New Court Decision Jeopardizes Affordable Rental Housing

Tuesday, July 28, 2009
Dean Preston of Tenants Together
BeyondChron

Last week, a California Appellate court took a giant step toward
eliminating affordable rental housing in communities across California.
In Palmer/Sixth Street Properties v. City of Los Angeles,
the Court ruled that a Los Angeles inclusionary housing law was
preempted by the Costa-Hawkins Rental Housing Act. As a result of this
decision, inclusionary housing laws across the state are in jeopardy of
being tossed out by over-zealous judges.

There has been virtually no coverage of this Court ruling, perhaps in
part because the decision is cloaked in legalese that does not make for
riveting news headlines. But behind the legalese is one undeniable
fact: three judges on the Court of Appeal have rewritten California
law, and jeopardized the development of affordable rental housing
across the state. This decision must be reversed, and it had better
happen quick.

Inclusionary housing laws exist in communities
across California and are essential to the development of affordable
housing, especially at a time of ever-shrinking government funds for
affordable housing. Over 150 jurisdictions in California have some
variation of these laws. As the California Coalition for Rural Housing puts it, “inclusionary programs are putting roofs over the heads of tens of thousands of Californians.”

Under these laws, local approval of a development project is
conditioned on the developer agreeing to include a certain number of
affordable units. Some of these laws, like the Los Angeles law, offer
developers the alternative that they can pay an “in lieu” fee so that
the city can finance the construction of affordable units elsewhere –
if the developer doesn’t want to include them in the proposed project.

In the Los Angeles case, a low-income residential hotel previously
existed at the site to be developed. The City, under its ordinance,
imposed a condition when it approved the proposed development requiring
that the developer either agree to provide the specified number of
affordable units in the project, or pay an “in-lieu” fee. The developer
sued, claiming the requirements were invalid under California’s Costa
Hawkins Rental Housing Act.

The Court of Appeal acknowledged that there was no “case directly on
point,” but nonetheless reasoned that Costa Hawkins preempted the Los
Angeles ordinance. According to the court, a law requiring affordable
rental units as part of new construction that is "hostile and inimical"
to a landlord's rights under Costa Hawkins.

The California Supreme Court should reverse this erroneous decision.
The Legislature passed the Costa Hawkins Rental Housing Act in 1995. No
appellate court has found that the Act preempts inclusionary housing
laws, because the Act has nothing to do with inclusionary housing laws.
The Act established vacancy decontrol in rent control jurisdictions,
allowing landlords to charge any rent to new tenants after a vacancy,
and exempting certain types of units (single family homes, condos, etc)
from rent control laws.

Costa Hawkins is about limiting the reach of local rent control laws.
Inclusionary housing laws are fundamentally different from local rent
control laws. Among other differences, local rent control laws apply
generally to units throughout a city, whereas inclusionary laws require
certain affordability deed restrictions as a condition for approval of
a particular new housing project.

Costa Hawkins is bad enough, without judges rewriting it to invalidate
inclusionary housing laws. Costa Hawkins undermined local rent control
systems, and provided an incentive for unscrupulous landlords to drive
long-term tenants from their homes in order to get higher rents from
new tenants. If the legislature had also wanted to eliminate
inclusionary housing laws, it would have said so in the Act.

This case continues a very disturbing pattern of judicial activism in
California hostile to the needs of renters and favors the interests of
developers and landlords at all costs. Unfortunately, as legally flawed
as the Palmer
case is, it comes as no surprise to tenant advocates who have become
accustomed to seeing California judges rewriting laws to benefit
landlord interests.

Amidst California’s housing crisis, it is particularly shameful that a
court would suddenly, for the first time since the Costa Hawkins Rental
Housing Act was enacted more than a decade ago, decide that the Act
preempts affordable housing laws that are so important to communities
across the state.

The Palmer decision must not be allowed to stand. If the
Supreme Court does not promptly reverse the decision, the Legislature
should step in. Affordable rental housing for tens of thousands of
families is at stake.

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