Amicus Curiae Brief — George Sheetz, Petitioner v. County of El Dorado, California
Supreme Court briefNov 20, 2023
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No. 22-1074
IN THE
Supreme Court of the United States
__________________
GEORGE SHEETZ,
Petitioner,
v.
COUNTY OF EL DORADO,
__________________
Respondent.
On Writ of Certiorari
to the California Court of Appeal,
Third Appellate District
__________________
BRIEF OF CALIFORNIA HOUSING DEFENSE
FUND, CALIFORNIA YIMBY, AND YES IN MY
BACK YARD AS AMICI CURIAE
IN SUPPORT OF PETITIONER
___________
Darren Teshima
Counsel of Record
Timothy Duncheon
COVINGTON & BURLING LLP
415 Mission St, 54th Floor
San Francisco, CA 94105
(415) 591-7094
dteshima@cov.com
November 20, 2023
Counsel for Amici Curiae
California Housing
Defense Fund, California
YIMBY, and Yes In My
Back Yard
i
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES ...................................... iii
INTERESTS OF AMICI CURIAE ..............................1
INTRODUCTION
AND
SUMMARY
OF
ARGUMENT ........................................................3
ARGUMENT ...............................................................4
I.
California Faces a Devastating Housing
Crisis. ...................................................................4
II.
The Crisis Is Getting Worse Because
California’s Impact Fees Lack the Requisite
“Nexus” and “Rough Proportionality” to the
Impacts of Housing. ...........................................10
A.
Impact fees in California do not have
“nexus” and “rough proportionality” to
the impacts of new housing........................10
B.
Disproportionately high impact fees
exacerbate the housing crisis. ....................15
C.
State law continues to provide no
remedy. .......................................................17
III. The “Rough Proportionality” Test Requires
Considering Government Revenue From New
Housing. .............................................................20
A.
Local governments must consider the
extent to which the costs of new
housing are already paid for. .....................21
B.
New housing offsets costs by directly
increasing local government revenue. .......23
ii
1.
After new housing is built,
it automatically generates
a
stream
of
new
revenue. .......................... 23
2.
California’s Proposition 13
further maximizes the
revenue
from
new
housing. .......................... 27
CONCLUSION ..........................................................30
iii
TABLE OF AUTHORITIES
Page(s)
Cases
AMCAL Chico LLC v. Chico Unified
Sch. Dist.,
57 Cal. App. 5th 122 (Ct. App. 2020) .................. 19
Armstrong v. United States,
364 U.S. 40 (1960) ................................................ 11
Boatworks, LLC v. City of Alameda,
35 Cal. App. 5th 290 (Ct. App. 2019) .................. 18
Dolan v. City of Tigard,
512 U.S. 374 (1994) .................................. 11, 21, 26
EEOC v. Waffle House, Inc.,
534 U.S. 279 (2002) .............................................. 22
Ehrlich v. City of Culver City,
911 P.2d 429 (Cal. 1996) ...................................... 13
Goodrich v. City of Los Angeles,
No. B216421, 2010 WL 797539 (Cal.
Ct. App. Mar. 10, 2010)........................................ 24
Home Builders Assn. of Tulare/Kings
Ctys., Inc. v. City of Lemoore,
185 Cal. App. 4th 554 (Ct. App.
2010) ................................................... 14, 18, 19, 26
Koontz v. St. Johns River Water Mgmt. Dist.,
570 U.S. 595 (2013) ...... 3, 10, 11, 17, 20, 21, 22, 26
iv
Mhany Mgmt., Inc. v. Cnty. of Nassau,
819 F.3d 581 (2d Cir. 2016) ................................... 6
Michigan v. EPA,
576 U.S. 743 (2015) .............................................. 25
Nollan v. California Coastal Comm’n,
483 U.S. 825 (1987) ........................................ 11, 22
Nordlinger v. Hahn,
505 U.S. 1 (1992) .................................................. 28
Penn Central Transp. Co. v. New York City,
438 U.S. 104 (1978) .............................................. 26
San Remo Hotel L.P. v. City & Cnty. of
San Francisco,
41 P.3d 87 (Cal. 2002) .......................................... 18
Tanimura & Antle Fresh Foods, Inc. v.
Salinas Union High Sch. Dist.,
34 Cal. App. 5th 775 (Ct. App. 2019) .................. 19
Tyler v. Hennepin Cnty., Minnesota,
598 U.S. 631 (2023) ........................................ 11, 13
Vill. of Euclid, Ohio v. Ambler Realty Co.,
272 U.S. 365 (1926) .............................................. 29
v
Statutes
Cal. Gov’t Code
§ 65852.2............................................................... 17
§ 65940.1............................................................... 18
§ 66001............................................................ 17, 18
§ 66006............................................................ 17, 18
§ 66016.5............................................................... 18
§ 66019............................................................ 17, 18
Legislative Materials
A.B. 516 (Cal. 2023)................................................... 19
A.B. 602 (Cal. 2021)................................................... 18
Constitutional Provisions
Cal. Const. art. 13A, § 1 ............................................ 27
Cal. Const. art. 13A, § 2 ............................................ 27
Other Authorities
Andrey Yushkov, Tax Found., Where Do
People Pay the Most in Property
Taxes? (Sept. 12, 2023),
https://perma.cc/M9JH-XW6J ............................. 23
Apartment List, More than Half of All
Renters Are “Cost-Burdened” According
to New Census Data (Oct. 17, 2023),
https://perma.cc/46QN-PTYX ................................ 7
vi
Auditor-Controller, Los Angeles Cty.,
Tax Rate Area Lookup,
https://perma.cc/ED9W-UUNX............................ 24
Brion Econ. Inc., Final Nexus Study: Park
and Recreation Residential Impact Fee
2020 Update ‐ City of Pasadena,
https://perma.cc/F47G-26Z3 ................................ 13
Cal. Air Res. Bd., 2022 Scoping Plan
Appendix E: Sustainable and
Equitable Communities (Nov. 2022),
https://perma.cc/P65Y-9S5W ................................. 9
Cal. Dep’t of Hous. & Comm. Dev., HCD
Dashboard – Construction – Structures,
https://perma.cc/7MY7-9GVS .............................. 17
Cal. Energy Comm’n, Transforming
Transportation,
https://perma.cc/SQ4Z-GDZW ............................... 9
Cal. Legis. Analyst’s Off., California’s
High Housing Costs: Causes and
Consequences (2015),
https://perma.cc/98R5-2W3V ................................. 5
Cal. Legis. Analyst, Understanding
California’s Property Taxes (Nov. 2012),
https://perma.cc/LT4L-DU89; .............................. 23
Cal. Property Tax Map,
https://perma.cc/V4FB-KJ22; .............................. 28
vii
Christopher S. Elmendorf et al., State
Administrative Review of Local
Constraints on Housing
Development: Improving the
California Model, 63 Ariz. L. Rev.
