Opinion ID: 1175625
Heading Depth: 1
Heading Rank: 7

Heading: Construction of Low Rent Housing Projects Without a Public Vote

Text: We now examine respondent's final and critical argument that any bonds issued pursuant to the Act and the Agency's resolutions are rendered invalid because no provision is made for local elections to approve the development of the projects, as required by article XXXIV, section 1, of the California Constitution, adopted as an initiative measure in 1950. Section 1 provides in part: No low rent housing project shall hereafter be developed, constructed, or acquired in any manner by any state public body until, a majority of the qualified electors of the city, town or county, as the case may be, in which it is proposed to develop, construct, or acquire the same, voting upon such issue, approve such project by voting in favor thereof at an election to be held for that purpose, or at any general or special election. (Italics added.) The constitutionality of this section was upheld by the United States Supreme Court in James v. Valtierra (1971) 402 U.S. 137 [28 L.Ed.2d 678, 91 S.Ct. 1331]. The Agency makes two responses to the article XXXIV argument. The first centers on the ownership of the project as reflected in the first and second resolutions of the Agency; the second, which concerns the second and third resolutions, involves the qualifications of the housing occupants. (a) (6) Does a State Public Body Develop, Construct, or Acquire the Housing Projects Under the Act? The Agency first contends that its involvement under the first and second resolutions does not constitute the development, construction, or acquisition of low-rent housing projects within the meaning of article XXXIV, section 1, because the projects are to be owned and developed by private sponsors rather than by the Agency itself. We reject the argument in light of the very extensive Agency participation in the housing projects authorized under the Act. Under the Act, before a project is financed, the Agency must take measures to assure the economic feasibility of the project, the financial eligibility of the sponsors and tenants, the consistency of the proposed projects with the Agency's objectives, access of the projects to supporting community services, and a location which furthers the policy of dispersing housing developments throughout communities thus avoiding concentration of low-income persons. (§ 41391.) Once a project is approved, the Agency must prescribe a uniform system of accounts and records for all sponsors; establish capital reserve requirements; set rents and eligibility standards for sponsors and tenants; regulate the occupancy agreements between sponsors and tenants; assure the provision of bilingual services to tenants where necessary (§ 41480); limit the profits of sponsors (§ 41482); prescribe grievance procedures between sponsors and tenants (§ 41400); insure that relocation payments be made to certain individuals displaced because of developments undertaken under the Act (§ 41397); and establish maximum sale prices for the housing developments (§ 41398). Further, the Agency is authorized to inspect the lands, building, equipment, books and records of the housing sponsors; to supervise the projects' operation and maintenance and to order repairs; to exact fees from housing sponsors to cover costs of inspection and regulation; to regulate the retirement of capital investments or the redemption of stock or distribution of any equity interest by any housing sponsor; and to withhold construction payments pending adequate performance of the acts required under the Agency-sponsor agreements. (§ 41481.) The Agency contends that its admittedly extensive involvement does not constitute development within the meaning of article XXXIV, section 1. In this regard, it attempts to distinguish between the entrepreneurial functions to be performed by private sponsors under the first and second resolutions and the financing function to be performed by the Agency. (See Connor v. Great Western Sav. & Loan Assn. (1968) 69 Cal.2d 850, 872-873 [73 Cal. Rptr. 369, 447 P.2d 609, 39 A.L.R.3d 224], dis. opn. by Mosk, J.). We note initially that even if the entrepreneur-financier distinction was significant in applying article XXXIV, section 1, the extensive supervision contemplated by the Act is not merely an aspect of the Agency's financing function; clearly, it is also a means to insure that the overall public policies and purposes of the program will be achieved. (See, e.g., §§ 41391, 41502.) The Agency's duties and interests as financier, while extending perhaps to the construction of safe housing developments (see Connor v. Great Western Sav. & Loan Assn., supra, 69 Cal.2d 850, at pp. 864-866), may not reasonably be said to encompass its extensive additional supervisorial and regulatory responsibilities. They do not extend, for example, to insuring that tenants are sufficiently needy to qualify for the program, that undue concentration of racial or economic groups are avoided, or that certain eviction or grievance procedures are followed. (See §§ 41391, 41400, 41496-41497, 41502.) The Agency contends that insofar as it will regulate the foregoing policy matters, it will act not as a developer of the projects but rather as a regulatory state agency, akin to other regulatory bodies which monitor public licensees, and therefore not subject to article XXXIV, section 1. We find the argument unpersuasive. Unlike the Public Utilities Commission, the Department of Alcoholic Beverage Control, and other state regulatory agencies, the Agency does not enjoy a power to control and regulate a trade or enterprise on an industry-wide basis. (See Pub. Util. Code, § 701; Cal. Const., art. XX, § 22; Bus. & Prof. Code, § 23077.) The Agency's primary purpose is to provide for the housing needs of persons and families of low or moderate income (§ 41331), not to regulate an industry which is explicitly made the subject of a statewide regulatory system. It would be a distortion to characterize the Agency as either a regulatory body or as a financier, rather than developer, for purposes of determining the applicability of article XXXIV, section 1. As discussed below, the constitutional provision at issue was adopted to assure that whenever a state agency closely participates, or assists, in the development of a low-cost housing project, the matter will be submitted for approval to the vote of the electors affected thereby. We may not lightly disregard or blink at such a clear constitutional mandate. The role of the Agency in the program before us is very similar to that of the federal government in the housing program considered in Appel v. Beyer, supra, 39 Cal. App.3d Supp. 7. In Appel, it was held that the federal government's involvement constituted state action necessitating compliance with certain due process requirements before tenants could be evicted. While