Amicus Curiae Brief — Home Builders Ass'n v. City of Napa

Supreme Court, US.

(Z FILED

No. 01-893 aa 8 mm

CLERK

| In The

Supreme Court of the United States

HOME BUILDERS ASSOCIATION

OF NORTHERN CALIFORNIA,

Petitioner,

v.

CITY OF NAPA,

Respondent.

On Petition For Writ Of Certiorari To

The Court of Appeals, State of California

BRIEF OF AMICI CURIAE

NATIONAL ASSOCIATION OF HOME BUILDERS

AND THE BUILDING INDUSTRY

LEGAL DEFENSE FOUNDATION

IN SUPPORT OF PETITIONERS

DAVID SMITH THOMAS JON WARD

BUILDING INDUSTRY LEGAL COUNSEL OF RECORD

DEFENSE FOUNDATION NATIONAL ASSOCIATION OF

1330 SOUTH VALLEY VISTA DRIVE HOME BUILDERS

DIAMOND Bar, CALIFORNIA 91765 1201 15™ STREET, NW

(909) 396-9993 WASHINGTON, DC 20005

(202) 266-8200

Attorneys for Amici Curiae

be _____________

A oy

TABLE OF CONTENTS

Page

INTEREST OF THE AMICUS CURIAE ...........000....

SUMMARY OF ARGUMENT ............ccccsssccssssessseeeseee 3

REASONS FOR GRANTING THE WRIT..............-. 4

I. ALL FEES AND EXACTIONS MUST BE

REVIEWED IN THE CONTEXT OF NOLLAN

FI Es ieinchettosicenieasadhanemetennintaaaveaniincniins +

Il. BUILDERS ARE NOT THE CAUSE OF

CALIFORNIA’S AFFORDABLE HOUSING

PATE sa teithncdvcccctiinecieniteretstdsnnsccacitiadecvationionied 6

A. Housing Affordability Is Influenced By Many

Factors Outside The Control Of Builders....... 6

B. The City of Napa’s Municipal Financing Scheme

Combined with Artificial Growth Boundaries

Led to Increased Housing Prices .................6+. 8

C. The City’s Ordinance Simply Adds Another

Cost to Building a Home ...............:::ceeeeeeeees 11

SGN chactiicdvicesievdicnicesiieitceptcneusneeiotecnsvsezenineees 14

TABLE OF AUTHORITIES

CASES Page(s)

Agins v. City of Tiburon, 447 U.S. 255 (1980) ........e0

Armstrong v. United States, 364 U.S. 40 (1960) ............ 6

Dolan v. City of Tigard, 512 U.S. 374 (1994) ....cccceeeees 5

Ehrlich v. City of Culver City,

DEEP Da A a SIE silniinatdevcovetashndivescrsscniavciveicnnins 5

Home Builders Association of Northern California v. City

of Napa, 90 Cal.App.4™ 188 (2001) ........ccscsseeseeseseenestenes 4

Lucas v. South Carolina Coastal Commission, 505 U.S.

DI CD vivcevscincinsvinikssinrsniessclansrinindasbuniiamacaiaendtil 4

Nollan v. California Coastal Comm'n,

QBS UD. SEPSIS vncicivcccncsasiiicivicnenionis sieektseualia 5

OTHER

Candida Ruesga, The Great Wall of Phoenix?: Urban

Growth Boundaries and Arizona's Affordable Housing

Market, 32 Ariz. St. L. J. 1063 (2000) ........cccccssessseseeeeees 9

California Budget Project, Locked Out: California's

Affordable Housing Crisis (2000) .......cccccscceseseseeeees 7-8

California Department of Housing and Community

Development, Pay to Play: Residential Development Fees

in California Cities and Counties, 1999 .........seseeeeees 9

Donna Kimura, State Addresses Housing Crisis With

Cautious Optimism, Affordable Housing Finance, October

ES TSISGN ED RSG 2 SS 7

Home Builder Press, Producing Affordable Housing:

