A longtime anti-poverty lawyer and his wife have lost an appellate case against the City of West Hollywood in which they challenged the city’s imposition of inclusionary housing fees on their project. The ruling strengthens the power of local governments to enforfe inclusionary housing policies, partly by reinforcing an appellate court ruling from San Jose last year.

Shelah and Jonathan Lehrer-Graiwer sued West Hollywood over a wide variety of fee-related issues on their 11-unit Croft Avenue housing project, including the inclusionary housing fees, which totaled more than $500,000. But the Second District Court of Appeal rejected a wide variety of arguments and said the city had acted properly under the Mitigation Fee Act (AB 1600) in setting out an overall schedule for inclusionary housing fees.

Instead, the Second District ruled that the fees were appropriately based on the city’s overall lack of affordable housing. Writing for a unanimous three-judge panel, Justice Victoria Chaney said that “the purpose of the in-lieu housing fee here is not to defray the cost of increased demand on public services resulting from Croft’s specific development project, but rather to combat the overall lack of affordable housing.”

Relying on California Building Industry Assn. v. City of San Jose (2015) 61 Cal.4th 435, she added: “This type of fee is not ‘for the purpose of mitigating the adverse impact of new development but rather to enhance the public welfare by promoting the use of available land for the development of housing that would be available to low- and moderate-income households.’”

The Lehrer-Graiwers, operating as 616 Croft Ave. LLC, have sought for many years to demolish two single-family homes just south of Melrose Avenue in West Hollywood and replace them with an 11-unit project. (Jonathan Lehrer-Graiwer was for many years a lawyer with the Western Center on Law and Poverty and later worked on many social justice cases as a lawyer in private practice.) The Lehrer-Graiwers won city approval for the project in 2005 but because of the downturn in the economy did not seek to pull permits until 2011. At that time, the city demanded that they pay higher fees totaling $580,000, including $540,000 for the inclusionary housing fee. The Lehrer-Graiwers paid the fees under protest and sued

They challenged the city’s fee ordinance both on its face and as applied to their project. The appellate court concluded that the facial challenge was time-barred because the ordinance was adopted 10 years before the lawsuit was filed. More importantly, the appellate court rejected the as-applied challenge as well.

The Lehrer-Graiwers made a wide range of arguments, including the idea that the fees were really taxes under Proposition 218. The court rejected all these arguments.

Most important, the appellate court concluded that the inclusionary housing fees did not need to be tied to the impact of the Lehrer-Graiwers’s project but, rather, could be part of an overall effort to tackle the affordable housing problem in West Hollywood.

First, the court concluded that the burden of proof that the fees are reasonable lies with the city, not with the developers. The Lehrer-Graiwers had argued otherwise, citing Prop. 218. But citing San Jose, the court said: “The purpose of the in-lieu housing fee here is not to defray the cost of increased demand on public services resulting from Croft’s specific development project, but rather to combat the overall lack of affordable housing.” Among other things, the court ruled on Ehrlich v. City of Culver City (1996) 12 Cal.4th 854, which distinguished between fees charged on a project basis and fees charged as part of an overall city policy.

Partly based on this reasoning – and again relying on San Jose – the court said the challenge should not have been based on the application of individual fees to an individual project. “Although the fee must be reasonable, the inquiry is not about the reasonableness of the individual calculation of fees related to Croft’s development’s impact on affordable housing,” the court wrote. “The inquiry is whether the fee schedule itself is reasonably related to the overall availability of affordable housing in West Hollywood.”

The Case:

616 Croft Ave LLC v. City of West Hollywood, No. B266660 (September 23, 2016)

The Lawyers:

For 616 Croft Ave (the Lehrer-Graiwers): David Lanferman, Rutan & Tucker, dlanferman@rutan.com

For City of West Hollywood: Michael Jenkins (mjenkins@localgovlaw.com) and Christi Hogin (hogin@localgovlaw.com), Jenkins & Hogan

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