Owners of a property at 612-616 Croft Ave. have filed an appeal with the California Supreme Court to overturn a decision that will force them to pay the City of West Hollywood an “in lieu” fee for deciding not to include affordable housing in the 11-unit condominium project they have planned for the site.
The lawsuit is being handled by Pacific Legal Foundation, the nation’s oldest conservative/libertarian law firm, which handles cases free of charge if it believes they involve undue government restrictions of private property.
The developers, Shelah and Jonathan Lehrer-Graiwer, on Sept. 23 lost an earlier appeal before the 2nd Appellate District Court of Appeal. That court affirmed a trial court decision denying the Lehrer-Graiwer challenge to West Hollywood’s levying $540,000 in fees that would go into the city’s affordable housing fund. City law requires that developers of buildings with 10 or more housing units ensure that at least 20% of the units are available to low- or moderate-income people. As an option, a developer can make an “in lieu” donation to the city housing trust fund.
“The state Supreme Court should take this case because West Hollywood has perpetrated an unconstitutional shakedown and the victims deserve justice,” said PLF principal attorney Brian Hodges in a press release. “The Fifth Amendment prohibits government from singling out individual property owners and exploiting them as ATMs to pay for politicians’ wish lists or for social programs that everyone should help pay for. The Lehrer-Graiwers aren’t to blame for West Hollywood’s affordable housing shortages. On the contrary, their 11-unit condominium project adds to the overall stock of housing — as the city itself has acknowledged. For the city to saddle them with a staggering fee for a problem they didn’t cause isn’t just unreasonable, it’s unconstitutional.”
According to PLF the couple decided in the early 2000s to buy two adjacent single family houses at 612-616 Croft Ave., which is between Rangely Street and Clinton Avenue, with the idea of replacing them with a condominium complex. The project was delayed for several years and the city extended its approval. The city also changed its fee schedule during that time. In 2011 the developer finally filed for a building permit, at which time the in-lieu fee had almost doubled to $540,000. The Lehrer-Graiwers also were required to pay $36,000 for parks and recreation under the state Quimby Act and $4,000 for traffic mitigation. They paid the fees “under protest” and sued the city.
PLF says its appeal relies on U.S. Supreme Court precedents such as Nollan v. California Coastal Commission, Dolan v. Tigard and Koontz v. St. Johns River Water Management District. Those cases required that land use permit conditions — including government demands for money — “must be connected to, and proportionate to, some identified public needs created by the proposed land use project.” PLF argues. “The Lehrer-Graiwers are appealing to the California Supreme Court after the Second District Court of Appeal failed to recognize how these precedents apply to — and prohibit — the city’s unjust financial demand.”
Jonathan Lehrer-Graiwer said “the second financial burden involves the sheer magnitude of the fee, which on this project equals the full construction cost of one of the larger two bedroom, two and a half bath units. “It is also equal to 30% of the total project profit — so it is the equivalent of a 30% net income tax.”
“Unfortunately, too many localities are resistant to offering real incentives that could make a genuine difference,” Lehrer-Graiwer said. “For instance, if West Hollywood were serious about providing affordable housing, it would permit increased densities in exchange for some of the new rental and for sale units being affordable to low and moderate income housing. Unfortunately, there is little political will for this because of pressure from NIMBY and low density movements.”
In its response to the lawsuit, the City of West Hollywood said that “at various points in the litigation the City entertained settlement discussions with the plaintiff but in each instance he wanted far more of a refund of his fee than the City was willing to give him.
“The City prevailed in the trial court; on or around the day that the trial court ruled for the City, the California Supreme Court decided the San Jose case, upholding in very strong terms that city’s inclusionary housing ordinance.
“The court of appeal decision mimics the San Jose decision insofar as it recites the state’s legislative findings as to the existence of a housing crisis in California and the role that state law expects cities to play in helping alleviate that crisis.
“The court’s opinion rests on a flat-out rejection of all of plaintiff’s theories challenging the City’s ordinance. It is a powerful reaffirmation of the legality of inclusionary housing policies, and the City’s policy and ordinance in particular. In the City’s favor are the facts that this is a unanimous decision by a well-respected appellate panel, relying heavily on a recent decision of the Supreme Court. ”
The decision on the appeal is likely to have a significant impact on one side or the other.
“The case is the first reported appellate decision to rely upon the broad holding of the California Supreme Court’s blockbuster 2015 affordable housing case, California Building Industry Assn. v. City of San Jose, and it boldly highlights the far reaching implications of that ruling,” says Bryan Wenter of the Miller Star Regalia law firm’s land use group, referring to the appeal brought before the state Court of Appeal. “In my opinion, it also underscores the ongoing need for the United States Supreme Court to finally address whether the heightened scrutiny of the Nollan, Dolan, and Koontz Fifth Amendment takings cases applies to legislatively imposed permit conditions.” In the California Building Industry Association case, the Supreme Court declined to review that industry association’s argument that the City of San Jose had no right to require a developer to set aside a certain percentage of a development for low- or moderate-income people or pay an in-lieu fee.
Wenter said the Croft Avenue property owners lost their earlier appeal because the city isn’t required to prove the reasonableness of its fee. An in-lieu housing fee is not viewed as an “exaction” fee under the Nollan and Dolan decisions, which would require justification as to its actual impact on West Hollywood’s need for affordable housing, Wenter said.