On Friday, PLF attorneys filed a petition for a writ of certiorari with the U.S. Supreme Court in the case, 616 Croft Ave, LLC v. City of West Hollywood. The petition asks the Court to review a California Court of Appeal decision holding that a city or county can force landowners to dedicate private property to public use, without providing just compensation, so long as the government can show that its use of the land will enhance the public welfare. That decision marks a stunning departure from decades of U.S. Supreme Court case law, which has repeatedly warned that, standing alone, a strong public desire to improve public conditions has never been sufficient to justify the government’s appropriation of private property.
At issue is the City of West Hollywood’s “Inclusionary Housing Ordinance,” which requires developers to dedicate a percentage of their newly built homes as low-income housing for sale at below market prices, or pay for each home that would have been dedicated into a city housing fund.
Petitioners, husband and wife entrepreneurs Shelah and Jonathan Lehrer-Graiwer purchased two adjacent homes in West Hollywood in the early 2000s with a dream of building an 11-unit condominium complex on the lots. The City praised the “superior architectural design” of the project, and noted that it would provide “11 families with a high quality living environment” while “helping the City achieve its share of the regional housing need.”
Then the couple got a shock: the City demanded a roughly $540,000 fee—to be used for “affordable housing”—as a condition of their building permits. Under its “Inclusionary Housing Ordinance,” West Hollywood will deny a building permit unless would-be home developers make a choice: set aside some of your units for sale at a below-market price, or pay a massive fee that the City purports to use for “affordable housing.” To avoid losing their permits, the Lehrer-Graiwers paid the fee under protest and sued the City, claiming that the fees were a violation of their property rights.
The Lehrer-Graiwers filed a lawsuit, seeking to invalidate the exorbitant fee as an unconstitutional condition under Nollan v. California Coastal Commission (1987), Dolan v. City of Tigard (1994), and PLF’s recent victory in Koontz v. St. Johns River Water Management District (2013). Together, those cases hold that permit conditions seeking a dedication of property to the public must be sufficiently related to the proposed development (such as mitigating for project impacts); otherwise, the condition will violate the Takings Clause and be invalid.
The City admitted that the affordable housing problem in West Hollywood existed long before the Lehrer-Graiwers ever applied for a permit. The City also conceded that it had no evidence whatsoever that the Lehrer-Graiwers’ project had any impact on the availability of affordable housing in West Hollywood. In fact, common sense (and the California Legislative Analyst’s Office) says that the best way to reduce the cost of housing is by creating more housing units—exactly what the Lehrer-Graiwers did. In effect, the couple is being punished for helping to solve the housing shortage. That is not only unfair, it’s unconstitutional.
Nonetheless, the California courts upheld the city’s demand for over a half-million in “affordable housing” fees under a line of cases holding such demands immune from Nollan, Dolan, and Koontz if the demand originated in the legislature rather than at the permit desk.
PLF’s petition argues that an exaction is and exaction. It doesn’t matter which government entity makes the demand, such conditions seek to take advantage of the permit process to force the transfer of private property to a public use without payment of just compensation. Indeed, there is no basis in the U.S. Supreme Court’s case law for drawing any distinction between a legislatively mandated exaction and other conditions. After all, the conditions invalidated in Nollan, Dolan, and Koontz were all required by acts of generally applicable land-use laws.
By creating an exception for legislatively-mandated exactions, the California courts have made an end-run around the constitutional safeguards guaranteed by the doctrine of unconstitutional conditions, which, according to Koontz, “vindicates the Constitution’s enumerated rights by preventing the government from coercing people into giving them up.”
PLF’s petition points out how far the California court strayed from the protections provided by the Takings Clause of the Fifth Amendment of the U.S. Constitution. The purpose of the Takings Clause is to protect against regulations that force “some people alone to bear public burdens, which in all fairness and justice, should be borne by the public as a whole.” Armstrong v. United States (1960). A rule like that adopted by the California Supreme Court would relieve government of that fundamental requirement, negating the very guarantees that the Constitution provides for property owners.
We are hopeful that the U.S. Supreme Court will recognize that the California court created a rule that circumvents the protections of the Takings Clause and accept review of this important case.