Here's the amici brief we filed today in California Building Industry Ass'n v. City of San Jose, No. 15-330 (Oct. 16, 2015).
That's the case in which the California Supreme Court upheld the city's "affordable housing" requirement against a challenge which asserted that it was an exaction and thus should have been subject to the heightened scrutiny of the unconstitutional conditions doctrine of Nollan, Dolan, and Koontz. The California court disagreed, holding that because the ordinance did not require a developer to give up land, or money in lieu of land, it was a mere zoning restriction and subject to the "rational basis" test.
CBIA filed a cert petition, and our brief (filed on behalf of the National Federation of Independent Business Small Business Legal Center and the Owners' Counsel of America) agrees that the Court should review this case. We argue that even though the city's requirement doesn't demand land, clouding an owner's title for up to 55 years with an encumbrance that prohibits its sale at market rates is pretty much the same thing, and calls up the same anti-extortion concerns that fuel the Nollan, Dolan, and Koontz requirements. The city made no effort to meet its burden to show that builders of new homes are somehow responsible for the astronomical prices of housing in the Silicon Valley.
Here's the Summary of Argument from our brief:
The fundamental reality, which the California Supreme Court avoided, is that San Jose is not simply regulating Petitioner’s property, but has affirmatively pressed it into public service to alleviate the city’s critical need for below-market housing. But, before forcing homebuilders to choose between (a) their fundamental right to just compensation and (b) their fundamental right to develop and use their property, the City is supposed to show that the builders are directly causing the City’s skewed housing market, and that market prices are not the product of greater economic (or regulatory) forces—say, the neo-forty-niners whose rush on Silicon Valley has outpaced the ability of homebuilders, in California’s highly restrictive regulatory climate, to meet the overwhelming, and insatiable, demands of the tech industry.2 This constitutional requirement applies equally when a legislature imposes a demand for dedication of any property interest because the same extortion-prevention rationale applies: the permitting process should not be leveraged as an opportunity for government to get “goodies,” and should only be utilized as a means to ensure that those who are exercising their property rights mitigate any impacts for which they are responsible. Nollan v. California Coastal Comm’n., 483 U.S. 825 (1987); Dolan v. City of Tigard, 512 U.S. 374 (1994); Koontz v. St. Johns River Mgmt. Dist., 133 S. Ct. 2586 (2013).
The California court, however, held that the unconstitutional conditions doctrine doesn’t apply, because the requirement that developers encumber title on newly constructed homes by artificially lowering the sales price for up to 55 years—the functional equivalent of a negative easement—does not fit the definition of an “exaction” because there is no express demand to turn over land, or money in lieu of land. Under this view, the requirement that homebuilders provide affordable housing is just another restriction on the use of property akin to a zoning ordinance, and thus subject only to rational basis review—not the more demanding standards of Nollan, Dolan, and Koontz. But, the city has forced a constitutionally repugnant choice upon Petitioners, which this Court’s decisions expressly forbid.
The city’s requirement forces owners into the same unconstitutional dilemma which faced James and Marilyn Nollan, Florence Dolan, Coy Koontz, and Marvin and Laura Horne: you are prohibited from making use of your property unless you first surrender your rights by agreeing to sell it for less than its fair market value. Additionally, the California court forgot that substance is more important than form, and joined with a number of lower courts which give legislatively-imposed demands a rational basis pass when the very same requirements would be subject to Nollan, Dolan, and Koontz if imposed during the permitting process. In the court’s view, as long as the extortion is systematic, it is of no constitutional moment; the more pervasive the offense, the lesser the review. This not only contravenes the unconstitutional conditions doctrine—which has always applied equally to legislative enactments—but affirmatively conflicts with Lingle v. Chevron U.S.A., 544 U.S. 528 (2005), which emphasized that the takings inquiry focuses on the burden imposed on the property owner, not the identity of the regulator. And it is no answer for the city to argue that the gears of government will grind to a halt should this Court affirm bedrock constitutional principles; the sky will not fall if this Court continues to require what the Constitution demands.
Here is an opportunity for the Court to clarify that legislatively imposed exactions are subject to review under unconstitutional conditions doctrine— because an “out-and-out plan of extortion” is just as repugnant when imposed by legislation as when carried out by an agency. Over the years, California courts adopting outlier arguments have provided fertile ground for development of this Court’s takings doctrine. See, e.g., San Remo Hotel, L.P. v. City and County of San Francisco, 545 U.S. 323 (2005); Tahoe-Sierra Pres. Council, Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302 (2002); City of Monterey v. Del Monte Dunes at Monterey, Ltd., 526 U.S. 687 (1999); Yee v. City of Escondido, 503 U.S. 519 (1992); First English Evangelical Lutheran Church v. Los Angeles Cnty., 482 U.S. 304 (1987); PruneYard Shopping Center v. Robins, 447 U.S. 74 (1980); Agins v. City of Tiburon, 447 U.S. 255 (1980). There’s no reason to believe the California court got it right this time, either.
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2. Even the San Francisco 49ers have moved to the Santa Clara Valley. See Ann Killion, 49ers move angers many longtime fans, San Francisco Chronicle (Feb. 13, 2015), available at http://www.sfgate.com/49ers/article/49ers-move-angers-manylongtime-fans-4277145.php.
Br. at 2-5.
There are other amicus briefs being filed, and we'll bring you those as they become available, as we continue to follow this case.
Brief of Amici Curiae National Federation of Independent Business Small Business Legal Center and Owners'...
