In California Building Industry Association v. City of San Jose, the state’s high court ruled that requiring developers to include affordable housing units in multiunit projects was not an illegal exaction under the state constitution’s takings clause.
The court found that the city’s ordinance was a regulation and not an exaction, an important distinction, according to Paul Beard, counsel in Alston & Bird’s Land Use Group.
“I’m afraid what we are going to see is cities and counties using a subset of the population – in this case, builders – to subsidize a public benefit enjoyed by all without paying those builders just compensation, which is precisely what the takings clause in the state and federal constitutions is specifically designed to prohibit,” he said. “The California Supreme Court has set a dangerous precedent in that sense.”
Beard doubted the decision would help the city accomplish its goal.
“Builders will simply internalize costs for providing below-market units and pass those costs on to buyers of market-rate units,” he said. “As a matter of supply and demand, I don't see how this is going to improve the lack of affordability of housing in the state.”