San Luis Obispo homebuilders challenge City’s exactions in federal lawsuit

San Luis Obispo, California; March 4, 2026: Three Californians filed a lawsuit today challenging a policy that requires builders to either pay tens of thousands in fees or give away homes for the City of San Luis Obispo to sell to its chosen buyers. John Ruda, Jordan Knauer, and Rami Zarnegar argue that the City’s policy violates their constitutional rights by imposing unjust conditions on land-use permits.

“Housing exactions like inclusionary zoning fees don’t solve housing shortages—they exacerbate them,” said David Deerson, an attorney with Pacific Legal Foundation. “The government needs to stop imposing unconstitutional fees on the Californians building homes where more affordable housing is needed.”

John Ruda, Jordan Knauer, and Rami Zarnegar bought a property in San Luis Obispo and subdivided it into four lots, building a total of eight new housing units on the property. Four are single-family residences and four are attached accessory dwelling units. Before the City would issue building permits, it required the homebuilders to either give up one of the units to be sold at a massive loss to a buyer of the City’s choosing or pay a $98,900 fee to satisfy its inclusionary housing policy.

Represented by Pacific Legal Foundation, the three filed a lawsuit to challenge the City’s exactions in federal court. The lawsuit continues PLF’s work to end unconstitutional exactions in California and across the country, building on recent victories for homebuilders and owners in Yu v. City of East Palo Alto, Pilling v. City of Healdsburg, and Sheetz v. County of El Dorado.

The case is Ruda v. San Luis Obispo.