Case Update: Appellate Court Holds That Affordable Housing “In-Lieu” Fees Are Not Exactions And Thus Not Subject To The Reasonable Relationship Test (Following California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435).

In 616 Croft Ave., LLC v. City of West Hollywood, (2016) 3 Cal.App.5^th 621, the court of appeal held that the City’s in-lieu affordable housing fee was not subject to the reasonable relationship test under the Nollan/Dolan line of cases.  The subject project, an 11-unit condominium development on two combined lots, was approved in 2005, but because of the economic downturn the developer did not request building permits until 2011.  During that time, the City’s in-lieu housing fee under its 2011 fee schedule had increased to $540,000.00.  The developer paid under protest, and then sued the City for a refund in 2012, arguing that the fee was an illegal “exaction”.

While that case was making its way through the courts, in 2015, the California Supreme Court held that an affordable housing provision requiring that a certain number of new housing units be set aside as “affordable” units was not an “exaction” that invoked the United States Constitution’s Fifth Amendment due process takings protections, but rather, such a restriction “is an example of a municipality’s permissible regulation of the use of land under its broad police power.” (California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435.)  Thus, in the 616 Croft Avenue case, the court of appeal followed the City of San Jose case and held that the same reasoning applied even though the issue in this case was the payment of an in-lieu fee as an alternative to setting aside affordable units, and thus, the fee was not required to satisfy several reasonable relationship requirements.

©2016 Miles J. Dolinger.  This article is not intended to and does not constitute legal advice or a solicitation for the formation of an attorney-client relationship.

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Miles Dolinger

Miles Dolinger epresents individual, business and public agency clients in a wide range of real estate, land use, and public law matters (transactional and litigation). His office is currently location in Capitola, CA and serves clients in Santa Cruz, Monterey, San Benito and Santa Clara Counties.

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