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Reflections on Inclusionary Housing and a Renewed Look at Its Viability Laura M Hofstra Law Review Volume 23 | Issue 3 Article 1 1995 Reflections on Inclusionary Housing and a Renewed Look at its Viability Laura M. Padilla Follow this and additional works at: http://scholarlycommons.law.hofstra.edu/hlr Part of the Law Commons Recommended Citation Padilla, Laura M. (1995) "Reflections on Inclusionary Housing and a Renewed Look at its Viability," Hofstra Law Review: Vol. 23: Iss. 3, Article 1. Available at: http://scholarlycommons.law.hofstra.edu/hlr/vol23/iss3/1 This document is brought to you for free and open access by Scholarly Commons at Hofstra Law. It has been accepted for inclusion in Hofstra Law Review by an authorized administrator of Scholarly Commons at Hofstra Law. For more information, please contact [email protected]. Padilla: Reflections on Inclusionary Housing and a Renewed Look at its Via HOFSTRA lAW REVIEW Volume 23 Spring 1995 REFLECTIONS ON INCLUSIONARY HOUSING AND A RENEWED LOOK AT ITS VIABILITY Laura M. Padilla* CONTENTS INTRODUCTION ............................. 540 If. BACKGROUND ................. ............. 542 A. The Affordable Housing Crisis ... ............. 542 B. Responses to the Crisis ....... ............. 546 C. A Specific Response to the Crisis: Inclusionary Housing ......... ............. 551 D. The Proposed MIHO ......... ............. 558 mT[. POLICY REASONS IN SUPPORT OF INCLUSIONARY HOUSING .............................. 564 IV. INCLUSIONARY HOUSING CRITICISMS: CRACKS IN THE FOUNDATION ...... 570 * Associate Professor of Law, California Western School of Law; J.D. Stanford Law School, 1987; B.A. Stanford University, 1983. I am deeply grateful to my California Western School of Law colleagues, Barbara Cox, Tom Barton and Katharine Rosenberry, for their support and comments. I also want to thank numerous research assistants from California Vestern School of Law for their help, especially Stacy Duffey, class of 1994, and Peggy O'Neill and David Schwartz, class of 1995. Published by Scholarly Commons at Hofstra Law, 1995 1 Hofstra Law Review, Vol. 23, Iss. 3 [1995], Art. 1 HOFSTRA LAW REVIEW [Vol. 23:539 V. LEGAL CHALLENGES: TAKINGS, DUE PROCESS, EQUAL PROTECTION, AND RESTRAINTS ON ALIENATION ........................ ...... 588 A. Takings ........................ ...... 588 1. General History of Takings Jurisprudence ...... 589 2. Do Inclusionary Housing Provisions Constitute Takings? . ............. 597 3. Rent Control ........... ............. 603 B. Fourteenth Amendment Challenges ............. 606 1. Due Process ........... ............. 607 a. Procedural Due Process ............. 607 b. Substantive Due Process ............. 608 2. Equal Protection ......... ............. 612 a. Developers ......... ............. 613 b. Inclusionary Unit Owners ............. 615 c. Market Rate Occupants . ............. 615 C. Restraints on Alienation ....... ............. 617 1. Resale Controls ......... ............. 617 2. Antitrust Law .......... ............. 621 VI. CONCLUSION ................... I. INTRODUCTION Inclusionary housing programs typically require that a residential home developer set aside a specified percentage of new units as very low-, low- or moderate-income housing.' These programs usually pro- 1. The actual amounts which qualify, a household as very low-, low- or moderate-in- come vary from region to region, but the definition tends to remain fairly constant. The Department of Housing & Urban Development ("HUD") has defined these households in the context of Section 8 housing as follows: The term "low-income families" means those families whose incomes do not exceed 80 per centum of the median income for the area, as determined by the Secretary with adjustments for smaller and larger families, except that the Secretary may establish income ceilings higher or lower than 80 per centum of the median for the area on the basis of the Secretary's findings that such variations are neces- sary because of prevailing levels of construction costs or unusually high or low family incomes. The term "very low-income families" means low-income families whose incomes do not exceed 50 per centum of the median family income for the area, as determined by the Secretary. 