HOME BUILDERS ASSOCIATION OF NORTHERN CALIFORNIA v. CITY OF NAPA
COURT OF APPEAL OF CALIFORNIA, FIRST APPELLATE DISTRICT, DIVISION FIVE
89 Cal. App. 4th 897; 2001 Cal. App. LEXIS 428; 108 Cal. Rptr. 2d 60; 2001 Cal. Daily Op. Service 4655; 2001 Daily Journal DAR 5713
JUDGES:
JONES, P.J. We concur:
STEVENS, J., SIMONS, J.
OPINION
BY:
JONES
OPINION:
[*900] [***62] Home Builders Association of Northern
California (HBA) appeals from a judgment entered after the trial court
sustained a demurrer and dismissed its complaint asserting a facial challenge
to an inclusionary zoning ordinance that was enacted by the City of Napa [**3] (City). HBA contends primarily that the
trial court erroneously applied Federal and California takings law. We disagree
and will affirm the judgment.
I. FACTUAL AND PROCEDURAL
BACKGROUND
City, like many other
localities in California, has a shortage of affordable housing. This shortage
has negative consequences for all of City's population, but causes particularly
severe problems for those on the lower end of the economic spectrum. Manual
laborers, some of whom work in the region's wine or leisure industries, are
forced to live in crowded, substandard housing. There is a large, and growing
population of homeless, including many families and teenagers. Workers from low
income families increasingly are forced to live greater distances from their
places of employment, which causes increased traffic congestion and pollution.
City formed the Napa
Affordable Housing Task Force to address these problems. The task force was a
broad based community group that included representatives from non-profit
agencies, environmental groups, religious institutions, local industries,
for-profit developers, and the local chamber of commerce. The purpose of the
task force was to "study the issues surrounding [**4] affordable housing in the City of Napa and
... make recommendations to the Housing Authority Commission."
The task force studied
housing issues for several months. It formed subcommittees, conducted public
hearings, and evaluated affordable housing solutions that had been enacted by
other communities. Ultimately the task force recommended that City enact an
inclusionary housing ordinance n1 modeled after one that had been enacted by
Napa County.
n1 An "inclusionary
zoning" or "inclusionary housing" ordinance is one that requires
a residential developer to set aside a specified percentage of new units for
low or moderate income housing. (See Padilla, Reflections on Inclusionary Housing and a Renewed Look at its Viability
(1995)
23 Hofstra Law Review 539, 540.)
[*901] City responded by
enacting the inclusionary zoning ordinance n2 that is at issue in the present
appeal. The ordinance applies to all development in the city, including
residential and non-residential.
n2 In fact, City enacted two
ordinances to address the inclusionary housing problem. We will refer to the ordinances
collectively as the "inclusionary zoning ordinance" or simply,
"the ordinance."
[**5]
[***63] The primary
mandate imposed by the ordinance on residential developers is a requirement
that ten percent of all newly constructed units must be "affordable"
as that term is defined. n3 The ordinance offers developers two alternatives.
First, developers of single-family units may, at their option, satisfy the so
called inclusionary requirement through an "alternative equivalent
proposal" such as a dedication of land, or the construction of affordable
units on another site. Developers of multi-family units may also satisfy the 10
percent requirement through an "alternative equivalent proposal" if
the City Council, in its sole discretion, determines that the proposed
alternative results in affordable housing opportunities equal to or greater
than those created by the basic inclusionary requirement.
n3 The definition of
"affordable" in the ordinance is complex. In general, the term refers
to an amount that could be paid by persons who live in a household that earns
significantly less than the area median income.
[**6]
As a second alternative, a
residential developer may choose to satisfy the inclusionary requirement by
paying an in-lieu fee. Developers of single-family units may choose this option
by right, while developers of multi-family units are permitted this option if
the City Council, again in its sole discretion, approves. All fees generated
through this option are deposited into a housing trust fund, and may only be
used to increase and improve the supply of affordable housing in City.
Developments that include
affordable housing are eligible for a variety of benefits including expedited
processing, fee deferrals, loans or grants, and density bonuses that allow more
intensive development than otherwise would be allowed. In addition, the
ordinance permits a developer to appeal for a reduction, adjustment, or complete waiver of obligations under the
ordinance "based upon the absence of any reasonable relationship or nexus
between the impact of the development and ... the inclusionary
requirement."
