Developers in California are taking their fight against the state’s inclusionary zoning laws to the U.S. Supreme Court, just as cities across the nation are increasingly committing to similar laws to address affordable housing shortages. The California Building Association opposes the soon-to-kick-in law mandating that developers discount a percentage of units in new housing projects for low-income families. They claim it constitutes an illegal “taking” of private property by the government and hope that SCOTUS justices will agree with them
California’s Supreme Court rejected this argument in June, pointing to an affordable housing crunch of “epic proportions” as the compelling reason for the law. The supply of housing that families of modest income can actually afford is so low that advocates in San Francisco are considering suing the suburbs to intensify density.
But the California developers say that forcing them to build below-market-rate units as a condition of obtaining building permits amounts to extortion. Developers in Chicago are also making this argument, and have similarly filed a lawsuit against the city’s inclusionary zoning laws. In California, the homebuilders are also challenging the idea that there is a connection between new housing construction and affordability. In an interview with CityLab earlier this month, Steve Joung, CEO of Pangea Properties, a company that rehabs old buildings into new moderately priced housing, said there is a connection—but not the one that inclusionary zoning proponents would favor…
If SCOTUS agrees to review the California case, however, it could slow momentum around such plans. And if SCOTUS ends up agreeing with the developers, it could drastically change the current calculus around how to increase the supply of affordable housing.
Though it is hard to know whether this would actually reach the Supreme Court, I predict the developers will lose in court. I anticipate this result due to two reasons:
- The United States has few other mechanisms for addressing affordable housing even as it is a pressing issue. The free market clearly does not work. The federal government doesn’t want to provide much housing. Non-profits or community groups can only provide so many units. For decades, there has been little incentive for developers or communities to provide cheaper housing. In contrast, they can make more money with more expensive housing units and promote and/or protect a higher social status.
- Prior court cases have determined that developers can be made to provide other things to local governments in order to be able to build. For example, Naperville was a pioneer in the 1950s in having developers pay for some infrastructure (sewers, roads, etc.) and then several decades later asking for donations of land or cash to help build schools. Both decisions were fought in court by developers and the courts ruled in favor of the municipality. Additionally, other decisions have gone against exclusionary zoning practices that try to promote bigger lots and more expensive housing units.
This will be interesting to watch.