California city’s zoning extortion blocks family’s homebuilding dream

Wesley Yu and his wife live with their young daughter in a small, 1,000-square-foot home in East Palo Alto, California. Like many growing families, the Yus began dreaming of a little more space where their three-year-old daughter could play safely and visiting grandparents could stay comfortably.

That dream took shape as plans to build a new home and a small guest unit—a detached accessory dwelling unit (ADU)—on the adjacent lot they also own. The goal was simple: a multi-generational family haven that could eventually add to the community’s housing stock.

But East Palo Alto stood in their way, forcing them into an impossible choice just to build modest living quarters on their own property.

Under the City’s Inclusionary Housing Ordinance, residential projects with fewer than five units—including the Yus’ two planned units—trigger a requirement to either dedicate one unit as “affordable housing” or pay a steep in-lieu fee. The Yus’ fee was a staggering $54,891.

The ordinance defines “affordable” based on income, and while the City doesn’t say which category applies in each case, the Yus likely wouldn’t have qualified to live in their own unit themselves. Making matters worse, their ADU is classified as a rental under local law, which means they couldn’t simply leave it empty. City guidance prohibits rental units from remaining vacant for more than six months.

In other words, to comply with the ordinance, the Yus would have had to open their property to tenants they didn’t choose—and don’t want—while permanently surrendering control through a deed restriction on the property. Or they’d have had to open their checkbook and pay the City nearly $55,000. No matter what, the City would have gotten something: the property, or the cash.

This isn’t just bad policy—it’s unconstitutional.

The Supreme Court has repeatedly made it clear that the government can’t force people to give up their property rights in exchange for a permit. In Cedar Point v. Hassid (2021), the Court reaffirmed the right to exclude others as a core property right. And it held in Nollan v. California Coastal Commission (1987) and St. Johns River Water Management District v. Koontz (2013) that the government cannot demand money or property in exchange for a land use permit without a direct connection to the impact of the project.

The Yus’ modest home project didn’t reduce affordable housing—it increased overall housing supply. Yet the City attempted to hold their permit hostage to force the family to give up a portion of either their property or their savings.

The right to use one’s land for a family home is a cornerstone of the American Dream. Families like the Yus shouldn’t have to buy the government’s permission to create a place where their children and aging parents can live.

Wesley Yu fought back. Represented free of charge by Pacific Legal Foundation, he challenged East Palo Alto’s extortionate housing ordinance in federal court—defending his family’s future and the fundamental rights of all Americans to build a better life on their own land.

Following Mr. Yu’s lawsuit, the City withdrew the fines it had initially charged and further amended its ordinance to exclude ADUs like theirs. In the future, the City will not impose in-lieu fees on residents who build projects as the Yu family did. 

“This settlement is a victory for the Yu family and their right to build a better life without unnecessary government interference,” said Austin Waisanen, an attorney at Pacific Legal Foundation, which represented Mr. Yu free of charge. “The City’s commitment to no longer imposing extortionate fees for some ADU projects is a step in the right direction. We will continue to fight for everyone’s property rights by challenging extortionate laws like these.”