HBA is a non-profit
corporation and association of builders, contractors, and related trades and
professionals involved in the residential construction industry. In September
1999, HBA [**7] filed a complaint
against City seeking to have the inclusionary zoning ordinance declared
facially invalid. As is relevant here, HBA alleged the ordinance violated (1)
the takings clauses of [*902] the Federal and State Constitutions, (2) the
Mitigation Fee Act (Gov. Code, § §
66000 et seq.), (3) the due process clause of the Federal Constitution,
and (4) Proposition 218.
City demurred to the
complaint arguing it was entitled to prevail as a matter of law. City supported
its demurrer with nearly 700 pages of reports and materials that it had relied
upon when adopting the ordinance.
In December 1999, the trial
court allowed a group of persons and entities to intervene in the action in
support of the ordinance. n4 The intervenors joined City's demurrer.
n4 The intervenors were Napa
Valley Community Housing, Non-Profit Housing Association of Northern
California, Housing California, Patricia Domingo, Heather Clayton, Donna Simon,
Hilda Avina, Rainy Stegall, and Hector Candelario.
The trial [**8] court sustained the demurrer without leave
to amend, and entered judgment in favor of City and the intervenors. This
appeal followed.
II. DISCUSSION
A. Introduction and Standard
of Review
HBA contends the trial court erred when it sustained
the demurrer to its complaint.
[***64] In arguing City's
inclusionary zoning ordinance is facially invalid, HBA again asserts the
ordinance violates (1) the takings clauses of the Federal and State
constitutions, (2) the Mitigation Fee Act (Gov. Code, § 66000 et seq.), (3) the due process clause
of the Federal Constitution, and (4) Proposition 218.
The standard of review we
apply is familiar. On appeal from a judgment of dismissal after an order
sustaining a demurrer, the appellate court reviews the record de novo, to
determine whether the complaint states a cause of action as a matter of law. ( Moore v. Regents of University of California
(1990) 51 Cal. 3d 120, 125, 271 Cal. Rptr. 146, 793 P.2d 479.) All facts
properly pleaded are deemed to be true. (Ibid.)
With these principles in
mind, we consider the arguments that have been advanced concerning each claim.
[*903] B. Takings Issues
1. Is the Ordinance [**9] Facially Invalid?
HBA contends that City's
inclusionary zoning ordinance is facially invalid because it violates the
taking clauses of the Federal and State Constitutions.
A claimant who advances a
facial challenge faces an "uphill battle." ( Keystone Bituminous Coal Assn. v. DeBenedictis (1987) 480 U.S. 470,
495, 94 L. Ed. 2d 472, 107 S. Ct. 1232.) " 'A claim that a regulation
is facially invalid is only tenable
if the terms of the regulation will not permit those who administer it to avoid
an unconstitutional application to
the complaining parties.' " ( San
Mateo County Coastal Landowners' Assn. v. County of San Mateo (1995) 38 Cal.
App. 4th 523, 547, quoting Tahoe-Sierra
Preservation Council v. State Water Resources Control Bd. (1989) 210 Cal. App.
3d 1421, 1442, 259 Cal. Rptr. 132.) This is because a facial challenge is
predicated on the theory that "the mere enactment of the ... ordinance
worked a taking of plaintiff's property ...." ( Hensler v. City of Glendale (1994) 8 Cal. 4th 1, 24, 876 P.2d 1043.)
Here, City's inclusionary
zoning ordinance imposes significant burdens on those who wish to develop
[**10] their property. However the
ordinance also provides significant benefits to those who comply with its
terms. Developments that include affordable housing are eligible for expedited
processing, fee deferrals, loans or grants, and density bonuses. More
critically, the ordinance permits a developer to appeal for a reduction,
adjustment, or complete waiver of the
ordinance's requirements. Since City has the ability to waive the requirements
imposed by the ordinance, the ordinance cannot and does not, on its face,
result in a taking.
