U.S. Supreme Court leaves San Jose housing law in place

The City of San Jose has a requirement in which builders of new construction have to allocated 15% of their units for below market rates - for low income buyers. If the builder doesn't want to allocate some of their units for low income buyers, then the builder has a fee, which works out to be over $100K. Naturally builders/developers are upset about this and took the issue to the California Supreme Court which upheld San Jose's law, so then it went to the US Supreme Court but they didn't want to hear the case.

This issue is kind of a big deal. It may affect the future of the real estate market here in numerous ways that only the time will tell. Great article below from the San Jose Mercury news.



The U.S. Supreme Court on Monday turned away a legal challenge to a San Jose affordable housing law, leaving intact the city's effort to address the exploding cost of housing in Silicon Valley.

The justices declined to hear the building industry's appeal of a ruling last year by the California Supreme Court upholding San Jose's law. In a brief opinion, Justice Clarence Thomas observed that the law on the issue remains "unsettled" and needs Supreme Court guidance, but agreed with the vote to reject the appeal because the San Jose case had technical legal problems that may prevent reaching the core questions.

In its appeal, the building industry argued that San Jose's law and others like it across California violate federal constitutional protections against the "taking" of private property. The Pacific Legal Foundation, a conservative Sacramento group representing the industry, pressed the fight to the nation's high court.

"The rights of all property owners were dealt a blow today, as San Jose's punitive treatment of homebuilders was allowed to stand," said foundation attorney Brian Hodges. "It is disappointing that the U.S. Supreme Court has chosen not to review the California Supreme Court's decision to uphold San Jose's inclusionary building mandates."

San Jose city officials welcomed the conclusion of the legal fight.

"(The) Supreme Court ruling could not have come any sooner for the thousands of families in our community who are struggling to keep up with skyrocketing rents, and we look forward to implementing this policy as quickly as possible," San Jose Mayor Sam Liccardo said.

The state Supreme Court, in a unanimous ruling in June written by Chief Justice Tani Cantil-Sakauye, determined that San Jose's affordable housing program is within the law, observing: "These problems have become more and more severe and have reached what may be described as epic proportions in many of the state's localities."

The case involved a legal challenge to a San Jose law that would require housing developers to include affordable, below-market priced units for low-income buyers on any new projects within the city. The building industry sued to block enforcement of the so-called "inclusionary housing" law several years ago.

The League of California Cities and California State Association of Counties, which backed San Jose in the case, estimate about 170 local governments have put versions of the law in place to deal with the state's shortage of affordable housing, considered an acute problem in Silicon Valley and around the Bay Area.

The state building industry, backed by groups such as the California Association of Realtors, considers such legislation a strong-arm tactic that in the long run will drive up already exorbitant housing prices. They maintain such laws will force developers to simply pass along the cost of subsidizing below-market units to new homebuyers.

In particular, the industry argues the law is an unconstitutional "taking" of property and that San Jose has not established a connection between the building of new housing and the affordable housing problem. Cities, they argue, make that case in forcing developers to pay fees to cover the impact of new housing developments on things such as local schools and parks, but haven't done so for affordable housing.

San Jose's law would require developers to offer 15 percent of units in new projects of 20 or more units at below-market rates. Developers could opt out of building affordable units by paying a fee, which the housing industry estimates could run about $122,000 per house.

Housing advocates warned of dire consequences if the Supreme Court invalidated San Jose's affordable housing regulation. California has been considered a model for such laws, designed not only to provide more low-income housing but also to get it built in a larger cross-section of neighborhoods.

Source: Mercury News, Howard Mintz
http://www.mercurynews.com/real-estate-news/crime-courts/ci_29576352/u-s-supreme-court-leaves-san-jose-housing.html