Af­ford­able hous­ing gets court boost

State jus­tices rule that cities and coun­ties can or­der de­vel­op­ers to sell some of their units at be­low-mar­ket rates.

Los Angeles Times - - FRONT PAGE - By Maura Dolan

SAN FRAN­CISCO — Cit­ing an af­ford­able hous­ing cri­sis of “epic pro­por­tions,” the Cal­i­for­nia Supreme Court made it eas­ier Mon­day for cities and coun­ties to re­quire de­vel­op­ers to sell some hous­ing at be­low-mar­ket rates.

The unan­i­mous de­ci­sion, writ­ten by Chief Jus­tice Tani Can­til-Sakauye, fol­lows study af­ter study doc­u­ment­ing a lack of af­ford­able hous­ing in the state, es­pe­cially in Cal­i­for­nia’s coastal re­gions.

“It will come as no sur­prise to any­one fa­mil­iar with Cal­i­for­nia’s cur­rent hous­ing mar­ket that the sig­nif­i­cant prob­lems aris­ing from a scarcity of af­ford­able hous­ing have not been solved over the past three decades,” the chief jus­tice wrote.

“Rather, these prob­lems have be­come more se­vere and have reached what might be de­scribed as epic pro­por­tions in many of the state’s lo­cal­i­ties.”

The de­ci­sion clears the way for Los An­ge­les and other cities to re­quire de­vel­op­ers to sell a per­cent­age of the units they build at be­low-mar­ket rates as a con­di­tion of a build­ing per­mit. De­vel­op­ers also could be given the op­tion of pay­ing into a fund for low-cost hous­ing.

“I ap­plaud the Cal­i­for­nia Supreme Court’s de­ci­sion,” Los An­ge­les Mayor Eric Garcetti said in a state­ment. “This gives Los An­ge­les and other lo­cal gov­ern­ments another pos­si­ble tool to use as we tackle our af­ford­able hous­ing cri­sis.”

The rul­ing came in a chal­lenge to an af­ford­able hous­ing or­di­nance passed by San Jose five years ago.

The state build­ing in­dus­try, backed by real es­tate groups, sued the city, block­ing it from en­forc­ing the law. De­vel­op­ers con­tended it was un­con­sti­tu­tional “tak­ing” of pri­vate prop­erty.

The law re­quired de­vel­op­ers build­ing 20 or more hous­ing units to of­fer 15% of them at be­low-mar­ket rates or pay into a city fund. Nearly 200 other cities and coun­ties in the state have sim­i­lar or­di­nances.

Mon­day’s rul­ing said mu­nic­i­pal­i­ties have “broad dis­cre­tion to reg­u­late the use of real prop­erty to serve the le­git­i­mate in­ter­ests of the gen­eral public.”

“Just as it would be per­mis­si­ble for a mu­nic­i­pal­ity to at­tempt to in­crease the amount of af­ford­able hous­ing … by re­quir­ing all new residential de­vel­op­ments to in­clude a spec­i­fied per­cent­age of stu­dio, one-bed­room or small-square-footage units,” Can­til-Sakauye wrote, “there is no rea­son why a mu­nic­i­pal­ity may not al­ter­na­tively at­tempt to achieve those ob­jec­tives by re­quir­ing new de­vel­op­ments to set aside a per­cent­age of its pro­posed units for sale at a price that is af­ford­able to mod­er­ate- or low-in­come house­holds.”

The de­ci­sion, a sweep­ing vic­tory for cities and coun­ties, came only months af­ter the state’s Leg­isla­tive An­a­lyst re­ported that Cal­i­for­nia’s hous­ing was among the costli­est in the na­tion.

The re­port found the short­age was gen­er­ally worse in coastal re­gions, but said high prices along the coast have also forced up prices in the state’s in­te­rior.

“Be­tween 1970 and 1980, Cal­i­for­nia home prices went from 30% above U.S. lev­els to more than 80% higher,” the re­port said. “This trend has con­tin­ued. To­day, an av­er­age Cal­i­for­nia home costs $440,000, about two and a half times the av­er­age na­tional home price ($180,000).”

The re­port blamed the short­age on a va­ri­ety of fac­tors, in­clud­ing high land and la­bor costs, com­plex en­vi­ron­men­tal re­views and lo­cal laws that re­strict de­vel­op­ment. Los An­ge­les, the re­port said, needed more hous­ing than any other re­gion in the state to stop the cost from ris­ing.

“On top of the 100,000 to 140,000 hous­ing units Cal­i­for­nia is ex­pected to build each year, the state prob­a­bly would have to build as many as 100,000 ad­di­tional units an­nu­ally — al­most ex­clu­sively in its coastal com­mu­ni­ties — to se­ri­ously mit­i­gate its prob­lems with hous­ing af­ford­abil­ity,” the re­port said.

Le­gal an­a­lysts said Mon­day’s court de­ci­sion prob­a­bly would en­cour­age other cities to adopt sim­i­lar pro­grams. Many have been con­cerned about the le­gal un­cer­tainty, they said.