Appel did not present the question of whether a state agency is a developer under article XXXIV, section 1, the court's appraisal of the government role in Appel is equally applicable to that of the Agency in the present case: The government is, essentially, the landlord. Without the government, there would be no such low-cost housing; with the government, the quality and cost of the housing is such as the government allows. ( Id., at p. 13.) Because the state, through the Agency, not only makes possible but fully regulates the low cost housing project involved here, albeit through private sponsors, we conclude that the Agency must be considered a developer for purposes of article XXXIV, section 1. The parties agree that the purpose underlying adoption of article XXXIV, section 1, was to permit the people of a community to have a voice in decisions which affect the future development of their community and which could substantially increase their tax burden. ( James v. Valtierra, supra, 402 U.S. 137, at p. 143 [28 L.Ed.2d 678, at pp. 683-684]; Board of Supervisors v. Dolan, supra, 45 Cal. App.3d 237, at p. 250; Ballot Pamp., arguments to voters, Gen. Election Nov. 7, 1950 pp. 12-13; 55 Ops.Cal.Atty.Gen. 13 (1972); 53 Ops.Cal.Atty.Gen. 120 (1970); 52 Ops.Cal.Atty.Gen. 247 (1969); id., at p. 133; 51 Ops.Cal.Atty.Gen. 245 (1968); 47 Ops.Cal.Atty.Gen. 17 (1966).) The people of California have reaffirmed their intention in this regard by their rejection at the November 5, 1974, general election of a ballot proposal for repeal of article XXXIV, section 1. We cannot ignore such a recent expression of the public will. While it is not clear whether or not the projects before us will have the benefit of a local tax exemption (see Rev. & Tax. Code, § 214), they will certainly have an impact, the dimensions of which may not as yet have been measured, on the physical characteristics of a community. It is also reasonable to conclude that the projects will place some financial strain on the taxpayers whose communities must provide additional services and assistance to low-income tenants. The electors in the affected communities must not be deprived of the opportunity to approve or disapprove the projects solely because private parties act as conduits for the purposes of carrying out the state-sponsored and Agency-regulated housing program. We therefore conclude that the Agency must be deemed to develop, construct, or acquire projects within the meaning of article XXXIV, section 1. (b) (7) Are Mixed Income Housing Projects Exempt From Article XXXIV, Section 1? The Agency next contends that the section in question is not applicable to the second and third resolutions because they provide for the development of mixed-income rather than low-income projects. Mixed-income projects are defined by the resolutions as those which will make no more than 75 percent of the units available to persons and families deemed by the Agency to be unable to pay the amounts at which unassisted, private enterprise is providing suitable, safe, decent and sanitary housing. Since article XXXIV, section 1, is designed to encourage low-income housing, so the argument runs, and since the resolutions in question cover some units designed for persons of other than low income, the article is inapplicable to projects contemplated by these resolutions. Article XXXIV defines low-rent housing projects as follows: ... any development composed of urban or rural dwellings, apartments or other living accommodations for persons of low income financed in whole or in part by the Federal Government or a state public body or to which the Federal Government or a state public body extends assistance by supplying all or part of the labor, by guaranteeing the payment of liens, or otherwise. We conclude that article XXXIV, section 1, is applicable to the housing program before us even though the projects will include some units which will be available only to those who are able to pay the market rate for housing. As previously observed, the projects may well substantially affect the physical character of local communities and increase the burden of providing services to the residents of the community. The Attorney General, in an opinion which concluded that the requirements of article XXXIV, section 1, must be met in developing a farm labor housing center, has reasoned that where a housing project will be a low-income housing project in effect, if not by exact definition, article XXXIV, section 1, is applicable. (55 Ops.Cal.Atty.Gen. 13, supra. ) We find this reasoning persuasive. The substance and primary purpose of the housing program herein is to provide housing for those who cannot otherwise afford quality housing. The addition of units for other tenants, though helpful in serving and accomplishing recognized public purposes (see, e.g., §§ 41332.5, 41335), does not substantially affect either the basic character of the low-rent housing program or its potential impact on the community. The Agency argues that its mixed-income projects should not be subject to the requirements of article XXXIV, section 1, because the program has built-in features which will render the project significantly different from those intended as the targets of this section. For example, the program provides an incentive to develop housing of higher quality than that usually associated with low-income housing by requiring developers to attract tenants willing to pay full-market rentals. The Act also directs that the program consider the aesthetic features of housing and high quality of design (§ 41006). The foregoing features of the Act may well be considered by a community in which a proposed housing project is to be located, and may be reflected in voter approval or disapproval. Given the clear terms and purposes of the section, however, we find no basis in law or principle on which we may exempt the Act, the resolutions, or the programs envisioned thereby from the application of article XXXIV, section 1. In passing we note that one court by way of dictum has recently stated that a leased housing program would not be subject to the requirements of article XXXIV, section 1, if only 30 percent of the project units in the program were to be made available to low-income tenants. ( Winkelman v. City of Tiburon, supra, 32 Cal. App.3d 834, at p. 838.) In doing so, the court apparently assumed that article XXXIV, section 1, would be inapplicable to projects which were not primarily low income projects. ( Id., at p. 844.) We reserve for a future determination the question  may a housing project which consists of a relatively small portion of low-income tenants be deemed a low-rent housing project within the meaning of article XXXIV, section 1? The answer to such an inquiry would have no persuasive or controlling force in the case before us in which up to 75 percent of the housing units may be leased to low-income tenants.