No. Newport Beach did not successfully challenge Senate Bill 2, which became law in 2008, nor did it adopt an ordinance to limit or regulate transitional housing. However, Newport Beach unsuccessfully litigated regulations for "sober-living" group homes. Ultimately, Newport Beach settled for $5.25 million and spent more than $4 million defending three lawsuits. The litigation lasted seven years and cost taxpayers $9.25 million.
In January 2008 and after having received complaints from Newport Beach residents about traffic issues, cigarette smoke, loitering and noise, Newport Beach adopted an ordinance that placed strict limits on group living arrangements. Group homes are residential facilities in which individuals recovering from drug and alcohol addiction temporarily reside. The ordinance effectively prohibited new group homes, housing seven or more residents, from opening in most residential areas with some exceptions in multifamily zones. It also required existing group homes to complete a permitting process within 90 days for a special use permit, which required extensive findings in order to allow the group home to operate. The rules could be waived only if the applicant could show a reasonable accommodation was required under either state or federal housing laws.
Newport Beach was sued by three operators, who contended that the ordinance violated anti-discrimination and fair housing laws. They claimed the ordinance forced out many of the group homes serving a protected class because they could not qualify for permits.
A U.S. District Court judge first ruled in 2010 that the nature of the ordinance was not discriminatory and granted summary judgment to Newport Beach. The case was appealed to the 9th Circuit Court of Appeals. In 2013, a three-justice panel, ruled that the ordinance may have illegally discriminated against group homes for people in recovery based on disability. The Court found that where there is direct or circumstantial evidence that the city acted with a discriminatory purpose and caused harm to members of a protected class, such evidence is sufficient to permit the protected individuals to proceed to trial under a disparate treatment theory. Newport Beach requested a review of the opinion by the U.S. Supreme Court, which denied review. Newport Beach subsequently settled with the three operators for $5.25 million.
The court case is Pacific Shores, LLC v. City of Newport Beach 730 F.3d 1142 9th Circle 2013 (PDF).
It is noted that the Newport Beach case addressed group homes and group living arrangements that predated the adoption of Senate Bill 2, which added the requirement in state law that cities must treat transitional housing the same as other residential uses in the same residential zone. Therefore, unless the conditions apply to all residential uses, they cannot be imposed on transitional housing. Imposing conditions or permit requirements exclusively for transitional housing but not to other residential uses would likely result in the same conclusion reached in the Newport Beach case.