609 (2021) ............................................................... 6
City of Fremont Development Impact
Fees (June 13, 2023),
https://perma.cc/P3JL-F6CY ............................... 16
Hans Johnson et al., Public Policy Inst. of
California, What’s Behind California’s
Recent Population Decline—and Why
It Matters (Oct. 2023),
https://perma.cc/43DB-VX3Z ................................. 7
Hayley Raetz et al., Terner Ctr. for
Hous. Innovation, Residential Impact
Fees in California (Aug. 2019),
https://perma.cc/VZ3E-BVGV .................. 12, 15, 16
John Landis et al., Cal. Dep’t. of Hous. &
Comm. Dev., Pay to Play: Residential
Development Fees in California Cities
and Counties, 1999 (Aug. 2001),
https://perma.cc/94PG-F49S .............. 11, 12, 15, 16
Jonathan Woetzel et al., McKinsey
Global Inst., Closing California’s
Housing Gap (Oct. 24, 2016),
https://perma.cc/PV7W-SAWN .............................. 5
Josh Patoka, Average Rent by State,
https://perma.cc/Z6XD-JWXQ ............................... 4
viii
Karen Chapple et al., Next 10 & UC
Berkeley, Ctr. for Cmty. Innovation,
Rebuilding for a Resilient Recovery
Planning in California’s Wildland
Urban Interface (June 2021),
https://perma.cc/W99T-MTJ8 .............................. 10
Katherine Levine Einstein et al.,
Neighborhood Defenders (2020)............................. 6
LAUSD Developer Fee Program Office,
https://perma.cc/5HT4-CACX .............................. 25
Los Angeles County Assessor Portal,
AIN 2357-027-007,
https://perma.cc/X48L-325E ................................ 24
Margot Kushel et al, UCSF Benioff
Homelessness & Hous. Init., Toward a
New Understanding: The California
Statewide Study of People Experiencing
Homelessness (June 2023),
https://perma.cc/GB37-9JCS.................................. 8
Marisol Cuellar Mejia et al, California’s
Housing Divide, Public Policy Inst.
of Cal. (May 13, 2022),
https://perma.cc/D5HA-4M47 ................................ 8
Nat’l Law Ctr. on Homelessness &
Poverty, Don’t Count On It: How the
HUD Point-in-Time Count
Underestimates the Homelessness
Crisis in America (2017),
https://perma.cc/UN77-QUFH ............................... 8
ix
Richard Rothstein, The Color of Law: A
Forgotten History of How Our
Government Segregated America (2017) ............... 9
San Francisco Is No Longer the Most
Expensive Large Bay Area City to Buy
a Home, S.F. Chron. (Sept. 23, 2023),
https://perma.cc/N6X9-NQK8 .............................. 17
Sarah Mawhorter et al., Terner Ctr. for
Hous. Innovation, It All Adds Up:
The Cost of Housing Development
Fees in Seven California Cities (Mar.
2018), https://perma.cc/SV9J-JGZ7 ......... 14, 15, 16
September Home Sales and Price Report
(Oct. 18, 2023),
https://perma.cc/2QPL-349Z .................................. 5
U.S. Census, Poverty in the United States: 2022,
https://perma.cc/6DWA-T4KB ............................... 7
U.S. Dep’t of Hous. & Urban Dev., The
2022 Annual Homelessness
Assessment Report to Congress,
https://perma.cc/6TZC-NQZX ................................ 8
Vicki L. Been, Impact Fees and Housing
Affordability, 8 Cityscape 139 (2005) .................. 12
Zillow, Property Details,
https://www.zillow.com/homes/315Lowell-Ave-Palo-Alto,-CA94301_rb/19496554_zpid/ .................................... 28
x
Zillow, Property Details,
https://www.zillow.com/homes/301Lowell-Ave-Palo-Alto,-CA94301_rb/19496555_zpid/ .................................... 28
1
INTERESTS OF AMICI CURIAE1
Amici curiae are nonprofit organizations
committed to legal and policy advocacy to address
California’s housing crisis. To provide affordable,
sustainable, and equitable housing for the current
and future residents of the state, amici believe that
local jurisdictions must permit significantly more
housing, particularly in coastal areas in close
proximity to jobs. Amici have a strong interest in
assisting this Court in understanding the practices of
California’s local governments in imposing exactions
that have little relationship to the actual costs of new
housing. Amici also have an interest in explaining
ways that new housing generates new revenue for
local governments to illuminate how those costs
should be contextualized for the purposes of the
constitutional test. Amici are:
The California Housing Defense Fund (“CalHDF”)
is a nonprofit organization focused on increasing
California’s housing supply, with an emphasis on
multi-family and affordable housing. CalHDF
monitors local governments for compliance with
laws governing land use planning and permitting
for residential construction, and sues to correct
any violations it uncovers.
1 Pursuant to Supreme Court Rule 37.6, amici curiae certify that
no counsel for any party authored this brief in whole or in part,
and that no party or counsel other than the amici curiae and
their counsel made a monetary contribution intended to fund the
preparation or submission of this brief.
2
California YIMBY is a nonprofit organization that
works to make California an affordable place to
live, work, and raise a family.
Yes In My Backyard (“YIMBY”) is a nonprofit
organization whose mission is to end the housing
shortage and achieve affordable, sustainable, and
equitable housing for all.
3
INTRODUCTION AND
SUMMARY OF ARGUMENT
This case is about California’s housing crisis.
