Last we checked in, the California Supreme Court had agreed to review the Court of Appeal's decision in California Building Industry Ass'n v. City of San Jose (6th District June 6, 2013), which held that under rational basis review (and not heightend scrutiny) the city of San Jose's "inclusionary housing" ordinance might survive challenge because it was designed to promote the development of affordable housing, and not to mitigate the impacts of market priced housing.
Yesterday, the CBIA filed its Opening Brief in the appeal, which presents a single Question Presented:
Must inclusionary housing ordinances which exact property interests or in-lieu development fees as a condition of development permit approval be reasonably related to the deleterious impact of the development on which they are imposed, as set forth in San Remo Hotel L.P. v. City & County of San Francisco, 27 Cal. 4th 643, 670 (2002)?
The brief answers "yes," naturally.
And the rest of the brief is worth reading, because it details why requirements such as San Jose's should be reviewed under the legal standard for exactions (nexus and proportionality), and not for a mere rational basis, as the Court of Appeal concluded.
The ordinance requires developers of residential projects of more than 20 units to set aside 15% for purchase at below-market rates by those earning no more than 110% of the area median income. Alternatively, a developer could either construct affordable housing on a different site, dedicate land, or pay an in lieu fee "not to exceed the difference between the median sale price of a market-rate unit in the prior 36 months and the cost of an 'affordable housing' unit for a household earning no more than 110 percent of the area median income." A waiver is available if the developer can show the lack of a "reasonable relationship" between the impact of the project and the exaction, or that applying the ordinance would result in a taking.
The Court of Appeal got around the San Remo exaction standard of review by reimagining the ordinance's purpose:
Unlike the mitigation fee challenged in San Remo, the Ordinance at issue here does not appear to have been enacted for the purpose of mitigating housing loss caused by new residential development. Its express purposes were to "enhance the public welfare by establishing policies which require the development of housing affordable to households of very low, lower, and moderate incomes" and to promote the use of available land for those households, thereby alleviating the demand for affordable housing. Thus, whether the Ordinance was reasonably related to the deleterious impact of market-rate residential development in San Jose is the wrong question to ask in this case.
Slip op. at 11. Our feeble minds couldn't quite grasp the difference between that and an affordable housing exaction, but the Court of Appeal did (despite a contrary decision from another court of appeal which struck down an affordable housing in lieu fee, contrasting a facial challenge and its attendant "formidable burden," with the "as applied" challenge in that case). The court also held that it is the plaintiff's burden and not the city's to show the connection, or, more precisely, the lack of connection.
The brief ably covers this territory, concluding that San Jose's ordinance is an "exaction" and not simply a police power land use regulation. Finally, the brief argues that the Court of Appeal's reasoning is inconsistent with Koontz, because its a demand for property from a land use applicant, and that all development in-lieu fees are exactions subject to nexus and proportionality requirements.
More to come.