42 U.S.C. § 1437a(b)(2) (Supp. V 1993). Elsewhere, HUD has defined moderate-income fami- lies as "families or persons whose incomes are between 80 percent and 95 percent of the http://scholarlycommons.law.hofstra.edu/hlr/vol23/iss3/1 2 Padilla: Reflections on Inclusionary Housing and a Renewed Look at its Via INCLUSIONARY HOUSING vide incentives to offset the costs of providing affordable housing. Cities and counties throughout the country have adopted inclusionary housing programs,2 and California, one of the affordable housing leaders, is considering adoption of a mandatory statewide program. The most important aspect of inclusionary housing is that it forces the production of low- and moderate-income housing at a time when there is a critical shortage of this housing. However, inclusionary housing is not problem-free. First, it puts the onus of solving a society-wide problem on a small group, namely developers. This may be unfair considering the scope and severity of the prob- lem, and that the group primarily responsible for solving the problem is not primarily responsible for causing the problem.3 Second, it may lead to a decrease in the production of housing generally, as well as the production of housing affordable to low- and moderate-income households.4 Third, it poses a number of legal issues the resolution of which may undermine inclusionary housing programs. For example, inclusionary housing may be invalid as a taking or may violate the due process and equal protection clauses of the United States Consti- tution and individual state constitutions. Similarly, resale restrictions, which are included in many inclusionary housing programs, may be invalid restraints on alienation and violate antitrust laws. The issues raised by inclusionary housing require a fresh review in light of changes to the United States Supreme Court and current trends favoring private property rights.' The inclusionary housing issue is also timely because California is considering adoption of a mandatory statewide inclusionary housing program,6 which, if adopt- ed, would be the first statewide program in the country. It would have such far-reaching consequences that prior to adoption of such a program, it is important to analyze issues posed by inclusionary hous- ing, fully exploring its advantages and disadvantages. Part II of this Article provides a background on the affordable median income for the area, as determined by the Secretary with adjustments for smaller and larger families." 12 U.S.C. § 4119(5) (Supp. V 1993). Some states also rely on these HUD definitions. See, e.g., CAL. HEALTH & SAFETY CODE § 50105 (West 1994). 2. While some localities enact inclusionary housing programs through inclusionary hous- ing ordinances or inclusionary zoning, others do so by incorporating them into their housing elements or other state-mandated housing requirements. Thus, for ease of reference, I will refer to all such inclusionary housing measures as "inclusionary housing programs." 3. See infra text accompanying note 164. 4. See infra text accompanying notes 218-20. 5. See infra text in first full paragraph following note 330. 6. See infra part II.D. Published by Scholarly Commons at Hofstra Law, 1995 3 Hofstra Law Review, Vol. 23, Iss. 3 [1995], Art. 1 HOFSTRA LAW REVIEW [Vol. 23:539 housing crisis, responses to the crisis, and why inclusionary housing is a crucial part of the response. It then gives a more detailed de- scription of inclusionary housing, including representative components of inclusionary housing programs. This part concludes with an intro- duction of California's proposed inclusionary housing program. Part I of this Article surveys policies in support of inclusionary housing. Part IV analyzes criticisms of inclusionary housing and in the process, reveals many flaws in those criticisms. Part V discusses legal chal- lenges to 'inclusionary housing programs, including challenges on the grounds that inclusionary housing constitutes a taking, violates sub- stantive due process and equal protection, imposes invalid restraints on alienation, and violates antitrust law. The Article concludes with my thesis that most inclusionary housing programs, including California's proposed program, remain viable and are legally valid, provided the governing regulations are carefully drafted to maximize efficiency, effectiveness, and fairness. II. BACKGROUND This section first provides a brief historical context to the afford- able housing crisis and responses to the crisis at federal, state and local levels. It then addresses why those responses have generally been inadequate, and why they should be supplemented by inclusionary housing. It concludes with a description of inclusionary housing programs and an overview of California's proposed program. A. The Affordable Housing Crisis Most people would agree that everyone in this country has a right to shelter meeting minimum quality standards. Federal policy promotes the "[r]ealization as soon as feasible ... of a decent home and a suitable living environment for every American family."7 It has even been suggested that there is a constitutional right to housing.' The Supreme Court, however, has not yet recognized such a right.' It 7. Originally declared in Housing Act of 1949, ch. 338, § 2, 63 Stat. 413, reaffirmed in Housing and Urban Development Act of 1968, Pub. L. No. 90-448,
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