OCA & NFIB Amici Brief: Cities Can’t Force Homebuilders To Provide More Than Fair Share Of Affordable Housing

Last week, OCA and the National Federation of Independent Business (NFIB) Small Business Legal Center filed an amici curiae brief with the United States Supreme Court urging the protection of private property rights from overreaching government regulation. The brief requests the Court agree to review the California Supreme Court’s decision in California Building Industry Association v. San Jose, No. 15-330 (September 16, 2015).

Background of the Case

This case stems from the City of San Jose’s Ordinance No. 28689, which requires developers of residential projects with more than 20 units to choose either to designate 15% of those units for sale at below-market prices to buyers with qualifying income levels, or construct affordable housing at a different location, give the City land or cash.

• California Building Industry Association (CBIA) challenged the validity of the ordinance ordinance and sought injunctive relief.
• A trial court struck down the ordinance concluding that the ordinance is an “exaction,” and that the City had not first undertaken the required studies to show that the affordable housing crisis in Silicon Valley is caused by the developers of new homes.
• The California Court of Appeal, reversed the trial court and upheld the ordinance, concluding that because the ordinance did not require a developer to give up land or money, it is a zoning restriction, not an exaction and, therefore, subject to the “rational basis” test not to the heightened scrutiny applied by the trial court.
• The California Supreme Court agreed, holding that the purpose of the requirement is to promote affordable housing, not to mitigate the impacts of market priced housing, which is an exercise of San Jose’s police rather than a development exaction.

OCA & NFIB Amici Brief Urges the Protection of Private Property Rights

The amici brief filed by the NFIB and OCA asks the Supreme Court to review this important property rights case and argues:

• San Jose is not simply regulating private property, but has effectively pressed it into public service to alleviate the city’s critical need for affordable housing.
• Although the ordinance does not demand the outright dedication of land, it does require the owner to set aside a certain number of units at below-market value, essentially requiring those units to be dedicated to public use.
• The city’s inclusionary zoning ordinance should have been subject to the heightened scrutiny of the unconstitutional conditions doctrine established by Nollan, Dolan, and Koontz, which hold that before the government can condition permission to build on the developer providing benefits, the government must show that what the developer proposes contributes to the problem, and that the condition will mitigate that impact and is proportional.
• This case provides an opportunity for the Court to clarify that legislatively imposed exactions are subject to review under unconstitutional conditions doctrine.

“While the city’s requirement does not demand land, it clouds the owner’s title for up to 55 years with an encumbrance that prohibits its sale at market value,” stated OCA Hawaii Member, Robert Thomas, a Director with Damon Key Leong Kupchak Hastert in Honolulu and a contributor to the NFIB-OCA brief. “In reality, it is as if the City were demanding land, and this raises the same anti-extortion concerns that fuel the requirements set forth in the Supreme Court’s decisions in Nollan, Dolan, and Koontz.”

“An ‘out-and-out plan of extortion’ forced upon citizens is just as repugnant when imposed by the legislature as when it is carried out by a government agency,” said Thomas.

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