The California Supreme Court unanimously ruled in San Francisco Monday that cities have the right to require developers to make a portion of new units available as affordable housing.
The court unanimously upheld a 2010 San Jose law that requires developers of 20 or more units to provide 15 percent of those units at below-market rates affordable to people with low and moderate incomes.
Chief Justice Tani Cantil-Sakauye wrote that the ordinance falls within cities' "broad discretion to regulate the use of real property to serve the legitimate interests of the general public and the community at large."
Problems stemming from a scarcity of affordable housing "have reached what might be described as epic proportions in many of the state's localities," the chief justice wrote.
The court rejected a challenge by the California Building Industry Association, which argued that the measure amounted to an unconstitutional taking of property without just compensation.
Cantil-Sakauye wrote for the court, "This condition does not require the developer to dedicate any portion of its property to the public or to pay any money to the public.
"Instead, like many other land use regulations, this condition simply places a restriction on the way the developer may use its property by limiting the price for which the developer may offer some of its units for sale," the court said.
More than 170 California cities and counties, including Pleasanton, have adopted similar laws, known as inclusionary housing ordinances, according to the court.
The San Jose law was put on hold while the building association pursued its lawsuit.
Mayor Sam Liccardo said, "The California Supreme Court has vindicated San José's bold decision to become the largest city in the nation with an inclusionary housing policy, and it couldn't have come at a time of greater need for affordable housing.
"With the crisis we face in our housing markets, I only regret that it required a Supreme Court ruling to uphold the ordinance, because we could have had the benefit of several years of implementation of this important tool," Liccardo said in a statement.
Tony Francois, a lawyer for the building association, said the organizations and its attorneys are reviewing the ruling to determine whether a further appeal to the U.S. Supreme Court is possible.
"This is a very disappointing decision from the standpoint of property rights generally, and specifically for those who want to build homes for the public, and for people who aspire to buy a new home," Francois said.
"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," he said.
Francois is a senior staff attorney with the Sacramento-based Pacific Legal Foundation, which supports property rights and limited government.
The San Francisco-based Non-Profit Housing Association of Northern California called the ruling "a big win for affordable housing."
"Inclusionary programs are an especially important tool to ensure that we maintain and create integrated and socio-economic and ethnically diverse communities," the group said in a statement.
The housing association was part of a coalition of six nonprofit housing organizations that was allowed by the trial judge in the case, Santa Clara Superior Court Judge Socrates Manoukian, to become an intervenor, or an official party, on the side of San Jose.
The case came to the state high court after Manoukian overturned the city law in 2012 and after a state appeals court in San Jose in 2013 reversed his decision and upheld the law.
The San Jose ordinance allows developers the options of paying a fee or providing affordable housing at another location as alternatives to making 15 percent of a new development affordable housing.