Cal. Bldg. Indus. Ass'n v. City of San Jose

• Decision Date: 15 June 2015
• Docket Number: No. S212072.,S212072.
• Citation: 61 Cal.4th 435,351 P.3d 974,189 Cal.Rptr.3d 475
• Court: California Supreme Court
• Parties: CALIFORNIA BUILDING INDUSTRY ASSOCIATION, Plaintiff and Respondent, v. CITY OF SAN JOSE, Defendant and Appellant; Affordable Housing Network of Santa Clara County et al., Interveners and Appellants.

61 Cal.4th 435

351 P.3d 974

189 Cal.Rptr.3d 475

CALIFORNIA BUILDING INDUSTRY ASSOCIATION, Plaintiff and Respondent

v. CITY OF SAN JOSE, Defendant and Appellant;Affordable Housing Network of Santa Clara County et al., Interveners and Appellants.

No. S212072.

Supreme Court of California

June 15, 2015.

Berliner Cohen, San Jose, Andrew L. Faber, Thomas P. Murphy ; Richard Doyle, City Attorney, Nora Frimann, Assistant City Attorney and Margo Laskowska, Deputy City Attorney, for Defendant and Appellant.

Burke, Williams & Sorensen and Thomas P. Brown, San Francisco, for League of California Cities and California State Association of Counties as Amici Curiae on behalf of Defendant and Appellant.

Kamala D. Harris, Attorney General, Edward C. DuMont, State Solicitor General, John A. Saurenman, Assistant Attorney General, Janill L. Richards, Deptuy State Solicitor General, Daniel L. Siegel and Christiana Tiedemann, Deputy Attorneys General, for Attorney General, as Amicus

Curiae on behalf of Defendant and Appellant.

Richard A. Rothschild, Los Angeles, KeAndra Dodds and Navneet K. Grewal for National Housing Law Project, Public Advocates, Public Counsel and Western Center on Law and Poverty as Amici Curiae on behalf of Defendant and Appellant.

Michael Timothy Iglesias for Leo T. McCarthy Center for Public Service and the Common Good, Corey Cook, Elizabeth S. Anderson, Peter Marcuse, Dr. Patrick Sharkey, Susan Eaton, Carolina K. Reid, Dr. Mark Santow, Camille Z. Charles, Elizabeth J. Mueller, James A. Kushner, Rigel C. Oliveri, William P. Quigley, David Rusk, Janis M. Breidenbach, Peter Dreier, J. Rosie Tighe, Victoria Basolo, Stephen Menendian, John A. Powell, Tracy K'Meyer, Philip Tegeler, James J. Kelly, Jr., Gregory D. Squires, Peter W. Salsich, Jr., Florence Wagman Roisman, Nico Calavita, Gerald S. Dickinson, Thomas M. Shapiro, Dan Immergluck, Myron Orfield, Jr., Timothy M. Mulvaney, George Lipsitz, Sarah Schindler, Michael P. Seng, John Goering, Joe Feagin, Nancy Denton, Kathleen C. Engel, John Mollenkopf, Gary Dymski, Gary Orfield, Mark L. Roark, Todd Swanstrom, William M. Wiecek and Susan D. Bennett as Amici Curiae on behalf of Defendant and Appellant.

Fenwick & West, San Francisco, Ryan J. Marton, Sebastian E. Kaplan and Julia M. Kolibachuk for Silicon Valley Leadership Group and Working Partnership USA as Amici Curiae on behalf of Defendant and Appellant.

Law Foundation of Silicon Valley Public Interest Law Firm, Kyra Kazantzis, San Jose, James F. Zahradka II, Melissa A. Morris; The Public Interest Law Project California Affordable Housing Law Project, Michael Rawson ; Wilson Sonsini Goodrich & Rosati, Colleen Bal, Corina I. Cacovean, San Francisco; and L. David Nefouse for Interveners and Appellants.

Sheppard, Mullin, Richter & Hampton, Rutan & Tucker, David P. Lanferman, Palo Alto, James G. Higgins ; Pacific Legal Foundation, Damien M. Schiff, Sacramento, Anthony L. Francois ; Nick Cammarota ; and Paul Campos for Plaintiff and Respondent.

Paul B. Campos for Building Industry Association of the Bay Area as Amicus Curiae on behalf of Plaintiff and Respondent.

June Babiracki Barlow and Neil Kain for California Association of Realtors as Amicus Curiae on behalf of Plaintiff and Respondent.

Devala A. Janardan and Thomas J. Ward, Lancaster, for National Association of Home Builders of as Amicus Curiae on behalf of Plaintiff and Respondent.

Opinion

CANTIL–SAKAUYE, C.J.

Health and Safety Code section 50003, subdivision (a), currently provides: “The Legislature finds and declares that ... there exists within the urban and rural areas of the state a serious shortage of decent, safe, and sanitary housing which persons and families of low or moderate income ... can afford. This situation creates an absolute present and future shortage of supply in relation to demand ... and also creates inflation in the cost of housing, by reason of its scarcity, which tends to decrease the relative affordability of the state's housing supply for all its residents.”

