Earlier this Fall I urged readers to pay attention to two big housing stories that were looming ominously on the horizon: first, Costa Mesa’s ongoing struggle to get a compliant Housing Element certified by the California Department of Housing and Community Development (HCD), a prerequisite to avoiding a State lawsuit as well as ensuring eligibility for all kinds of critical state funds; and second, the precarious and uncertain state of the city’s homelessness programs.

Since then there have been significant developments in both stories, none of them positive. So pour yourself the sweetest cup of hot chocolate (with maybe something extra) to take the edge off, and let’s talk about the coal in Costa Mesa’s stockings this holiday season.

Costa Mesa and HCD: We’re probably getting sued, and that’s the least of our concerns

To recap, HCD sent a very unhappy letter to the city back in August, recapping all of the ways it had failed to meet various deadlines related to the Housing Element certification process (verdict: HCD is 100% correct, we’re terribly behind). The city then responded to that letter with one of its own, one containing a lot of happy talk about a “shortened” timeline to get through the biggest hurdle — the rezoning of the various Housing Element sites — but not a lot of concrete promises.

Then, during the City Council’s November 4, 2025 meeting, Mayor John Stephens quipped that the rezoning process was on “a rocketship to the moon,” noted that the intention was to complete the rezoning process by March 2026, and implied this was HCD’s desired timeline.

HCD to Costa Mesa: We’re waiting…

That catches us up to the Planning Commission meeting earlier this week where an update on the HCD process was on the agenda, which happened to feature one of the most intimidating Agenda Reports I’ve ever read. While the text is scary, at least the infographics are clear and helpful:

… But that sure doesn’t seem like we’re getting to the finish line in March 2026, does it!

I can only conclude that the city has resigned itself to getting some kind of action by HCD brought against it. And I don’t entirely blame them; it recently dawned on me that, in addition to the rezoning process described in the above graphic, we have to finish up the Fairview Developmental Center rezoning, too, since it’s a major Housing Element opportunity site. Whoops. That’s a looooooooong pole in the tent. Maybe no matter how fast we move on the rezoning, it seems like the FDC issue alone will force the city to miss all the deadlines.

So, we’re very likely getting sued. But don’t worry: it gets worse!!

As you might have guessed, Costa Mesa isn’t the only city in legal hot water over the Housing Element process. One such city, perennial housing-resister Redondo Beach, has been in a years-long litigation war with its development community over the so-called “builder’s remedy”, which punishes cities by allowing development with almost no regulatory strings attached IF that city does not have a compliant Housing Element (spoiler alert: Costa Mesa has been subject to this remedy for years now for this reason). In a recent lawsuit, developers were trying to invalidate Redondo Beach’s certified Housing Element presumably so the builder’s remedy would once again apply, allowing their projects to move forward over that city’s resistance.

And they won. Bigly. And it has dire implications for Costa Mesa’s Housing Element process.

Overlay Zoning and the New Commune Decision

But let’s back up and go over some basics first. Zoning, for those unfamiliar with city planning jargon, essentially works like this: the city takes an empty parcel, determines what “kind” of building should be there (residential, industrial, commercial, etc.), determines how big the building should be (number of units, how far back from the street it should be, how tall it should be, etc.), and then writes that down in its “zoning code”. The owner of that parcel can then build whatever he or she likes, assuming it fits the type and size of building in the code. If it doesn’t, the owner can ask for a “variance”, but for the sake of argument let’s assume people generally stick to the code.

Then something like the Housing Element comes up, with the city required to zone for thousands of new residential units. But there’s a problem: all the parcels in the city have already been zoned for one thing or another, and worse, they’ve already been developed in accordance with their zoning. So what do you do? Well, many cities use what is called an “overlay” zone. For example, let’s take a parcel that’s currently zoned for commercial use and has an existing commercial use built on it, say a restaurant. The city could then add an “overlay” so that, when the property is redeveloped, it could either stay a commercial use (i.e., it could be replaced with another restaurant) OR it could become whatever is permitted by the overlay – an apartment complex if the overlay permitted multifamily housing, a hotel if the overlay permitted transient occupancy, etc.

Many cities, including Costa Mesa, took advantage of the overlay zone mechanics to “upzone” its industrial and commercial areas so that they could also include mixed use or exclusively residential development — allowing the city to “count” those potential units towards its regulatory requirements, while allowing property owners in those overlay zones to maintain flexibility to stick to the original zoning.

Enter New Commune DTLA LLC v. City of Redondo Beach. Redondo Beach used these “overlays” to zone for a sufficient number of new units to meet its housing needs allocation and get its Housing Element certified. But, due to the language of the relevant statute, the Court held that these overlays could not be used to meet those housing needs requirements if they provided optionality to the land owner to redevelop its land without providing new housing. There are some nuances to this holding, but that’s the gist.

To clarify what this means, let’s return to the restaurant example. Let’s say there is a Redondo Beach restaurant zoned for commercial before the Housing Element process. The city decides to tag it as a “housing opportunity site” and apply a residential overlay, such that the restaurant could now be redeveloped as another commercial use or as a small apartment complex.

