December 18, 2015

Affordable housing scheme before U.S. Supreme Court

By Brian T. Hodges Senior Attorney

San Jose’s costly affordable housing scheme is now pending on a certiorari petition with the U.S. Supreme Court in the case, California Building Industry Association v. City of San Jose. As you may recall, in order to address the ever growing cost of new housing, the City of San Jose adopted an ordinance that requires developers of new residential housing (in developments of 20 units or more) to sell 15 percent of the homes be sold at below-market prices to low-income buyers, or pay a $122,000 in-lieu fee per unit. Setting the wisdom of such a scheme aside, the city’s approach to the affordable housing crunch violates one of the most basic protections provided by the Takings Clause, the purpose of which is “to bar Government from forcing some people alone to bear the public burdens which, in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States (1960). Thus, the importance or wisdom of a public policy goal is irrelevant to a takings analysis.

PLF’s petition argues that San Jose’s affordable housing condition—which asks developers to solve a preexisting public problem—constitutes the type of exaction that the U.S. Supreme Court has held subject to heightened security in Nollan v California Coastal Commission (1987), Dolan v. City of Tigard (1994), and most recently in Koontz v. St. Johns River Water Management District (2013). The petition drew a large number of amicus briefs in support of review.

Unsurprisingly, the city and its supporters argue (here and here) that the inclusionary zoning ordinance is just an ordinary exercise of police power—the sort of everyday regulatory restriction that should evade any constitutional scrutiny. According to them, the government should be allowed to demand that developers build new houses for low-income buyers without compensating the owners for lost income

Earlier today, PLF filed a reply brief explaining why the city’s demands are extraordinary and why they must be held subject to constitutional scrutiny:

Certainly, many “use restrictions” will not rise to the level of a taking. But when restrictions are imposed as a permit condition with an option to pay a fee in-lieu, the “restriction” warrants a closer look. The fact that the City, when it adopted the Ordinance, believed that its affordable housing demand was worth hundreds of thousands of dollars and/or a deed of an equivalent amount of land belies the argument that the condition does not demand a valuable right in property. So, too, does the fact that the Ordinance allows the City to profit from the condition by later selling the “low income housing” at a full market price.

We expect the Court to conference on this case in early January.

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