## Facts

- The City of Napa found a serious shortage of affordable housing for low- and moderate-income residents and adopted an inclusionary housing ordinance to address it.
- The ordinance broadly applied to new development within the city, including residential and certain nonresidential projects.
- For residential development, the ordinance generally required developers to make 10% of newly constructed units affordable as defined by the ordinance.
- The ordinance allowed alternative compliance methods for certain projects, including donating land, building affordable units off-site, or paying an in-lieu fee.
- Developers who complied could receive incentives, including expedited processing, fee deferrals, loans, grants, and density bonuses.
- The ordinance included a waiver/reduction mechanism allowing a developer to seek a reduction, adjustment, or complete waiver if there was no reasonable relationship between the project’s impact and the inclusionary requirement.
- A builders’ trade association filed a facial constitutional challenge alleging an uncompensated taking and a substantive due process violation.

## Issues

1. Whether the inclusionary zoning ordinance was facially invalid as an uncompensated taking under the federal and state Takings Clauses.
2. Whether the heightened “essential nexus” and “rough proportionality” standards associated with permit exactions apply to this generally applicable inclusionary zoning ordinance on facial review.
3. Whether the ordinance was arbitrary or irrational in violation of substantive due process.

## Decision

- The Court of Appeal affirmed the judgment sustaining the city’s demurrer without leave to amend.
- The court held the complaint failed to state a facial takings claim because the ordinance did not necessarily result in a taking in all or nearly all applications, particularly given the waiver provision.
- The court declined to apply the heightened exactions tests to a generally applicable legislative ordinance in a facial challenge.
- The court held the ordinance was economic regulation rationally related to a legitimate governmental purpose and therefore did not violate substantive due process.

## Legal Principles

- A facial constitutional attack on a land-use regulation requires showing the law is unconstitutional in all, or nearly all, of its applications.
- A meaningful waiver or adjustment procedure that allows relief when the required condition lacks a reasonable relationship to a project’s impacts can defeat a facial takings claim by preventing inevitable unconstitutional applications.
- Generally applicable, legislatively adopted land-use regulations are reviewed under traditional takings doctrines rather than heightened exactions scrutiny associated with individualized permit conditions.
- Substantive due process review of economic and land-use regulation is deferential; the regulation is valid if it is rationally related to a legitimate public purpose.

## Conclusion

The court upheld Napa’s inclusionary housing ordinance on a facial challenge, concluding that its flexible compliance options and waiver mechanism prevented any inevitable taking and that the ordinance, as economic regulation aimed at increasing affordable housing, satisfied rational-basis substantive due process review.


Home Builders Ass'n of N. Cal. v. City of Napa, 108 Cal. Rptr. 2d 60 (Cal. Ct. App. 2001)