Other papers from this session:

• Inclusionary Housing: The Napa Experience
• Inclusionary Housing: Measuring the Causal Connection
  

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I. STANDARD OF JUDICIAL REVIEW OF LEGISLATIVE DECISIONS

1. Arbitrary-and-Capricious Standard of Review

   When a city or county makes a legislative decision it generally is adopting local laws or policies. The local agency is granted the discretion to make these policy decisions by statute and sometimes by the state Constitution. Courts do not have this discretion. Accordingly, courts will overturn an agency’s legislative decision only if it is arbitrary, capricious, wholly lacking in evidentiary support, or fails to conform to the procedures required by law. See, e.g., Fullerton Joint Union High Sch. Dist. v. State Bd. of Education, 32 Cal. 3^rd 779, 786 (1982). ("In reviewing . . . legislative decisions, the trial court does not inquire whether, if it had the power to act in the first instance, it would have taken the action taken by the administrative agency. The authority of the courts is limited to determining whether the decision of the agency was arbitrary, capricious, entirely lacking in evidentiary support, or unlawfully or procedurally unfair.") This standard often is called the "arbitrary-and-capricious" standard of review.

2. Doctrine of Separation of Powers

This limited review is grounded in the doctrine of separation of powers, which sanctions the legislative delegation of authority to the agency and acknowledges the presumed expertise of the agency. Courts have consistently refused to substitute judicial judgment for the legislative judgment of the governing body of a local agency. So long as the enactment bears a reasonable relationship to the public welfare, it is upheld. Associated Home Builders, Inc. v. City of Livermore, 18 Cal. 3^rd 582 (1976).

The deferential approach courts must take in reviewing legislative matters frequently is expressed in the context of zoning. The United States Supreme Court has explained:

It is not our function to appraise the wisdom of its decision. . . . In either event, the city’s interest in attempting to preserve the quality of urban life is one that must be accorded high respect. Moreover, the city must be allowed a reasonable opportunity to experiment with solutions to admittedly serious problems.

Young v. American Mini Theatres, 427 U.S. 50, 71 (1976).

A California appellate court explained this general principle by reciting the rules courts must follow when reviewing legislative enactments such as zoning ordinances:

In considering the scope or nature of appellate review in a case of this type we must keep in mind the fact that the courts are examining the act of a coordinate branch of the government–the legislative–in a field in which it has paramount authority, and not reviewing the decision of a lower tribunal or of a fact finding body.

Courts have nothing to do with the wisdom of laws or regulations, and the legislative power must be upheld unless manifestly abused so as to infringe on constitutional guaranties. The duty to uphold the legislative power is as much the duty of appellate courts as it is of trial courts, and under the doctrine of separation of powers neither the trial nor appellate courts are authorized to "review" legislative determinations.

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As applied to the case at hand, the function of this court is to determine whether the record shows a reasonable basis for the action of the zoning authorities, and, if the reasonableness of the ordinance is fairly debatable, the legislative determination will not be disturbed.

Carty v. City of Ojai, 77 Cal. App. 3^rd 329, 333 n.1 (1978) (citations and quotations omitted).

II. TAKINGS CLAIM

A. Substantially Advancing a Legitimate Governmental Interest

The usual contention is that the land use regulatory ordinance, such as an inclusionary zoning ordinance, is facially invalid because it violates the takings clause of the federal and applicable state Constitutions. As the U.S. Supreme Court has stated, "a claimant who advances a facial challenge faces an ‘uphill battle.’ " (Keystone Bituminous Coal Assn. v. DeBenedictis, 480 U.S. 470, 495 (1987).)

In the case of Home Builders Assn. v. City of Napa, 90 Cal. App. 4^th 188 (2001), where the court upheld a ten percent inclusionary housing requirement, the court stated that such 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. 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, 8 Cal. 4^th 1, 24 (1994).)

Here, the City’s inclusionary zoning ordinance imposed significant burdens on those who wished to develop their property. However, the ordinance also provided sufficient benefits to those who complied with its terms. Developments that include affordable housing were eligible for expedited processing, fee deferrals, loans or grants, and density bonuses. More critically, the ordinance permitted a developer to appeal for a reduction, adjustment, or complete waiver of the ordinance’s requirements. Since the City had the ability to waive the requirements imposed by the ordinance, the ordinance could not and does not, on its face, result in a taking.

One of the major issues in a takings claim is if the ordinance substantially advances a legitimate governmental interest.

In Agins v. Tiburon, 447 U.S. 255 (1980), the U.S. Supreme Court provided a test to determine whether a taking has occurred. The court said "[t]he 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. . . ."

In Napa, supra, the Home Builders Association contended that the City’s inclusionary zoning ordinance effected a taking under the first of these tests; i.e., that the ordinance was invalid because it failed to substantially advance legitimate state interests. The court was not persuaded.

