Several recent legal developments have cast doubt on the ability of California cities to continue using favored tools to promote construction of “inclusionary” affordable housing units. Few would dispute that the state faces a “severe shortage of affordable housing,” as the Legislature has declared. But this consensus has not translated into agreement on how best to allocate the societal burden of providing affordable housing. As conflicts have intensified over a number of cities’ approaches to inclusionary housing, the courts have created a patchwork of law that has provided little practical guidance to local governments or developers, but recent actions by the Governor and the California Supreme Court may be bringing things into focus.

BACKGROUND: THE PALMER/PATTERSON LANDSCAPE -

The current stage was set primarily by two appellate decisions in 2009 that dealt a blow to affordable housing advocates, but left many questions unanswered. In Palmer/Sixth Street Properties v. City of Los Angeles, the Second District Court of Appeal held that an ordinance requiring developers to set aside rental units for inclusionary use violated the state’s Costa-Hawkins Act, the rent “de-control” law that allows landlords to set initial rents. Decided around the same time, Building Industry Association of Central California v. City of Patterson concerned a requirement to pay in-lieu fees as a condition of developing ownership units. The Fifth District applied an exactions analysis to find that such a fee is not “reasonably justified” unless the City can show a reasonable relationship between that fee and the “deleterious” impact of the development itself, a general interest in increasing affordable housing is not enough.