Justices Uphold San Jose Affordable-Housing Rule

     (CN) – An interest group failed to challenge San Jose legislation that sets aside 15 percent of big, new developments for affordable housing, the California Supreme Court ruled.
     The 64-page mostly unanimous decision begins with an look at the circumstances that led 170 California municipalities including San Jose to adopt so-called “inclusionary housing” programs.
     “It will come as no surprise to anyone familiar with California’s current housing market that the significant problems arising from a scarcity of affordable housing have not been solved over the past three decades,” Chief Justice Tani Cantil-Sakauye wrote for the court. “Rather, these problems have become more severe and have reached what might be described as epic proportions in many of the state’s localities.”
     The ordinance San Jose enacted in 2010 requires developers of new residential areas that contain 20 or more units to sell at least 15 percent of the units at a price that low to moderate income families can afford.
     Before the law had even taken effect, the California Building Industry Association (CBIA) filed suit under “the unconstitutional conditions doctrine,” claiming that the city failed to demonstrate that new, 20-unit developments exacerbated an affordable housing problem, and that its requirements were reasonably related to this.
     Though a judge in Santa Clara enjoined the law for CBIA, an appeals court later reversed and the state Supreme Court affirmed that reversal Monday.
     CBIA had focused on the just-compensation clauses of the federal and state constitutions, but Cantil-Sakauye emphasized that San Jose’s law presents no issue of exaction.
     “The ordinance does not require a developer to give up a property interest for which the government would have been required to pay just compensation under the takings clause outside of the permit process,” she wrote.
     Indeed San Jose offers developers that choose to comply with the affordable-housing requirements “a number of economically beneficial incentives – including a density bonus, a reduction in parking requirements, and potential financial subsidies,” the decision states.
     Thus, “it is not the case that the San Jose ordinance will necessarily reduce a developer’s revenue or profit from what the developer could earn by selling all of the units at market rate, or will do so either in the ?great majority of cases,” Cantil-Sakauye added.
     San Jose’s ordinance falls within the general broad discretion municipalities have to regulate the use of real property in service of legitimate public interests, the court found.
     Another example of such a permitted regulation is the designation of “certain areas of a city where only residential units may be built and other areas where only commercial projects are permitted,” according to the ruling.
     The Association of Bay Area Governments determined in 2008 that 60 percent of the new housing units built between 2007 and 2014 would need to be affordable for extremely low to moderate-income households.
     Cantil-Sakauye noted that San Jose had met only a small percentage of its regional need allocation by February 2009.
     The ruling concludes with the finding that San Jose’ ordinance serves a “constitutionally legitimate purpose of increasing the number of affordable housing units in the city … and assuring that new affordable housing units are distributed throughout the city as part of mixed-income developments in order to obtain the benefits that flow from economically diverse communities and avoid the problems that have historically been associated with isolated low income housing.”

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