California Supreme Court Rules in Favor of Affordable Housing Requirement

Street of residential houses
With the state facing an unprecedented affordable housing crisis, California’s Supreme Court ruled to uphold San Jose’s controversial affordable housing requirement, saying cities and counties have the right to require housing developers to sell some housing at below-market rates.

According to a June 15 LA Times article, the unanimous decision came after court justices reviewed study after study showing the severe lack of affordable housing throughout the state, especially in the coastal regions. Today, the average home in California costs a stunning $440,000 — more than twice the national average.

“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,” Chief Justice Tani Cantil-Sakauye wrote in the decision. “Rather, these problems have become more severe and have reached what might be described as epic proportions in many of the state‘s localities.”

Local governments like the City of Los Angeles may now require developers to sell a certain percentage of their housing units below the average market rate when the developer obtains a building permit. This also allows for more economically diverse housing developments rather than developments that segregate higher-income residents from lower-income residents.

In San Jose, the law states that new home builders and developers building 20 or more housing units must offer 15% of these units at below-market rates. Alternately, they can choose to pay into a city fund for affordable housing.

“Our market is completely different than in California’s, of course. We have areas where we offer different price points from the low $100k’s and up, allowing for a diversity of products to a range of buyers,” said Lorie Parker from Synergy Homes. “The top quality we offer in our end product is the same no matter what price range we are building in. It is well known that particular areas drive building costs. We work hard to price ourselves in all areas to offer product to any qualified buyer.”

While real estate groups and the state home building industry sued the city of San Jose five years ago for its affordable housing ordinance, it’s not the only place in California that requires developers to provide affordable places to live. The LA Times reports that almost 200 other cities and counties throughout California have made similar provisions.

San Jose Mayor Sam Liccardo welcomed the news with feelings of vindication. However, he also expressed disappointment that his city was unable to build more affordable housing throughout the last five or six years, the San Jose Mercury News reported.

“It’s a sigh of relief, but we wish we had the money six years ago,” Liccardo said. “It just meant that affordable housing did not get built. We could have had many hundreds of affordable units in place for our fast-growing population.”

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