HBA contends the ordinance's
waiver clause does not preclude a facial challenge because that clause
improperly places the burden on the developer to prove that a waiver would be
appropriate when the City has not established a justification for the exactions
mandated by the ordinance. According to HBA, allocating the burden in this way
is inconsistent with Dolan v. City of
Tigard (1994) 512 U.S. 374, 391, 129 L. Ed. 2d 304, 114 S. Ct. 2309,
footnote 8. HBA misreads Dolan. Quite
to the contrary, the Supreme Court stated in Dolan, that when evaluating the validity of generally applicable
zoning regulations, it is appropriate to place [**11] the burden on the party
[*904] who is challenging the
regulation. (Ibid.) As we will
discuss below, City's inclusionary zoning ordinance is a generally applicable
legislative enactment rather than an individualized assessment imposed as a
condition of development. Thus, the burden
[***65] shifting standard
described in Dolan does not apply.
2. Does the Ordinance
Substantially Advance a Legitimate Interest?
The Fifth Amendment to the
United States Constitution states that "private property [shall not] be
taken for public use without just compensation." Article I, section 19 of
the California Constitution contains similar language, stating that
governmental entities must pay just compensation when they "take"
private property for public use.
In Agins v. Tiburon (1980) 447 U.S. 255, 65 L. Ed. 2d 106, 100 S. Ct.
2138, the Supreme Court provided a test to determine whether a taking has
occurred. The court said, "the application of a general zoning law to
particular property effects a taking if the ordinance does not substantially
advance legitimate state interests ... or denies an owner economically viable
use of his land ...." ( Id. at p.
260.)
Here, [**12]
HBA contends that City's inclusionary zoning ordinance effects a taking
under the first of these tests; i.e., that the ordinance is invalid because it
fails to substantially advance legitimate state interests. We are unpersuaded.
First, we have no doubt that
creating affordable housing for low and moderate income families is a
legitimate state interest. Our Supreme Court has said that the "assistance
of moderate-income households with their housing needs is recognized in this
state as a legitimate governmental purpose." ( Santa Monica Beach, Ltd. v. Superior Court (1999) 19 Cal. 4th 952, 970,
968 P.2d 993.) This conclusion is consistent with repeated pronouncements
from the state Legislature which has declared that "the development of a
sufficient supply of housing to meet the needs of all Californians is a matter of statewide concern," (Gov.
Code, § 65913.9, emphasis added) and
that local governments have "a responsibility to use the powers vested in
them to facilitate the improvement and development of housing to make adequate
provision for the housing needs of all
economic segments of the community." (Gov. Code, § 65580,
[**13] subd. (d), emphasis
added.) Indeed, Witkin lists 12 separate statutes that are "designed to
stimulate the construction of low and moderate income housing by the private
sector." (4 Witkin, Summary of Cal. Law (9th ed. 1987) Real Property
§ 54, p. 275; id. (2000 Supp.) § 54, p.
134.)
[*905] Second, it is
beyond question that City's inclusionary zoning ordinance will
"substantially advance" the important governmental interest of
providing affordable housing for low and moderate income families. By requiring
developers in City to create a modest amount of affordable housing (or to
comply with one of the alternatives) the ordinance will necessarily increase
the supply of affordable housing. We conclude City's ordinance
"substantially advances legitimate state interests." ( Agins v. Tiburon, supra, 447 U.S. at p.
260.)
HBA's principal
constitutional claim is that City's ordinance is invalid under Nollan v. California Coastal Comm'n (1987)
483 U.S. 825, 97 L. Ed. 2d 677, 107 S. Ct. 3141, and Dolan v. City of Tigard, supra, 512 U.S. 374.
In Nollan the court discussed the "substantially advance"
test in the context of a governmental [**14]
requirement that appellant property owners dedicate a portion of their
beachfront property to the public as a condition for obtaining a rebuilding
permit. In the course of its discussion, the court said there must be an
"essential nexus" between a condition imposed on the use of [***66]
land, and the impacts caused by the proposed use. ( Nollan v. California Coastal Comm'n, supra, 483 U.S. at p. 837, 107 S.
Ct. 3141.)
Dolan also
involved dedications of property that were a condition for granting a
development permit. There the court said that a "rough
proportionality" standard "best encapsulates what we hold to be the
requirement of the Fifth Amendment. No precise mathematical calculation is
required, but the city must make some sort of individualized determination that
the required dedication is related both in nature and extent to the impact of
the proposed development." ( Dolan
v. City of Tigard, supra, 512 U.S. at p. 391.)
