trustee . Beneficiary may, from time to time, by written instrument executed and acknowledged by Beneficiary and recorded in the county or counties where the Property are located, or by any other procedure permitted by applicable law, substitute a successor or successors for the Trustee named herein or acting hereunder.
6.18 S
uccessors and Assigns. This Deed of Trust applies to, inures to the benefit of and binds all parties hereto, their heirs, legatees, devisees, administrators, executors, successors and assigns.
6.19 No
n -Recourse Obligation. In the Event of Default under the terms of the Agreement, the Note, this Deed of Trust, or any of the other Project Documents, the sole recourse of City for any such Default shall be Developer’s interest in the Property and the Project and Developer and its Affiliates shall not be personally liable for the payment of any obligations under this Agreement; provided, however, that the foregoing shall not in any way affect any rights City may have hereunder, or any right of City to recover or collect funds, damages or costs (including without limitation reasonable attorneys’ fees and costs) incurred by City as a result of fraud, intentional misrepresentation or bad faith waste, and/or any costs and expenses incurred by City in connection therewith (including without limitation reasonable attorneys’ fees and costs).
IN WITNESS WHEREOF, Trustor has duly executed this Deed of Trust and Assignment of Rents as of the date set forth below.
AMERICAN FAMILY HOUSING,
a California nonprofit, public benefit corporation
By: ______________________________
Myles Anthony Peinemann II
Chief Executive Officer
312
LEGAL DESCRIPTION