A home-building project in San Marcos, California REUTERS/Mike Blake

A challenge by California developers got smacked down by the state’s supreme court. Now they’re taking their fight to the next level.

Developers in California are taking their fight against the state’s inclusionary zoning laws to the U.S. Supreme Court, just as cities across the nation are increasingly committing to similar laws to address affordable housing shortages. The California Building Association opposes the soon-to-kick-in law mandating that developers discount a percentage of units in new housing projects for low-income families. They claim it constitutes an illegal “taking” of private property by the government and hope that SCOTUS justices will agree with them

California’s Supreme Court rejected this argument in June, pointing to an affordable housing crunch of “epic proportions” as the compelling reason for the law. The supply of housing that families of modest income can actually afford is so low that advocates in San Francisco are considering suing the suburbs to intensify density.

But the California developers say that forcing them to build below-market-rate units as a condition of obtaining building permits amounts to extortion. Developers in Chicago are also making this argument, and have similarly filed a lawsuit against the city’s inclusionary zoning laws. In California, the homebuilders are also challenging the idea that there is a connection between new housing construction and affordability. In an interview with CityLab earlier this month, Steve Joung, CEO of Pangea Properties, a company that rehabs old buildings into new moderately priced housing, said there is a connection—but not the one that inclusionary zoning proponents would favor.

"[Inclusionary zoning] absolutely adds costs to the development process, and I think both sides understand that,” says Joung. “You can understand what [cities] are trying to do, in terms of bringing affordable housing to nicer neighborhoods, but it is also basically just blocking new construction from coming on, and less supply means higher rents.”

This is what the California’s developers’ legal team is arguing, as well.

“Penalizing homebuilders with more costs and mandates deters the creation of more housing, and raises the overall cost of market-rate homes,” said Tony Francois, attorney for the Pacific Legal Foundation, in a press release. “The ruling which we’re appealing will make it even harder for average families to afford a home in California.”

There are roughly 170 cities across the state that are implementing the inclusionary zoning policies, which allow developers to opt out by paying into a fund that would finance affordable units elsewhere. California and Chicago are not alone in addressing housing affordability in this manner. Given that there is virtually no place in America that’s been able to meet the affordable housing needs of its residents, many cities are resorting to ways to creatively entice (or force) developers to pitch in with solutions. Jersey City is luring developers into building low-income housing with tax abatements. In New Orleans, the city is awarding “density bonuses” to developers who include affordable units. New Orleans City Council member Latoya Cantrell told Citylab she’d like to leverage support around the density bonuses into a mandatory inclusionary-zoning law across the city.

If SCOTUS agrees to review the California case, however, it could slow momentum around such plans. And if SCOTUS ends up agreeing with the developers, it could drastically change the current calculus around how to increase the supply of affordable housing.

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