Anderson v. City of San Jose

42 Cal.App.5th 683

255 Cal.Rptr.3d 654

Sarah ANDERSON et al., Plaintiffs and Appellants,

v.CITY OF SAN JOSE et al., Defendants and Respondents.

H045271

Court of Appeal, Sixth District, California.

Filed November 26, 2019

Sarah Anderson, Joana Cruz, Urban Habitat Program, Housing California, Bay Area Legal Aid, Rebekah Evenson, Oakland, Cristina Peña Vazquez, Public Interest Law Project, Oakland, Michael Rawson, Valerie Feldman, Public Advocates, Samuel Tepperman-Gelfant, David Zisser, San Francisco, Weil, Gotschal & Manges, Adrian Percer, Redwood Shores, for Plaintiffs/Appellants.

Attorney General of California, Xavier Becerra, Daniel A. Olivas, Senior Assistant Attorney General, Deborah M. Smith, Supervising Deputy Attorney General, Jessica E. Tucker-Mohl, Deputy Attorney General, for Amicus Curiae in support of appellants.

City of San Jose San Jose City Council, Office of the City Attorney, Richard Doyle, Nora Frimann, Assistant City Attorney, Maren J. Clouse, Sr. Deputy City Attorney, for Defendants/Respondents.

Best Best & Krieger, Amy E. Hoyt, Riverside, Gregg W. Kettles, Manhattan Beach, for Amicus Curiae in support of respondents.

Premo, J.

In this appeal we decide whether a California charter city’s policy for the sale of surplus city-owned land is preempted by the state’s affordable housing law.

The dispute centers on the City of San Jose’s passage of City Policy 7-13 (Policy 7-13), which appellants Sarah Anderson, Joana Cruz, Urban Habitat Program, and Housing California contend violates the Surplus Land Act ( Gov. Code, §§ 54220 - 54233 ). The question is whether state constitutional authority granting charter cities plenary power over their municipal affairs allows the City of San Jose and its city council (together, the City or San Jose) in this case to adopt a policy for the sale of surplus municipal property that conflicts with the state law.

The trial court answered this question affirmatively. It ruled that in regulating how local government disposes of surplus property for the benefit of its residents, the Surplus Land Act addresses a decidedly municipal affair, not a statewide concern, and under the state Constitution does not preempt the City’s policy. The trial court therefore sustained without leave to amend the City’s demurrer to the relevant causes of action.

We will reverse. The Surplus Land Act advances state land use policy objectives by mandating a uniform approach to the disposition of local government land that is no longer needed for government use. By requiring municipalities to prioritize surplus land for the development of low- and moderate-income housing, the statute addresses the shortage of sites available for affordable housing development as a matter of statewide concern. Because the statute also narrowly tailors the restrictions on local government to avoid unnecessary interference in the locality’s affairs, it meets the test for statewide preemption. We conclude that while a city’s process for disposing of surplus city-owned land is typically a municipal affair, San Jose’s policy here must yield to the state law.

I. BACKGROUND

Anderson and Cruz are two low-income individuals who rent housing in San Jose. Both live with their families in crowded conditions and struggle to afford rent, paying 50 percent or more of their income toward housing costs. Anderson and her two minor children are a very low-income household according to the Department of Housing and Urban Development’s (HUD) definition, earning less than 50 percent of the area median income. Cruz, her husband, two minor children, and brother-in-law are an extremely low-income household according to HUD, earning less than 30 percent of the area median income. Urban Habitat Program and Housing California are two nonprofit organizations whose stated goals include advocating for and helping to increase affordable housing locally, regionally, and in the case of Housing California, statewide.

San Jose is a charter city and municipal corporation formed under the laws of the State of California and governed by the city charter, enacted in 1965. San Jose has taken various measures to expand affordable housing availability for its residents. It imposes a housing impact fee of $17 per square foot on most newly constructed residential rental properties to support funding for affordable housing supply. It also requires at least 15 percent of for-sale units in new residential development projects of 20 or more units to be set aside for sale at prices affordable to low- or moderate-income households. This feature is part of San Jose’s inclusionary housing ordinance, which the City successfully defended in a legal challenge that was considered by the California Supreme Court in California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435, 189 Cal.Rptr.3d 475, 351 P.3d 974 ( California Building ).

San Jose also has established procedures for the sale of city-owned property. In April 2016, city staff recommended that the city council update the City’s procedures for the sale of surplus property to reflect changes to the Surplus Land Act (the Act) ( Gov. Code, §§ 54220 - 54233 )¹ as amended in 2014.²

The Act declares "that housing is of vital statewide importance to the health, safety, and welfare of the residents of this state and that provision of a decent home and a suitable living environment for every Californian is a priority of the highest order." ( § 54220, subd. (a).) It addresses the "shortage of sites available for housing for persons and families of low and moderate income" (ibid. ) by providing that "surplus government land, prior to disposition, should be made available for that purpose" (ibid. ). It applies to "every city, whether organized under general law or by charter" as well as counties and districts "empowered to acquire and hold real property." (§ 54221, subd. (a).) The 2014 amendments to the Act require, depending on the scenario, a minimum percentage of units to be made available at specified affordability levels when the surplus land is sold or leased to develop low- or moderate-income housing, or for general residential development of 10 or more units.

( §§ 54222.5, 54233.)³ We discuss the relevant history and provisions of the Act in greater detail in the Discussion, post , at II.B.2.c.

The City responded to its staff recommendations by adopting Policy 7-13, titled a "Policy for the Sale of Surplus Property With Provisions Relating to Affordable Housing." The stated purpose of Policy 7-13 is to "strengthen[ ] the ability for affordable housing developers to acquire surplus land" and to reinforce the "importance of promoting affordable housing within the City in addition to open space, and the development of educational institutions."

In adopting Policy 7-13, the city council committed to "generally follow" the amended Act as a means of promoting affordable housing within the City. It noted that the state law can serve "as an additional tool to support the development of affordable housing that is important for addressing the housing crisis in the area." The council at the same time observed that the 2014 amendments to the Act "may impact the value of real property to be sold by the City and ... impede the City’s power to determine the future use of parcels to be sold ...." In light of these concerns, the city council asserted that as a charter city San Jose had "plenary power over its municipal affairs" and was "not required to follow the ... modified provisions of Government Code Sections 54220 et seq., pertaining to the sale of surplus real property by a local agency ...."

The City’s updated policy, Policy 7-13, consequently departed from the Act in several key areas. Among these, it created a five-year exemption from affordable housing restrictions for high-rise rental developments in the downtown. It allowed City staff to request and obtain city council approval in specific cases for a property to be sold for use other than affordable housing, or for the City manager to modify the process for disposing of surplus property " ‘to accommodate circumstances applicable to significant or unusual properties.’ " It expanded the income range for those eligible for affordable for-sale units, enabling developers to sell at a higher sales price to moderate-income households. And it omitted the requirement that certain affordable housing restrictions be recorded in a covenant at the time the surplus land is sold.

II. PROCEDURAL HISTORY

Anderson, Cruz, Urban Habitat Program, and Housing California (together appellants) filed a verified petition for writ of mandate and complaint for declaratory and injunctive relief (petition) against the City shortly after the adoption of Policy 7-13.

The petition alleged that the City’s policy "undercut the state law’s mandate to make public land available for affordable housing in the City" and disproportionately harmed low-income residents and minorities. The first and second causes of action of the petition sought declaratory relief and a writ of mandate compelling the City to comply with the Act. The third and fourth causes of action alleged that the City policy violated state statutory law by discriminating against the development of housing intended for occupancy by very-low and low-income households (§ 65008) and by denying housing opportunities to protected classes based on race and ethnicity, disability, sex, and familial status (§ 12900 et seq.).

The City demurred to all causes of action. It contended that it was exempt from the Act under the home rule doctrine because the power to sell city property and determine how the property should be used falls within the City’s exercise of authority over its own municipal affairs. Appellants responded that under the four-part test articulated in California Fed. Savings & Loan Assn. v. City of Los Angeles (1991) 54 Cal.3d 1, 283 Cal.Rptr. 569, 812 P.2d 916 ( California Fed. Savings ) and confirmed in State Building &...