The crisis, which stems from a shortage of three
million homes, has devastating effects on
Californians. It causes sky-high housing costs and
rates of homelessness. It disproportionately impacts
people of color, who already suffer the legacy of
systemic racism in housing. And it worsens the
climate crisis, as it forces people to live further inland,
often in wildfire-prone areas from which they must
make multi-hour commutes to job centers.
Disproportionately high exactions like the one
imposed on Petitioner contribute to this shortage. In
imposing impact fees, local governments employ
faulty methodologies that vastly overestimate the
impacts of new housing. The exactions lack the
requisite “nexus” and “rough proportionality” between
“the property that the government demands and the
social costs of the applicant’s proposal.” Koontz v. St.
Johns River Water Mgmt. Dist., 570 U.S. 595, 605–06
(2013) (citations omitted). Impact fees exacerbate the
housing shortage by making it more costly to build
much-needed housing.
California courts have
manifestly failed to provide a remedy for these fees.
In addition to overstating the negative impacts of
housing, local governments also fail to ask whether
new housing generates revenue to offset those
impacts. When new housing is built, the owners
immediately begin paying local governments a much
larger stream of property taxes. Solely because that
4
new housing is built, government revenue increases
significantly. To determine the appropriate impact
fee, local governments must consider not only the
costs that housing imposes on society but also the
extent to which that housing automatically pays those
costs. No local governments currently do so. Instead,
local governments effectively demand that new
housing pay for its costs twice. Paying twice is not
“rough proportionality.”
This Court should reverse. In doing so, it should
clarify the “rough proportionality” test so that lower
courts can better monitor extortion by local
governments. High impact fees are not just hurting
the landowners or developers with the resources to
apply for a permit. They are hurting us all—
especially those struggling or unable to afford a place
to live.
ARGUMENT
I. California Faces a Devastating Housing
Crisis.
California is in the midst of a massive housing
affordability crisis.
The average rent price in
California is $1,958—more than 40% higher than the
national average of $1,372.2 The median price of an
existing condominium or townhome in California is
2 See Josh Patoka, Average Rent by State, https://perma.cc/Z6XDJWXQ (citing August 2023 data from Apartment List).
5
$650,000 and that of a single-family home is
$843,340.3
Although the crisis has recently grown worse, it is
not new. Home prices were already 80% above the
national average in 1980.4 Of course, in an ordinary
market, higher prices incentivize building more
houses. But California is no ordinary market. In fact,
each year between 1980 and 2010, California built an
average of 90,000 fewer units than were necessary to
keep cost growth in line with that in other states.5
Moreover, most of the units built during this period
were in inland and rural areas with the least housing
need; the coastal counties with the greatest housing
need built one-third (or less) of what was needed.6
During these thirty years, the typical U.S.
metropolitan area increased its housing stock by 54%,
while Los Angeles and San Francisco increased theirs
by only 20%.7 California now faces a housing shortage
of around three million homes.8
3 See Cal. Ass’n of Realtors, September Home Sales and Price
Report (Oct. 18, 2023), https://perma.cc/2QPL-349Z.
Cal. Legis. Analyst’s Off., California’s High Housing Costs:
Causes and Consequences 7 (2015), https://perma.cc/98R5-2W3V
[hereinafter California’s High Housing Costs].
4
5 Id. at 21.
6 Id. at 21–22.
7 Id. at 10.
8 Id. at 21 (estimating 2.7 million from 1980 to 2010).
In 2016,
McKinsey estimated that California needed 3.5 million homes by
2025 to address the shortage. See Jonathan Woetzel et al.,
6
The shortage exists because local governments
erect legal barriers to prevent homes from being built.
One common explanation is the political power of
certain incumbent residents, who perceive new
development as a threat to their home values or to the
status quo.9 Many of these existing residents claim
that new housing will lead to higher crime, traffic
congestion, and school overcrowding. Some are also
motivated by class- or race-based animus. E.g.,
Mhany Mgmt., Inc. v. Cnty. of Nassau, 819 F.3d 581,
608, 611 (2d Cir. 2016) (noting the forceful protests of
citizens in an “overwhelmingly” white town about
“affordable housing and associated undesirable
elements” that would change the town’s “flavor”).
Impact fees are one of the legal barriers that raise the
cost of building housing or impede its construction
altogether. But these barriers come in many shapes
and sizes, including single-family zoning, minimum
lot sizes, parking requirements, height limits,
environmental and historical review, and floor area
ratio requirements.10
Because of its housing costs, California has a
poverty rate among the highest in the nation—despite
high incomes and a robust welfare state. The state’s
McKinsey Global Inst., Closing California’s Housing Gap (Oct.
24, 2016), https://perma.cc/PV7W-SAWN.
9 See Katherine Levine Einstein et al., Neighborhood Defenders
15–16 (2020).
See Christopher S. Elmendorf et al., State Administrative
Review of Local Constraints on Housing Development: Improving
the California Model, 63 Ariz. L. Rev. 609, 620 (2021).
10
7
supplemental poverty measure, a poverty rate that
takes into account cost of living, is 13.2%—the highest
of any state.11 As a result, many can no longer afford
to stay. Every year for the past decade, tens of
thousands more low- and middle- income households
have left California than have migrated to California,
and this trend is accelerating.12 Because so many lowand middle-income people are leaving the state, the
rates of Californians in poverty (13.2%) and California
renters who are cost-burdened (56%), while high, are
misleadingly low. Many Californians who would be
counted as low-income or cost-burdened go uncounted
because they have effectively been pushed out.13 With
the housing affordability crisis falling particularly
hard on younger adults, many are delaying starting
families.14
While many housing-insecure Californians have
left, many others lack the resources to leave. Despite
having only 12% of the total population, California is
home to 35% of the nation’s unhoused population and
more than half of the nation’s unsheltered homeless
11 See U.S. Census, Poverty in the United States: 2022, at 47,
https://perma.cc/6DWA-T4KB. The District of Columbia is the
only jurisdiction with a higher rate.
See Hans Johnson et al., Public Policy Inst. of California,
What’s Behind California’s Recent Population Decline—and Why
It Matters (Oct. 2023), https://perma.cc/43DB-VX3Z.
12
Apartment List, More than Half of All Renters Are “CostBurdened” According to New Census Data (Oct. 17, 2023),
https://perma.cc/46QN-PTYX.
