California Supreme Court Upholds the City of San Jose’s Inclusionary Housing Ordinance

BY Faith Bruins

Citing a lack of affordable housing of “epic proportions”, the California Supreme Court has given cities and counties a powerful tool to help address the state's affordable-housing crisis. In a unanimous decision earlier this week, the California Supreme Court made it easier for local governments throughout the state to require developers to either sell a percentage of the units they build at below-market rates or pay into a fund for affordable housing as a condition of being issued a building permit.  

The City of San Jose’s inclusionary zoning law, which was at issue in this case, required developers building 20 or more housing units to offer 15% of them at below-market rates or pay into a city’s affordable housing trust fund. Nearly 200 cities in California have similar inclusionary zoning laws, which have operated under a cloud of uncertainty in recent years. In upholding San Jose’s inclusionary zoning law, the Court ruled that municipalities have broad discretion to regulate the use of real property through zoning or other land-use laws to serve the legitimate interests of the general public. The Court’s decision will likely lead to the adoption of similar ordinances by municipalities throughout California.

While this decision is victory for affordable housing advocates, it does not address the issue of whether inclusionary zoning laws may be used for the promotion and creation of affordable rental housing, as the San Jose ordinance only applied to housing which is for sale. A separate 2009 appellate court decision in Palmer/Sixth Street Properties L.P. v. City of Los Angeles, which barred Los Angeles’ inclusionary zoning law for rental housing, still stands. However, given the Court’s decision earlier this week the California Legislature will likely revive a recent bill that would have allowed cities to require affordable housing in new for-sale and rental developments.

The California Supreme Court’s decision in California Building Industry Association v. San Jose can be found at: