Many Golden State developers must now include so-called affordable housing units in their sales plans. The California Supreme Court sided against the builders, who brought a contentious, high-profile suit against municipal policymakers.
“At issue was a 2010 San Jose law that requires some new residential developments to set aside 15 percent of their units for sale at below-market rates,” noted the San Jose Mercury News. “The California Building Industry Association said the city failed to justify the 15 percent requirement and should base any such quota on an assessment of possible negative effects of the market-rate housing.”
But the impact of the ruling went far beyond San Jose city limits. “The League of California Cities and California State Association of Counties estimate more than 170 municipalities have some kind of ordinance on the books,” according to KQED. Officials in Sacramento have also brought attention to the diminishing quantity of less costly urban housing. As the Los Angeles Times observed, the state’s Legislative Analyst reported months ago that California’s housing is among the nation’s most expensive.
Given the court’s protection of the laws, their continued expansion became all but certain in liberal-leaning urban areas. “The decision clears the way for Los Angeles and other cities to require developers to sell a percentage of the units they build at below-market rates as a condition of a building permit. Developers also could be given the option of paying into a fund for low-cost housing,” the Times reported.
In a statement, the Times added, L.A. mayor Eric Garcetti applauded the ruling. “This gives Los Angeles and other local governments another possible tool to use as we tackle our affordable housing crisis,” he said.
A hands-off approach
Describing California’s paucity of cheap housing as a crisis of “epic proportions,” Chief Justice Tani Cantil-Sakauye went well beyond the bounds of San Jose’s set-asides to endorse broad municipal regulatory powers. Cities, she wrote, should “regulate the use of real property to serve the legitimate interests of the general public and the community at large.”
Rather than seeing itself as indulging in judicial activism, however, the court embraced city attorneys’ contentions that its powers simply didn’t extend to pricing rules. “There is no basis for the courts to second-guess the City Council’s considered judgment in adopting an inclusionary housing ordinance as a means to comply with its affordable housing aims,” they argued,according to the Associated Press.
Behind the hands-off approach, however, the court followed a complex line of legal interpretation. Plaintiffs claimed that San Jose’s “inclusive housing ordinance,” or IHO, amounted to an unconstitutional “taking” of property. Previously, the U.S. Supreme Court had ruled that the possibility of such a taking triggered heightened judicial scrutiny, a stricter standard of interpretation than the city’s attorneys wanted the California Supreme Court to use.
Under heightened scrutiny, a so-called “exaction” imposed by an IHO can only pass constitutional muster if regulators “can establish a reasonable relationship between the amount of a city’s need for affordable housing and the portion of that need attributable to a particular development project,” as the National Law Review noted.
The city admitted that it broke new ground in the aggressiveness of its housing regulations. As KQED noted, “the city side-stepped the usual study showing a relationship between the development of for-sale housing and the city’s need for affordable housing.”
But the court, the Review continued, ruled the set-aside in San Jose’s IHO was not an exaction at all, “because it did not constitute the payment of a monetary fee but rather simply placed a limit on the way a developer may use its property.” Rather than requiring developers to pay money or turn over its property to the public, the IHO placed “a restriction on the property by limiting the price for which the developer may offer certain units for sale.”