San Diego's 3-year-old affordable housing law was thrown out yesterday by a Superior Court judge, putting in jeopardy more than $9 million in fees the city has collected from home builders.
SCOTT LINNETT / Union-Tribune
The La Boheme condo development in North Park exceeds the requirements of the inclusionary housing ordinance, with 45 of the 224 units to be affordably priced.
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The decision, a setback for City Attorney Michael Aguirre, is a victory for the San Diego County building industry, which sued the city not long after the City Council approved the “inclusionary housing” ordinance in 2003.
The measure, similar to laws in cities throughout California, requires developers to set aside 10 percent of the houses in their residential projects for low-or moderate-income households. Builders, however, have the option of paying a fee instead of constructing the affordable housing.
Just last month, the council agreed to settle the lawsuit by adjusting the timing of when builders have to pay the fee, a move that would have saved individual developers thousands of dollars. The agreement later collapsed when the council rejected additional guarantees sought by the San Diego County Building Industry Association.
“This is just a disaster,” said Council President Scott Peters, who had voted for the initial settlement. “We were told that this settlement was unnecessary because the city attorney would prevail, but for this to happen and have the whole program thrown out is shocking.
“I'll do whatever I can to save the program. As modest as some people think it is, it's still helpful.”
SCOTT LINNETT / Union-Tribune
The La Boheme project is under construction in the North Park
neighborhood of San Diego.
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Mayor Jerry Sanders was similarly troubled by the ruling, saying he feared that the judge's decision could potentially “expose the taxpayers of San Diego to significant costs.”
Aguirre, who personally argued the case in court on Friday, said yesterday he will take amendments to the council on Tuesday that should address the concerns of Superior Court Judge John S. Meyer.
Meyer concluded that the ordinance results in an “unconstitutional taking” because it fails to include a necessary exemption clause that would allow developers to argue that the measure should not apply to them. “We've prepared the ordinance to add that one little sentence,” Aguirre said. “We'll go back to the judge and show him that we've added that section he wanted, and that should take care of the problem. There won't be any returning of any money.”
Building industry spokesman Paul Tryon said it was still an open question as to whether his organization would go after the city for developer fees already collected. If the city fails to persuade Meyer to reverse his ruling, millions more in housing fees could be lost.
“I think this is an opportunity now to step away from the failed policy of inclusionary housing and to comprehensively address the housing issue in San Diego,” said Tryon, chief executive of the Building Industry Association, which filed the suit.
“As for the money, it's certainly in question,” Tryon said. “What the law says is if you collected money under an illegal law, then the monies derived from that have to be refunded. There is some responsibility to our home buyers.”
Builders have long argued that the city's housing law hurts new home buyers the most. Developers ultimately pass on the cost of providing affordable housing by raising the price of new homes.
Since enacting the law, most builders have opted to pay a fee rather than build the housing, netting the city more than $9.1 million. So far, only a portion of the money has been committed to affordable housing.
Some developers have agreed to build the affordable housing, accounting for more than 1,200 units, according to the San Diego Housing Commission.
Elizabeth Morris, the commission's chief executive officer, said she is worried that the $9 million could be in jeopardy if the judge does not reverse his decision.
“My primary concern is for the program itself,” Morris said. “I'm going to strongly encourage the council to continue to pursue its legal remedies. Without the ordinance, it will be much more difficult to provide affordable housing for the residents of the city.”
Meyer's ruling hinged on a 2001 appellate court decision that upheld a similar affordable housing ordinance in Napa. While the Napa and San Diego ordinances include exemptions for builders, San Diego's waiver provisions focus more on financial hardship.
What's included in the Napa measure, but missing in the San Diego ordinance, is a clause that gives builders an out if they show there is no connection between the impact of their projects and the requirement to help address the city's shortage of affordable housing. The building industry had argued in its suit that such a provision was required under the U.S. and state constitutions.
It is that provision that Aguirre plans to bring before the council Tuesday.
At the outset of Friday's court hearing, Meyer said he was inclined to rule in the city's favor, but by the end of the hearing, he said he needed more time to study the Napa ruling before making a decision.
