351 P.3d 974 (2015)
In late 2008, the Association of Bay Area Governments calculated San Jose's share of the regional housing need for the 2007-2014 period as approximately 34,700 units.1 Of these, roughly 19,300 units were needed for moderate, low, very low, and extremely low income households.2 As of February 2009, the city had met only a small percentage of its allocation for those income levels.3
Before 2010, San Jose applied its mandatory inclusionary policy only within redevelopment areas.4 More than 10,000 affordable units were built there between 1999 and 2009 under that policy.5
The city commissioned a 300-page economic feasibility study.6 It held more than fifty stakeholder meetings and nine public meetings on a draft ordinance.7 On January 26, 2010, the city council adopted Ordinance No. 28689.8 The ordinance applied to new residential developments of twenty or more units.9 It required at least fifteen percent of on-site for-sale units to be offered at an affordable housing cost to households earning no more than 120 percent of area median income.10 Alternative compliance options were available but at a higher twenty-percent rate.11
On March 24, 2010, the California Building Industry Association filed suit in Santa Clara County Superior Court.12 The suit sought facial invalidation of the ordinance.13 The complaint alleged that the city had failed to provide a sufficient evidentiary basis demonstrating a reasonable relationship between the developments' impacts and the ordinance's requirements.14 Six nonprofit affordable housing organizations and a low-income resident sought leave to intervene in support of the ordinance.15
The superior court ruled for CBIA and enjoined enforcement.16 The Court of Appeal reversed, holding that the ordinance does not require a dedication of property.17 The California Supreme Court granted review.18
Whether the San Jose inclusionary housing ordinance imposes an exaction on developers' property so as to bring into play the unconstitutional conditions doctrine under the takings clauses of the United States and California Constitutions?19
Under the takings clauses, the unconstitutional conditions doctrine applies only when the government conditions a land-use permit on an exaction.20 An exaction is the dedication of a property interest or the payment of money that would constitute a taking if imposed outside the permit process.21 Price controls and other use restrictions that limit how an owner may develop or sell property, without requiring conveyance of any identifiable property interest to the public, are not exactions and are evaluated under the ordinary police-power standard.22
No. The San Jose ordinance requires that fifteen percent of on-site for-sale units in developments of twenty or more units be offered at an affordable housing cost to households earning no more than one hundred twenty percent of area median income.23 Alternative compliance options are available at a higher percentage.24 This requirement restricts the price at which a developer may sell some of its units.25 It does not compel the developer to dedicate any portion of the property to the city or to pay any sum of money to the city.26
The ordinance therefore imposes no exaction that would trigger Nollan/Dolan/Koontz scrutiny under the takings clauses.27
The ordinance does not impose an exaction that triggers the unconstitutional conditions doctrine.28
Related opinions on this issue
Justice Chin concurred on narrow grounds.29 He agreed that the ordinance is a valid land-use regulation because it leaves developers room to build the affordable units more cheaply than market-rate units through permitted differences in unit type, lot size, and interior finishes.30 He cautioned, however, that an ordinance requiring developers to sell units below cost would present a different question and might constitute an exaction rather than a mere price control.31
The community as a whole should bear the burden of providing affordable housing rather than singling out developers.32
Whether the passage in San Remo Hotel v. City and County of San Francisco upon which CBIA relies applies to the affordable housing conditions imposed by the San Jose ordinance?33
The passage in San Remo Hotel requires that legislatively imposed development mitigation fees bear a reasonable relationship to the deleterious public impact of the development.34 This requirement applies only to fees whose purpose is to mitigate the specific effects of the projects on which they are imposed.35 It does not apply to land-use regulations or price controls enacted to serve broader public purposes such as increasing the overall supply of affordable housing and promoting economically integrated communities.36
No. The San Remo Hotel passage addresses mitigation fees intended to offset the loss of long-term rental units caused by conversion to tourist use.37 The San Jose ordinance, by contrast, advances multiple distinct purposes.38 These purposes include meeting the city's regional housing allocation, dispersing affordable units throughout market-rate developments, and alleviating the cumulative effects of market-rate construction on land prices and service-employee housing demand.39 Because the ordinance is not limited to mitigating project-specific impacts, the San Remo Hotel test does not govern its validity.40
The San Remo Hotel passage does not apply to the San Jose inclusionary housing ordinance.41
Related opinions on this issue
Justice Werdegar concurred to clarify that the reasonable-relationship test articulated in San Remo Hotel for legislatively prescribed mitigation fees is best understood, after Lingle, as a due-process standard rather than a takings test.42 She emphasized that the test asks only whether the fee schedule bears a real and substantial relationship to the public measures needed to accommodate development impacts and does not require individualized proportionality studies for each project.43
The burden of proof remains on the challenger to show the fee lacks a substantial relationship to development impacts.44
Whether the Court of Appeal correctly held that the validity of the San Jose inclusionary housing ordinance is governed by the ordinary police power standard of review?45
A legislative land-use regulation is valid under the police power if it bears a real and substantial relationship to a legitimate public interest.46 Judicial review is deferential: the ordinance is presumed constitutional, and the challenger bears the burden of demonstrating that it lacks such a relationship.47
Yes. The San Jose ordinance was enacted after extensive study and public input to address the documented shortage of affordable housing, to fulfill the city's obligations under the Housing Element Law, and to promote economically diverse communities.48 These are unquestionably legitimate public purposes.49 CBIA has not shown that the ordinance is arbitrary or confiscatory on its face.50
The Court of Appeal correctly applied the ordinary police-power standard.51