Inclusionary Zoning: Superior Court Strikes Down City Of San Jose's 'Inclusionary Housing' Ordinance

On July 11, 2012, the Santa Clara County Superior Court entered a judgment declaring the City of San Jose's inclusionary housing ordinance to be invalid. The court concluded that the City had failed to provide "a legally sufficient evidentiary showing to demonstrate justification" for the ordinance's exactions of privately subsidized homes or substantial fees in lieu of such housing exactions. The Judgment also enjoins the City from enforcing or implementing the ordinance. The ordinance had been challenged by the California Building Industry Association, on grounds that the City had failed to provide any nexus analysis or other evidence purporting to show that the housing exactions and in lieu fees (estimated at $122,000 per home) were in fact reasonably related to any increased community need for subsidized housing created or caused by development of new market-rate housing. (California Building Industry Association v. City of San Jose, No. 1 10 CV 167289.)

The San Jose ordinance (Ord. No. 28689) was adopted in January 2010, and required that 15% of the new homes approved in the City be offered for sale at artificially low, below market, prices set by the City. Alternatively the City could in its discretion accept payment of fees in lieu of the actual provision of price restricted homes. The in lieu fees were estimated to be in the amount of $122,000 per price restricted home otherwise required under the inclusionary zoning ordinance. Home builders' associations, as well as several other advocacy groups and individuals, had questioned the City's rationale for the proposed ordinance and had objected that the ordinance was approved without any supporting evidentiary justification. During a bench trial, the court had asked the City to provide evidence in the record demonstrating the constitutionally required reasonable relationships between new residential development and the exactions established under the ordinance, but concluded that "the City has appeared to be unable to do so." The court declared the ordinance to be invalid: "Since the City of San Jose adopted this ordinance in derogation of controlling state law, without providing any evidence purporting to meet the legal standards required, the ordinance was not properly enacted and is invalid on its face."

Inclusionary Zoning: It has been reported...