U.S. Supreme Court is asked to review San Jose’s “Inclusionary Housing” law

SACRAMENTO, CA – September 16, 2015 – (RealEstateRama) — Appealing from a ruling of the California Supreme Court, Pacific Legal Foundation (PLF) announced today that it has just asked the U.S. Supreme Court to hear a constitutional challenge to San Jose’s “Inclusionary Housing Ordinance.” The ordinance penalizes homebuilders — and raises overall home prices — by forcing homebuilders to dedicate a percentage of units as below-market residences, or pay into a city housing fund.

PLF is a nonprofit watchdog that litigates for limited government and property rights. In this challenge, PLF represents the California Building Industry Association (CBIA) — free of charge.

San Jose’s ordinance requires developers of 20 homes or more to dedicate 15 percent for city-designated buyers at below-market prices. Alternatively, a builder must pay a fee, estimated by the city itself as $122,000 for each unit that would otherwise have to be dedicated for the inclusionary housing program.

As argued in PLF’s petition for certiorari, received this morning by the U.S. Supreme Court, this costly demand constitutes an “exaction” in violation of the Fifth Amendment’s ban on uncompensated takings of private property, because it singles out homebuilders to turn over a property interest to underwrite a government program — a below-market housing program — which the entire community should be responsible for funding.

California Supreme Court truncates U.S. Supreme Court property rights precedents
Under established U.S. Supreme Court precedents against takings — including PLF’s landmark victories in Nollan v. California Coastal Commission and Koontz v. St. Johns River Water Management District — demands for property or money as a condition of a land use permit must be tied to some societal need created by the building project. Yet San Jose has not even tried to show that the construction of market-rate housing creates a need for additional below-market units. For this reason, a Superior Court struck down the ordinance as unconstitutional.

However, that ruling was reversed on appeal, and in June the California Supreme Court upheld the reversal, affirming San Jose’s ordinance. It did so by announcing arbitrary exceptions and limits to Nollan’s and Koontz’s reach and application, exempting San Jose’s inclusionary housing permit conditions from any requirement that they relate to impacts from the builders’ projects.

For instance, the ruling suggested that government could shield a permit condition from meaningful takings scrutiny, simply by asserting that the condition is intended to serve some general public purpose, and not to mitigate for the building project’s impacts. The ruling also suggested that a condition could escape takings review if it could be characterized as a land use regulation or restriction — even though the condition invalidated in Nollan (a requirement to set aside property as a public access easement) amounted to a land use restriction. The ruling also held that the Nollan line of takings cases does not apply to permit conditions enacted through legislation rather than ad hoc, by regulators; yet the easement condition invalidated in Nollan was an application of a general coastal commission policy, and courts in other parts of the country have rejected the legislation/ad-hoc-regulation distinction in applying Nollan review.

California Supreme Court gives politicians a roadmap around constitutional prohibitions on unjust land use conditions
“The California Supreme Court’s ruling carves arbitrary limits and loopholes in core constitutional property rights safeguards as laid down by the U.S. Supreme Court,” said PLF Principal Attorney Brian Hodges. “That is why this case should be accepted by the justices — because the integrity of their fundamental property rights precedents is under assault.

“The California Supreme Court has given politicians and regulators a road map for evading the constitutional ban on unjust land use conditions,” Hodges continued. “All they have to say is that the condition isn’t meant to be a mitigation measure. With those magic words, they’re free from having to tailor and limit the condition so that it responds to some need created by the proposed project. In other words, they’re allowed to do precisely what the Fifth Amendment’s ban on takings is meant to forbid: exploit property owners by forcing them to fund community programs and political wish lists that, in all fairness, should be funded by taxpayers as a whole.”

PLF and CBIA appeal on behalf of property rights — and housing affordability for California families
“The state Supreme Court’s ruling doesn’t just subvert constitutional property rights principles, it also, ironically, contributes to the housing affordability crisis,” said PLF Senior Staff Attorney Tony Francois. “Penalizing homebuilders with more costs and mandates deters the creation of more housing, and raises the overall cost of market-rate homes. In short, the ruling from which we’re appealing will make it even harder for average families to afford a home in California.”

The case is California Building Industry Association v. City of San Jose. More information, including the petition for certiorari to the U.S. Supreme Court, and a podcast, may be found at: www.pacificlegal.org.

About Pacific Legal Foundation
Donor-supported PLF is a watchdog organization that litigates for limited government and property rights. PLF represents all clients without charge

Contact
Tony Francois
Senior Staff Attorney
Pacific Legal Foundation
alf (at) pacificlegal (dot) org
(916) 419-7111

Brian T. Hodges
Principal Attorney
Pacific Legal Foundation
bth (at) pacificlegal (dot) org
(916) 419-7111