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Real Estate
9 min read
Areas of Expertise :
Land Use, Zoning, Urban Planning, Real Estate Appraisal, Economics
Published Date:
Last Modified Date:
Jurisdiction:
California State
California Building Industry Association v. City of San Jose, 61 Cal. 4th 435 (2015), concerned a facial constitutional challenge to San Jose’s inclusionary housing ordinance. The ordinance generally applied to residential developments containing 20 or more dwelling units and required developers to sell at least 15% of new on-site, for-sale homes at restricted prices to qualifying low- or moderate-income households. It also provided alternative compliance methods, including constructing affordable units off-site, dedicating land, acquiring and rehabilitating existing housing, or paying an authorized in-lieu fee. Those alternatives generally required affordable housing equal to at least 20% of the project’s total units.
The California Building Industry Association, or CBIA, argued that the ordinance imposed development exactions without establishing the connection required between the housing obligations and the effects of new residential construction. On June 15, 2015, the California Supreme Court rejected that facial claim. The court classified the basic on-site requirement as a land-use and price regulation rather than a compelled transfer of property subject to the heightened standards established in Nollan v. California Coastal Commission and Dolan v. City of Tigard. The U.S. Supreme Court denied CBIA’s petition for certiorari on February 29, 2016, leaving the California judgment in place without ruling on the merits. The ordinance discussed in the litigation has since been amended.
The San Jose City Council approved the inclusionary housing ordinance after considering an economic feasibility study, housing data, public testimony, and comments from developers, labor groups, housing organizations, and community members. Public records identify January 12, 2010, as the date of council approval, while the California Supreme Court opinion states that the ordinance was adopted on January 26, 2010.
The ordinance generally covered developments containing 20 or more residential units. Developers could satisfy the ordinance by including restricted-price homes within the project or by using one of several alternative compliance methods. It also included procedures for requesting a waiver, reduction, or adjustment when applying the requirements could produce an unconstitutional result.
CBIA filed an action in Santa Clara County Superior Court before the ordinance became operative. It sought declaratory and injunctive relief and requested a writ of mandate directing the city to set the measure aside.
CBIA argued that the affordable housing requirements operated as development exactions. According to the association, San Jose could not impose those obligations without demonstrating a sufficient connection between the requirements and the adverse effects caused by new residential projects. Because the action presented a facial challenge, the court considered the ordinance as written rather than its effect on a particular development.
After briefing and oral argument based largely on stipulated documents, the Superior Court granted relief to CBIA. The court determined that San Jose had not provided the evidentiary relationship it considered necessary between market-rate residential construction and the affordable housing obligations.
The trial court treated the requirements as exactions that required a closer connection to project-generated impacts. Its ruling prevented San Jose from enforcing the ordinance under the legislative record then before the court.
The Superior Court entered a formal judgment declaring Ordinance No. 28689 invalid. It enjoined the city from implementing the program unless San Jose supplied a legally sufficient basis connecting the affordable housing requirements to the effects of residential development.
San Jose and the affordable housing organizations that had intervened in the litigation appealed. They disputed the trial court’s classification of the ordinance as a development exaction.
The Sixth District Court of Appeal reversed the Superior Court judgment. It concluded that the ordinance operated as a generally applicable land-use regulation rather than a compelled dedication of property for public use.
The appellate court rejected the application of the heightened constitutional standards governing certain permit exactions. It held that the ordinance should instead be reviewed under the traditional standard applied to zoning and municipal police-power regulations.
The California Supreme Court unanimously affirmed the Court of Appeal. It held that San Jose’s basic on-site requirement regulated the manner in which residential property could be developed and the prices at which certain units could be sold.
The court distinguished the ordinance from a requirement compelling a developer to transfer land, money, or another property interest to the government. Because the on-site affordability requirement did not require such a transfer, the court declined to apply the nexus and proportionality tests associated with Nollan and Dolan.
The court also concluded that increasing the supply of affordable housing and placing restricted-price units within mixed-income developments were permissible municipal objectives. Its decision addressed CBIA’s facial exaction theory. It did not decide whether a particular application of the ordinance could support an as-applied taking claim, a confiscatory price-control claim, or another project-specific constitutional challenge.
The U.S. Supreme Court denied CBIA’s petition for a writ of certiorari. The denial allowed the California Supreme Court judgment to remain in effect but did not approve or reject the reasoning used by the state court.
Justice Clarence Thomas issued a separate statement regarding the denial. He wrote that the constitutional treatment of land-use conditions imposed through legislation remained unsettled, but he concluded that the case presented procedural and preservation issues that made it an unsuitable vehicle for deciding that question.
In Sheetz v. County of El Dorado, the U.S. Supreme Court held that a permit condition is not categorically exempt from Nollan and Dolan merely because a legislative body adopted it. The decision rejected a general distinction between legislatively imposed and administratively imposed permit conditions.