HBA contends City's
ordinance is invalid under Nollan and
Dolan because there is no
"essential nexus" or "rough proportionality" between the
exaction required by the ordinance, and the impacts caused by development of
property.
We reject [**15] this argument because Nollan and Dolan are
inapplicable under the facts of this case. "The intermediate standard of
judicial scrutiny formulated by the high court in Nollan and Dolan is
intended to address ... land use 'bargains' between property owners and
regulatory bodies--those in which the local government conditions permit
approval for a given use on the owner's surrender of benefits which purportedly offset the impact of the
proposed development. It is in this paradigmatic permit context--where the individual
property owner-developer seeks to negotiate approval of a [*906]
planned development--that the combined Nollan and Dolan test
quintessentially applies." ( Ehrlich
v. City of Culver City (1996) 12 Cal. 4th 854, 868, 911 P.2d 429.)
"But a different standard of scrutiny [applies] to development fees that
are generally applicable through legislative action 'because the heightened
risk of the "extortionate" use of the police power to exact
unconstitutional conditions is not present.' " n5 ( Santa Monica Beach, Ltd. v. Superior Court, supra, 19 Cal. 4th at p.
966, quoting Ehrlich v. City of
Culver City, supra, 12 Cal. 4th at p. 876.) [**16] "Individualized development fees
warrant a type of review akin to the conditional conveyances at issue in Nollan and Dolan, whereas generally applicable development fees warrant the
more deferential review that the Dolan court
recognized is generally accorded to legislative determinations." ( Santa Monica Beach, Ltd. v. Superior Court,
supra, 19 Cal. 4th at pp. 966-967.) The justification for these varying
levels of scrutiny is founded in the nature of the two types of exactions.
"It is one thing for courts to make a government agency adhere to its own
justification for requiring the dedication of a particular portion of property
as a condition of development; such adherence safeguards against the
possibility that the justification is merely a pretext for taking the property
without paying compensation. ... But it is another thing for courts to require
that a complex, generally applicable piece of economic legislation that will
have many effects on many different persons and entities accomplish precisely
the goals stated in a legislative preamble in order to preserve its
constitutionality." ( Santa Monica
Beach, Ltd. v. Superior [***67] Court, supra, 19 Cal. 4th at p. 972, 81 Cal. Rptr. 2d 93, 968 P.2d
993.) [**17]
n5 While the court in Santa Monica Beach, discussed the scope
of Nollan and Dolan in the context of "development fees," the court has
made clear that the same analysis applies whether a governmental entity
requires the conveyance of property, or the payment of a fee. (See Ehrlich v. City of Culver City, supra, 12
Cal. 4th at p. 876.)
Here, we are not called upon
to determine the validity of a particular land use bargain between a
governmental agency and a person who wants to develop his or her land. Instead
we are faced with a facial challenge to economic legislation that is generally
applicable to all development in
City. We conclude the heightened standard of review described in Nollan and Dolan is inapplicable under these facts.
3. Other Takings Issues
HBA advances two additional arguments on the takings
issue.
First HBA contends that even
if the heightened level of scrutiny set forth in Nollan and Dolan are
inapplicable, City's inclusionary zoning ordinance [**18] is still invalid under California cases such
as Rohn v. City of Visalia (1989) 214
Cal. App. 3d 1463, 263 Cal. Rptr. 319, Whaler's
Village Club v. California Coastal Com. (1985) 173 Cal. App. 3d 240, 220 Cal.
Rptr. 2, and Liberty v. California
Coastal Com. (1980) 113 Cal. App. 3d 491, 170 Cal. Rptr. 247. These
decisions are inapposite. The issue in each was the validity of an ad hoc
condition that was imposed on an individual developer. None of them involved a
facial challenge to a generally applicable zoning ordinance that imposed
obligations on all development in a given area. We conclude Rohn, Whaler's Village, and Liberty are not applicable under the
facts of this case.
HBA also contends that the
inclusionary zoning ordinance is invalid because the lack of housing for low
and moderate income families in City is the product of City's own prior
restrictive land use policies.
