Litigation & Case Law Update

• Jurisdiction: California,United States,Federal
• Author: Compiled by K. Scott Dickey*
• Publication year: 2015
• Citation: Vol. 38 No. 3

Litigation & Case Law Update

Compiled by K. Scott Dickey*

LAND USE/INCLUSIONARY HOUSING

California Building Industry Association v. City of San José (2015) ___ Cal. 4^th ___, 2015 WL 3650184

Inclusionary housing ordinance requiring developers adding 20 or more new, modified, or additional units to designate 15 percent of the units for low- and moderate-income housing, or provide in lieu benefits, was not taking under the unconstitutional conditions doctrine.

In 1980, the California Legislature recognized that California faced a "serious shortage of decent, safe, and sanitary housing which persons and families of low or moderate income . . . can afford" in both urban and rural areas. Consequently, the statewide Housing Element Law places responsibility upon a city to use its powers to facilitate the development of housing that makes adequate provision of housing for all economic segments of the community, in particular extremely low, very low, lower and moderate income households. In response to this obligation, over one-third of California's cities have adopted inclusionary housing or inclusionary zoning ordinances, which require or encourage developers to set aside a certain percentage of housing units in new or rehabilitated projects for low-and moderate-income residents.

In 2010, the City of San José adopted an inclusionary housing ordinance that requires all residential development projects with 20 or more new, additional, or modified units to sell at least 15 percent of the for-sale units at a price that is affordable to low or moderate income households. The ordinance alternatively permitted the developer to build affordable housing elsewhere, pay an in-lieu fee based on the median price of affordable housing units, dedicate land of equal value, or acquire and rehabilitate and equivalent number of affordable housing units. To encourage integration of affordable housing in the development, the alternatives were based on 20 percent of the total units, rather than 15 percent.

Two months after the adoption of the ordinance, Plaintiff California Building Industry Association ("CBIA") filed a lawsuit challenging the inclusionary housing ordinance as invalid on its face "because at no time prior to the adoption of the ordinance had the City provided substantial evidence 'to demonstrate a reasonable relationship between any adverse public impacts or needs for additional subsidized housing units in the City ostensibly caused by or reasonably attributed to the development of new residential developments of 20 units or more and the new affordable housing exactions and conditions imposed on residential development by the Ordinance.'" CBIA alleged that without evidence of that nexus, the ordinance's inclusionary housing requirement violated the "unconstitutional conditions doctrine," as applied to development exactions under the takings clauses of the United States and California Constitutions, and was in violation of controlling constitutional principles and the requirements applicable to such housing exactions as set forth in San Remo Hotel L.P. v. City & County of San Francisco (2002) 27 Cal.4th 643, and Building Industry Association of Central California v. City of Patterson (5th Dist. 2009) 171 Cal. App.4th 886. The complaint sought a judicial declaration invalidating the ordinance, and injunctive relief prohibiting its enforcement.

The Santa Clara County Superior Court agreed with CBIA and issued an order enjoining the City from enforcing its inclusionary housing ordinance. The City appealed to the California Court of Appeal, Sixth District. The Court of Appeal reversed and remanded, finding that the superior court had erred 1) in finding that the San José ordinance requires a developer to dedicate property to the public within the meaning of the takings clause, and (2) in interpreting the controlling constitutional principles and the decision in San Remo Hotel, supra, as limiting the conditions that may be imposed by such an ordinance to only those conditions that are reasonably related to the adverse impact the development projects that are subject to the ordinance themselves impose on the city's affordable housing problem. The Court also concluded that the superior court had applied the wrong standard—requiring a nexus between...