Is a city required to prove its affordable housing fees are reasonably related to public costs caused by a proposed development?

616 Croft Ave. v. City of West Hollywood

Facts: A residential developer applies to the city for permits to demolish existing single family residences (SFRs) and construct a condominium project. The project is subject to the local inclusionary housing ordinance requiring developers to either sell or rent a portion of their units at specified below-market rates or pay “in-lieu” fees to fund construction of a proportionate number of affordable units. The developer elects to pay the in-lieu fees “under protest” and the city approves their permit application.

Claim: The developer seeks a refund for the in-lieu fees, claiming the fees are invalid and violate the Mitigation Fee Act (the Act) since the city did not prove the imposition of fees is reasonably related to costs incurred by the public due to the development, as required by the Act.

Counter claim: The city claims the in-lieu fees are valid since they are a voluntary alternative to the developer setting aside affordable units and are justified by the city’s affordable housing crisis, thus exempting the fees from the Act.

Holding: A California court of appeals holds the city’s in-lieu fees are proper and valid since the fees are not subject to the Act as they are not exacted to defray costs incurred by the public due to the development, but are part of the city’s statutory obligation to enact land use regulations that address the critical lack of affordable housing for low- and moderate-income residents. [616 Croft Ave. v. City of West Hollywood (September 23, 2016)_CA4th_]

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