The court first said it had no doubt that creating affordable housing for low and moderate income families is a legitimate state interest. It stated that the California 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, 19 Cal. 4^th 952 (1999).) This conclusion was 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’t Code § 65913.9), 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’t Code § 65580, subd. (d).)

Second, it was beyond question that the 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 the 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. Therefore, the court concluded the City’s ordinance "substantially advance[s] legitimate state interests." Also see, San Remo Hotel LP v. City and County of San Francisco, 2002 Daily Journal D.A.R. 2463 (March 5, 2002) (Calif. Supreme Court No. S091757), where the Court in upholding San Francisco’s Residential Hotel Unit Conversion and Demolition Ordinance held that the housing replacement fees have a reasonable relationship to housing lost by conversion to tourist use.

B. Applicability of the Heightened Scrutiny Test of Nollan/Dolan

The next principal contention usually made is the ordinance is invalid under Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987) and Dolan v. City of Tigard, 512 U.S. 374 (1994), the higher scrutiny test.

In Nollan, the court discussed the "substantially advance" test in the context of a governmental 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 land, and the impacts caused by the proposed use. (Nollan v. California Coastal Comm’n, supra, 483 U.S. at p. 837.)

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.)

In Napa, supra, the court rejected Home Builders Association’s argument that the higher scrutiny test applied because Nollan and Dolan were inapplicable under the facts of this case. "[T]he intermediate standard of judicial scrutiny formulated by the high court in Nollan and Dolan is intended to address . . . the 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 planned development–that the combined Nollan and Dolan test quintessentially applies." (Ehrlich v. City of Culver City, 12 Cal. 4^th 854, 868 (1996).) "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 enact unconstitutional conditions is not present.’ " (Santa Monica Beach, Ltd. v. Superior Court, supra, 19 Cal. 4^th at p. 966, quoting Ehrlich v. City of Culver City, supra, 12 Cal. 4^th at p. 876.) "[I]ndividualized development fees warrant 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. 4^th 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." (Beach, Ltd. v. Superior Court, supra, 19 Cal. 4^th at p. 972.)

In Napa, supra, situation, the court was 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, it was faced with a facial challenge to economic legislation that is generally applicable to all development in the City. Therefore, the court concluded the heightened standard of review described in Nollan and Dolan was inapplicable under these facts.

Recently, the California Supreme Court in San Remo, supra, in upholding the San Francisco Residential Hotel Unit Conversion and Demolition Ordinance held that such an ordinance enacted as a generally legislative act applicable to a class was not subject to Nollan/Dolan/Ehrlich scrutiny basing its ruling on Santa Monica and Ehrlich, supra.

In the San Remo case, in upholding the ordinance and the in-lieu housing replacement fee in the amount of $567,000 required under the ordinance, the court said such regulations must be reviewed under the deferential review standard and not the higher scrutiny standard. On that point, the California Supreme Court stated:

While legislatively mandated fees do present some danger of improper leveraging, such generally applicable legislation is subject to the ordinary restraints of the democratic political process. A city council that charged extortionate fees for all property development, unjustifiable by mitigation needs, would likely face widespread and well-financed opposition at the next election. Ad hoc individual monetary exactions deserve special judicial scrutiny mainly because, affecting fewer citizens and evading systematic assessment, they are more likely to escape such political controls.

Nor are plaintiffs correct that, without Nollan/Dolan/Ehrlich scrutiny, legislatively imposed development mitigation fees are subject to no meaningful means-ends review. As a matter of both statutory and constitutional law, such fees must bear a reasonable relationship, in both intended use and amount, to the deleterious public impact of the development. (Ehrlich, supra, 12 Cal. 4^th at pp. 865, 867 (plur. opn. of Arabian, J.); id. at p. 897 (conc. opn. Mosk, J.); Associated Home Builders etc., Inc. v. City of Walnut Creek (1971) 4 Cal. 3^rd 633, 640.)

In summary, inclusionary land use ordinances, such as in the Napa situation, as legislative acts are entitled to deference from the courts and to be judged under a deferential standard. (See, Santa Monica Rent Control Bd. and San Remo, supra.) The challenger must show that the law is arbitrary or capricious.

III. CONCLUSION

If a city or county in adopting an inclusionary housing land use ordinance has properly followed all of the legally required procedural steps for enacting such a law, it will be difficult to overthrow that law, especially since the local agency is using its police power.

The police power is an elastic power. Regulations are sustained under today’s complex conditions which but a short time ago might have been condemned as arbitrary and unreasonable. Euclid v. Ambler Realty Co., 272 U.S. 365, 387 (1926). A city may exercise its police power to provide a "modern, enlightened and progressive community." Rancho La Costa v. County of San Diego, 111 Cal. App. 3^rd 54, 60 (1980).

