Posted by: Patricia Salkin | June 7, 2017

Fed. Dist. Court in IL Finds Developer Failed to Allege Ordinance Effected Per Se or Regulatory Taking of Its Property

Plaintiff Hoyne Development LLC, a real estate developer, purchased commercial property seeking to re-zoning and develop the property for residential use. Hoyne got the property re-zoned, but as a condition of obtaining building permits, the City of Chicago demanded that Hoyne comply with its Affordable Requirements Ordinance (“ARO”), a measure to increase the availability of affordable housing in Chicago. Specifically, the City required Hoyne to set aside two housing units for rent or sale to low-income residents, or pay a $200,000 fee. Hoyne complied by paying the fee, and then filed this action in state court, alleging that the ARO constituted a taking in violation of the U.S. and Illinois Constitutions, both facially and as applied. Plaintiff Home Builders Association of Greater Chicago (“HBAGC”), a real estate trade association, joined Hoyne in the facial challenge to the ordinance. The City of Chicago removed the case to federal court and moved to dismiss for failure to state a claim.
At the outset, the court noted that although the complaint alleged that the building permit was conditioned on complying with the ARO, the complaint did not contain any specific allegations that the ARO was the taking of a property interest without just compensation. Nevertheless, Plaintiffs contended that there was a per se taking because: the ARO deprives landowners of the right to fix the price at which they will sell property; the ARO “operates on” an identifiable property interest; and the ARO requires a recorded encumbrance on the property. Here, however, the court found that while landowners generally have the right to set the prices at which to sell their land, Hoyne did not have the right to develop the multifamily project at all before the up-zoning that rendered the property subject to the ARO. Additionally, the ARO did not compel Hoyne to rent its property, or impose restrictions indefinitely – only for 30 years. Lastly, the court found that the act of recording itself did not create a public property right or a public easement. Hoyne’s per se takings claims were therefore dismissed.
As to the regulatory taking claim, the court determined that the ARO was not a physical invasion of the property. The court found that it was implausible that Hoyne’s property had decreased in value substantially, and that any potential decrease could potentially be counterbalanced by other possible uses. Furthermore, Hoyne did not have a reasonable expectation of developing fourteen market-rate units because Hoyne purchased the property when it was zoned for commercial use. It was not until Hoyne requested and received the up-zoning, that it had the right to develop twelve market rate units and two affordable units. As such, the plaintiff’s regulatory takings claim was also dismissed.

Home Builders of Chicago v City of Chicago, 213 F. Supp. 3d 1019 (ND IL 9/3/2016)

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