Cities can require affordable housing from developers – California Supreme Court

Reuters / Lucy Nicholson
The California Supreme Court has ruled that cities and counties have broad authority to require builders to include affordable housing units in new projects. Local ordinances requiring units to be set aside at below market price are thus constitutional.

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

The case before the California Supreme Court considered whether a 2010 San Jose law, which required some new residential developments to set aside 15 percent of their units for sale at below-market rates, was unconstitutional.

The California Building Industry Association, an organization comprised of real estate groups, argued that the city failed to justify the requirement, while developers argued the law was an unconstitutional “taking” of private property.

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The court saw it differently.

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, according to the Associated Press.

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.

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 the city before the court, said the ruling would encourage more cities and counties to require developers to build affordable housing.

“It is very important because no one disputes that there is a huge affordable housing crisis in California,” Faber told the Los Angeles Times. “Housing prices have gone up, and incomes haven’t risen to meet them.”

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Developers disagreed and said the ruling would allow local governments to impose financial penalties on providers of new housing, which would consequently further deter efforts to ease the state’s housing shortage.

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,” Tony Francis, a senior staff attorney for Pacifica Legal Foundation, which is a developer representative, told the LA Times.

Francis said the building industry was considering its options, which could include an appeal to the US Supreme Court.

Monday’s ruling keeps affordable housing requirements approved in more than 170 California cities intact.