Judge to Decide If Developers of Eight-Story Building Behind Mission Can Sue California, City of Santa Barbara

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This article was underwritten in part by the Mickey Flacks Journalism Fund for Social Justice, a proud, innovative supporter of local news. To make a contribution go to sbcan.org/journalism_fund.

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A federal judge is considering dismissing a lawsuit filed against the State of California and the City of Santa Barbara.  The development team The Mission LLC sued the state and city in October, alleging that SB 158 — a budget trailer bill that passed in September — illegally singles out the company’s housing project and requires it to undergo environmental review. The lawsuit also alleges that the City of Santa Barbara has a noncompliant housing element because it uses zoning overlays to plan where to put housing.

Judge Hernán D. Vera, a United States District Court judge for California’s Central District, took the motions to dismiss the cases under submission on March 5. Judge Vera will now review the entire case before deciding whether it will continue.

A Builder’s Remedy Project

The Mission LLC filed a preliminary application for an eight-story apartment building in January 2024. The project would dwarf other buildings in the neighborhood, which is mostly single-family homes, and stand above Santa Barbara’s historic Old Mission. It would include 270 apartments; 20 percent of those units would be rented at a rate affordable for low-income households.  

The project is not bound by typical zoning restrictions. That’s because it filed the project under Builder’s Remedy, a 36-year-old state housing provision. Builder’s Remedy allows housing developers willing to list a certain percentage of their proposed units at an “affordable price” to bypass zoning laws, if a city does not have a housing element — which Santa Barbara did not at the time The Mission LLC submitted its preliminary application. 

A city can deny a Builder’s Remedy project if it poses an unmitigable health or safety risk to the community.

The eight-story building would sit on a sloped parcel of land, just less than five acres. It is near a fault line and contains areas within a floodway fringe zone as defined by Federal Emergency Management Agency (FEMA). The City of Santa Barbara has identified the site as having several archaeologic resources, including from the prehistoric and Mission eras. The property is also near Mission Church’s historic cemetery.

Affordable Housing and Environmental Review

In a May evaluation of the project’s application, the city identified 11 different studies that would be needed for environmental review, including geology studies, traffic studies and historic resource studies.

But with last year’s legislative session came changes to which projects require review. Last June, California legislators passed a bill that allows some housing projects in urban areas to bypass environmental review. It was a move Governor Gavin Newsom supported, saying the entire state budget would be inoperative if state legislators did not pass the bill.

Initially, it was unclear whether The Mission LLC’s property hit the marks required to forgo environmental review: The property was small enough (less than five acres) and in an area considered “urban infill” but had structures on it included on Santa Barbara’s historic resource inventory, which the city said is equivalent to a local historic register. Those historic structures may have disqualified it from its exemption.

In September, Senate President pro Tempore Monique Limón, who represents Santa Barbara County, introduced a budget trailer bill, SB 158, that would bring that environmental review requirement back for properties that fit certain parameters. These parameters are specific:

–       A project located in a city with a population between 85,000 and 95,000

–       The city is located in a county with a population between 440,000 and 455,000

–       The project is on a parcel four acres or larger

–       The project is filed under “Builder’s Remedy”

–       The property site includes FEMA-ID-ed floodways

–       The project site has Fish and Wildlife–identified wetland

–       The project is adjacent to a state historic landmark

That bill passed and was attached to the proposed budget that is legally required to be passed by June 2026. The Mission LLC’s project appears to be the only project in the state that met these requirements.

The Lawsuit

On October 24, The Mission LLC sued both the State and the City of Santa Barbara. The company alleges that SB 158  violates the U.S. Constitution and the California Constitution’s equal protection clauses, nondiscrimination laws, and a bar on special legislation removing rights to a single person or piece of land. 

“This law is designed to block a low-income residential ‘Builder’s Remedy’ project in Santa Barbara,” the complaint reads.

The Mission LLC further argues that because CEQA analysis began before SB 158 passed, the new law is being applied retroactively, which is illegal.

As for the City of Santa Barbara, The Mission LLC says that the city used zoning overlays — those are areas that add other zoning on top of base zoning layers — to complete its housing element. That, The Mission LLC argues, makes the housing element noncompliant. The Mission LLC points to an October 2025 court ruling in the State’s Second District Court of Appeals, involving a developer and the City of Redondo Beach; the court ruled that a municipality could not use an overlay to satisfy density or residential use requirements.

The State of California argues that The Mission LLC’s claims are “unripe,” meaning they are based on future events, that they are barred by California’s sovereign immunity and that their complaint does not state any claims by which “relief” can be granted. Regarding The Mission LLC’s claim that the city’s housing element is noncompliant because of zoning overlays, the case’s defendants argue that the court does not have jurisdiction over the claim.

Who Filed the Lawsuit?

The Mission LLC is a shell company managed by real estate advisor Ben Eilenberg. Craig and Stephanie Smith, a husband-and-wife development pair working with Eilenberg on another housing project in Santa Barbara on Grand Avenue, are connected to the company. The Smiths are listed as the chief officers for another company, the Universalist Unitarian Mission LLC. In June, the Mission LLC and the Universalist Unitarian Mission LLC sued Santa Barbara County, alleging the Mission LLC did not have to pay property taxes because it rented to the Universalist Unitarian Mission. Santa Barbara’s Superior Court dismissed this lawsuit.

The Mission LLC owes more than $307,000 in property taxes.

What’s Next

As per District Court standards, the judge will rule on the motions to dismiss the case within 120 days of March 5. Neither The Mission LLC’s attorney, Richard Jacobs, nor the defendant attorneys working the case, responded to a request for comment for this story.