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Cal. Supreme Court to Review San Jose's Affordable Housing Law

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By William Peacock, Esq. on September 12, 2013 4:27 PM

More than 170 jurisdictions have passed "inclusionary zoning laws," which require a developer to either set aside a portion of new units for low to moderate income buyers, to pay fees to fund affordable housing, or to otherwise contribute to the cause. San Jose is the latest to pass such a law, doing so in 2010.

A local court quashed the law in 2011, holding that the city had to demonstrate some nexus between the planned housing developments and the ill to be cured (lack of affordable housing). Earlier this year, however, the Sixth Appellate District in San Jose reversed, finding that the wrong standard had been applied, and that the burden fell on the developers, not the city, to show that the law had no "substantial and reasonable relationship to the public welfare."

'Inclusionary Zoning' and Affordable Housing Laws

To quote our favorite New Yorker, those of us living in the Bay Area will all agree: "the rent is too damn high!" The area suffers from a massive housing shortage, made worse by the housing bubble collapse coinciding with growth in the tech industry. Unless you're very well off, it can take months to find a reasonably affordable place to rent or buy.

One commonly used means of addressing this issue is to pass so-called "inclusionary zoning" laws, which place the burden on developers to provide affordable housing, preferably by setting aside a few units in the midst of the newer upscale developments. Otherwise, they have to build units off-site or pay exemption fees. The hope is to both provide affordable housing, and to do so outside of concentrated low-income housing "projects."

Former San Jose State University professor and economist Benjamin Powell argues that such laws have the opposite affect: they decrease housing overall, which drives up costs. While teaching at SJSU, he worked on a study that found that the "tax" on developers through these types of laws actually reduced the numbers of units built in the following years. The study estimates that the law tacked on an additional $44,000 to each new home in the Bay Area, and $66,000 to new homes in Los Angeles and Orange County.

Powell's criticism is in response to a bill that is headed to the Governor's desk that directly authorizes California cities, towns, and counties to pass these laws, which circumvents the general "police power" at issue in the San Jose case.

Supreme Court Steps In

The state's highest court, on Wednesday, agreed to hear an appeal in the San Jose case, reports the San Jose Mercury News. They will review the appellate court's determination that the burden lies on the developer to show that there is no "rational reason related to the public welfare for the restriction imposed."

Due to the prevalence of such laws across the state, this case is important for more than just residents of San Jose. Should the Supreme Court strike down the law, it could lead to a domino effect across the state.

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