13
14 Johnson et al., supra.
8
population. The problem is getting worse: California’s
homeless population increased by at least 10,000
people between 2020 and 2022—almost four times the
increase in the state with the next highest increase.15
People of color are disproportionately likely to be
negatively impacted by California’s housing costs.
Black and Latino residents are more likely than white
residents to spend more than 30% of their income on
rent. Just 37% of Black Californians and 44% of
Latino Californians own a home, compared to 63% of
white Californians.16 And although only about 7% of
Californians identify as Black, they account for nearly
26% of the state’s homeless population.17
These disparate impacts are the legacy of
structural racism.
For nearly a century after
Reconstruction, people of color confronted an
U.S. Dep’t of Hous. & Urban Dev., The 2022 Annual
Homelessness
Assessment
Report
to
Congress
28,
https://perma.cc/6TZC-NQZX. These values are based on the
Department’s annual Point in Time count, which is likely a
significant underestimate. See Nat’l Law Ctr. on Homelessness
& Poverty, Don’t Count On It: How the HUD Point-in-Time Count
Underestimates the Homelessness Crisis in America 6–7 (2017),
https://perma.cc/UN77-QUFH.
15
Marisol Cuellar Mejia et al, California’s Housing Divide,
Public
Policy
Inst.
of
Cal.
(May
13,
2022),
https://perma.cc/D5HA-4M47.
16
Margot Kushel et al, UCSF Benioff Homelessness & Hous.
Init., Toward a New Understanding: The California Statewide
Study of People Experiencing Homelessness 25 (June 2023),
https://perma.cc/GB37-9JCS.
17
9
unbroken series of federal, state, and local laws that
enforced segregation and prevented people of color
from buying houses and building wealth.18 California
began restricting its housing supply—and locking
newcomers out of the market—only shortly after the
Fair Housing Act of 1968 ended de jure segregation.
That people of color have been disproportionately left
out is not surprising (and perhaps not accidental).
Finally, the housing shortage causes serious
environmental consequences.
Local barriers to
housing in coastal job centers require workers to live
further inland and take longer commutes. In forcing
more people into motor vehicles for longer periods of
time, the housing shortage increases vehicle miles
traveled as well as emissions of conventional air
pollutants
and
greenhouse
gases
(GHGs).
Transportation emissions now form around half of all
of California’s GHG emissions.19 Unless further
growth occurs mainly in transportation-efficient,
resource-rich areas, California will not meet its goal
of carbon neutrality by 2045.20 And development
further inland poses other environmental risks.
Under current development patterns, more than
18 See Richard Rothstein, The Color of Law: A Forgotten History
of How Our Government Segregated America 75 (2017).
Cal. Energy Comm’n, Transforming
https://perma.cc/SQ4Z-GDZW.
19
Transportation,
20 Cal. Air Res. Bd., 2022 Scoping Plan Appendix E: Sustainable
and
Equitable
Communities
https://perma.cc/P65Y-9S5W.
22–23
(Nov.
2022),
10
600,000 homes will be built in very high fire-hazard
severity zones by 2050.21
II. The Crisis Is Getting Worse Because
California’s Impact Fees Lack the Requisite
“Nexus” and “Rough Proportionality” to the
Impacts of Housing.
One
key
barrier
to
new
housing
is
disproportionately high impact fees, which local
governments set based on fanciful overestimates of
the impacts of new housing. As a result, fewer homes
are built, and the crisis continues to worsen. Neither
state law nor the federal constitutional test has been
meaningfully enforced in California to address these
exactions.
A. Impact fees in California do not have
“nexus” and “rough proportionality” to
the impacts of new housing.
Local governments may impose exactions on new
development to “[i]nsist[] that landowners internalize
the negative externalities of their conduct.” Koontz,
570 U.S. at 605. Those negative externalities include
impacts that the development directly imposes on the
public, including additional needs for sewer and water
infrastructure.
But the Takings Clause “bar[s]
Government from forcing some people alone to bear
public burdens which, in all fairness and justice,
21 Karen Chapple et al., Next 10 & UC Berkeley, Ctr. for Cmty.
Innovation, Rebuilding for a Resilient Recovery Planning in
California’s Wildland Urban Interface 9 (June 2021),
https://perma.cc/W99T-MTJ8.
11
should be borne by the public as a whole.” Tyler v.
Hennepin Cnty., Minnesota, 598 U.S. 631, 647 (2023)
(quoting Armstrong v. United States, 364 U.S. 40, 49
(1960)). Accordingly, when a government demands an
exaction in exchange for a permit, the Constitution
requires an “individualized determination” that the
exaction is “related both in nature and extent to the
impact of the proposed development.” Dolan v. City of
Tigard, 512 U.S. 374, 391 (1994); see Nollan v.
California Coastal Comm’n, 483 U.S. 825, 837 (1987).
There must be a “nexus” and “rough proportionality”
between “the property that the government demands
and the social costs of the applicant’s proposal.”
Koontz, 570 U.S. at 605–06.
An “individualized determination” of the “extent”
of the impacts logically requires marginal cost pricing.
See Dolan, 512 U.S. at 391. Rather than charging the
average cost over all units, local governments must
charge the additional cost that a given unit imposes.
This furthers both efficiency and fairness.22 After all,
the “extent” of social costs depends on the type of
housing, its location, and other factors. Landowners
who build housing that will be more expensive for the
public to service ought to internalize those higher
costs.
Compared to single-family homes in an
exurban greenfield, a new multifamily building in an
infill area with existing sewer service will have fewer
impacts on sewer and roads, as it will not require new
22 See John Landis et al., Cal. Dep’t. of Hous. & Comm. Dev., Pay
to Play: Residential Development Fees in California Cities and
Counties, 1999, at 16–17 (Aug. 2001), https://perma.cc/94PGF49S [hereinafter Pay to Play].
12
infrastructure and its residents are less likely to use
a motor vehicle.23
Many exactions in California clearly flunk both
parts of the constitutional test. Under current
practice, governments adopt fees based on so-called
“nexus studies” in which consultants use inaccurate
methodologies to estimate the purported impacts of
development on an array of amenities that new
development likely does not affect.
