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California Building Industry Association v. City of San Jose

California Court of Appeals, Sixth District

June 6, 2013

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.

Trial Court: Santa Clara County Superior Court No. 1-10-CV167289 Trial Judge: Hon. Socrates P. Manoukian

Attorneys for Defendants and Appellants: Berliner Cohen and Andrew L. Faber and Thomas P. Murphy and Richard Doyle, San Jose City Attorney, Nora Frimann, Assistant City Attorney and Margo Laskowska, Sr. Deputy City Attorney.

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

Attorneys for Plaintiff and Respondent: Sheppard, Mullin, Richter & Hampton and David P. Lanferman and James G. Higgins.

ELIA, J.

Respondent California Building Industry Association (CBIA) brought this action for declaratory and injunctive relief against the City of San Jose, the City Council, and the mayor (collectively, "the City") to invalidate the City's "Inclusionary Housing" ordinance on its face. The superior court granted the requested relief, on the ground that the City had failed to demonstrate a nexus between the challenged ordinance and the "deleterious public impacts of new residential development." The City appeals. Also separately appealing are several nonprofit entities that intervened in the action. We find the appellants' arguments to be well taken. Accordingly, we must reverse the judgment and remand the matter for further consideration.

Background

Repeatedly throughout Title 7 of the Government Code the Legislature has highlighted the "severe shortage of affordable housing" in this state, "especially for persons and families of low and moderate income." (Gov. Code, § 65913, subd. (a).)[1] In the Housing Accountability Act the Legislature stated that the lack of housing "is a critical problem that threatens the economic, environmental, and social quality of life in California." (§ 65589.5, subd. (a)(1).) The Legislature further recognized that "California housing has become the most expensive in the nation." (§ 65589.5, subd. (a)(2).)

Accordingly, the Legislature has expressly declared that the availability of housing for every Californian is "of vital statewide importance." (§ 65580.)[2] To that end, local governments are charged with the responsibility of facilitating the provision of housing for "all economic segments of the community." (Ibid.) Each locality, however, is acknowledged as "best capable of determining what efforts are required by it to contribute to the attainment of the state housing goal, " by addressing regional housing needs through the implementation of "housing elements" as part of the community's general plan. (§§ 65581, 65582.) Section 65583 delineates the components of those housing elements, including an assessment of housing needs for all income levels, the identification of adequate housing sites, and a program that assists in the development of such housing "to meet the needs of extremely low, very low, low-, and moderate-income households." (§ 65583, subd. (c)(2).) The housing element is presumptively valid. (§ 65589.3.)

The City's effort to implement the state's policy took the form of Ordinance No. 28689, the Inclusionary Housing Ordinance (IHO or the Ordinance), which the city council passed on January 12, 2010. In the measure, the city council cited its "legitimate interest" in alleviating the shortage of affordable housing in San Jose for "Very Low, Lower, and Moderate Income Households." The "Inclusionary Housing Requirement" of the new law called for residential developments of 20 or more units to set aside 15 percent for purchase at a below-market rate to households earning no more than 110 percent of the area median income, though the units could be sold to households earning at most 120 percent of the area median income.[3] The inclusionary housing requirement could also be satisfied by constructing affordable housing on a different site at specified percentages. However, incentives were available if the affordable units were constructed on the same site as the market-rate units.

The Ordinance provided an alternative to setting aside the "inclusionary units": developers could pay an "in-lieu fee." The fee was not to exceed the difference between the median sale price of a market-rate unit in the prior 36 months and the cost of an "affordable housing" unit for a household earning no more than 110 percent of the area median income. All in-lieu fees collected were destined for the Affordable Housing Fee Fund, to be used exclusively to provide affordable housing to the designated households. The housing requirement could also be satisfied by dedication of land. A "waiver, adjustment or reduction" provision allowed the developer to show, "based on substantial evidence, that there is no reasonable relationship between the impact of a proposed Residential Development and the requirements of this Chapter, or that applying the requirements of this Chapter would take property in violation of the United States or California Constitution."

Respondent CBIA filed its complaint on March 24, 2010, seeking declaratory and injunctive relief and a writ of mandate to set aside the Ordinance. On May 9, 2011, two months before the July 11 trial, the court permitted a motion by several nonprofit entities and one individual to intervene in opposition to the complaint.[4] In May 2012, after extensive briefing and oral argument revolving around a set of stipulated documents, the superior court granted the relief CBIA had sought. In its July 11, 2012 judgment the court declared Ordinance No. 28689 invalid and enjoined the City from implementing it "unless and until the City of San Jose provides a legally sufficient evidentiary showing to demonstrate justification and reasonable relationships between such Inclusionary Housing Ordinance exactions and impacts caused by new residential development." The City and Interveners separately filed timely notices of appeal.

Discussion

1. Basis of the ...


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