This post is part of a series highlighting the CEQA cases currently pending before the California Supreme Court.

Petition for Review Granted

September 11, 2013

Current Status

Fully briefed by the parties as of January 31, 2014.

Amicus briefing complete as of March 27, 2014.

Oral Argument April 8, 2015.

Court’s Statement of Issues Presented

What standard of judicial review applies to a facial constitutional challenge to inclusionary housing ordinances that require set asides or in lieu fees as a condition of approving a development permit? (See San Remo Hotel L.P. v. City & County of San Francisco (2002) 27 Cal.4th 643, 670.)

Summary of the Parties’ Arguments

Petitioner California Building Industry Association (BIA) observes that San Remo Hotel, supra, requires “legislatively imposed development exactions” to “‘bear a reasonable relationship, in both intended use and amount, to the deleterious public impact of the development.’” BIA argues that the City of San Jose’s Inclusionary Housing Ordinance (Ordinance) is a “legislatively imposed development exaction” that should be reviewed under the San Remo Hotel standard, and as such, “can only be sustained if both its purpose and extent are reasonably related to some negative public impact proximately caused by the new home projects on which the exaction would be imposed.”

Respondent City of San Jose (City) conversely argues that the more deferential “police power” standard of review applies to the Ordinance.  City also argues that the Ordinance cannot be facially unconstitutional because of a provision that gives the City discretion to adjust, reduce, or waive the requirements of the Ordinance on a case by case basis.

Interveners and Appellants challenged Petitioner’s reading of San Remo Hotel as requiring heightened scrutiny, and argued for application of the “police power” standard.

Parties/Counsel

Plaintiff/Petitioner and Respondent:

• California Building Industry Association, Represented by Pacific Legal Foundation, Rutan and Tucker LLP, California Building Industry Association, and Building Industry Association of the Bay Area

Defendant/Respondent and Appellant:

• City of San Jose, Represented by Office of the City Attorney and Berliner Cohen

Interveners and Appellants:

• Affordable Housing Network of Santa Clara County, Represented by The Public Interest Law Project/CA Affordable Housing Law Project, Wilson Sonsini Goodrich and Rosait PC, and Law Foundation Of Silicon Valley
• Housing of California, Represented by Public Interest Law Project, Wilson Sonsini Goodrich and Rosait PC, and Law Foundation Of Silicon Valley
• California Coalition for Rural Housing, Represented by Louis David Nefouse
• Non-Profit Housing Association of Northern California, Represented by The Public Interest Law Project/CA Affordable Housing Law Project
• Southern California Association of Non-Profit Housing, Represented by The Public Interest Law Project/CA Affordable Housing Law Project
• San Diego Housing Federation, Represented by The Public Interest Law Project/CA Affordable Housing Law Project

Procedural History

The Ordinance at issue was adopted January 26, 2010, and effective February 26, 2010.  Plaintiff and Petitioner California Building Industry Association filed its timely Complaint and Petition for Writ of Mandate as a facial challenge to the constitutionality of the Ordinance on March 24, 2010.

The trial court ruled in favor of Petitioner, and granted injunctive relief on May 25, 2012.  The City appealed.

The Court of Appeal, Sixth District, reversed on June 6, 2013, holding that the San Remo Hotel case was not applicable to the Ordinance.  Instead, the Court of Appeal held the Ordinance was only reviewable as an exercise of the City’s police power.

Amicus Curiae Briefs

• California Association of Realtors, in support of Plaintiff and Respondent; Amicus argued a facial challenge to the Ordinance was the only means of meaningful review because an as-applied challenge would have no chance of success due to the wording of the Ordinance.  Amicus also argued due process grounds for increased scrutiny of the Ordinance, and argued the Ordinance represents an unlawful exaction.
• League of California Cities, California State Association of Counties, in support of Defendant and Appellant; Amici argued separation of powers required deference to the City Council.  Amici also argued the San Remo standard does not apply because the Ordinance is a “quintessential” land use or zoning ordinance.  Even if San Remo applies, amici argued, the Ordinance satisfies such intermediate scrutiny because the City Council made findings that are entitled to deference. Finally, amici argued the facial challenge to the Ordinance was not ripe because the Ordinance contained an administrative waiver provision.
• California Attorney General Kamala D. Harris; in support of Defendant and Appellant; Amicus argues the Ordinance is a land use and planning regulation that falls within the City’s police power, and thus should be given deference.  Amicus also argued that the Ordinance should not be subject to a takings analysis because it does not require conveyance of a property interest, but rather is a permissible exercise of the police power in the form of a non-confiscatory price control.
• National Housing Law Project, Public Advocates, Western Center on Law and Poverty, Public Counsel, in support of Defendant and Appellant; Amici observed that inclusionary housing policies are used to combat segregation and comply with Federal fair housing obligations.  Amici also opined that combating segregation leads to upward mobility, educational achievement, and better health outcomes.
• Silicon Valley Leadership Group, Working Partnerships USA, in support of Defendant and Appellant; Interveners and Appellants; Amici opined that the Ordinance meets goals of increasing affordable housing and income integration, to address an “acute scarcity” in the San Jose area.  Amici also opined that affordable housing reduces the harms of long-distance commuting, lack of affordable housing hinders employee retention, compliance with the Ordinance is financially feasible for developers, and there are few alternatives to the Ordinance for producing affordable homes.
• National Association of Home Builders, in support of neither party; Amicus opined that the Respondent and Interveners have improperly conflated affordable housing with inclusionary housing, observing that inclusionary housing programs actually increase the market price of new homes, thereby increasing the number of people who are priced out of the market.  Amicus also opined that mandatory private housing subsidies are detrimental to small business home builders, and that application of the San Remo standard in this case will encourage, rather than constrict, creative affordable housing strategies.
• Leo T. McCarthy Center For Public Service and the Common Good, et al., in support of Defendant and Appellant; Amici provide a lengthy brief containing context for the parties’ legal arguments, covering topics such as racial and economic segregation, legal and policy responses to such segregation, land use challenges, and the benefits of inclusionary housing.

Case Implications

A ruling for BIA would affirm that the San Remo Hotel standard of review applies to inclusionary housing ordinances, which would require local agencies to show a reasonable relationship between an ordinance and the impacts of the project that are required to comply with the terms of such an ordinance.

A ruling for the City would likely have to overrule the City of Patterson case, and would allow inclusionary housing ordinances to be reviewed under the more deferential police power standard.

Key Cases that May be Affected by the Court’s Ruling

• San Remo Hotel L.P. v. City and County of San Francisco (2002) 27 Cal.4th 643; The Court held there must be a reasonable relationship between exactions and the deleterious impact of the projects on which they are imposed.

• Building Industry Association of Central California v. City of Patterson (2009) 171 Cal.App.4th 886; The court held that San Remo Hotel applies to inclusionary housing ordinances.

• San Remo Hotel L.P. v. City and County of San Francisco (2002) 27 Cal.4th 643; The court held there must be a reasonable relationship between exactions and the deleterious impact of the projects on which they are imposed.

• Sterling Park, L.P. v. City of Palo Alto (2013) 57 Cal.4th 1193; The Court held that affordable housing set-asides are exactions under the Mitigation Fee Act.