Nexus studies generally determine fees based on
average cost. Jurisdictions “typically multiply a set
fee amount by a characteristic of a building, such as
square feet, dwelling units, or bedrooms,” essentially
assuming that all infrastructure needs will increase
proportionally.24 This approach ignores both the
actual “extent” of the costs of a specific development
and economies of scale in providing city services.
Nexus studies only sometimes point to specific capital
improvement projects.25
Many impact fees are imposed to fund projects
without a “nexus” to the impacts of new housing. For
example, some of the most exorbitant impact fees
purport to be addressing negative impacts on parks.
But more residents enjoying a park is as likely to be a
23 See Vicki L. Been, Impact Fees and Housing Affordability, 8
Cityscape 139, 143–44 (2005).
Hayley Raetz et al., Terner Ctr. for Hous. Innovation,
Residential Impact Fees in California 37 (Aug. 2019),
https://perma.cc/VZ3E-BVGV [hereinafter Residential Impact
Fees]; Pay to Play, supra, at 55–56.
24
25 Pay to Play, supra, at 2.
13
positive externality as a negative one. At most, there
might be a nexus with increased maintenance
expenditures.
Instead, California jurisdictions
postulate that existing parks are full and cannot be
enjoyed by one more person. They then require that
each new unit of housing pay to buy new parkland
necessary to replicate existing per-capita park
acreage. In Pasadena, as of 2020, new parkland was
projected to cost $4.6 million per acre.26 Accordingly,
Pasadena’s
nexus
study
matter-of-factly
recommended increasing the parks fee from $19,622
to $29,379—for each studio apartment.27 There is no
“nexus” between a new studio apartment and a
hypothetical brand new park the city of Pasadena
would like to build. Nor is there a nexus when local
governments demand that homebuilders pay a set
amount into a “city art fund” or “contribute an
approved work of art of an equivalent value.” Ehrlich
v. City of Culver City, 911 P.2d 429, 450 (Cal. 1996).
In lacking a “nexus” and “rough proportionality” with
real impacts, these exactions “forc[e] some people to
bear public burdens which, in all fairness and justice,
should be borne by the public as a whole.” Tyler, 598
U.S. at 647.
Local governments sometimes do not even have
plans to build the facilities that supposedly have a
“nexus” with the impacts of housing. In the midBrion Econ. Inc., Final Nexus Study: Park and Recreation
Residential Impact Fee 2020 Update ‐ City of Pasadena, at 21,
https://perma.cc/F47G-26Z3. Pasadena did not increase the fee
that year.
26
27 Id. at 25.
14
2000s, the city of Lemoore, a town 30 miles south of
Fresno, imposed high impact fees based on its
purported need for recreational facilities such as “an
aquatic center, a gymnasium and fitness center, and
a naval air museum.” Home Builders Assn. of
Tulare/Kings Ctys., Inc. v. City of Lemoore, 185 Cal.
App. 4th 554, 565 (Ct. App. 2010) (Lemoore). The
reviewing court did not mind that the city lacked “any
actual plan or commitment” to build them. Id.
These disproportionate impact fees are ubiquitous
and they accumulate. Cities, water districts, and
school districts set up their own impact fees. So do
different departments within a jurisdiction, often
without coordination.28 Impact fees can add up to
anywhere from 6% to 18% of the (very high) local
median home price.29 In 2015, California’s impact
fees were nearly three times the national average.30
It is unlikely that the social costs of new housing in
California are somehow three times the social costs of
new housing everywhere else.
28 See Sarah Mawhorter et al., Terner Ctr. for Hous. Innovation,
It All Adds Up: The Cost of Housing Development Fees in Seven
California Cities 4 (Mar. 2018), https://perma.cc/SV9J-JGZ7
[hereinafter It All Adds Up].
29 It All Adds Up, supra, at 3.
30 Id. at 5.
15
B. Disproportionately high impact
exacerbate the housing crisis.
fees
Impact fees now make up “a significant portion of
the cost to build new housing in California cities.”31
By increasing the cost of construction, they exacerbate
the housing shortage at the root of the crisis.
When impact fees exceed the costs directly
attributable to new homes, homes that can be built
feasibly and at public benefit never break ground. In
some jurisdictions, impact fees now comprise 17% of
the cost of building new housing.32 Because of these
costs, less housing can be financed and built. And
even when it can be built, homebuilders will build
fewer affordable units, as they need the guarantee of
greater upside from higher rents and sale prices.33
Further, although impact fees for apartments are
generally lower than those for single-family homes,
they are higher per dollar of valuation.34 Impact fees
often disincentivize construction of precisely the types
31 Id. at 3.
32 Id. at 5.
33 See Residential Impact Fees in California, supra, at 21–22. For
some jurisdictions, this may be a feature rather than a bug. Local
governments may intentionally “boost fees to discourage the
construction of building forms regarded as onerous or costly (e.g.,
apartments or starter homes).” Pay to Play, supra, at 17. In
other words, impact fees are another means of excluding people
considered undesirable because of their class or race.
34 Pay to Play, supra, at 66.
16
of housing that is most urgently needed—starter
homes and apartments.35
These high impact fees have exacerbated the
current crisis. California’s impact fees have been
unusually high since the 1980s. As far back as 1999,
owners of new infill homes paid an average of $20,327
per unit and apartment developers paid $15,531 per
new apartment.36 And it has gotten worse. Between
2008 and 2015, impact fees in California grew 2.5%
while the national average decreased by 1.2%.37
A 2018 study estimated that the impact fees in the
San Francisco Bay Area city of Fremont averaged
$75,000 per multi-family unit.38 (About one-fifth was
“Parks and/or Art.”)39 This number is likely much
higher now: Fremont raises impact fees annually “to
keep pace with increases in construction costs”—and
did so by 13.65% in 2023 alone.40 It is not surprising,
then, that it is now more expensive to buy a home in
35 See Residential Impact Fees in California, supra, at 21–22.
36 Pay to Play, supra, at 1.
37 It All Adds Up, supra, at 5.
38 Id. at 3.
39 Id. at 19.
40 City of Fremont Development Impact Fees (June 13, 2023),
https://perma.cc/P3JL-F6CY.
