Affordable housing law passes muster, for now

On a landmark leap year day on which Justice Clarence Thomas asked his first question from the bench in more than 10 years and the court issued its first round of orders since the death of Justice Antonin Scalia, the U.S. Supreme Court announced it would not review California Building Industry Association v. City of San Jose, 61 Cal. 4th 435 (2015).

The case was a unanimous California Supreme Court decision rejecting a challenge to San Jose's affordable housing ordinance on the grounds that it was an exaction and thus should have been subject to heightened scrutiny under Nollan v. California Coastal Commission, 483 U.S. 825 (1987), Dolan v. City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Management District, 133 S. Ct. 2586 (2013). The court concluded that San Jose's affordable housing ordinance is not an exaction because it does not require a developer to give up a property interest for which the government would have been required to pay just compensation outside the permit process. The court considered the ordinance instead to be a typical zoning restriction subject to rational basis review and not to the heightened scrutiny that applies to exactions.

Many speculated that the California Building Industry Association would file a petition for writ of certiorari asking the U.S. Supreme Court to review the California Supreme Court's decision. On Sept. 15, 2015, CBIA petitioned the court for review. CBIA described the issue, one splitting state supreme courts and federal courts of appeal, as follows "A San Jose, California, ordinance conditions housing development permits upon a requirement that developers sell 15 [percent] of their newly-built homes for less than market value to city-designated buyers. Alternatively, developers may pay the city a fee in lieu. The California Supreme Court held that, even where such legislatively-mandated conditions are unrelated to the developments on which they are imposed, they are subject only to rational basis review. ... The question presented is: Whether such a permit condition, imposed legislatively, is subject to scrutiny and is invalid under the unconstitutional conditions doctrine as set out in Koontz; Dolan; and Nollan." (Citations omitted)

The court set the case for consideration three times, but it was rescheduled each time. The court finally denied certiorari at the fourth conference on Feb. 26.

Thomas wrote separately and concurred in the denial, noting that important issues were not addressed in lower courts "that might preclude us from reaching the [t]akings [c]lause question." But in explaining his concurrence, he also wrote that the case "implicates an important and unsettled issue under the [t]akings [c]lause" given that lower courts are "divided over whether the Nollan/Dolan test applies in cases where the alleged taking arises from a legislatively imposed condition rather than an administrative one."

Thomas also reiterated his long-held doubt about whether "the existence of a taking should turn on the type of governmental entity responsible for the taking." As he wrote cogently with the late Justice Sandra Day O'Connor in dissent from the court's denial of certiorari in Parking Association of Georgia, Inc. v. City of Atlanta, 264 Ga. 764 (Ga. 1994): "It is hardly surprising that some courts have applied Dolan's rough proportionality test even when considering a legislative enactment. It is not clear why the existence of a taking should turn on the type of governmental entity responsible for the taking. A city council can take property just as well as a planning commission can. Moreover, the general applicability of the ordinance should not be relevant in a takings analysis. If Atlanta had seized several hundred homes in order to build a freeway, there would be no doubt that Atlanta had taken property. The distinction between sweeping legislative takings and particularized administrative takings appears to be a distinction without a constitutional difference."

The court's decision not to review California Building Industry Association is a sweet relief to the more than 170 California municipalities that have adopted such inclusionary zoning or housing programs. The state Supreme Court's decision stands. And even though the California Building Industry Association decision was not based on the legislative/administrative distinction that troubles Thomas, legislatively imposed conditions such as inclusionary housing requirements will continue to only be subject to rational basis review in California.

However, given Thomas' invitation to have the court one day address the issue, property rights advocates remain undeterred. Pacific Legal Foundation attorney Brian T. Hodges, counsel of record for CBIA, wrote that "we will continue to challenge the contention that the Constitution's prohibition on unjust land use conditions does not apply when those demands are imposed by legislative act, rather than through individualized regulations." While the denial of certiorari completes the facial challenge to San Jose's ordinance, "the issue remains very alive for future action ... and will once again raise a live issue when implemented as a condition on permit approval."

Bryan Wenter is a shareholder in Miller Starr Regalia's Walnut Creek office and a member of the firm's Land Use Practice Group.