In a closely watched case, the California Supreme Court on Monday issued a major decision unanimously upholding the City of San Jose’s affordable housing ordinance against a constitutional challenge brought by a builders’ association. Andrew L. Faber and Thomas P. Murphy of the San Jose law firm Berliner Cohen, LLP represented San Jose in the California high court.
The San Jose ordinance requires developers of for-sale residential projects of more than 20 units to sell 15 percent of their units at below-market prices to persons of low and moderate income, while also affording developers potential incentives allowing the construction of more units at lower cost. Such ordinances are commonly referred to as “inclusionary zoning” or “inclusionary housing.” The high court held that, like local regulations controlling housing size and density, inclusionary housing requirements are properly considered to be exercises of municipalities’ general broad discretion to regulate the use of real property to serve the legitimate interests of the general public and the community at large. It rejected the builders’ contention that San Jose’s ordinance imposed an “exaction” of property from developers that could be valid only to the extent that San Jose could show that the below-market requirement was necessary to mitigate negative impacts of new development on the availability of affordable housing.
Citing problems of scarcity of affordable housing that “have reached what might be described as epic proportions in many of the state’s localities,” Chief Justice Tani Cantil-Sakauye wrote that more than 170 California municipalities have adopted inclusionary programs as one means of addressing the lack of a sufficient number of affordable housing units affordable to low and moderate income households. She also stated: “[t] here is no reason why a municipality may not ... [require] new developments to set aside a percentage of its proposed units for sale at a price that is affordable to moderate or low income households.” Six of the members of the high court joined the Chief Justice’s opinion, with the remaining member, Justice Ming Chin, concurring in the result on narrower grounds.
San Jose enacted its inclusionary housing ordinance in 2010 in response to a serious shortage of affordable housing in San Jose, after holding numerous public meetings and soliciting input from a wide range of stakeholders, including developers, community members, and fair housing, disability and civil rights advocates. Almost immediately, the California Building Industry Association sued San Jose challenging the inclusionary ordinance. The trial court declared the ordinance invalid and enjoined San Jose from implementing the ordinance. The Sixth District Court of Appeal reversed the trial court’s judgment and the California Supreme Court affirmed the judgment of the Court of Appeal after the case was briefed and it heard oral arguments in April in Los Angeles. Berliner Cohen, LLP also represented San Jose in the lower courts as well as in the California Supreme Court. The City was also represented by San Jose City Attorney Richard Doyle, Assistant City Attorney Nora Frimann, and Deputy City Attorney Margo Laskowska.
The State has imposed on local governments the primary burden to make adequate provisions for the existing and projected housing needs of all economic segments of the community. Nearly 70 percent of Bay Area cities have adopted inclusionary zoning as one tool to meet these state law requirements. Many local governments also use inclusionary zoning policies to mitigate economic and racial segregation, enhance educational and economic opportunity, and foster economic growth and upward mobility. According to Berliner Cohen attorney Andrew Faber, the ruling will encourage more cities and counties to require developers to build affordable housing. “It is very important because no one disputes that there is a huge affordable housing crisis in California,’ Faber said. ‘Housing prices have gone up, and incomes haven’t risen to meet them.”