Most market-rate builders oppose the enactment of
inclusionary zoning, but now they are taking their concerns to court—with some
success.
California cities were trend setters when it came to
adopting inclusionary ordinances. But movement in this direction was stopped in
2009, when a Los Angeles developer won a major case challenging the city's
inclusionary requirement. Now other law suits are pending. One city, Rancho
Cordova, has even repealed its inclusionary zoning ordinance.
Most recently, the California Building Industry Association
filed a lawsuit challenging the adoption of the city of San Jose’s inclusionary
zoning ordinance.
The association says San Jose did not follow the ruling in
another case requiring cities to demonstrate prior to adopting an inclusionary
ordinance that that the construction of new market-rate housing causes a need
for affordable housing. The appellate court in Building Industry Association of
Central California v. City of Patterson ruled that the city of Patterson acted
illegally when it interpreted a builder’s development agreement with the city
to include a requirement to pay an “in lieu” fee to provide affordable housing.
According to the court, Patterson failed to demonstrate that
there was a “reasonable relationship” between the impacts of the builder’s new
market rate housing development and the exaction of in lieu fees for affordable
housing.
The San Jose ordinance requires that builders plan that 15%
of all new homes in a subdivision will be affordable and of the same floor plan
as other homes in the subdivision. Under the ordinance, a builder has the
option of building affordable homes offsite from the subdivision, but in that
case, 20% of the homes must be affordable.
The biggest
blow to inclusionary policies came when the California Court of Appeals upheld
the trial court in the case of Palmer/Sixth Street Properties, L.P., et al. v.
City of Los Angeles. The case grew out of Palmer’s 2006 Piero II project in
downtown Los Angeles.
The court affirmed a superior court decision that precluded
the city of Los Angeles from enforcing an affordable housing ordinance against
Palmer’s project. The court concluded that, as applied to Palmer’s project, the
ordinance conflicts with, and is preempted by, the rent control provisions of
the Costa-Hawkins Rental Housing Act ("Costa-Hawkins"), which allows residential
landlords to set rent levels at the commencement of a tenancy.
The California Supreme Court has refused to review the
decision. However, housing advocates point out that the decision does not
affect inclusionary requirements for ownership housing. They also believe it
remains legal to require rental developments to pay a mitigation fee that is
not connected to any sort of mandatory set aside of low-rent units. They add
that it is safer to base the fee on the community’s need for affordable housing
rather than the idea that the new project generates increased need for
affordable units.
Read more here. Sources: Shashi Hanuman, Public Counsel; Barbara Kautz,
Goldfarb & Lipman LLP.
Inclusionary Zoning Resources
The Public Interest Law Project determined that, in general, revisions to existing ordinances will not be necessary immediately in the wake of two recent California Court of Appeals decisions regarding the legal parameters of inclusionary zoning. Download the PDFs here (part 1; part 2).