Two cash-strapped renters are appealing a judge’s dismissal of their claim that a San Jose land-use policy flouts state affordable housing law. The lawsuit alleges that it’s illegal for San Jose to exempt certain downtown properties from California’s Surplus Land Act, which requires cities to prioritize public land for below-market housing.

San Jose’s City Council voted in 2016 to make an exception for downtown parcels slated for high-rise development in the next five years. The rule also exempts properties used to bring manufacturing and other commercial development, which rakes in more local tax revenue than housing.

San Jose argues that as a charter city it can make certain exemptions from state law, including when it comes to sale of surplus land.

“It’s well-established, that if it’s city money, the state can’t tell us to do with our money,” City Attorney Rick Doyle told San Jose Inside. “Similarly, the state can’t tell us what to do with our property. These are purely municipal assets.”

The lawsuit disputes that assertion.

“The Surplus Land Act states explicitly that it applies to charter cities in California,” said Cristina Peña Vásquez, an attorney with Bay Area Legal Aid. “We’re confident that our claim will ultimately prevail and San Jose will be required to prioritize its surplus land for affordable housing, as state law requires.”

Joana Cruz and Sarah Anderson, two low-income moms struggling to make rent, filed the lawsuit in Santa Clara County Superior Court along with advocacy groups Urban Habitat and Housing California.

Their appeal comes as San Jose grapples with an affordability crisis that’s pricing out the middle-class and contributing to overcrowding and homelessness. The average monthly rent for a two-bedroom apartment in San Jose comes to slightly more than $3,000, according to RentJungle, which runs online rental listings.

“The depth of the region’s housing crisis requires every community to prioritize public land for public good,” Urban Habitat Director Ellen Wu said.

Doyle said San Jose’s policies are already designed with that goal in mind. The exemptions to the state Surplus Land Act in downtown are to encourage economic development, he said. But that comes alongside a commitment to boost its affordable housing stock.

“I will always challenge anybody in the state to match what we’ve accomplished in terms of affordable housing since I’ve been in the city,” he said. “All you have to do is go to a council meeting to see what actions they’ve taken to protect affordable housing.”

Click here to read a copy of the original complaint.