No, there is no “legislative exaction” exception to the unconstitutional conditions doctrine

Today, PLF attorneys filed a petition for a writ of certiorari with the U.S. Supreme Court in the case, California Building Industry Association v. City of San Jose. The petition asks the Court to review a California Supreme Court decision holding that a city or county can force landowners to dedicate private property to public use, without providing just compensation, so long as the government can show that its use of the land will enhance the public welfare. That decision marks a stunning departure from decades of U.S. Supreme Court case law, which has repeatedly warned that, standing alone, a strong public desire to improve public conditions has never been sufficient to justify the government’s appropriation of private property.

At issue is the City of San Jose’s “Inclusionary Housing Ordinance,” which forces developers of 20 homes or more to dedicate 15% of their newly built homes as low-income housing for sale at below market prices, or pay $122,000 for each home that would have been dedicated for the inclusionary housing program into a city housing fund.

Petitioner California Building Industry Association (CBIA) filed a lawsuit, seeking to invalidate the ordinance provisions as unconstitutional conditions as that doctrine is set out in Nollan v. California Coastal Commission (1987), Dolan v. City of Tigard (1994), and PLF’s recent victory in Koontz v. St. Johns River Water Management District (2013). Under those cases, a demand for property or money as a condition of a land-use permit—an “exaction”—will be unlawful and invalid unless it mitigates for an adverse impact of the development. San Jose did not try to make this necessary connection. It could not. The construction of new residential housing does not create a need for more low-income housing—that need preexists new construction. For this reason, a trial court struck down the ordinance as unconstitutional.

That ruling, however, was reversed on appeal, and earlier this year the California Supreme Court upheld the reversal. It did so by announcing a rule that allows the government to circumvent the rule of Nollan, Dolan, and Koontz whenever the legislature adopts a law that requires that permit applicants dedicate property to the public welfare. According to the California court, only conditions imposed at the permit desk are subject to the constitutional limitations in Nollan, Dolan, and Koontz.

PLF’s petition argues that an exaction is an exaction. It doesn’t matter which government entity makes the demand, such conditions seek to take advantage of the permit process to force the transfer of private property to a public use without payment of just compensation. Indeed, there is no basis in the U.S. Supreme Court’s case law for drawing any distinction between a legislatively mandated exaction and other conditions. After all, the conditions invalidated in Nollan, Dolan, and Koontz were all required by acts of generally applicable land-use laws.

By creating an exception for legislatively-mandated exactions, the California Supreme Court’s decision makes an end-run around the constitutional safeguards guaranteed by the doctrine of unconstitutional conditions, which, according to Koontz, “vindicates the Constitution’s enumerated rights by preventing the government from coercing people into giving them up.”

PLF’s petition points out how far the California court strayed from the protections provided by the Takings Clause of the Fifth Amendment of the U.S. Constitution. The purpose of the Takings Clause is to protect against regulations that force “some people alone to bear public burdens, which in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States (1960). A rule like that adopted by the California Supreme Court would relieve government of that fundamental requirement, negating the very guarantees that the Constitution provides for property owners.

We are hopeful that the U.S. Supreme Court will recognize that the California court created a rule that circumvents the protections of the Takings Clause and accept review of this important case.