1) Real Estate Advisory
March 11, 2016
What Does the US Supreme Court Ruling Mean
for Local Affordable Housing Laws?
On February 29, the US Supreme Court denied certiorari in California Building Industry
Association v. City of San Jose, 61 Cal. 4th 435 (2015), and leaves standing a unanimous decision
by the California Supreme Court upholding the city of San Jose’s affordable housing ordinance.
San Jose’s ordinance compels all developers of new residential development projects with 20
or more units to reserve a minimum of 15 percent of for-sale units for low-income buyers, and
the price of those units cannot exceed 30 percent of the buyers’ median income. The ordinance
requires these restrictions to remain in place for 45 years. Alternatively, the developer can pay the
city a fee in lieu. The California Building Industry Association argued that the ordinance was an
unlawful exaction in violation of Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987), Dolan v.
City of Tigard, 512 U.S. 374 (1994), and Koontz v. St. Johns River Water Management District, 133 S. Ct.
2586 (2013). In a June 15, 2015 decision, the California Supreme Court disagreed, concluding that
the ordinance is not an exaction because it does not require a developer to give up a property
interest, but instead a typical zoning restriction subject to rational basis review.
For more information, please contact
any of the following members of Katten’s
Multifamily, Affordable Housing and
Community Development practice.
David P. Cohen
+1.312.902.5284
david.cohen@kattenlaw.com
Kenneth G. Lore
+1.202.625.3555
ken.lore@kattenlaw.com
Cynthia L. Burch
+1.310.788.4539
cynthia.burch@kattenlaw.com
Bryan K. Brown
+1.310.788.4496
bryan.brown@kattenlaw.com
In concurring with the US Supreme Court’s denial of certiorari in this case, Associate Justice
Clarence Thomas acknowledged the important issues raised in California Building Industry
Association, perhaps signaling the Court may revisit this issue. In particular, Justice Thomas
stated, “For at least two decades . . . lower courts have divided over whether the Nollan/Dolan
test applies in cases where the alleged taking arises from a legislatively imposed condition
rather than an administrative one. . . . I continue to doubt that ‘the existence of a taking should
turn on the type of governmental entity responsible for the taking. . . . Until we decide this
issue, property owners and local governments are left uncertain about what legal standard
governs legislative ordinances and whether cities can legislatively impose exactions that would
not pass muster if done administratively.”
Ultimately, however, Justice Thomas determined that California Building Industry Association did
not provide an opportunity to decide the conflict: “The City raises threshold questions about
the timeliness of the petition for certiorari that might preclude us from reaching the Takings
Clause question. Moreover, petitioner disclaimed any reliance on Nollan and Dolan in the
proceedings below. Nor did the California Supreme Court’s decision rest on the distinction (if
any) between takings effectuated through administrative versus legislative action.”
The denial of certiorari leaves in place similar “inclusionary” affordable housing programs that
have been adopted in more than 170 California municipalities.
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3/9/16