Stanford University's claims against a Santa Clara County inclusionary-housing ordinance that applies to new housing developments on university land were largely dismissed by a federal district court judge on Thursday. But the university will still have a chance to amend its claims, leaving the door open for the court to rule in Stanford's favor.
The court supported the county's position that the university's lawsuit should be thrown out because the ordinance neither treats Stanford separately from other similar developers nor is "irrational" in mandating that the university mitigate for its growth by meeting an affordable-housing quota.
Stanford is in the throes of an acrimonious process of trying to get the Santa Clara County Board of Supervisors to approve an updated general use permit (GUP), which would allow development of more than 2.275 million square feet of new academic space and 3,150 new housing units and student beds. It argues that the county's Sept. 25, 2018, adoption of two ordinances to mandate an affordable-housing quota and per-square-foot mitigation fees are designed as leverage during the GUP process.
The first ordinance, which is the subject of Thursday's ruling, requires that 16% of any new non-student residential units must be allocated as affordable housing. The ordinance targets the Stanford Community Plan Area and encompasses newly constructed rental and for-sale housing, properties converted to residential use, those converted to for-sale from rental, and the subdivision of land to develop residential units. The law applies to units for which a development application is deemed complete on or after July 1, 2019, and which creates three or more new, additional or modified dwelling units.
The second ordinance, which is the subject of a separate lawsuit that is not part of the court's Thursday ruling, requires the university to pay an affordable-housing impact fee of $68.50 per each net-new square foot of academic space the university develops on campus after July 1, 2020.
Stanford's lawsuit claims the county ordinance regarding the 16% affordable-housing requirement violates the "class-of-one" equal protection ordinance under the U.S. and California constitutions by unfairly singling out the university. The ordinance doesn't apply to any other entity, the university said. The ordinance also has no "rational basis" for singling out Stanford to address the housing problem, a problem the county has admitted occurs throughout the county, the university argued.
During the county's past two cycles for the County Regional Housing Needs Allocation under state law, from 1999 through 2014, the university produced 1,324 affordable-housing units, which was 75% of the total amount of affordable-housing development within the county's unincorporated areas, Stanford claimed. In the current cycle, 2015-2022, Stanford is developing another 1,400 affordable units within the county's jurisdiction. (These affordable units don't include hundreds of dormitory-style units the university has built for its undergraduates, which don't meet the U.S. Census Bureau's definition of a "housing unit.")
Stanford said that Santa Clara County has not adopted a countywide ordinance addressing affordable housing and has no proposal under consideration. The university disputed the county's assertion that the lack of affordable housing within the county is felt more acutely at or around Stanford than elsewhere in the county.
The university also opposed the county's request for "judicial notice" -- an evidentiary rule of law that allows a fact (in this case, several documents and government staff reports) -- which the county said demonstrate the plausibility of its claims about Stanford's impacts.
U.S. District Judge Beth Labson Freeman found in favor of admitting those records as evidence that she could consider, which were rationales for applying the ordinance to Stanford's lands.
Santa Clara County countered that Stanford is the largest employer in the county. The housing concerns being felt countywide are particularly acute around Stanford due to high housing prices in the area and the employment opportunities generated by Stanford. As Stanford has expanded, some of the new workers earn incomes that are only adequate to pay for affordable housing. Such housing is in short supply around Stanford and its campus, and workers consequently live in less-than-adequate housing, pay a disproportionate share of their incomes for housing or commute extremely long distances, the county claimed.
Freeman agreed that Stanford had not shown it was being unfairly singled out. Under legal precedent, federal appeals courts have set a high standard for class-of-one claims. Plaintiffs of such claims "must show an extremely high degree of similarity between themselves and the persons to whom they compare themselves," the court quoted from an opinion by the Second Circuit Court. She noted this opinion has been followed by several district courts within the Ninth Circuit Court.
Stanford had not identified a single similarly situated property owner as a comparison that was treated differently by the county, she wrote.
Freeman also noted the university said it has proposed development of 550 residential units as part of its pending GUP application. Those units are comparable to the 512 housing units the county's housing element says would be built on non-Stanford lands for the years 2015-2022. Stanford claimed these figures in the housing element show that numerous landowners exist who are comparable to Stanford.
The county argued that Stanford could not identify a comparable entity because no other entity is developing housing at the pace and scope of Stanford. The court seemed to agree. Freeman ruled that Stanford had not proven its claims.
"Stanford has not alleged any facts indicating whether the 512 housing units on non-Stanford lands will be developed by a single developer or hundreds of different developers," she wrote.
The county also argued, and Freeman agreed, that the county doesn't have to come up with a single plan to solve all of its housing problems. Freeman noted the county Board of Supervisors found that the countywide affordable-housing shortage has a particularly strong effect at and around Stanford University. The board determined these concerns would be alleviated by the ordinance. The county cited statements at the Sept. 25, 2018, board hearing on the ordinance that the Stanford Community Plan Area is the largest job-generating area in the county and that Stanford is root creator of the job-housing imbalance in the county, the judge noted.
But Stanford contended the county's finding regarding the countywide nature of the shortage is countered by its own reports, which disprove the notion that the housing problem is specific to Stanford. One county report found that new residential developments throughout the county, not just Stanford, brought more jobs and the need for more services, which in turn required more affordable housing. A second study linked commercial and industrial development with the need for more affordable housing. A June 2018 county Civil Grand Jury characterized the need for affordable housing as a regional problem.
Freeman concluded that if the facts Stanford stated are proved, it could show that the need for affordable housing is not more acute at or around Stanford and the factors causing the increased need are not more prevalent at or around Stanford than other parts of the unincorporated county. But she agreed with the county's assertion that its incremental approach to the affordable-housing shortage wouldn't necessarily negate the ordinance. The county argued that "regardless of whether it is worse in the (Stanford) area or not, the county is allowed to respond, as it has here, to just one part of that crisis while deferring a countywide response."
Freeman wrote: "This is perhaps the most difficult hurdle for Stanford to overcome with respect to its equal-protection claim. The county is correct that both the Supreme Court and the Ninth Circuit have made clear that 'the legislature must be allowed leeway to approach a perceived problem incrementally.'"
In an email to the Weekly, Stanford stated: "Judge Freeman's decision is largely procedural and allows Stanford to amend its complaint with additional information, which we intend to do.
"Stanford recognizes the critical affordable housing challenges in our region, which is why the university is a major supporter and developer of affordable housing. We have proposed to meet the 16 percent requirement of the ordinance through a development agreement related to our proposed general use permit, and we will continue seeking an opportunity to work collaboratively with the county on a development agreement that delivers much-needed affordable housing.
"However, Stanford maintains that the county's inclusionary housing ordinance unfairly targets the university by applying only to Stanford within all of unincorporated Santa Clara County, thus violating the university's right to equal protection. The issue in the litigation is not about Stanford's commitment to more affordable housing but rather that it is unlawful for Stanford to be singled out for unequal treatment in a county ordinance."
Freeman did deny one of the county's arguments: that the ordinance doesn't target Stanford as an entity but applies neutrally to the Stanford Community Plan Area. She found the case law the county presented didn't apply in the current case.
Although she dismissed the case as it stands, Stanford can file an amended complaint by Oct. 31.