This statutory language was first enacted by the Legislature over 35 years ago, in the late 1970s. (Stats.1975, 1st Ex.Sess., ch. 1, § 7, pp. 3859–3861, adding Health & Saf.Code, former § 41003; Stats.1979, ch. 97, § 2, p. 225, amending Health & Saf.Code, § 50003.) It will come as no surprise to anyone familiar with California's current housing market that the significant problems arising from a scarcity of affordable housing have not been solved over the past three decades. Rather, these problems have become more severe and have reached what might be described as epic proportions in many of the state's localities. All parties in this proceeding agree that the lack of affordable housing is a very significant problem in this state.

As one means of addressing the lack of a sufficient number of housing units that are affordable to low and moderate income households, more than 170 California municipalities have adopted what are commonly referred to as “inclusionary zoning” or “inclusionary housing” programs. (Non–Profit Housing Association of Northern California, Affordable by Choice: Trends in California Inclusionary Housing Programs (2007) p. 3 (hereafter NPH Affordable by Choice).) As a 2013 publication of the United States Department of Housing and Urban Development (HUD) explains, inclusionary zoning or housing programs “require or encourage developers to set aside a certain percentage of housing units in new or rehabilitated projects for low- and moderate-income residents. This integration of affordable units into market-rate projects creates opportunities for households with diverse socioeconomic backgrounds to live in the same developments and have access to [the] same types of community services and amenities....” (U.S. Dept. of Housing and Urban Development, Inclusionary Zoning and Mixed–Income Communities (Spring 2013) Evidence Matters, p. 1, fn. omitted (hereafter 2013 HUD Inclusionary Zoning ) [as of June 15, 2015].)¹

In 2010, after considerable study and outreach to all segments of the community, the City of San Jose (hereafter sometimes referred to as the city or San Jose) enacted an inclusionary housing ordinance that, among other features, requires all new residential development projects of 20 or more units to sell at least 15 percent of the for-sale units at a price that is affordable to low or moderate income households. (The ordinance is described in greater detail in pt. II., post. )

Very shortly after the ordinance was enacted and before it took effect, plaintiff California Building Industry Association (CBIA) filed this lawsuit in superior court, maintaining that the ordinance was invalid on its face on the ground that the city, in enacting the ordinance, failed to provide a sufficient evidentiary basis “to demonstrate a reasonable relationship between any adverse public impacts or needs for additional subsidized housing units in the City ostensibly caused by or reasonably attributed to the development of new residential developments of 20 units or more and the new affordable housing exactions and conditions imposed on residential development by the Ordinance.” The complaint maintained that under the “controlling state and federal constitutional standards governing such exactions and conditions of development approval, and the requirements applicable to such housing exactions as set forth in San Remo Hotel v. City And County Of San Francisco (2002) 27 Cal.4th 643, 117 Cal.Rptr.2d 269, 41 P.3d 87, and Building Industry Assn. of Central California v. City of Patterson (2009) 171 Cal.App.4th 886, 90 Cal.Rptr.3d 63 ” the conditions imposed by the city's inclusionary housing ordinance would be valid only if the city produced evidence demonstrating that the requirements were reasonably related to the adverse impact on the city's affordable housing problem that was caused by or attributable to the proposed new developments that are subject to the ordinance's requirements,

and that the materials relied on by the city in enacting the ordinance did not demonstrate such a relationship. Although the complaint did not explicitly spell out the specific nature of its constitutional claim, CBIA has subsequently clarified that its challenge rests on “the unconstitutional conditions doctrine, as applied to development exactions” under the takings clauses (or, as they are sometimes denominated, the just compensation clauses) of the United States and California Constitutions. CBIA's challenge is based on the premise that the conditions imposed by the San Jose ordinance constitute “exactions” for purposes of that doctrine. The superior court agreed with CBIA's contention and issued a judgment enjoining the city from enforcing the challenged ordinance.

The Court of Appeal reversed the superior court judgment, concluding that the superior court had erred (1) in finding that the San Jose ordinance requires a developer to dedicate property to the public within the meaning of the takings clause, and (2) in interpreting the controlling constitutional principles and the decision in San Remo Hotel v. City And County Of San Francisco, supra, 27 Cal.4th 643, 117 Cal.Rptr.2d 269, 41 P.3d 87 (San Remo Hotel ), as limiting the conditions that may be imposed by such an ordinance to only those conditions that are reasonably related to the adverse impact the development projects that are subject to the ordinance themselves impose on the city's affordable housing problem. Distinguishing the prior appellate court decision in Building Industry Assn. of Central California v. City of Patterson, supra, 171 Cal.App.4th 886, 90 Cal.Rptr.3d 63 (City of Patterson ), the Court of Appeal held that the appropriate legal standard by which the validity of the ordinance is to be judged is the ordinary standard that past California decisions have uniformly applied in evaluating claims that an ordinance regulating the use of land exceeds a municipality's police power authority, namely, whether the ordinance bears a real and...