17
Fremont than in San Francisco. The typical home
value there is $1.4 million.41
C. State law continues to provide no remedy.
This Court has previously suggested that “state
law normally provides an independent check on
excessive land-use permitting fees.” Koontz, 570 U.S.
at 618. Not so, unfortunately, in California.42
The Mitigation Fee Act is the California law that
sets the rules local governments must follow in
imposing impact fees. See Cal. Gov’t Code §§ 66000–
66025. First passed in 1987, the act requires local
governments to make nexus findings: they must
identify the purpose of the fee, how it will be used, and
a “reasonable relationship” among the type of
development project, the fee’s use, and “the need for
the public facility.” Id. § 66001(a)(1)–(4). In addition,
they must make findings of rough proportionality—
i.e., a “reasonable relationship between the amount of
the fee and the cost of the public facility or portion of
the public facility attributable to the development on
which the fee is imposed.” Id. § 66001(b). Local
41 San Francisco Is No Longer the Most Expensive Large Bay Area
City to Buy a Home, S.F.
https://perma.cc/N6X9-NQK8.
Chron.
(Sept.
23,
2023),
There is one small exception. In 2017, the Legislature
preempted local government impact fees on accessory dwelling
units (ADUs) less than 750 square feet. See Cal. Gov’t Code
§ 65852.2(f)(3)(A).
Since then, construction of ADUs has
increased considerably: from 5,154 in 2017 to 24,831 in 2022.
Cal. Dep’t of Hous. & Comm. Dev., HCD Dashboard –
Construction – Structures, https://perma.cc/7MY7-9GVS.
42
18
governments must deposit the impact fees they collect
in a capital facilities account and publish a report
annually as to its uses of those funds. Id. § 66006.
The law requires local governments to make nexus
findings every five years, if any funds have not yet
been spent. Id. § 66001(d). The Legislature has
updated the law as recently as 2021, now requiring
local governments to consider cost information
submitted by the public, to review the assumptions of
nexus studies, to use a methodology based on square
footage as a default, and to make their reports and
studies available on their websites. See A.B. 602 (Cal.
2021), Cal. Gov’t Code §§ 66019(d), 66016.5(a)(4)–(5),
65940.1(a).
California courts have effectively gutted the
Mitigation Fee Act. The California Supreme Court
has intoned that legislatively-imposed fees are
“subject to [ ] meaningful means-ends review” under
the Mitigation Fee Act. San Remo Hotel L.P. v. City
& Cnty. of San Francisco, 41 P.3d 87, 105 (Cal. 2002).
In fact, courts have held that § 66001(b)’s “rough
proportionality”
requirement—a
reasonable
relationship between the fee and the cost of the public
facility attributable to the development—does not
apply at all to legislatively-imposed fees. See Pet.App.
A-20–21 (citing cases). Moreover, in showing a
violation of the nexus requirement, the plaintiff has
the burden of proof, see Lemoore, 185 Cal. App. 4th at
562, and the standard of review is incredibly
deferential. Courts ask “only whether the action
taken was arbitrary, capricious or entirely lacking in
evidentiary support, or whether it failed to conform to
procedures required by law.” Boatworks, LLC v. City
of Alameda, 35 Cal. App. 5th 290, 298 (Ct. App. 2019)
19
(citation omitted). “This limited review recognizes the
legislative delegation of authority to the [local
government] and its presumed expertise within its
scope of authority.” Tanimura & Antle Fresh Foods,
Inc. v. Salinas Union High Sch. Dist., 34 Cal. App. 5th
775, 786 (Ct. App. 2019). In short, local governments
have a financial incentive to demand as much revenue
as they can, and courts “presume” that they have
“expertise” when they do exactly that.
State courts routinely uphold impact fees under
the Mitigation Fee Act, even when the jurisdiction
makes little or no showing that the fees relate to the
costs of new housing. See, e.g., Tanimura, 34 Cal.
App. 5th at 803–04 (school district impact fees may be
imposed on agricultural workforce housing despite no
evidence it will house dependent children); AMCAL
Chico LLC v. Chico Unified Sch. Dist., 57 Cal. App.
5th 122, 128 (Ct. App. 2020) (same as to university
student housing); Lemoore, 185 Cal. App. 4th at 563–
64 (impact fees may be imposed to fund a naval air
museum despite no evidence that it relates to the
social costs of new housing). And although the
Legislature continues to make minor procedural
tweaks to the act, it has proven unable to address the
substantive problems. See, e.g., A.B. 516 (Cal. 2023)
(amending the act to require local governments’
annual reports to explain why capital projects are
delayed and to allow an applicant to request an audit
to determine whether an impact fee is reasonable).
If anything, the published California case law
understates the ubiquity of exorbitant impact fees
because homebuilders rarely challenge them. Fees in
nearby jurisdictions are often just as high, so builders
20
are accustomed to extortionate exactions as a cost of
doing business. Moreover, in light of the above
precedent, they likely believe they cannot prevail in
court. Finally, even when they might be able to win,
litigation may not make business sense: if you plan to
build homes in the future, it is imprudent to sue the
government from which you will need permits.
Although California law provides no remedy, the
“nexus” and “rough proportionality” test does. The
Court should provide guidance to lower courts to
properly analyze these exactions. Koontz, 570 U.S. at
605–06.
In the absence of this guidance, the
Constitution will remain underenforced and the
housing crisis will continue to get worse.
III. The “Rough Proportionality” Test Requires
Considering Government Revenue From
New Housing.
As noted above, local governments in California
violate the “nexus” and “rough proportionality” test by
vastly overstating the costs attributable to new
housing. But they also make another accounting
error. As Dolan indicates, the “rough proportionality”
test requires local governments to ask a threshold
question: Will some of the costs of new housing
automatically be paid for? If a local government is
already guaranteed to receive some of that payment,
it cannot collect it again. Local governments do not
ask this fundamental question. The Court should
clarify that they must do so.
21
A. Local governments must consider the
extent to which the costs of new housing
are already paid for.
To establish “rough proportionality” between “the
property that the government demands and the social
costs of the applicant’s proposal,” see Koontz, 570 U.S.
at 605–06, the government must ask to what extent
the “social costs” of the proposal are already paid for.
