A New Tool For Challenging Attorneys' Fee Awards In Housing Project Litigation

The expectation that prevailing petitioners would recover attorneys' fees has long been a significant motivating factor for bringing CEQA and entitlement challenges. This prospect has not only made litigation available to petitioners who may not otherwise have the means to sue, but has also added to the risk and expense for anyone proposing to develop in California. A recent decision interpreting a relatively new provision in the Housing Accountability Act (“HAA”), however, signals a meaningful shift in this dynamic.

Coalition of Pacificans for an Updated Plan v. City Council of Pacifica (Cal. Ct. App. Dec. 30, 2025) (“Coalition of Pacificans”) is the first published case interpreting the recently-enacted HAA provision that alters the factors courts weigh when deciding whether to grant attorneys' fees in litigation challenging the approval of housing projects. The case explains that petitioners can no longer depend on being awarded their attorneys' fees when they win, even when enforcing the California Environmental Quality Act (“CEQA”). This provision may reduce litigation against housing development projects and at a minimum should mitigate the risk of defending legal challenges.

1. Background

Historically, prevailing petitioners in CEQA litigation were almost guaranteed attorneys' fees under California's so-called “private attorney general” statute, which allows successful project challengers to recover attorneys' fees in litigation that, among other things, provides a significant public benefit. (Code of Civil Procedure § 1021.5.) Courts have presumed that enforcing CEQA serves an important public right, leaving agencies and project applicants with few options to defeat or significantly reduce fee awards, except in cases of extreme overreach or minimal success, or where the petitioner had an obvious and direct financial incentive to bring suit.

The addition of Government Code section 65589.5(p)(1) to the HAA, which took effect on January 1, 2024, changes the fee equation. This new provision requires courts, when considering motions for attorneys' fees in cases challenging a local agency's approval of a housing project, to give “due weight” to housing-related policy factors, including:

• The degree to which the local agency's approval furthers HAA policies, including but not limited to, addressing housing shortages and promoting development in urban areas;
• The suitability of the site for housing; and
• The reasonableness of the local agency's decision.

Coalition for Pacificans  clarifies that the trial court's decision to award fees must be “made on a case-by-case basis, after considering the criteria in Code of Civil Procedure section 1021.5 and, as part of that inquiry, giving “due weight” to the factors in section 65589.5, subdivision (p)(1).”

2. Key Takeaways from Coalition of Pacificans

In Coalition for Pacificans,  petitioners challenged the City of Pacifica's approval of an eight-unit townhouse project, arguing that the project required the preparation of a full Environmental Impact Report (EIR) rather than the Mitigated Negative Declaration the City had relied upon. The trial court agreed, finding that plaintiffs had “presented substantial evidence of a fair argument that the Project may have a significant effect on the environment,” and rescinded project approvals. Thereafter, the trial court awarded $1.2 million in attorneys' fees under Code of Civil Procedure section 1021.5, finding specifically that the litigation conferred a significant benefit on the general public, and that private enforcement of CEQA was necessary in the present case. Since section 65589.5(p)(1) had taken effect while the fee motion was pending, the trial court acknowledged that the new law altered the analysis, but found that plaintiff's CEQA victory still justified the full award.

The Court of Appeal vacated the fee award and remanded the case to the trial court with further instructions, finding that the trial court had failed to properly apply the new HAA balancing test. Key takeaways about how the balancing test works include the following:

1. Courts must consider the housing policy factors alongside the traditional section 1021.5 criteria when considering motions for attorneys' fees in actions challenging a local agency's approval of a housing project. Those factors modify, and do not displace, the inquiries in Code of Civil Procedure section 1021.5.
2. Courts should not measure the degree a project expands housing supply by comparing a project to the total statewide housing need and instead must consider local context. In Coalition of Pacificans, the project proposed only eight units, which is a tiny number considering California's estimated shortfall of two million units. But the analysis requires the trial court to consider the project's eight units in the context of the City's 413-unit regional housing needs allocation for the relevant 8-year cycle and the fact that the City has permitted an average of only 16 units per year.
3. When determining whether a housing project furthers the HAA goal of filling in existing urban areas, courts should not evaluate the criteria by using a categorical approach that designates an entire county or city as being “urban” or “not urban.” A categorical approach ignores the reality that urban areas exist throughout a given locality and may have the unintended consequence of releasing significant communities from an appreciation of the need to comply with the statewide obligation to build new housing. 
4. When considering a site's suitability for housing, courts may consider potential adverse impacts of housing on the proposed site. But when doing so, courts must also account for the standard of review in the CEQA action. Coalition of Pacificans concerned a Mitigated Negative Declaration, where the trial court applied the “fair argument” test, which sets a low bar for finding more environmental review is required. Where the “fair argument” standard applies, the Court of Appeal cautioned that the merits ruling “is not properly understood as a determination that the project will have, or even that it is likely to have, significant environmental effects.” Thus, when courts weigh potential negative environmental impacts under the “suitability” factor, they should recognize the preliminary nature of CEQA findings.

3. Conclusion

Though Coalition of Pacificans  is the first published decision interpreting section 65589.5(p)(1), it signals that fee awards in CEQA cases challenging housing projects are no longer guaranteed. This decision underscores the Legislature's intent to prioritize housing production and mitigate fee awards that have long incentivized lawsuits.

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