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Affordable housing ruling a setback to cities

Submitted by News Desk on Fri, 01/08/2010 - 3:25pm

San Francisco city officials are working to address a court decision giving developers a major victory in the battle over whether they must provide affordable housing in new projects.

Legislation could be introduced at the Board of Supervisors on Tuesday related to a ruling the California Supreme Court let stand in the fall. The ruling prohibits cities from forcing developers to rent a percentage of units in new apartment buildings at rates affordable to people earning below the median income.

The case, Palmer/Sixth Street Properties vs. City of Los Angeles, relates to a proposed apartment complex there, but it will probably impact the approximately 170 jurisdictions in California that have affordable-housing laws, also known as inclusionary housing ordinances. Legal experts said the ruling does not affect new condominium projects or other units built for sale.

"I think it's safe to say that city attorneys and county counsels across the state are working with their clients to assess how Palmer may affect their own ordinances," said Matt Dorsey, spokesman for San Francisco City Attorney Dennis Herrera.

Dorsey said he could not discuss specifics about San Francisco's efforts because doing so could compromise attorney-client confidentiality.

Board of Supervisors President David Chiu said that the board would be "doing everything it can to tailor San Francisco's inclusionary housing ordinance so that it is preserved."

In December, the Board of Supervisors approved a resolution urging the state Legislature to amend the law that was central to the court's decision.

Initial Rent

That law says that landlords may establish the initial rent for apartments, even in areas where there is rent control.

In the Palmer case, developers convinced the court that when the city of Los Angeles imposed affordable-housing requirements on new apartment units, it violated the law, because initial rents were established by the affordable housing laws, and not landlords.

Attorneys who have studied the Palmer case said that a legislative amendment would be the easiest way for cities to eliminate the conflict with their affordable-housing rules. Language could be added to the state law saying that landlords are entitled to establish initial rents, except in developments that are subject to affordable-housing ordinances.

"I think it's pretty clear that the state law was not intended to end affordable-housing programs," said Amy Forbes, a real estate attorney in Los Angeles with the law firm Gibson, Dunn & Crutcher.

Projects not Built

Developers in San Francisco have long complained that the city's affordability requirements cut so deeply into the bottom line that they preclude the building of some projects.

Brett Gladstone, a San Francisco attorney who represents builders, said the city should involve developers in discussions about any law changes.

"It wouldn't be in the city's interests to try to modify the Palmer decision without the input of developers," Gladstone said. "Developers might stand in the way of changes and that could slow down the process."

Since 1992, San Francisco has created affordable-housing laws to address the city's chronic housing shortage and high costs.

Revised Rules

In 2006, the city revised its rules, requiring developers to rent or sell 15 to 20 percent of new housing at affordable levels. Under the laws, developers can choose to pay a fee in lieu of building affordable housing.

The definition of affordability varies based on the housing costs and median incomes of a given area. San Francisco's median income for a family of three is $77,750 per year.

E-mail Robert Selna at

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