In the 1970s, Justice Douglas, speaking for the United States Supreme Court, upheld a village’s zoning ordinance relating to land use restrictions on single-family dwelling units:

A quiet place where yards are wide, people few, and motor vehicles restricted are legitimate guidelines in a land use project addressed to family needs. This goal is a permissible one within Berman v. Parker, supra. The police power is not confined to elimination of filth, stench, and unhealthy places; it is ample to lay out zones where family values, youth values, and the blessings of quiet seclusion and clean air make the area a sanctuary for people.

Village of Belle Terre v. Boraas, 416 U.S. 1, 9 (1974).

Today, regulations permitting smaller yards, denser housing, affordable housing, and inclusionary house, similarly will be upheld as a proper exercise of a city’s police power.

Courts also have held that regulations affecting economic interests in real property are an appropriate exercise of the police power. See, e.g., Birkenfeld v. City of Berkeley, 17 Cal. 3^rd 129 (1976) (upholding regulations implementing local rent control laws); Griffin Dev. Co. v. City of Oxnard, 39 Cal. 3^rd 256 (1985) (upholding regulations relating to condominium conversions).

The court has held that aesthetic reasons alone justify the exercise of the police power when it upheld, in part, the City of San Diego’s total ban of offsite advertising signs (Metromedia, Inc. v. City of San Diego, 26 Cal. 3^rd 848 (1980)) and Culver City’s public art fee ordinance (Ehrlich v. City of Culver City, 12 Cal. 4^th 854 (1996)). The United States Supreme Court has cited several times to aesthetics to support land use regulations. In upholding a local ordinance prohibiting the posting of signs on public property, the Court stated that aesthetic interests are substantial governmental interests which a city can address under its police power. (Members of City Council v. Taxpayers for Vincent, 466 U.S. 789 (1984).) In upholding New York City’s Landmark Preservation Law, the Court stated that land use regulations may be enacted through the police power "to enhance the quality of life by preserving the character and desirable aesthetic features of a city." Penn Cent. Transp. Co. v. City of New York, 438 U.S. 104, 129 (1978).

Recently, the Supreme Court of Ireland unanimously upheld a national 20% affordable housing statute which allows the local planning agency, as part of a condition of granting permission to develop residential or a mixture of residential and other uses, to require the developer to enter into an agreement whereby it gives up to 20% of the land for affordable housing or provides several sites or houses actually built for such purposes. See, In the Matter of Article 26 of the Constitution and In the Matter of Part V of the Planning and Development Bill 1999 (Supreme Court of Ireland, August 28, 2000.)

Many of the same arguments raised in the Napa case were raised in the Irish case, and the court, in recognizing the inadequate supply of housing in the country’s booming economy, held that such a requirement was a legitimate concern of the National Legislature and there was no denial of taking property without due compensation in violation of Ireland’s Constitution.

FOOTNOTE:

1. Thomas E. Roberts, Taking Sides on Takings Issues---Public and Private Perspectives, (Sect. of State and Local Gov’t Law, ABA 2002).

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Author and Copyright Information

Copyright 2002 by author

Daniel J. Curtin, Jr. concentrates his practice on local government and land use law representing both private and public-sector clients. He is a member of the firm of McCutchen, Doyle, Brown & Enersen, LLP in the Walnut Creek office.

Mr. Curtin serves as Chair and on the Council, the governing body, of the State and Local Government Law Section of the American Bar Association. He was Past Chair of the Land Development, Planning & Zoning Section of the International Municipal Lawyers Association (formerly NIMLO). He is past Vice-Chair of the Executive Committee of the Real Property Law Section of the State Bar of California. Mr. Curtin has also served as President of the City Attorneys’ Department of the League of California Cities, as a member of the Board of Directors of the League, and as Regional Vice President of the International Municipal Lawyers Association.

In recognition of his extensive contributions to NIMLO and to the entire municipal law community nationwide, as well as his years of leadership and service to the legal profession, Mr. Curtin was honored with NIMLO’s Charles S. Rhyne Award for Lifetime Achievement in Municipal Law. He is the recipient of the American Planning Association’s National Distinguished Leadership award for 20 years of writing, teaching, encouraging and supporting planning ideas. He also was named Honorary Life Member of the California Park and Recreation Society in recognition of his exceptional service to the field of parks and recreation.

Mr. Curtin is the author of numerous publications on California land use and subdivision law, which have been cited frequently by the California Courts, including "Curtin’s California Land Use & Planning Law," published and revised annually by Solano Press, "Subdivision Map Act Manual," published by Solano Press and "California Subdivision Map Act Practice," published by California Continuing Education of the Bar, supplemented annually. He is a frequent lecturer for the University of California Extension and Continuing Education of the Bar (CEB) and was an adjunct professor for the University of San Francisco Law School teaching Land Use Law.

Mr. Curtin received his A.B. from the University of San Francisco and his J.D. from its School of Law. He has served as assistant secretary of the California State Senate, Counsel to the Assembly Committee on Local Government, Deputy City Attorney of Richmond, and City Attorney of Walnut Creek.