West Hollywood punishes developers for building houses

One thing that nearly all Californians agree on is that the price of housing in this state is too high. The relentlessly rising prices are unmistakable evidence of a housing shortage: not enough homes are built to meet the rising demand.

Husband and wife entrepreneurs Shelah and Jonathan Lehrer-Graiwer thought they could help meet that demand when they purchased two adjacent homes in West Hollywood in the early 2000s, with a dream of building 11 condos on the lots. The City praised the “superior architectural design” of the project, and noted that it would provide “11 families with a high quality living environment” while “helping the City achieve its share of the regional housing need.”

Then the couple got a shock: the City demanded a roughly $540,000 fee—to be used for “affordable housing”—as a condition of their building permits. Under its “Inclusionary Housing Ordinance,” West Hollywood will deny a building permit unless would-be home developers make a choice: set aside some of your units for sale at a below-market price, or pay a massive fee that the City purports to use for “affordable housing.” To avoid losing their permits, the Lehrer-Graiwers paid the fee under protest and sued the City, claiming that the fees were a violation of their property rights.

To date, the lower courts have ruled against the couple—but the Lehrer-Graiwers are in the right. That is why Pacific Legal Foundation has stepped forward to take their case pro bono and seek review at the California Supreme Court and beyond. Our petition for review was filed with the court this week.

The U.S. Supreme Court has repeatedly said that individual property owners should not be forced to pay for public benefits—such as subsidized housing—that, in all fairness, should be borne by the public as a whole. Nor can cities condition permits on landowners giving up their constitutionally-protected rights.

The City admits that the affordable housing problem in West Hollywood existed long before the Lehrer-Graiwers ever approached the City for a permit. The City also concedes that it has no evidence whatsoever that the Lehrer-Graiwers’ project had any impact on the availability of affordable housing in West Hollywood. In fact, common sense (and the California Legislative Analyst’s Office) says that the best way to reduce the cost of housing is by creating more housing units—exactly what the Lehrer-Graiwers did. In effect, the couple is being punished for helping to solve the housing shortage. That is not only unfair, it’s unconstitutional.

As a matter of policy, cities like West Hollywood should encourage this type of development, not punish it. Shelah and Jonathan Lehrer-Graiwer have created modern, safe, high-quality homes for 11 households in West Hollywood, nine more than would have been able to live there before. How many homes, condos, or apartments in California will never be built because of punitive “affordable housing” fees such as those imposed by West Hollywood?

The Lehrer-Graiwers believed so strongly in their project that they built it in spite of the City of West Hollywood’s extortionate demands. Facing the same regulatory maze and punitive fees, many entrepreneurs would simply walk away from potential housing developments entirely. By striking down West Hollywood’s unconstitutional “inclusionary housing” fees, the California Supreme Court could go a long way to encouraging the kind of development needed to solve the state’s desperate housing shortage.