For at least the third time in two years, litigation filed by housing advocates has resulted in a court order or settlement for hundreds of affordable housing units. The latest city to get hit with a judgment is Brea, whose redevelopment agency was ordered to produce 208 units of low- and very low-income housing by June 2012.
Orange County Superior Court Judge Sheila Fell found that Brea's redevelopment agency had inappropriately double-counted replacement units (those built to replace demolished housing) and inclusionary units (the percentage of new units that must be affordable). Fell issued her ruling in October 2006 in a case brought by San Diego-based Affordable Housing Advocates. To head off an appeal, the organization and the redevelopment agency recently signed a settlement agreement that holds the agency to the housing production mandate.
The decision follows rulings in cases involving Stockton and Pittsburg. In the latter, the City of Pittsburg and its redevelopment agency agreed to produce 990 units of affordable housing (including 396 very low-income units) within nine years. The agreement settled a lawsuit brought by Public Advocates and the California Affordable Housing Law Project. In the Stockton case, the Ninth U.S. Circuit Court of Appeals ordered the city to provide relocation assistance to people who were displaced from their single-room occupancy (SRO) hotels by a large code enforcement effort. (Price v. City of Stockton, 394 F. Supp. 2d 1256 (2005); see CP&DR Legal Digest, January 2005.) The court blocked the city from removing additional downtown hotels or apartments until the city met certain conditions. Stockton settled the litigation by agreeing to provide 340 replacement units.
Local redevelopment agency officials sometimes see such litigation as nuisance lawsuits. Stockton officials, for example, make no apologies for shuttering substandard residential hotels. Redevelopment Agency Executive Director Steve Pinkerton said that the lawsuit against his city resulted in a modest amount of relocation assistance for plaintiffs and an agreement to develop units that the city was already planning to provide. In fact, he contended, the city had already provided nearly half of the settlement's 340 units. Mostly the lawsuit resulted in $1.5 million in legal fees for housing advocacy lawyers, Pinkerton complained.
Eric Nicoll, who heads Brea's economic development and redevelopment agencies, sounded the same theme.
"This was a frivolous lawsuit. It wastes the public's money," Nicoll said. "I'm completely convinced that it was all about her attorneys fees."
Judge Fell did award plaintiffs' attorneys $1.9 million, an amount the settlement reduced to $1.4 million. Most of that money went to Affordable Housing Advocates, whose directing attorney is Catherine Rodman.
"It's mind-boggling the spin that some agencies put on this," Rodman said. "If there was no merit to the case, we wouldn't have gotten a dime."
Lynn Martinez, an attorney for Western Center on Law and Poverty involved in the Stockton litigation, has heard it before. Stockton officials vigorously fought the lawsuit before declaring afterward that the city was going to do the right thing all along, she said.
"Most cities recognize when they are doing something wrong, and they don't drive up the attorneys fees," Martinez said. Most cities will either amend policies in order to prevent litigation, or quickly settle a lawsuit, she said.
But some jurisdictions — including Brea — concede nothing. Six years passed from the filing of the Affordable Housing Advocates' lawsuit to the settlement signing.
"They had plenty of time to get their house in order. Instead, they spent their time fighting us," said Rodman, who noted the city filed numerous motions intended to prevent a trial. "They tried very hard to prevent us from getting to the merits."
Rodman said she began scrutinizing all Orange County redevelopment agencies in 1998. She uncovered what she thought were improprieties in Brea and leaned on the city for two years to change its practices before she filed suit in 2001.
Her lawsuit against Brea had a number of aspects, and she lost some key portions. She argued that the agency should reimburse the low/mod housing fund because the agency spent all of a $200 million bond issued in 1986 on infrastructure in commercial areas, allocating nothing to serve housing. She also argued that the city should reimburse the housing fund millions of dollars from past years because the city was deducting pass-through and administrative fees before setting aside the housing fund's 20%.
Judge Fell imposed a three-year statute of limitations, so the challenge to the bond spending failed. Fell found the city had incorrectly been setting aside 20% of net, rather than gross, income and ordered repayment to the housing fund back to 1998, a total of $524,000.
Rodman also sought 458 replacement units and 130 inclusionary units. In the end, Fell ordered the agency to provide 204 inclusionary and 4 replacement units.
Nicoll, the agency's executive director, called the housing fund repayment "no big deal. We can live with it." But he said there was no reason for Rodman and the court to spend so much time on the 1986 bond. The city filed a validation suit to get a legal ruling on the bond at the time, the bond provided infrastructure in an area where affordable units have been built, and the three-year statute of limitations is well known, he said. In fact, he said, a court of appeal confirmed the three-year limitation in Hogar Dulce Hogar v. Community Development Commission of the City of Escondido, 110 Cal.App.4th 1288, a case litigated by Rodman (see CP&DR Legal Digest, September 2003). Nicoll charged that Rodman challenged the bond expressly to run up her bill.
As for the double-counting, Nicoll said the agency has been doing so because the law is unclear.
"Should we have done anything differently? No. In fact, the final outcome weighed more in our favor," Nicoll said.
According to city statistics, 788 housing units, including 323 affordable units, have been constructed in Brea's redevelopment project areas since 1980. Another 1,377 units have been built outside the project area, including 341 affordable units. Nicoll said the agency would amend its redevelopment implementation plan in July to account for the judge's order, but the agency already has plans for more than 300 new units.
"The average cost of doing an affordable unit in Brea is about $175,000," Rodman said. "If you multiply that by 208 units, that's over $35 million for affordable housing."
Catherine Rodman, Affordable Housing Advocates, (619) 233-8474.
Lynn Martinez, Western Center on Law and Poverty, (707) 552-5306.
Eric Nicoll, Brea Economic Development Department, (714) 671-4421.
The Case: Un Hogar Nuestro v. Brea Redevelopment Agency, OCSC No. 01CC08089.
Corrections. The May Redevelopment Watch story erroneously stated that the City of Brea issued a $200 million bond for infrastructure improvements in 1986. In fact, the bond was for $30 million. In addition, the story should have made clear that a judge's order regarding the Brea Redevelopment Agency's underfunding of the low- and moderate-income housing fund requires the agency to recalculate housing fund contributions in the future, as well as to repay shortages dating to 1998.