In 2010, San Jose, California adopted Inclusionary Housing Ordinance No. 28689, San Jose Municipal Code chapter 5.08 in response to a purported shortage of affordable housing. The Ordinance requires that new residential development projects of 20 or more units sell at least 15% of the units at an “affordable price” for low or moderate income households. Or the developers may construct off-site affordable units, pay in lieu fees based on the median sale price of a housing unit, dedicate land of equal value to the in lieu fee, or acquire and rehabilitate a comparable number of low income housing units.
Because the Ordinance violates the Takings Clauses in the U.S. and California Constitutions, the CBIA challenged the Ordinance on its face. In 2013, a California trial court invalidated the Ordinance and enjoined San Jose from enforcing it unless and until the city proves a “reasonable relationship between [the Ordinance] and impacts caused by new development.” The California Court of Appeals reversed, holding that CBIA had the burden to prove that the Ordinance was invalid and not San Jose’s burden to prove it had authority to promulgate the Ordinance. The California Supreme Court affirmed the Court of Appeals’ ruling, holding that municipalities are afforded broad authority pursuant to their general police powers to regulate the use of real property and to promote the public welfare. The court also held that the Ordinance violate neither the federal nor the state Takings Clause.
On September 14, 2015, the CBIA filed a petition for writ of certiorari to the Supreme Court of the United States. On October 16, 2015, MSLF filed an amicus curiae brief in support of CBIA’s petition. On February 29, 2016, the Court denied the petition. Although Justice Thomas concurred in the denial of certiorari because of procedural problems with the case, he acknowledged that the question presented will need to be resolved by the Court eventually and stressed that until the issue is decided “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.” California Bldg. Indus. Ass’n v. City of San Jose, Calif., 136 S. Ct. 928, 929 (2016) (Thomas, J., dissenting from denial of certiorari).