U.S. Supreme Court Decision on Monday Could Have Impact on WeHo’s Affordable Housing

UPDATE:  The U.S. Supreme Court has decided to carry over its decision on this matter to its Friday meeting.

The U.S. Supreme Court on Monday will decide whether to consider a lawsuit filed against the City of West Hollywood that could have a major impact on how WeHo funds housing for low- and moderate-income people.

616 Croft Ave. LLC vs. the City of West Hollywood is a challenge to a city law that requires developers to set aside 20% of the housing units in a building of 10 units or more as affordable housing or to make a payment into a fund the city has established to fund affordable housing.

In the early 2000s, Shelah and Jonathan Lehrer-Graiwer, the couple behind 616 Croft Ave. LLC, bought two houses on adjacent lots at 612-616 Croft, 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 Lehrer-Graiwers 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.

An illustration of the 612-618 N. Croft Ave. project.

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 on private property. PLF contends that the City of West Hollywood has no right to require a private individual or entity to pay for social programs such as affordable housing that should be funded by the city as a whole.

Thus far the couple have been unsuccessful in their quest for reimbursement. The Second District Court of Appeal affirmed Los Angeles Superior Court Judge Luis Lavin’s June 2015 ruling in favor of the city, and the state Supreme Court declined to review the case.

“The Lehrer-Graiwers were victims of a shakedown and we’re asking the U.S. Supreme Court for relief and redress against … the City of West Hollywood,” PLF senior attorney Brian Hodges said in a statement earlier this year announcing the appeal. “The Lehrer-Graiwers aren’t to blame for affordable housing shortages. On the contrary, their condominium project would add to the stock of housing. For city bureaucrats to punish them with an astronomical fee … for providing more housing isn’t just unconscionable, it’s unconstitutional.”

But lawyers for the City of West Hollywood stated in their court papers that the developers’ case is barred by the statute of limitations. They also stated that the fees were “lawfully imposed, both with respect to their amount and their timing.”

SCOTUSblog, the leading source for information on U.S. Supreme Court actions, notes that the review of the case could mean that one or more Justices wants to take a closer look at it; that one or more Justices is trying to pick up enough votes to grant a formal review (four are needed); that the Justices are writing a summary reversal (that is, a decision that the lower court opinion was so wrong that the Court can decide the case on the merits without briefing or oral argument), or that one or more Justices are writing a dissent from the decision to deny review.

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.

  1. it does not suprise me. The incidents and conflict within how the affordable housing program works and the other programs that are not current weho tenant or proposed weho resident. It shows nothing but tactyics and manipulation to push low income tenants out ofthe city

  2. What this policy does is push the buried of low income housing onto the private citizen and away from the government.They expect us as landlords to provide better for the tenant than they can provide for themselves. Also the standard is much higher on the landlord than the it ever was for the government.

  3. @J Simmons:
    I can see how inclusionary housing policies (and the alternative option, paying an in-lieu fee) could reduce overall annual rental income, but developer still owns them and can mitigate cost with federal tax credits. In many cases, if applying the state’s density bonus law, the developer may be entitled to reduced parking incentive, increase in allowable height, etc.

    Inclusionary Housing policies are probably the most successful tool cities have for 1) creation of new very low, low & moderate income affordable units; 2) providing long term deed-restricted affordable housing (rent controlled/stabilized apartments could disappear at any time due to Ellis Act); & 3) ensuring those units are built throughout the community right along side higher income neighbors, not in just the poorest areas with low land values (providing access to better schools, higher-wage job opportunities, & in many cases less environmentally toxic air and water).

    If we really want to reduce the cost for building housing, we need to reduce the number CEQA challenges not environment-related filed against projects and we should also reduce/eliminate minimum parking requirements since it’s in developer’s interest to include ample parking for the product s/he plans to sell.

    @Donald E Azars:
    The developer is not getting out of following any laws, building codes or setbacks – its not a bribe or trade off. The City’s inclusionary housing policy applies to all new housing projects, requiring developers build a percentage (20%) of deed-restricted affordable units or pay an in-lieu fee to City’s affordable housing trust fund. For a few years between about 2004 until the Palmer decision in 2009, City required projects 10+ units to build inclusionary units on site – projects under 10 units had alternative option of paying a fee in-lieu of building on-site. (smaller buildings more challenging to build on-site) Although calculated to about equal cost of building units on-site, if given option, developers tended to pay in-lieu fee to be done and not need to deal with the management of and annual paperwork required on a single deed-restricted unit. Theoretically the cost is same for developer but by the time enough money accumulates in the trust fund to build, the cost for building materials will have risen. I believe after Palmer put into question a City’s authority to have an inclusionary policy, City began allowing all rental housing projects the option of paying the in-lieu fee.

  4. Rents have gone crazy everywhere and making development not profitable will only mean more housing shortage and higher prices. We need more affordable housing but it’s not going to happen when we make it harder and more expansive to build.

  5. Well its my opinion that its these peoples own fault for waiting to build their project. They are developers. They bought two single family homes to tear down and build condo’s to make a HUGE profit. During their delay…fee’s and laws changed and thus the price went up. Its their own fault for not acting quick enough. I’m sick of wealthy people complaining and trying to find loopholes and every which way around the law.

  6. I agree, Mr Azars.
    Like I recently thought about the developers who donate to the housing fund instead of offering the requisite number of affordable units. It shouldn’t be a trade-off and I know it’s legal, but it doesn’t advance the amount of livable space.

  7. I hope The Court DOES ban this extreme cost on small, few units, new construction. THE MEGA DEVELOPERS WHO BOUGHT WEHO AND “Tore Down Paradise To Put Up A Parking Lot” (literally) {I don’t know the song reference}. A new 8 unit single lot project, basically makes a profit of the last unit sold (basic way that segment of building oversimplifies how it works). Forcing a low income RENTAL makes basic development totally unprofitable (small margins compared to the hotels & Mega Buildings. Also, if an 8 unit condo, it’s really 7 owners and THEN THE NEED TO MANAGE ONE UNIT AS A RENTAL. Apartments only work because one manager can run a whole building. Managing one rental with a tiny 7 member HOA makes the units undesirable to buy if someone built it at almost zero profit.

  8. I have NEVER supported our city making property developers or anyone to pay a fee (bribe if you will) to avoid adhering to standards, laws etc. regarding setback, parking, height, design, signage or other requirements in our zoning and construction requirements. Those “standards” were written to maintain our city the way it was intended when created…not something you give away to replenish our treasury, afford pet projects of the Council members or others. We are changing out village like environment into the type of city(like LA) that we didn’t want.

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