Consequential to Emeryville: Court Finds Developers On the Hook for Affordable Housing

From the Los Angeles Times:

Developers can be required to include affordable housing, California high court rules

By MAURA DOLAN  June 15th, 2015

The California Supreme Court decided unanimously Monday that cities and counties may require developers to provide below-market-rate housing as a condition of a building permit.

The decision is expected to make it easier for Los Angeles and other cities with housing shortages to force developers to build or pay for affordable housing.

“There 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,” Chief Justice Tani Cantil-Sakauye wrote for the court.

California has a housing shortage, with demand exceeding supply. To ensure cities and counties remain affordable, scores of local governments have passed ordinances requiring developers to provide below-market-rate residences.

Monday's decision stemmed from a constitutional challenge of an affordable housing ordinance passed in San Jose five years ago.

The state building industry, backed by real estate groups, sued and blocked the city from enforcing the law. Developers contended it was unconstitutional “taking” of private property.

The law requires developers building 20 or more housing units to offer  15% at below-market rates or pay into a city fund.

Nearly 200 cities and counties have passed some version of the law.

In a concurring opinion, Justice Ming W. Chin observed that the San Jose ordinance permitted developers to build the affordable units more cheaply than the market-rate housing. An ordinance that required developers to offer housing at below-cost rates might fare differently, Chin wrote.

“Providing affordable housing is a strong, perhaps even compelling, governmental interest. But it is an interest of the government,” Chin wrote. “The community as a whole should bear the burden of furthering this interest, not merely some segment of the community.”

Andrew L. Faber, who represented San Jose before the court, said the ruling would encourage more cities and counties to require developers to build affordable housing.

He said the California Building Industry Assn. has been aggressively challenging such ordinances,  and “this decision is quite a rebuff to their arguments.”

“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.”

Thomas B. Brown, who represented California’s cities and counties, called the ruling “a ringing recognition” that local governments have the right to pass such laws.

The decision “recognizes that these kinds of laws are really land use laws,” Brown said.

But Tony Francois, who represented the building industry in the case,  called the decision “very disappointing.”

“The ruling allows government to impose financial penalties on providers of new housing – a penalty that can only deter efforts to ease the state’s housing shortage, and make it even harder and costlier for average families to afford a home in California,” said Francois, a senior staff attorney with the Pacific Legal Foundation, a conservative, property-rights group that represented the industry free of charge.

“Even more broadly,” he added, “ the decision exposes every homeowner and property owner in California to limitless potential fees and other property demands any time they ask for a permit of any kind, because the local government is allowed to use the permit process to raise money for any purpose whatsoever, whether it relates to the property owner or not.”

He said the building industry was considering its options, which could include an appeal to the U.S. Supreme Court.