This week, PLF filed a petition in the California Supreme Court on behalf of the California Building Industry Association. The petition asks the Court to review CBIA v. City of San Jose, a very ominous lower court decision that could begin a new flood of extortionate development fees imposed on property owners throughout California.
CBIA sued the City of San Jose after it passed an ordinance that requires builders of new homes to give 15% of them to the City, to be sold at government-fixed (i.e. below market) prices to qualified low income residents. In the alternative, builders can pay the City $122,000 per ‘affordable’ unit.
How does the City justify forcing builders to surrender 3 out of every 20 homes they build to the City? Simple. San Jose’s land use policies make homes prohibitively expensive for those of modest means. Instead of reforming its land use policy, the City has decided to extort some ‘affordable homes’ from private property owners.
If this sounds like it can’t be legal, you are on the right track. The United States and California Constitutions prohibit governments from using their permitting processes as leverage to exact property for which cities would otherwise have to pay the owners compensation. PLF’s recent victory at the United States Supreme Court for the Koontz family in Koontz v. St. Johns River Water Management District confirms that this rule applies whether the city council wants your land, or your money. If the exaction does not have a substantial nexus to an actual impact of your development, or is not roughly proportional to that impact, then it is unconstitutional for the government to even demand it of you.
San Jose is certainly concerned about home prices, but new homes don’t raise prices. By adding to the supply of homes, they reduce prices. So new homes do not impose the impact that the City is trying to address by commandeering 15% of them. They actually mitigate a problem that the City has created with its land use policies.
When CBIA sued, the trial court agreed that new homes do not cause the high housing prices that the City is trying to address with its shake-down program. Since the requirements to turnover 15% of your new homes to the City, or ransom them for $122,000 each instead, are not related to any impacts caused by new homes, the trial judge struck down the ordinance.
When the City took the case up on appeal, however, the Court of Appeal ruled in the City’s favor. The appellate court held that San Jose’s extortionate housing demands do not need to be related to the impacts of the development on which they are imposed. In the appellate court’s view, as long as there is a valid public purpose for seizing the homes, the City may take them without paying for them.
This ruling turns the law on its head, and conflicts with other appellate decisions holding that affordable housing exactions have to be related to impacts of new developments. PLF is proud to represent the CBIA in asking the California Supreme Court to review and overturn this unsound decision.