An­drew L. Faber, who rep­re­sented San Jose be­fore the court, said the Cal­i­for­nia Build­ing In­dus­try Assn. has ag­gres­sively chal­lenged such or­di­nances, and “this de­ci­sion is quite a re­buff to their ar­gu­ments.”

Tony Fran­cois, who rep­re­sented the build­ing in­dus­try, called the de­ci­sion “very dis­ap­point­ing.”

“The rul­ing al­lows gov­ern­ment to im­pose fi­nan­cial penal­ties on providers of new hous­ing — a penalty that can only de­ter ef­forts to ease the state’s hous­ing short­age and make it even harder and costlier for av­er­age fam­i­lies to af­ford a home in Cal­i­for­nia,” said Fran­cois, a se­nior staff at­tor­ney with the Pa­cific Le­gal Foun­da­tion, a con­ser­va­tive prop­erty-rights group that rep­re­sented the build­ing in­dus­try.

Edgar Kha­la­tian, a lan­duse en­ti­tle­ment lawyer who is co-chair­man of Los An­ge­les’ ad­vi­sory com­mit­tee on zon­ing, pre­dicted the city would have a law sim­i­lar to San Jose’s within a year. He noted that West Hol­ly­wood, Santa Mon­ica and Pasadena al­ready have such or­di­nances.

The laws tend to be “po­lit­i­cal hot pota­toes,” said Kha­la­tian, a part­ner at law firm Mayer Brown. “Although ev­ery­one wants af­ford­able hous­ing, not ev­ery­one wants it in their backyard.”

Such or­di­nances should be drafted with flex­i­bil­ity, he said, al­low­ing the lower-cost units to be smaller than the oth­ers and per­mit­ting de­vel­op­ers to pay into a hous­ing fund in­stead of build­ing. Oth­er­wise, de­vel­op­ers may de­cide not to build at all or may com­pen­sate for the cheaper units by pric­ing the oth­ers at rates the mid­dle class can­not af­ford.

“To me, that has al­ways been the rub,” Kha­la­tian said. “If the or­di­nance isn’t drafted well, you will have lower-in­come hous­ing and very ex­pen­sive hous­ing, which of course hurt the mid­dle class.”

Hasan Ikhrata, ex­ec­u­tive di­rec­tor of the South­ern Cal­i­for­nia Assn. of Gov­ern­ments, said Mon­day’s de­ci­sion un­der­scored a prob­lem that is forc­ing the mil­len­nial gen­er­a­tion — gen­er­ally those born in the years from the early 1980s to the early 2000s — to leave the state. He citied the high cost of hous­ing in Los An­ge­les, San Fran­cisco and San Jose in par­tic­u­lar.

“It just sim­ply high­lights the fact that we do not have enough hous­ing at the right price to house the new mil­len­nial gen­er­a­tion, which is the largest gen­er­a­tion,” Ikhrata said. “Af­ford­abil­ity is the rea­son that many mil­len­ni­als are leav­ing Cal­i­for­nia.”

Los An­ge­les pre­vi­ously had an or­di­nance that re­quired builders of rentals to set aside some units for be­low-mar­ket rents. An ap­peals court over­turned that or­di­nance in 2009, rul­ing that it con­flicted with a state law that al­lowed own­ers of empty units to set the rents, a prac­tice known as va­cancy de­con­trol.

Mon­day’s rul­ing ap­plied to hous­ing for sale and did not over­turn the ear­lier deci- sion, which many ac­tivists and lawyers said made L.A. re­luc­tant to pass another strong af­ford­able hous­ing or­di­nance.

“Los An­ge­les was sort of shell­shocked by that rul­ing,” said Larry Gross, ex­ec­u­tive di­rec­tor of the Coali­tion for Eco­nomic Sur­vival, a grass­roots ten­ants rights’ or­ga­ni­za­tion.

Los An­ge­les has tried to pro­mote af­ford­able hous­ing in other ways, lawyers said. It has taken ad­van­tage of state law that gives de­vel­op­ers the op­tion of build­ing lower-cost units in ex­change for cer­tain ben­e­fits, in­clud­ing higher den­sity and re­laxed park­ing re­quire­ments. It also helps pro­vide fi­nanc­ing for af­ford­able hous­ing projects.

In de­cid­ing the San Jose case, Jus­tice Ming W. Chin warned in a con­cur­ring opin­ion that the out­come might have been dif­fer­ent if the law had forced de­vel­op­ers to lose money on af­ford­able units.

He noted that San Jose’s or­di­nance per­mit­ted de­vel­op­ers to spend less on units that were to be sold at be­low­mar­ket rates.

“Pro­vid­ing af­ford­able hous­ing is a strong, per­haps even com­pelling, gov­ern­men­tal in­ter­est. But it is an in­ter­est of the gov­ern­ment,” Chin wrote. “The com­mu­nity as a whole should bear the bur­den of fur­ther­ing this in­ter­est, not merely some seg­ment of the com­mu­nity.”

Mar­cus Yam Los An­ge­les Times

THE HIGH COURT said mu­nic­i­pal­i­ties have “broad dis­cre­tion to reg­u­late the use of real prop­erty.” Above, a com­plex goes up in Fe­bru­ary in down­town L.A.

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