Fed. Dist. Court in CA Finds Ordinance Requiring a Fee to Offset “the Impact of the Loss of Affordable Housing” from the Demolition of Residential Buildings Did Not Constitute a Taking

Plaintiffs OPHCA, LLC, and Clifford and Olga Orloff had been in the business of buying, renovating, and leasing apartment buildings and owned a distressed 18-unit residential property built in 1925, near the University of California at Berkeley. The property had numerous habitability and safety defects, including mold and vermin infestation, corroded and substandard plumbing, and a damaged foundation that inspectors cautioned “possibly would disintegrate in the event of an earthquake.” Defendant City of Berkeley adopted an ordinance that required a fee to offset “the impact of the loss of affordable housing” from the demolition of certain residential buildings. OPHCA argued that the ordinance exacted an unconstitutional taking without just compensation, and violated procedural and substantive due process.

As to OPHCA’s facial challenge claim, it was required demonstrate that there was “no set of circumstances” under which the demolition fee passes the Nollan-Dolan-Koontz test. Here, this ordinance set a fee tied to the actual costs that a developer imposes on the City’s affordable housing stock by demolishing affordable housing units. Because the court found that the City could impose a fee that approximates the effects of the proposed demolition, OPHCA’s facial challenge had no merit. Additionally, OPHCA’s as-applied takings challenge to the demolition fee was not ripe because the City had not yet calculated the amount of the fee, which was required before the court could analyze the proportionality prong of the Nolan-Dollan-Koontz test.

OPHCA next contended that the demolition fee violated procedural due process because the City applied the fee retroactively and without proper notice; and because the terms of the fee were unconstitutionally vague. The court first noted that the city was free to impose a fee in an amount to be set later, so long as the fee was contemplated by the permit: as was the case here. As to the vagueness argument, the court determined that the City could set a fee no higher than necessary to mitigate “the reasonable cost” of the project’s effect on affordable housing stock, and that due process did not require the City to explain its regression methodology on that face of every building permit that it issued. Here, there was a rational relationship between that purpose and a fee expressly required to approximate “the reasonable cost” of that loss. Because none of OPHCA’s federal law claims were found to have merit, the Court failed to exercise supplemental jurisdiction over the state law claims.

Ophca LLC v. City of Berkeley, 2016 WL 6679560 (ND CA 11/14/2016)