Here's one we've been meaning to post for a few days. In California Building Industry Ass'n v. City of San Jose, No. H0338563 (June 6, 2013), the California Court of Appeal (6th District) held that the city's affordable housing exaction might survive judicial scrutiny because it was designed to promote the development of affordable housing, and not to mitigate the impacts of developing market priced ("unaffordable?") housing.
San Jose is one of the most expensive markets in the country, where homes don't come cheap. The city's "inclusionary housing" 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 California Building Industry Association brought a facial challenge to the ordinance seeking declaratory and injunctive relief, arguing that the city had not made a showing that the exactions were reasonably related to any impacts caused by a proposed project, and there was no attempt made to calculate the public impacts causes. In the plaintiff's view, the set-aside percentages and in lieu fees were arbitrary.
The trial court invalided the ordinance, and enjoined its implementation, concluding that "the challenged portion of the ordinance bears no reasonable relationship to permissible outcomes in the generality or great majority of cases," and that the city was not able to show where in the record there was evidence showing the reasonable relationship between the exactions and projected impacts.
The court of appeal reversed:
The "reasonable relationship" required by the [Califfornia] Supreme Court in San Remo was between the development mitigation fee and the "deleterious public impact of the development." (San Remo, supra, 27 Cal.4th at p. 671.) Thus, it was appropriate to require a connection between the in-lieu fee and the loss of housing—that is, the "deleterious public impact" of the conversion. (Ibid.) 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. 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 court distinguished a 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 concluded that the exaction test applied by the trial court was not the right test, and it should have reviewed the ordinance as an exercise of the city's police power. And we know what that means, even though the court of appeals held that "this does not entail unthinking acquiences to the City's stated goals." Slip op. at 16.
The court remanded the case:
We again emphasize, however, that it is CBIA's burden to establish the facial invalidity of the IHO, not the City's to prove that it survives the challenge. (Cf. Building Industry Assn of Cent. California v. County of Stanislaus, supra, 190 Cal.App.4th at p. 590 [party attacking the regulation must demonstrate its invalidity]; see also Action Apartment Ass'n v. City of Santa Monica (2008) 166 Cal.App.4th 456, 468 [party asserting facial takings claim must demonstrate that its "mere enactment constitutes a taking"].) We thus leave it to the superior court to determine whether CBIA has rebutted the presumption that the inclusionary housing conditions are reasonably related to the City's legitimate public purpose of ensuring an adequate supply of affordable housing in the community.
Slip op. at 18.
Notably absent from the opinion is an analysis of Nollan/Dolan, because the plaintiff "repeatedly emphasized that 'this is not a takings case.'" Slip op. at 6 (emphasis original). See also slip op. at 15 & n.8 (Nollan/Dolan only apply to land exactions, not demands for money).
California Building Industry Ass'n v. City of San Jose, No. H038563 (Cal. App. June 6, 2013)
