Building Owners Challenge Local Housing Law

By Olin Ericksen
Staff Writer

September 20 -- Once dubbed a “test-tube” for liberal housing laws, Santa Monica is now a test case that could shape how cities across California try to provide low-cost units to those who urgently need them.

After a half-decade truce between developers and the City, building owners are challenging a city law passed in June that requires developers to build affordable housing on-site or within a quarter mile of the project. The law, opponents argue, is effectively limiting condominium construction.

“It is a thin disguise… in what amounts to a moratorium on condominium development,” said Attorney Rosario Perry, a local land use attorney who filed the suit September 11 on behalf of the ACTION Apartment Association, which represents Santa Monica landlords.

“A lot of other cities are trying to stop (condominium development) as well,” Perry said, adding that the case could potentially impact several cities in California, including Los Angeles. “Just as they are saying they need housing, they are saying ‘not in my backyard,”

Approved by the City Council on June 13, the Santa Monica law restricts a developer’s option to pay an “in-lieu” fee into a City-wide affordable housing fund, instead of building the mandated affordable units on site.

The so-called "inclusionary zoning" ordinance requires that builders of projects with four or more residential units also build a specified number of "affordable" housing units that must be rented below-market rates.

While the City’s consultant, Paul Silvern, concluded that the formula would spur affordable housing because condominium development is profitable enough to absorb the costs, plaintiffs’ attorneys argue that there is not enough room to build low-cost housing at or near the proposed developments and turn a profit.

“An owner can build seven units, with one affordable and a bonus unit (subsidized by the state), and the bonus (unit) will pay for the affordable unit,” Perry said. “But you can’t build seven condo units on a 50 foot lot, because there’s not enough parking and it’s not tall enough.”

In addition, the cost of acquiring land near the new development may be prohibitively expensive, Perry said, warning that the law could backfire.

City attorney Marsha Moutrie said she could not comment on the case.

The plaintiffs argue that the Santa Monica ordinance violates California's Housing Element law, because it acts as a constraint on the production of housing. They also argue that the law is unconstitutional under the Takings Clauses of the Federal and State constitutions, because it is not demonstrated that new market housing creates an impact that requires new sub-market housing.

"By singling out builders of residential units to shoulder the cost of sub-market housing, Santa Monica is using the permitting process as an opportunity for extortion," Burling said.