California Building Industry Association v. City of San Jose

Over the years, the California legislature passed several laws promoting affordable-housing policies at the municipal level. Pursuant to state law, the City of San Jose (defendant) conducted significant studies and analysis regarding the affordability of its housing supply. The city concluded that requiring new developments to include affordable units was consistent with municipal and state goals to protect the public welfare by promoting an adequate supply of housing for residents of all economic means because new market-rate housing was reasonably related to increasing housing prices. In 2010, the city enacted an inclusionary-housing ordinance (ordinance), which required developers seeking permits for developments that created 20 or more new dwelling units to sell 15 percent of the units at an affordable-housing cost. The ordinance had several options for alternative compliance and a waiver provision that applied if a developer could show that the ordinance’s requirements would result in an unconstitutional taking without just compensation. The California Building Industry Association (building association) (plaintiff) filed a lawsuit in the superior court, claiming that the ordinance resulted in an unconstitutional exaction on a developer because a permit conditioned on the requirement that a developer sell 15 percent of its units at below-market price was a constitutionally impermissible taking without just compensation. The building association argued that the city needed to show a reasonable relationship between new developments and the city’s affordable-housing problem under the higher standard of the unconstitutional-conditions doctrine. The superior court found for the building association and enjoined the city’s enforcement of the ordinance. The appellate court reversed the superior court’s judgment. The building association appealed.