Sheetz did not directly reverse California Building Industry Association v. City of San Jose. The San Jose decision rested on the threshold classification of the on-site affordability requirement as a land-use and price regulation rather than an exaction requiring the surrender of a property interest. Sheetz addressed whether an otherwise qualifying exaction escapes constitutional review solely because it was adopted through legislation.
Court:
Supreme Court of California
Case Name:
California Building Industry Association v. City of San Jose
Low Income Housing
Housing Market
Property Valuation
Real Estate Development
Land Development
Municipal Planning
City Planning
California Building Industry Association v. City of San Jose, 61 Cal. 4th 435 (2015), concerned a facial constitutional challenge to San Jose’s inclusionary housing ordinance. The ordinance generally applied to residential developments containing 20 or more dwelling units and required developers to sell at least 15% of new on-site, for-sale homes at restricted prices to qualifying low- or moderate-income households. It also provided alternative compliance methods, including constructing affordable units off-site, dedicating land, acquiring and rehabilitating existing housing, or paying an authorized in-lieu fee. Those alternatives generally required affordable housing equal to at least 20% of the project’s total units.
The California Building Industry Association, or CBIA, argued that the ordinance imposed development exactions without establishing the connection required between the housing obligations and the effects of new residential construction. On June 15, 2015, the California Supreme Court rejected that facial claim. The court classified the basic on-site requirement as a land-use and price regulation rather than a compelled transfer of property subject to the heightened standards established in Nollan v. California Coastal Commission and Dolan v. City of Tigard. The U.S. Supreme Court denied CBIA’s petition for certiorari on February 29, 2016, leaving the California judgment in place without ruling on the merits. The ordinance discussed in the litigation has since been amended.
The San Jose City Council approved the inclusionary housing ordinance after considering an economic feasibility study, housing data, public testimony, and comments from developers, labor groups, housing organizations, and community members. Public records identify January 12, 2010, as the date of council approval, while the California Supreme Court opinion states that the ordinance was adopted on January 26, 2010.
The ordinance generally covered developments containing 20 or more residential units. Developers could satisfy the ordinance by including restricted-price homes within the project or by using one of several alternative compliance methods. It also included procedures for requesting a waiver, reduction, or adjustment when applying the requirements could produce an unconstitutional result.
CBIA filed an action in Santa Clara County Superior Court before the ordinance became operative. It sought declaratory and injunctive relief and requested a writ of mandate directing the city to set the measure aside.
CBIA argued that the affordable housing requirements operated as development exactions. According to the association, San Jose could not impose those obligations without demonstrating a sufficient connection between the requirements and the adverse effects caused by new residential projects. Because the action presented a facial challenge, the court considered the ordinance as written rather than its effect on a particular development.
After briefing and oral argument based largely on stipulated documents, the Superior Court granted relief to CBIA. The court determined that San Jose had not provided the evidentiary relationship it considered necessary between market-rate residential construction and the affordable housing obligations.
The trial court treated the requirements as exactions that required a closer connection to project-generated impacts. Its ruling prevented San Jose from enforcing the ordinance under the legislative record then before the court.
The Superior Court entered a formal judgment declaring Ordinance No. 28689 invalid. It enjoined the city from implementing the program unless San Jose supplied a legally sufficient basis connecting the affordable housing requirements to the effects of residential development.
San Jose and the affordable housing organizations that had intervened in the litigation appealed. They disputed the trial court’s classification of the ordinance as a development exaction.
The Sixth District Court of Appeal reversed the Superior Court judgment. It concluded that the ordinance operated as a generally applicable land-use regulation rather than a compelled dedication of property for public use.
The appellate court rejected the application of the heightened constitutional standards governing certain permit exactions. It held that the ordinance should instead be reviewed under the traditional standard applied to zoning and municipal police-power regulations.
The California Supreme Court unanimously affirmed the Court of Appeal. It held that San Jose’s basic on-site requirement regulated the manner in which residential property could be developed and the prices at which certain units could be sold.
The court distinguished the ordinance from a requirement compelling a developer to transfer land, money, or another property interest to the government. Because the on-site affordability requirement did not require such a transfer, the court declined to apply the nexus and proportionality tests associated with Nollan and Dolan.
The court also concluded that increasing the supply of affordable housing and placing restricted-price units within mixed-income developments were permissible municipal objectives. Its decision addressed CBIA’s facial exaction theory. It did not decide whether a particular application of the ordinance could support an as-applied taking claim, a confiscatory price-control claim, or another project-specific constitutional challenge.
The U.S. Supreme Court denied CBIA’s petition for a writ of certiorari. The denial allowed the California Supreme Court judgment to remain in effect but did not approve or reject the reasoning used by the state court.
