A pro-housing nonprofit backed by the California Association of Realtors® (C.A.R.) has filed lawsuits against three California cities, alleging each is working to subvert a state law meant to open up residential development near major transit corridors. The conflict has direct implications for California's chronically strained housing pipeline.
Californians for Homeownership, a 501(c)(3) organization sponsored by C.A.R., filed separate cases against San Diego, San Francisco, and Montebello, arguing each city has adopted legal maneuvers that contravene Senate Bill 79 (SB 79), the transit-oriented development law signed by Governor Gavin Newsom in October 2025.
Under SB 79, housing that meets specific criteria is permitted on parcels within a half-mile or quarter-mile of qualifying transit stations, regardless of local zoning. The California Housing Defense Fund (CalHDF) is a co-plaintiff in all three cases. Nonprofit YIMBY Law has also joined the San Francisco filing.
"Cities throughout California must play by the same set of rules," said Tamara Suminski, C.A.R.'s president and a Southern California broker and REALTOR®, in a statement accompanying the lawsuits.
Three cities, three legal theories
Each city is accused of a distinct form of non-compliance. In San Diego, the nonprofit alleges the city applied a "walking path" exemption to exclude large areas near San Diego Trolley stations, including parcels blocked by minor alleyways or sidewalk gaps. The plaintiffs argue state law bars cities from citing their own infrastructure shortfalls to restrict transit-adjacent development.
Separately, San Diego's planning office is accused of publishing internally inconsistent maps that have complicated site review for developers. The case is filed as Californians for Homeownership et al. v. City of San Diego in San Diego County Superior Court.
The San Francisco lawsuit targets the city's decision to designate portions of its land base as "industrial employment hubs," a classification the plaintiffs contend does not comply with state standards for lawful exclusion under SB 79.
The city is also alleged to be improperly restricting access to California's State Density Bonus Law, a key housing production tool. Spokesperson Jen Kwart said only that the city would "review the complaint and respond in court."
The most sweeping challenge is directed at Montebello, which enacted a full moratorium on SB 79 developments through Ordinance No. 2495 in June.
Californians for Homeownership argues the moratorium violates the Housing Crisis Act of 2019, which explicitly prohibited local governments from suspending residential development approvals.
The case is filed as Californians for Homeownership et al. v. City of Montebello in Los Angeles County Superior Court.
What the litigation means for California's housing market
For mortgage brokers operating in California's coastal urban markets where loan volume is directly tied to inventory turnover, the resolution of these cases carries significant weight.
The US housing supply gap reached an estimated 4.03 million homes in 2025, up from 3.8 million in 2024, according to Realtor.com's 2026 Housing Supply Gap Report, as new construction continued to fall short of household formation rates.
California's affordability shortfall feeds directly into that national deficit, and brokers working in markets where housing inventory shapes lending pipelines are watching the SB 79 litigation closely.
Matthew Gelfand, Californians for Homeownership's in-house litigator, said the organization is "committed to ensuring that cities strictly comply with these provisions."
The nonprofit has previously filed enforcement actions against 10 other California cities and currently has pre-litigation discussions underway with additional municipalities.
Californians for Homeownership is also exploring a path short of litigation in some jurisdictions, recently entering a tolling agreement with the city of Burlingame that allows state regulators to review its policies before any lawsuit is filed.
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