California court curbs Coastal Commission on building permits

A California home builder sought to build three additional houses on lots it had owned for more than two decades in a coastal county.

That should have been easy. It had already built four nearby homes. But it wasn’t.

Years of court hearings followed when a state agency overrode San Luis Obispo County’s authority and denied the building permits.

On Thursday, the California Supreme Court ruled the agency went too far in denying Shear Development’s permits to build infill homes in an established neighborhood.

The unanimous decision stripped the California Coastal Commission of the jurisdictional basis it had used to override the county’s approval of the homes in Los Osos. The ruling sets new legal guardrails on how far the agency can reach into local permitting decisions.

Chief Justice Patricia Guerrero ordered the commission to vacate its 2020 permit denial and dismiss the appeal for lack of jurisdiction. Her ruling reversed a 2024 Court of Appeal decision that had sided with the commission.

Pacific Legal Foundation, the nonprofit law firm that represented Shear at no cost, framed the decision as a check on regulatory opportunism.

“Today’s decision is a win for every property owner along California’s coast,” Jeremy Talcott, an attorney at Pacific Legal Foundation, said in a statement. “The Coastal Commission cannot simply decide to reinterpret legislation based on its own whims.”

The ruling arrives as builders nationwide face regulatory and financial obstacles to new housing production. Even when state reforms and local approvals align, local fee structures can determine whether permitted projects ever break ground.

Pacific Legal Foundation is separately challenging nearly $100,000 in inclusionary zoning fees on an eight-unit San Luis Obispo project, arguing the fees amount to unconstitutional extortion. Thursday’s ruling adds a legal precedent to the fight over who controls the housing pipeline.

Years of disputes

Shear Development purchased eight residential lots in unincorporated Los Osos in 2003 and received county approval in 2004 to build homes in two phases. Four residences rose in the first phase. The second phase was deferred pending the construction of a community sewer system, which came online in 2016.

In 2019, the San Luis Obispo County Board of Supervisors approved the remaining three homes. One lot had been removed after endangered Morro shoulderband snails were found.

The board found adequate water and sewer capacity with required conservation retrofits. But two Coastal Commission members appealed to the full commission, which denied the permit in July 2020.

The commission claimed appellate jurisdiction on two grounds: that the site lay within a sensitive coastal resource area, and that single-family dwellings were not “the principal permitted use” because zoning designated three coequal principal uses.

Sensitive habitat and permit triggers

Relying primarily on a single map in the county’s Estero Area Plan, the commission argued that the infill parcels fell within the Los Osos Dune Sands Habitat sensitive resource area. The court rejected that reading, finding the designation was meant to protect high-quality dune habitat outside the urban reserve line, not developed neighborhood lots within it.

The court also rejected the commission’s claim that a site’s designation with multiple principal permitted uses automatically triggers appellate authority. Guerrero wrote that the commission may only appeal when a proposed development falls within none of the designated principal permitted uses.

That holding carries weight countywide, where every coastal zone zoning category carries more than one principal permitted use. Under the commission’s now-rejected theory, every coastal development permit in the county was subject to commission appeal, rendering other statutory jurisdictional triggers meaningless.

New rules for court review

The ruling also resets how courts handle these disputes. When a developer challenges the commission’s right to intervene, judges must now conduct an independent review rather than defer to the agency’s interpretation of a local coastal program.

The commission wanted deference. The court said no. In its ruling, the court said judges must reach their own conclusions.

Judges must weigh both interpretations when a county and the commission read the same document and reach opposite conclusions, Guerrero wrote. She added that judges must consider which agency knows the material better and which has interpreted it consistently longer.

If neither holds a clear edge, Guerrero ruled that neither earns deference. That was the case here, and the court sided with the county.