Justice Clarence Thomas issued a separate statement regarding the denial. He wrote that the constitutional treatment of land-use conditions imposed through legislation remained unsettled, but he concluded that the case presented procedural and preservation issues that made it an unsuitable vehicle for deciding that question.
In Sheetz v. County of El Dorado, the U.S. Supreme Court held that a permit condition is not categorically exempt from Nollan and Dolan merely because a legislative body adopted it. The decision rejected a general distinction between legislatively imposed and administratively imposed permit conditions.
Sheetz did not directly reverse California Building Industry Association v. City of San Jose. The San Jose decision rested on the threshold classification of the on-site affordability requirement as a land-use and price regulation rather than an exaction requiring the surrender of a property interest. Sheetz addressed whether an otherwise qualifying exaction escapes constitutional review solely because it was adopted through legislation.
The reported appellate decisions do not identify retained experts who testified in the CBIA facial challenge. The following disciplines concern general project-specific litigation and should not be presented as witnesses disclosed or called in this case.
Real Estate Appraisal Expert Witness
A real estate appraisal expert may evaluate land value, market-rate home prices, restricted affordable housing prices, comparable developments, and the effect of affordability controls on a specific property. Appraisal evidence may be relevant to an as-applied taking claim or an allegation that a regulation caused a substantial reduction in value.
Land-Use Planning Expert Witness
A land-use planning expert may examine zoning classifications, general plans, housing elements, entitlement procedures, density allowances, and the treatment of affordable units within a proposed development. The analysis may address how the city applied its ordinance to a particular parcel or permit request.
Housing Expert Witness
A housing economist may assess development costs, expected returns, housing demand, affordability levels, financing conditions, and the economic effect of on-site or alternative compliance requirements. That evidence may be used in a project-specific dispute involving feasibility, waiver requests, or the claimed financial burden of an ordinance.
Define the Challenged Condition Before Selecting the Constitutional Test
A party challenging a development requirement should first identify what the government is demanding. The legal analysis may differ depending on whether the condition restricts land use, controls sale prices, requires payment of money, compels an easement, or demands a transfer of land.
Separate Facial Claims From As-Applied Claims
A facial challenge may resolve the legal classification of an ordinance without addressing its financial effect on a specific project. Developers asserting economic harm may need a developed administrative record that includes a permit application, project data, valuation evidence, and the city’s response to any waiver request.
Examine Mandatory and Optional Compliance Methods Separately
An ordinance may contain a basic requirement and several alternatives. A facial challenge to the entire measure may fail when at least one method can be applied constitutionally.
Counsel should determine whether a disputed payment, land transfer, or off-site obligation is mandatory, voluntarily selected, or imposed after administrative review. Each route may require a different factual and constitutional analysis.
Preserve Federal Constitutional Arguments Throughout the Case
Justice Thomas’s statement regarding the denial of certiorari referred to preservation and procedural concerns. Parties seeking federal review should clearly present federal constitutional arguments in the trial court and maintain them through each stage of the state appellate process.
Account for Later Changes in Exactions Law
Sheetz rejected the proposition that legislative enactment alone removes a permit condition from Nollan and Dolan review. Future disputes must therefore examine both the nature of the demanded property interest and the relationship between the condition and the proposed development.
The litigation began with a Superior Court judgment declaring San Jose’s inclusionary housing ordinance invalid and ended with the California Supreme Court rejecting CBIA’s facial exaction claim. The state high court concluded that the basic on-site requirement regulated the development and sale of residential property without compelling developers to surrender land or another property interest. It therefore declined to apply the heightened standards associated with Nollan and Dolan.
The U.S. Supreme Court’s 2016 denial of certiorari left the California judgment in place without resolving the federal constitutional question. Its 2024 decision in Sheetz later established that legislatively adopted permit conditions are not automatically exempt from exactions analysis. That ruling did not decide whether San Jose’s on-site affordability requirement qualifies as an exaction, and it did not reopen the judgment entered in the CBIA litigation.
What was the main issue in California Building Industry Association v. City of San Jose?
The case concerned whether San Jose’s inclusionary housing ordinance imposed an unconstitutional development exaction or operated as a generally applicable land-use and price regulation.
What did San Jose’s inclusionary housing ordinance require?
The ordinance generally applied to residential developments containing 20 or more units and required at least 15% of new on-site, for-sale homes to be sold at restricted prices to qualifying households. It also provided alternative compliance methods that generally required affordable housing equal to at least 20% of the project’s total units.
Why did the California Supreme Court reject CBIA’s challenge?
The court concluded that the basic on-site requirement regulated how property could be developed and how certain homes could be sold. It did not require developers to transfer land or another property interest to the government.
Did the U.S. Supreme Court affirm the California Supreme Court’s ruling?
No. The U.S. Supreme Court denied certiorari on February 29, 2016. A denial of certiorari leaves the lower court judgment in effect but does not constitute a ruling on the merits.
