When Is Forcing a Landowner/Developer to Provide Below Market Housing As a Condition of Permit Issuance Not an Exaction

Today, on June 15, 2015, the California Supreme Court — the court that never met a harsh land-use regulation it didn’t like — issued its opinion in California Building Industry Association v. San Jose, Docket No. S212072, which upheld a city regulation requiring developers of 20-plus unit apartment projects in San Jose to set aside 15% of the units built by them as “low cost” housing for impecunious folk who can’t afford the rents and prices in general housing, which — practically speaking means just about everybody, given the fact that housing in the San Francisco Bay area has gone through the roof.

Legally speaking, the court held that a regulation so requiring does not give rise to an exaction (because that might be a constitutional no-no under the US Supreme Court’s decisions in the Nollan and Dolan cases) but is rather a vanilla-flavored land-use regulation reviewable as any other land-use regulation; i.e., under the deferential due process standard of review, under which anything goes. To get the long, 60-plus page opinion, compleat with two concurrences (by Werdegar and Chin, J.J.) click on http://www.courts.ca.gov/opinions/documents/S212072.PDF

But if you are a maven of such stuff, you ask: what about the 2013 Koonts v. St. Johns River Water Mgmnt. Dist, case in which the US Supreme Court broadened the applicability of the unconstitutional conditions doctrine and held it improper for government to grant permits on condition that the owners pay money or do things that are unrelated to the negative impact of the private project? You can read the California court’s evasion of that holding for yourself at pp. 27 et seq. of this opinion; it’s a masterpiece of parsimonious reading of the import of Koonts.

Anyway, when it comes to inverse condemnation, nothing has changed “up there” at the state supreme court level. No property owner has ever won a case there on a regulatory taking claim, and given the court’s composition none is likely to do so.

We assume that the owners will petition the US Supreme Court for certiorari, and we hope they prevail.

One last thing. Back in 1980 (that’s over 30 years ago) California Supreme Court Justice William P. Clark, Jr., dissented in the Agins case, pointing out that the court’s extreme deference to local land-use regulations would inevitably lead to a cleavage between the wealthy housing haves and their counterpart housing have-nots. Which is exactly what happened. Particularly so in the San Francisco Bay area where San Jose is located. So the bottom line here in California is that the Legislature passes statutes ostensibly requiring that affordable housing be provided, while local government entities that issue the actual building permits, do what they can to limit availability of reasonably-priced housing and increase its cost. They don’t come anywhere near to meeting the statutory goals, as the court conceded in this case. So the predictable result is a housing shortage (at least in areas where people want to live) and a consequent upsurge in housing prices and rents.

You don’t believe us? In recent years there have been two or three Presidential Commissions studying the problem, and they concluded that the high cost of housing is brought about by the effect of government regulations, and the fact that local land regulatory entities tend to pander to the NIMBY crowd.

For today’s front page story about this case, that praises the San Jose case, see Maura Dolan, Affordable Housing Gets Court Boost, LA Times, June 16, 2015, at p. A1 (above the fold).

In the meantime, another housing bubble is being pumped up in California, and it’s only a question of time when it will pop.

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