California Building Industry Ass'n v. City of San Jose
189 Cal. Rptr. 3d 475
Cal.2015Background
- California municipalities often adopt inclusionary housing ordinances to increase affordable housing; San Jose enacted a 2010 ordinance requiring 15% of on-site for-sale units in developments of 20+ units be sold at prices affordable to households up to 120% of area median income, with alternatives (off-site units, in-lieu fees, land dedication) and incentives (density bonus, parking/setback reductions).
- The ordinance includes resale restrictions and mechanisms (shared-appreciation notes, recorded restrictions) to preserve long-term affordability and deposits funds into an affordable housing fund.
- CBIA sued soon after adoption, arguing the ordinance imposed unconstitutional "exactions" and therefore must satisfy the Nollan/Dolan nexus and rough-proportionality standard; trial court enjoined enforcement.
- The Court of Appeal reversed, applying the ordinary deferential land-use standard (whether the ordinance bears a real and substantial relationship to legitimate public interests) and remanded; San Jose and interveners defended the ordinance as a valid exercise of police power.
- The California Supreme Court granted review and affirmed the Court of Appeal: the ordinance is a permissible land-use regulation, not an exaction triggering Nollan/Dolan, and San Remo Hotel’s discussion of legislatively mandated mitigation fees does not require project-specific impact proportionality for inclusionary price-control requirements.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether San Jose’s inclusionary price controls and related requirements constitute a takings "exaction" triggering Nollan/Dolan (unconstitutional conditions) | CBIA: Pricing a subset of units below market and related resale restrictions functionally compel conveyance/payment and thereby are exactions requiring nexus and rough proportionality | San Jose: The ordinance regulates use/price of property (a permissible police-power land-use regulation) and offers incentives/alternatives; it does not require conveyance of a property interest or payment in lieu as the sole means | Held: Not an exaction; Nollan/Dolan inapplicable. The ordinance is a regulation of property use, not a compelled dedication or forced monetary exaction. |
| Whether San Remo Hotel’s "reasonable relationship" language requires that inclusionary requirements be tied to impacts attributable to each subject project (i.e., a project-specific causal nexus) | CBIA: San Remo Hotel means legislatively imposed mitigation/fees must be reasonably related to the specific development’s adverse impacts, so ordinance fails facially without project-specific evidence | San Jose: San Remo addressed legislatively imposed mitigation fees aimed at mitigating project-specific loss; inclusionary measures can serve broader public purposes (increase overall affordable housing, dispersed mixed-income communities) and thus are judged under ordinary land-use review | Held: San Remo’s passage applies to development mitigation fees, not to legislatively adopted inclusionary price controls serving broader public goals; ordinary deferential land-use standard applies. |
| Whether Sterling Park or City of Patterson require different treatment of inclusionary ordinances (e.g., treat them as exactions or apply San Remo) | CBIA: Relies on those precedents to argue for heightened scrutiny / different outcome | San Jose: Sterling Park addressed procedural limits/statute of limitations and whether certain inclusionary terms are "exactions" for protest/payment statutes; City of Patterson misapplied San Remo by treating an inclusionary in-lieu fee as governed by project-specific nexus | Held: Sterling Park is procedural and does not alter substantive test; City of Patterson’s approach disapproved to extent it requires project-specific nexus for inclusionary ordinances. |
Key Cases Cited
- Nollan v. California Coastal Comm’n, 483 U.S. 825 (U.S. 1987) (ad hoc dedication as permit condition requires an "essential nexus" to the permit’s impacts)
- Dolan v. City of Tigard, 512 U.S. 374 (U.S. 1994) (exactions must satisfy "rough proportionality")
- Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595 (U.S. 2013) (Nollan/Dolan principles apply to certain monetary exactions and permit alternatives)
- Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (U.S. 2005) (the "substantially advance" test is a due process, not takings, inquiry)
- Penn Central Transp. Co. v. New York City, 438 U.S. 104 (U.S. 1978) (ad hoc regulatory takings multi-factor test)
- San Remo Hotel v. City & County of San Francisco, 27 Cal.4th 643 (Cal. 2002) (upheld legislatively imposed in-lieu fee as reasonably related to mitigation; distinguished ad hoc exactions)
- Ehrlich v. City of Culver City, 12 Cal.4th 854 (Cal. 1996) (applied Nollan/Dolan scrutiny to ad hoc monetary exaction; contrasted with legislatively mandated requirements)
- Sterling Park, L.P. v. City of Palo Alto, 57 Cal.4th 1193 (Cal. 2013) (addressed procedural protest/payment statute and whether inclusionary requirements can be "exactions" for protest statutes)
- Building Indus. Assn. of Cent. Cal. v. City of Patterson, 171 Cal.App.4th 886 (Cal. Ct. App. 2009) (Court of Appeal ruling requiring project-specific justification for in-lieu fee; disapproved to extent inconsistent with this decision)
- City of Livermore v. Assn. of Home Builders, 18 Cal.3d 582 (Cal. 1976) (deferential standard: ordinances presumed constitutional and must bear a real and substantial relation to public welfare)