April 28, 2017

Supreme Court directs West Hollywood to respond to PLF’s legislative exactions challenge

By Brian T. Hodges Senior Attorney

Earlier this week, the U.S. Supreme Court ordered the City of West Hollywood to respond to PLF’s certiorari petition in the legislative exactions case, 616 Croft Ave, LLC v. City of West Hollywood.

As you may recall, the 616 Croft Ave. petition asks the U.S. Supreme Court to review a California Court of Appeal decision holding that a city or county can enact regulations forcing landowners to dedicate private property to public use as a permit condition, 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 the U.S. Supreme Court precedents Nollan v. California Coastal Commission (1987), Dolan v. City of Tigard (1994), and Koontz v. St. Johns River Water Management District (2013), which hold that permit conditions seeking a dedication of property to the public must be sufficiently related to the proposed development (such as mitigating for traffic or storm water impacts). Without this essential connection, the condition will violate the Takings Clause and be invalid.

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 a fee for each home that would have been dedicated into a city housing fund. Petitioners 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.” Nonetheless, the City demanded a$540,000 fee—to be used for “affordable housing”—as a condition of their building permits.

The California courts upheld the city’s “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.

Noting the importance of the legislative exactions issue, several property rights groups have filed amicus briefs asking to Supreme Court to grant review of this case. An amicus brief filed by Citizens Alliance for Property Rights argues that the 616 Croft petition presents the Court with the unique opportunity to resolve the decades-long split of authority on the question whether legislatively-imposed permit conditions are exempt from the heightened scrutiny demanded by Nollan, Dolan, and Koontz. The brief—authored by former PLF attorney Paul Beard, who argued Koontz—explains why the permit condition in this case directly implicates the developer’s property rights, where various courts have found other inclusionary zoning ordinance to not exact a property interest.

The amicus briefs filed by National Federation of Independent Business Legal Center and Owner’s Council of America and Southeastern Legal Foundation detail the longstanding split of authority among state and federal courts on the legislative exactions question.

A brief filed by Cato Institute, Reason Foundation, and National Association of Home Builders argues that the California decision exempting legislative exactions threatens to undermine the protections guaranteed by the Fifth Amendment. The brief also points out that review is necessary now because state courts are tending away from subjecting exactions to the heightened scrutiny required by Nollan, Dolan, and Koontz.

The Center for Constitutional Jurisprudence provides more background on the cause of California’s housing shortage—spoiler alert! it’s directly attributable to overly burdensome and restrictive land use regulations—arguing that inclusionary zoning ordinance force landowners to pay for problems caused by the government, not individual developers.

With the due date for West Hollywood’s response brief set for May 25, 2017, we are hopeful that the Court will decide whether to accept review by the end of this term.

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616 Croft Ave., LLC v. City of West Hollywood, California

Shelah and Jonathan Lehrer-Graiwer became victims of government extortion in West Hollywood, California over new condos. A city ordinance purports to address an affordable housing problem by demanding builders either sell a percentage of new homes at below-market rates or pay hefty “affordable housing” fees. Our clients were squeezed for $500,000. Two previous PLF Supreme Court wins determined such “inclusionary zoning” policies without clear public need are unconstitutional. PLF will argue this license to steal is no exception.

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