What alternative compliance methods did the ordinance provide?
The ordinance permitted off-site affordable housing construction, land dedication, acquisition and rehabilitation of existing housing, and payment of an authorized in-lieu fee. It also included a procedure for requesting a waiver, reduction, or adjustment.
The reported appellate decisions do not identify retained experts who testified in the CBIA facial challenge. The following disciplines concern general project-specific litigation and should not be presented as witnesses disclosed or called in this case.
Real Estate Appraisal Expert Witness
A real estate appraisal expert may evaluate land value, market-rate home prices, restricted affordable housing prices, comparable developments, and the effect of affordability controls on a specific property. Appraisal evidence may be relevant to an as-applied taking claim or an allegation that a regulation caused a substantial reduction in value.
Land-Use Planning Expert Witness
A land-use planning expert may examine zoning classifications, general plans, housing elements, entitlement procedures, density allowances, and the treatment of affordable units within a proposed development. The analysis may address how the city applied its ordinance to a particular parcel or permit request.
Housing Expert Witness
A housing economist may assess development costs, expected returns, housing demand, affordability levels, financing conditions, and the economic effect of on-site or alternative compliance requirements. That evidence may be used in a project-specific dispute involving feasibility, waiver requests, or the claimed financial burden of an ordinance.
Define the Challenged Condition Before Selecting the Constitutional Test
A party challenging a development requirement should first identify what the government is demanding. The legal analysis may differ depending on whether the condition restricts land use, controls sale prices, requires payment of money, compels an easement, or demands a transfer of land.
Separate Facial Claims From As-Applied Claims
A facial challenge may resolve the legal classification of an ordinance without addressing its financial effect on a specific project. Developers asserting economic harm may need a developed administrative record that includes a permit application, project data, valuation evidence, and the city’s response to any waiver request.
Examine Mandatory and Optional Compliance Methods Separately
An ordinance may contain a basic requirement and several alternatives. A facial challenge to the entire measure may fail when at least one method can be applied constitutionally.
Counsel should determine whether a disputed payment, land transfer, or off-site obligation is mandatory, voluntarily selected, or imposed after administrative review. Each route may require a different factual and constitutional analysis.
Preserve Federal Constitutional Arguments Throughout the Case
Justice Thomas’s statement regarding the denial of certiorari referred to preservation and procedural concerns. Parties seeking federal review should clearly present federal constitutional arguments in the trial court and maintain them through each stage of the state appellate process.
Account for Later Changes in Exactions Law
Sheetz rejected the proposition that legislative enactment alone removes a permit condition from Nollan and Dolan review. Future disputes must therefore examine both the nature of the demanded property interest and the relationship between the condition and the proposed development.
The litigation began with a Superior Court judgment declaring San Jose’s inclusionary housing ordinance invalid and ended with the California Supreme Court rejecting CBIA’s facial exaction claim. The state high court concluded that the basic on-site requirement regulated the development and sale of residential property without compelling developers to surrender land or another property interest. It therefore declined to apply the heightened standards associated with Nollan and Dolan.
The U.S. Supreme Court’s 2016 denial of certiorari left the California judgment in place without resolving the federal constitutional question. Its 2024 decision in Sheetz later established that legislatively adopted permit conditions are not automatically exempt from exactions analysis. That ruling did not decide whether San Jose’s on-site affordability requirement qualifies as an exaction, and it did not reopen the judgment entered in the CBIA litigation.
What was the main issue in California Building Industry Association v. City of San Jose?
The case concerned whether San Jose’s inclusionary housing ordinance imposed an unconstitutional development exaction or operated as a generally applicable land-use and price regulation.
What did San Jose’s inclusionary housing ordinance require?
The ordinance generally applied to residential developments containing 20 or more units and required at least 15% of new on-site, for-sale homes to be sold at restricted prices to qualifying households. It also provided alternative compliance methods that generally required affordable housing equal to at least 20% of the project’s total units.
Why did the California Supreme Court reject CBIA’s challenge?
The court concluded that the basic on-site requirement regulated how property could be developed and how certain homes could be sold. It did not require developers to transfer land or another property interest to the government.
Did the U.S. Supreme Court affirm the California Supreme Court’s ruling?
No. The U.S. Supreme Court denied certiorari on February 29, 2016. A denial of certiorari leaves the lower court judgment in effect but does not constitute a ruling on the merits.
What alternative compliance methods did the ordinance provide?
The ordinance permitted off-site affordable housing construction, land dedication, acquisition and rehabilitation of existing housing, and payment of an authorized in-lieu fee. It also included a procedure for requesting a waiver, reduction, or adjustment.
Low Income Housing
Housing Market
Property Valuation
Real Estate Development
Land Development
Municipal Planning
City Planning
Real Estate Appraisal, +3
Real Estate
Mold, +4
Real Estate