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By Jorge Casuso

September 8 – An Appeals Court has dismissed a challenge to a Santa Monica law that requires condo developers to build affordable units on site or at another location.

The suit filed by the Action Apartment Association argued that the law approved by the City Council in June 2006 “constitutes an unlawful uncompensated taking” because there is no “nexus” between building condo units and the need for subsidized housing.

The plaintiffs also argued that the law -- which makes it practically impossible to build condominiums in the beachside city -- requires prior review by the California Department of Housing and Community Development before it can kick in.

“We disagree with both of plaintiff’s challenges” to the ordinance, the three-member court wrote in a published decision filed August 28. “The dismissal order is affirmed.”

The court then ordered the plaintiffs to pay the City’s court costs.

City officials hailed the decision.

“We’re pretty pleased but not surprised that the court of appeals has upheld the City’s affordable housing program,” said City Attorney Marsha Moutrie. “We always believed it was facially constitutional.”

Plaintiffs were disappointed with the court’s ruling upholding the ordinance, which requires condo developers of four to 15-unit buildings to construct 20 percent of the total units as moderate income units for sale or as low-income units for rent, or 25 percent for projects larger than 15 units.

“The City says you can afford to build six condos market rate and two affordable units,” said Rosario Perry, one of the attorneys for the plaintiffs. “Their model was completely fallacious.

“Just because we’re building a building doesn’t mean we’re creating a need for affordable housing,” he said.

By not allowing condo developers to pay “in-lieu” fees the City can use to build affordable housing, the law is not only halting all condo development, it is curbing the construction of new affordable housing, Perry argued.

“If you abolish in-lieu fees, you can’t build condos, and you don’t have in-lieu fees for condos,” Perry said. “In an attempt to stop developers from building condos, they’ve stopped the building of low-income housing.”

At the heart of the plaintiff’s argument was the contention that a takings case could be expanded “from an individual developer’s request for approval of a project” to “a facial challenge to a land use regulation.”

The City countered that a “takings did not apply” to the case and that “there were insufficient facts pled showing (the ordinance) was egregiously arbitrary and irrational,” according to the court decision.

“There is a reasonable relationship between the obligation to construct affordable housing units as imposed by (the ordinance) and the need for such housing caused by the subject development,” the City argued in its demurrer to the complaint.

The plaintiffs countered that they “should be given the opportunity at a trial to demonstrate defendants could not justify the alleged uncompensated takings resulting from the adoption of (the) ordinance,” according to the court’s ruling.

The court declined the request.

“In the context of a facial takings claim, a party attacking a statute must demonstrate that its mere enactment constitutes a taking and deprives the owner of all viable use of the property at issue,” Judge P.J. Turner wrote in the decision.

“The United States Supreme Court has defined a facial takings claim as an ‘uphill battle’ and ‘difficult’ to demonstrate,” the court concluded.