ELK GROVE, Calif. (KTXL) — The California Housing Agency says Elk Grove leaders broke state law when they rejected an affordable housing project a few months ago.

The city said they declined it due to the location, which is known as the Old Town Historic District.

The news comes at the same time as the developer for the project filed a lawsuit against the city for denying the project. Many people in the area believe the project should not be built there.

But the developer says they are following all the laws.

The California Department of Housing and Community Development report shows city leaders failed to meet affordable housing goals and used double standards when it declined the project and approved a similar one half a mile away.

FOX40 covered the proposed Oak Roe apartments back in June when the project was hoping to get approval from the city’s planning commission. Eventually, it was denied due to its location.

Then a few weeks later, the city council denied it for similar reasons. Randy Bekker, is a community member who has been closely following this project

“This project is needed. But is this the right place for it? I don’t believe it is when there is opportunities elsewhere,” Bekker said.

The hope for this empty plot of land is to build a three-story building that includes more than 60 affordable units and services. But Bekker says so far the process isn’t taking in all the facts.

“First thing is the OTSPA, which is the document that manages old town,” Bekker said.

This week, the Southern California company, Excelerate Housing Group, filed a lawsuit saying the city violated Senate Bill 35, which allows for an expedited process to build homeless housing.

“We followed all the applicable laws and regulations in designing the project, and we have exhausted every avenue with the city to get them to approve the project. At this point, we have no choice but to ask for the court’s assistance,” CEO Dana Trujillo said.

Elk Grove City Manager Jason Behrmann was not able  to comment on the lawsuit, but said in part, “The city of Elk Grove is committed to providing housing options for everyone.”

Bekker agrees more homes for low-income families are needed, but he says the small lot just isn’t it.

“I think we can come to a great project if we can get in the same room together and discuss and compromise with it,” Bekker said.

A compromise will be needed, as Elk Grove faces a lawsuit and a letter from the state asking for answers.

The city has 30 days to respond to the state on what it plans to do next.

The letter from the state can be read in full below.