Posted by: Patricia Salkin | January 13, 2020

CA Appeal Court Holds Surplus Land Act Preempted City Policy

This post was authored by Matthew Loeser, Esq.

Anderson and Cruz were low-income individuals renting housing in San Jose. Anderson and her two minor children earned less than 50 percent of the area median income, and were therefore a very low-income household according to the Department of Housing and Urban Development’s (“HUD”) definition. Cruz, her husband, two minor children, and brother-in-law were an extremely low-income household according to HUD, earning less than 30 percent of the area median income. In April 2016, City of San Jose staff recommended that the city council update the City’s procedures for the sale of surplus property to reflect recent changes to the Surplus Land Act. As a result, the City adopted Policy 7-13, titled a “Policy for the Sale of Surplus Property with Provisions Relating to Affordable Housing.” Policy 7-13 created a five-year exemption from affordable housing restrictions for high-rise rental developments in the downtown, and 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. It also enabled developers to sell at a higher sales price to moderate-income households, and eliminated the requirement that certain affordable housing restrictions be recorded in a covenant at the time the surplus land was sold. The trial court ruled that, in regulating how local government disposes of surplus property for the benefit of its residents, the Surplus Land Act addressed municipal – rather than statewide – concerns, and did not preempt the City’s policy.

At the outset, both parties recognized the “actual conflict” between state law and the local policy. Here, the court found that the trial court failed to correctly identify the nature of the statewide concern that underlied the Act, and overlooked the relationship to California’s housing crisis as indicated in both legislative enactments and judicial decisions. Specifically, the Act was determined to advance state land use policy objectives by mandating a uniform approach to the disposition of land that “local public agencies, including charter cities, no longer needed”. The court held that the Act had a broad reach, and applied to any local government entity empowered to acquire and hold real property, including cities, counties, and districts. Additionally, the Act’s potential constraint on a charter city’s ability to negotiate an optimal deal, or to set a minimum floor for affordability in a surplus land conveyance, did preclude the finding of this matter being a statewide concern.

Finally, the court held that the state’s “protective measures” required local government agencies to prioritize available surplus land for affordable housing development and to adhere to minimum set-asides at specified affordability levels when the land is developed for housing purposes. These measures were found to be reasonably related to, and no broader in sweep than, the state interest in reducing the statewide shortage of sites available for affordable housing development. As such, prioritizing surplus city-owned land for affordable housing purposes as required by the Act was held to be reasonably related to the statewide concern, and providing a narrowly tailored solution that did not unnecessarily interfere in local governance. Accordingly, the trial court’s judgment was reversed and vacated.

Anderson v City of San Jose, 2019 WL 6317875 (CA App. 11/26/2019)

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