California Supreme Court upholds affordable housing requirements

The California Supreme Court recently ruled that the state’s cities and counties can 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 low-cost housing fund.

Describing a shortage of affordable housing in the state as a crisis of “epic proportions,” the court ruled in favor of the City of San Jose in a challenge to an affordable housing ordinance passed five years ago. 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, according to the Los Angeles Times.

The state building industry sued the city to block it from enforcing the law. Developers contended it amounted to an unconstitutional taking of private property. According to the ruling, municipalities have “broad discretion to regulate the use of real property to serve the legitimate interests of the general public.”

The court’s decision is expected to encourage other cities to adopt similar programs now that legal uncertainty has been addressed. According to a recent legislative report, the average California home costs $440,000, about two and a half times the average national home price ($180,000).