Local governments cannot demand double recovery
for the same costs.
Dolan commands this common-sense approach.
There, the Court held that two of the City of Tigard’s
exactions—a 15-foot strip of public greenway adjacent
to
the
Fanno
Creek
floodplain
and
a
pedestrian/bicycle pathway—failed to meet the “rough
proportionality” test. 512 U.S. at 392–96. The Court
held that there was a nexus between these exactions
and the legitimate governmental purposes of
“prevention of flooding” and “reduction of congestion,”
respectively. Id. at 387–88. But it explained that the
public greenway was not “roughly proportional” to the
costs the development imposed on the public because
the purpose of preventing flooding was met by existing
law without the exaction. The city’s zoning scheme
“already required that petitioner leave 15% of [her
property] as open space and the undeveloped
floodplain would have nearly satisfied that
requirement.” Id. at 393. The problem was that “the
city demanded more—it not only wanted petitioner
not to build in the floodplain, but it also wanted
petitioner’s property along Fanno Creek for its
greenway system.” Id.
In short, the “rough
proportionality” analysis rested on the preliminary
22
question of whether existing law already addressed
the social costs of the development (i.e., increased risk
of flooding) by requiring “payment” to the government
(i.e., leaving open space in the undeveloped
floodplain). Neither Nollan nor Koontz in any way
suggests a contrary approach to the analysis.43
Analysis of whether existing law already pays the
government is especially important when it comes to
monetary exactions. In Dolan, it was almost selfevident that the zoning code largely addressed the
flooding risk. But with the proliferation of monetary
exactions, there is increased potential for local
governments to obscure whether these costs are
already addressed. Local governments can slice and
dice their demands into dozens of opaque exactions
that sound plausible but are already compensated.
Without analysis of whether these costs are already
paid for, “it would be very easy for land-use permitting
officials to evade the limitations of Nollan and Dolan.”
See Koontz, 570 U.S. at 612.
It “goes without saying that the courts can and
should preclude double recovery by an individual.”
EEOC v. Waffle House, Inc., 534 U.S. 279, 297 (2002)
(citation omitted). The same must be true of local
governments with monopoly power over land-use
permitting.
43 Nollan predates the “rough proportionality” test, and Koontz
did not reach the issue. 483 U.S. at 837; 570 U.S. at 619.
23
B. New housing offsets costs by directly
increasing local government revenue.
When new housing is built, local governments
automatically collect significantly more revenue from
the owners of that housing. This increased revenue
occurs directly because of the new housing. This effect
is even more pronounced in California due to the
state’s unique tax scheme. Local governments must
consider to what extent the costs of new housing are
offset by the new revenue they generate.
1. After new housing is built, it automatically
generates a stream of new revenue.
The owner of a lot with newly-constructed housing
pays significantly more property tax than he did
before it was developed. Before construction, tax was
assessed based on the value of the vacant or
underutilized lot. After construction, it is assessed to
include the much higher value of new housing. The
increased annual revenue is the difference between
the prior assessed value and the new assessed value,
times the state’s property tax rate. California’s
property tax rate is 1% of the assessed value plus
additional ad valorem taxes approved by the voters,
but some states have rates as high as 2.23%.44 And
this revenue stream continues in perpetuity. In
44 Cal. Legis. Analyst, Understanding California’s Property Taxes
7–8, 17–18 (Nov. 2012), https://perma.cc/LT4L-DU89; Andrey
Yushkov, Tax Found. Where Do People Pay the Most in Property
Taxes? (Sept. 12, 2023), https://perma.cc/M9JH-XW6J.
24
imposing fees, local governments must offset the costs
of new housing with the revenue from new housing.
Consider the following example. In the late-2000s,
a Los Angeles resident developed his 0.4-acre parcel—
of which 40% housed a duplex and 60% was
undeveloped—into a 20-unit apartment building.
Pursuant to its legislatively-imposed fee schedule, the
city charged him $89,240 in park and recreation
impact fees. He contested some of these fees in
California court, arguing that they lacked “rough
proportionality” to the impacts of the proposed use.
The court rejected his claims under the Mitigation Fee
Act and held that Nollan and Dolan did not apply
because the fees were legislatively imposed. See
Goodrich v. City of Los Angeles, No. B216421, 2010
WL 797539 (Cal. Ct. App. Mar. 10, 2010).
As discussed above, it is questionable whether this
new housing actually had a “nexus” and “rough
proportionality” with $89,240 in impacts on Los
Angeles’ park and recreation system. But even if it
did, the preliminary question is whether the new
housing was automatically going to pay for some of
those costs. The above property is located in Tax Rate
Area #13, which now has a total tax rate of about
1.2%.45 At the time of construction, the underutilized
lot was assessed at about $500,000. Following
construction, it was reassessed at about $2.7 million.46
45 Auditor-Controller, Los Angeles Cty., Tax Rate Area Lookup,
https://perma.cc/ED9W-UUNX. Although this number is from
the most recent year, the past-year tax rate was likely similar.
46 See Los Angeles County Assessor Portal, AIN 2357-027-007,
https://perma.cc/X48L-325E.
25
Where the property owner previously paid local
governments $6,000 per year, he was now paying
$32,400 per year.
The housing automatically
generated $26,400 in annual revenue that local
governments would never have received if the housing
had not been built.
Admittedly, not all of this additional $26,400 goes
to the city, as a good share goes to the school district
or other governments. But assuming one-third of it
goes to the city, the park costs would be paid off in
about a decade. By now, the property owner would
have more than paid off the purported costs on the
parks—without any impact fee at all. Moreover, the
rest of that $26,400 in annual revenue goes to other
governments, many of which independently charge
their own impact fees.47 Those costs would also be
paid off by now through the additional tax revenue.
None of these governments consider this obvious fact
in imposing impact fees.
They scrutinize—and
exaggerate—the costs of new housing while “g[iving]
[the benefits] no thought at all.” Michigan v. EPA,
576 U.S. 743, 750–51 (2015).48
These tax payments are cognizable for the
purposes of the “rough proportionality” analysis.
First, the revenue is significantly more direct and
inevitable than many of the costs put forth in nexus
47 Los Angeles Unified School District currently charges $4.79
per square foot.
