CA Supreme Court Holds That Developers Can Be Required to Provide
Affordable Housing

On June 15, 2015, the California Supreme Court issued a unanimous decision holding that cities and counties in the state can require developers of new real estate to provide below-market-rate housing as a condition of obtaining a building permit.

The decision resolves a dispute concerning an inclusionary housing ordinance passed by the City of San Jose in 2010 that requires developers building 20 or more housing units to either offer 15 percent of the units at below-market rates or pay into a city fund. WSGR and co-counsel The Law Foundation of Silicon Valley and The Public Interest Law Project represent a group of non-profit affordable housing advocacy organizations that intervened in the case in support of San Jose's ordinance and were instrumental in securing favorable decisions in both the Sixth District Court of Appeal and the California Supreme Court.

According to news reports, nearly 200 cities and counties in California have passed similar laws aimed at battling the state's housing shortage and, in particular, the lack of affordable housing.

The California Building Industry Association (CBIA), backed by real estate groups, filed a lawsuit and blocked the city from enforcing the law. Real estate developers argued that the ordinance was an unconstitutional "taking" of private property, and therefore was subject to a higher standard of review. After the city and interveners successfully appealed, CBIA sought review of the court of appeal's decision in the California Supreme Court.

The California Supreme Court affirmed the court of appeal's ruling that the ordinance is subject to the ordinary standard of judicial review to which legislative land use regulations have traditionally been subjected. The court held that inclusionary housing requirements are not "exactions" and need only be reasonably related to a legitimate government purpose. Writing for the court, Chief Justice Tani Cantil-Sakauye wrote "[t]here 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."

This decision affirms the validity of the important tool of inclusionary zoning that cities across California can use in their efforts to combat the affordable housing crisis. WSGR's team was led by Colleen Bal and Corina Cacovean and was assisted by paralegals Anthony DeNatale and Pamela Sandillo.

For more information concerning the case, please see the opinion in California Building Industry Association v. City of San Jose.