HBA has not cited any
authority to support the proposition that a zoning ordinance which tries to
solve problems caused by prior legislative decisions is invalid, and case law
is directly to the contrary. For example, in Penn Central Transp. Co. v. New York City (1978) 438 U.S. 104, 57 L.
Ed. 2d 631, 98 S. Ct. 2646, [**19] the Supreme Court ruled that New York could enact a landmark
preservation law that was designed to mitigate the effects of prior policies
that permitted "large numbers of historic structures, landmarks, and areas"
to be destroyed. ( Id. at p. 108.) If
New York can enact a landmark preservation law to remedy a shortage of historic
buildings created by its prior policies, City can enact an inclusionary zoning
ordinance even if its prior policies contributed to a scarcity of available
land and a shortage of affordable housing.
C. Mitigation Fee Act
[NOT CERTIFIED FOR
PUBLICATION]
D. Due Process
HBA contends the inclusionary zoning ordinance is
facially invalid under the due process clause of the Federal Constitution
because it "requires property owners who develop residential housing to
sell or rent 10% of their units at prices or rents that are based entirely upon
certain fixed percentages of the income levels of lower and very low- income
households." Imposing such a requirement violates the due process clause,
HBA argues, because "the inclusionary zoning law provides no mechanism to
make a fair return for property owners who are forced to sell or rent units
[**20] at an amount unrelated to market
prices."
We doubt seriously that HBA
is entitled to a "fair return" under the due process clause. The
"fair return" standard is commonly used to evaluate restrictions
placed on historically regulated industries such as railroads and public
utilities. (See, e.g., Power Comm'n v.
Pipeline Co. (1942) 315 U.S. 575, 86 L. Ed. 1037, 62 S. Ct. 736.) It has
also been used to evaluate rent control ordinances. (See e.g. Fisher
v. City of Berkeley (1984) 37 Cal. 3d 644, 679, 209 Cal. Rptr. 682, 693 P.2d
261.) However HBA has not cited, and we are not aware of, any case that holds
a housing developer is entitled to "fair return" on his or her
investment.
However we need not base our
decision on this ground. First, it is not literally correct to say that City's
ordinance "requires property owners who develop residential housing to
sell or rent 10% of their units [to low income individuals]." Under the
ordinance, any person who does not want to sell or rent a portion of his or her
housing units to low income individuals may choose one of the alternatives,
such as donating vacant land or paying an in-lieu fee. Thus HBA's argument
[**21] is based on an incorrect
premise.
Second, and more
importantly, HBA's facial due process challenge must necessarily fail. As we
have said, " 'A claim that a regulation is facially invalid is only tenable if the terms of the regulation
will not permit those who administer it to avoid an unconstitutional application to the complaining parties.'
" ( San Mateo County Coastal
Landowners' Assn. v. County of San Mateo, supra, 38 Cal. App. 4th at p. 547,
internal citation omitted.) When an ordinance contains provisions that allow
for administrative relief, we must presume the implementing authorities will
exercise their authority in conformity with the Constitution. (See Fisher v. City of Berkeley, supra, 37 Cal.
3d at p. 684.)
Here, as we have noted,
City's ordinance includes a clause that allows city officials to reduce, modify
or waive the requirements contained in the ordinance "based upon the
absence of any reasonable relationship or nexus between the impact of the
development and ... the inclusionary requirement." Since City has the
authority to completely waive a developer's obligations, a facial challenge
under the due process clause must necessarily [**22] fail.
HBA contends the waiver
clause does not preclude a facial challenge because it does not state expressly
that a waiver may be granted based on a lack of a "fair return."
However the power of an agency to make adjustments to guarantee a fair return
is "not limited to those literally granted by the ordinance ...." ( City of Berkeley v. City of Berkeley Rent
Stabilization Bd. (1994) 27 Cal. App. 4th 951, 962.) When this standard is
not expressly stated, it is "present by implication." (Ibid.)
E. Proposition 218
[NOT CERTIFIED FOR
PUBLICATION]
[*907] III. DISPOSITION
The Disposition is affirmed.
JONES, P.J.
We concur:
STEVENS, J.
SIMONS, J.