LAUSD Developer Fee Program Office,
https://perma.cc/5HT4-CACX.
48 In addition, of course, local governments may receive indirect
fiscal benefits of new housing, including those that might flow
from agglomeration effects.
26
studies. E.g., Lemoore, 185 Cal. App. 4th at 563–64
(naval air museum). Second, it is of no consequence
that these costs are paid in the guise of taxes. Of
course, Koontz affirmed that taxes are not themselves
takings. 570 U.S. at 615 (citing cases). But Dolan
makes clear that, to assess whether an exaction is a
taking, a court must consider it in context of existing
laws that are not takings. 512 U.S. at 393. No one
argued that the city’s zoning code, which required
maintaining 15% of the property as open space, was a
taking. Id.; see Penn Central Transp. Co. v. New York
City, 438 U.S. 104, 124 (1978). Nonetheless, the
Court’s essential first step was to ask to what extent
existing laws already compensated the public for the
relevant costs. Dolan, 512 U.S. at 393. Precisely the
same is required here.49
This Court need not wade into the fiscal
accounting of local governments.
And “rough”
proportionality does not necessarily require “precise
mathematical calculation.” Id. at 391. But a local
government cannot achieve any proportionality at all
if it has not attempted to assess the extent to which
new housing will offset its own costs.
Local governments can do this. They know the
proportion of revenue they receive from property
taxes.
Counties—and online sites like Zillow—
already publish property assessment information.
Nor is it difficult to estimate the expected appraised
value of new housing. If local governments are to
49 For this reason, there is no slippery slope: this analysis would
not suggest that all taxes are takings any more than Dolan
suggested that all zoning laws are takings.
27
engage in an individualized proportionality analysis
as to each property, as they must, they must try to do
it right.
2. California’s
Proposition
13
further
maximizes the revenue from new housing.
This is all the more important in California, where
local governments benefit even more from new
housing than do those in other states. By slowing the
growth of government revenue in the absence of new
construction, Proposition 13 magnifies the benefits
when new construction finally occurs.
Proposition 13, passed by the voters in 1978, bases
a property owner’s tax assessment on his original
acquisition price plus an annual increase up to 2%—
i.e., far below the rate that home prices appreciate.
See Cal. Const. art. 13A, §§ 1(a), 2(a)–(b).
Assessments increase to market value only when the
property is purchased or “newly constructed” or there
is a change in ownership. Id. § 2(a).
Because new construction is one of the few events
that increases a property’s assessment to market
value, it can maximize the increase in revenue for
California’s local governments. On the 300-block of
Lowell Avenue in wealthy Palo Alto—in the center of
Silicon Valley—are two neighboring and roughly
similar single-family homes.
Each has 6 or 7
bedrooms and sits on a lot slightly under one third of
an acre. However, one was last purchased in 1971,
probably for under $100,000, and the other was last
28
purchased in 2016 for $7.2 million.50
Because
Proposition 13 capped growth of the former property’s
assessment over decades of price appreciation, its
owner now pays less than $4,000 in property tax per
year. The latter, whose property was assessed much
later, pays over $92,000 per year.51
Suppose each lot is sold and redeveloped into a 20unit building. Given high demand for housing in this
bikeable suburb near jobs, the assessment of a 20-unit
building could very well reach $20 million. The
associated annual tax bill would be around $250,000.
For the reasons explained above—and as would be
true in any state—this $250,000 in tax represents a
significant increase over the prior baseline when the
lots had single-family homes and were comparatively
underutilized. For the property last purchased in
2016 and that previously paid $92,000 in taxes, the
new housing would send local governments an
additional $158,000 each year.
But for the property last sold in 1971, there is an
additional stream of revenue. Because Proposition 13
Compare Zillow, Property Details, https://www.zillow.com/
homes/315-Lowell-Ave-Palo-Alto,-CA-94301_rb/19496554_zpid/,
with Zillow, Property Details, https://www.zillow.com/homes/
301-Lowell-Ave-Palo-Alto,-CA-94301_rb/19496555_zpid/.
50
Cal. Property Tax Map, https://perma.cc/V4FB-KJ22; see
Nordlinger v. Hahn, 505 U.S. 1, 6 (1992) (“Proposition 13 has
been labeled by some as a ‘welcome stranger’ system—the
newcomer to an established community is ‘welcome’ in
anticipation that he will contribute a larger percentage of
support for local government than his settled neighbor who owns
a comparable home.”).
51
29
caused its property tax ($4,000) to be set far below
market value of the property, resetting it to market
value means local governments net even more new
revenue than in the prior example—$246,000 more
per year.
This is uniquely a consequence of
Proposition 13, and it maximizes the benefits
California’s local governments can collect when new
housing is built on older properties.
As this example underscores, new housing (and
particularly infill development) can be a significant
fiscal benefit to local governments.
Simply by
allowing a 20-unit building to be built on an old lot in
a wealthy, high-amenity neighborhood, Palo Alto and
other local governments could collect $1 million every
four years. Of course, this new housing would also
pose some costs. The city might need to upgrade the
sewer and water system to accommodate the
additional units. But local governments cannot treat
new housing as a “mere parasite” that only imposes
costs. See Vill. of Euclid, Ohio v. Ambler Realty Co.,
272 U.S. 365, 394 (1926). After all, that housing pays
them a quarter-million dollars a year.
The Court should reverse and clarify that the
“rough proportionality” test requires considering
government revenue from new housing. In deciding
the appropriate impact fee, Respondent must
determine not only what traffic-related costs
Petitioner’s house will impose, but also how much
additional revenue it will receive from him. Such a
clarification will provide a bit of relief not only for
Petitioner, but for all those who struggle to pay rent
or lack shelter in the wealthiest state in the country.
30
CONCLUSION
For the reasons set forth above, the judgment of
the California Court of Appeal should be reversed.
Respectfully submitted,
Darren Teshima
Counsel of Record
Timothy Duncheon
COVINGTON & BURLING LLP
415 Mission St, 54th Floor
San Francisco, CA 94105
(415) 591-7094
dteshima@cov.com
November 20, 2023
Counsel for Amicus
Curiae California
Housing Defense Fund,
California YIMBY, and
Yes In My Back Yard
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.