California court rules for city in affordable housing fight

SAN FRANCISCO (KGO) -- The California Supreme Court ruled Monday morning that cities and counties can require developers to provide affordable housing. The unanimous decision comes five years after San Jose passed an ordinance on affordable housing that was challenged by developers. ABC7 News took a look at what impact this ruling will have in the Bay Area.

It is very specific to new units that will be up for sale, not for rent. Monday's ruling makes it easier for any city in California with a housing crisis to force developers to build more affordable housing.

San Jose passed its affordable housing ordinance five years ago, but until this week, lawsuits kept that city from forcing developers to comply.

"In San Jose it will allow us to have a tool that will require and increase the supply of affordable housing, but it's not unique to San Jose," San Jose city attorney Richard Doyle said.

Other cities in California, more than 177, have similar ordinances, but this ruling makes them all much stronger because the decision came from the state's highest court.

The California Supreme Court ruled that developers with 20 or more housing units must sell 15 percent of those at below-market rates or pay into a city fund.

Those who opposed it, like the Association of Realtors, maintain in the long run it will drive up housing prices because developers will pass on the cost of subsidizing these units to new home buyers.

"It will certainly raise the prices significantly for the other 85 percent of the home buyers affected by this particular decision in any new home subdivisions," Rick Smith from the Santa Clara County Association of Realtors said.

This court action could indirectly affect the 2009 Palmer decision which basically overturned affordable housing laws in the rental market.

"And so now that the Supreme Court has spoken so clearly, in favor of inclusionary housing, it's likely that affordable housing people will now follow up and try to get the Palmer decision overruled," Tim Iglesias from the University of San Francisco School of Law said.

Before that happens, developers will try to get the U.S. Supreme Court to weigh in on Monday's decision.

Of course, it's not clear whether or not the U.S. Supreme Court will take on this case. Regardless, there is no doubt that this decision could have national implications.