What the New Commune court held is that the restaurant in our example cannot be a housing opportunity site if the zoning permits it to be redeveloped as a solely commercial use. In other words, the new overlay has to require building housing as part of a redevelopment, or the city can’t count those potential units towards its housing needs allocation. And if this issue is pervasive enough the whole Housing Element might be invalid.

And therein lies Costa Mesa’s problem. Costa Mesa’s entire strategy to achieve Housing Element compliance hinges on upzoning its commercial and industrial corridors with residential overlays. However, implicit in this strategy was that the city didn’t actually expect all of those corridors to become wall-to-wall housing, and certainly not overnight. Not only would landowners likely not jump at the chance to change uses — folks that have run car dealerships for years, for example, won’t all rush to become apartment landlords — the city needs these businesses to support its sales tax revenue. So the strategy behind the selection of the Housing Element sites, as well as the parcels selected for inclusion in Measure K, depended on landowners maintaining the option to keep the sites commercial or at least mixed-use.

But, thanks to New Commune, that strategy is, to put it mildly, completely knackered. The New Commune court is telling us that, if a parcel is a housing opportunity site, then any residential overlay must supersede the base zoning and require redevelopment in accordance with the overlay (that is, the owner must build housing when they redevelop).

And, at this juncture, this appears to be exactly what Staff intends to propose the city do. Staff has proposed amending one of Costa Mesa’s existing overlay districts, the Multi-Use Overlay District, or MOUD (an acronym fit to spawn a thousand blog post titles), so that it will require, rather than just permit, residential redevelopment in the city’s housing opportunity sites. And that makes sense from a legal perspective; note that the Agenda Report states that HCD was “strongly supportive” of this course of action when Staff previewed it with that agency.

But from a process perspective, I can’t imagine anyone involved in the Housing Element process could have possibly expected that we were effectively banishing commercial and industrial uses on these parcels as we were allowing housing to be built on them. Which means that the entire public and public body outreach process has been severely undermined, too.

Now, how property owners will react to the news that their parcels can no longer be redeveloped in accordance with those parcels’ original zoning is anyone’s guess. It’s entirely possible those owners might sue, and I’m not sure how that case would shake out. In addition, my head is spinning with the perverse incentives such a regime might create; for example, instead of having Norm’s on Harbor Boulevard be redeveloped into a handful of smaller shops and restaurants to support the surrounding housing development, the Norm’s owners may shrewdly conclude that it’s better to keep the aging building as-is rather than tangle with becoming residential landlords. Enough of this thinking and the “requirement” to build housing actually becomes a guarantee against redevelopment of any kind in all of our Housing Element sites. Which… would be a very California outcome.

So to recap: we’re going to get sued by the State for being pathetically behind on a process that’s probably destined to produce very little housing while it sends our commercial districts into complete zoning disarray.

Great.

But like I said above, don’t worry: it gets EVEN worse!

Newport Beach is out at the Costa Mesa Bridge Shelter, and new funding is TBD

I regret to inform you that I was dead-on when I was previewing the changes to the Newport Beach/Bridge Shelter contract last week when I surmised Staff was quietly telling us that Newport Beach will no longer provide guaranteed support for the Bridge Shelter after 2026. They are officially out as Costa Mesa’s partner, leaving us dancing on the homelessness services dance floor all by ourselves.

But maybe not for long. During the meeting, Staff and City Manager Cecilia Gallardo-Daly announced that they were deep in talks with another city to take Newport Beach’s place as a yearly contributor to the shelter’s annual operations budget. Now, which city this could be, I cannot say.

But if I had to guess (and you know I love rank speculation), I’m going to go out on a limb and say Santa Ana. It’s a big neighboring city with a large unhoused population with a high demand for services. It also has been asked to shoulder the bulk of the county’s homelessness work, which it has bridled at in recent years. So seeking out a partner city, especially one with its own shelter already in place, makes a fair amount of sense.

[Sidebar: I am also sensing that some of our policy direction, especially in the City Manager’s Neighborhood Improvement department under Nate Robbins, is trending Santa Ana’s way. Remember that anti-eviction ordinance the city past a couple years ago? Santa Ana did it first. And that aid to residents facing immigration prosecutions by ICE and others? Yep, Santa Ana did that ahead of us, too. And of course, Santa Ana has a rental registry. So now, Costa Mesa is looking into having one. It’s almost like we’re copying Santa Ana’s progressive anti-homelessness and anti-poverty playbook. Which would be great, if either of those playbooks were winning metaphorical championships.]

But whoever we partner with, I can tell you that the city absolutely 100% cannot shoulder the burden of running the Bridge Shelter without state aid. And the other shoe that dropped during the discussion of Newport Beach’s terminating contract was the announcement that the city also has not received two-years worth of state funding for the Bridge Shelter from the Permanent Local Housing Allocation program. Why?

Because Costa Mesa does not have a compliant Housing Element. It’s right there, in that nasty August 2026 letter the city received.

Behold, the majesty of California housing policy: if you don’t get your Housing Element done on time, we’ll rip away the funds we give you to take care of homeless people. That will show them.

Dark snark aside, Costa Mesa isn’t just in a housing pickle. It’s in a pickle fryer. And with HCD breathing down our neck, no clear path to Housing Element certification, and state funds being trimmed for our tardiness, 2026 is looking downright crispy.