Partnerships for Profit (1999) .......crersssrsseresssssversevseeeeees 6

Housing Element Steering Committee, City of Napa's

Growth Management Strategy, December 12, 2000 Report

I sandisk cailiniiicapeiebincineesndabannveeneieccens 12

Jennifer Morgan, Zoning for All: Using Inclusionary

Zoning Techniques to Promote Affordable Housing, 44

INIT ci TEE IIT istnissconecesceesneussseeesnrboerseveswecnerecevcoses 9

John J. Delaney, What Does It Take To Make a Take? 27

I as rcasenninnnnonatonennced 4

Kevin Courtney, Caps On High-end Development Not

Included In City Housing Plan, Napa Valley Register,

December 6, 2000 (visited Jan. 14, 2002)

<http://WWW.NAaPANEWS.COM> .........ccccsceeeeeeceersereeeeseenes 12

Martin Leitner & Susan Schoettle, A Survey of State

Impact Fee Enabling Legislation, in Exactions, Impact

Fees and Dedications (Robert Freilich and David Bushek

National Association of Home Builders, Decent Affordable

Housing, It’s the American Dream (2001)... 9

Samuel Staley and Gerard Mildner, Reason Public Policy

Institute, Urban-Growth Boundaries and Housing

Affordability: Lessons from Portland (1999).............+++ 11

iV

Susanna Kniffen, Housing Takes Center Stage, California

fe Cee ao 7

Wendell Cox and Ronald Utt, Smart Growth, Housing

Costs and Homeownership, 1426 The Heritage Foundation

OGIOTEET CRUNGE ccccecescicusstnetinmmnaiieniinnininemmnnan 10

l

INTERESTS OF THE AMICUS CURIAE

The National Association of Home Builders (“NAHB”)

and the Building Industry Legal Defense Foundation

(“BILD”) have received the parties’ written consent to file

this brief as amici curiae in support of the petitioners.

Letters of consent have been filed with the Clerk of the

Court.’

NAHB represents over 205,0U0 builder and associate

members throughout the United States, including more

than 5,700 members in the state of California. Its members

include not only people and firms that construct and

supply single family homes, but also apartment,

condominium, multi-family, commercial and industrial

builders, land developers, and remodelers. It is the voice

of the American shelter industry. NAHB, therefore, is

concerned with any judicial decision that calls into

question the remedies available to its members under the

U.S. Constitution and federal statutes, particularly when

such remedies are in any way obstructed by a state court.

Since its inception, NAHB has played an integral role in

increasing affordable housing for low-income people.

Many of its members, both nationally and in California,

construct multifamily buildings, including government-

subsidized housing. Therefore, as NAHB works to ensure

an affordable housing market exists for buyers, it works to

ensure an affordable rental market exists for those who

lease their homes.

' Pursuant to Rule 37.6 of this Court, amici state that their counsel

authored this brief and amici paid for it. This brief was not written in

whole or part by counsel for a party, and no one other than amici

made a monetary contribution to its preparation.

2

NAHB has been before the Court as amicus curiae or as

“of counsel” to the landowner in a number of cases

involving the rights of property owners and the remedies

available to them when their rights are interfered with.

These include Agins v. City of Tiburon, 447 U.S. 255

(1980), San Diego Gas & Elec. Co. v. City of San Diego,

450 U.S. 621 (1981), Williamson County Regional

Planning Comm'n v. Hamilton Bank, 473 U.S. 172 (1985),

MacDonald, Sommer & Frates v. Yolo County, 477 U.S.

340 (1986), First English Lutheran Church v. Los Angeles

County, 482 U.S. 304 (1987), Nollan v. California Coastal

Comm’n, 483 U.S. 825 (1987), Yee v. City of Escondido,

503 U.S. 519 (1992), Lucas v. South Carolina Coastal

Council, 505 U.S. 1003 (1992), Dolan v. City of Tigard,

512 U.S. 374 (1994), Suitum v. Tahoe Regional Planning

Agency, 520 U.S. 725 (1997), City of Monterey v. Del

Monte Dunes at Monterey, Lid., 526 U.S. 687 (1999),

Palazzolo v. Rhode Island, 533 U.S. 606 (2001), and

Tahoe-Sierra Reservation Council, Inc. v. Tahoe Regional

Planning Agency, et al., --- U.S. --- (oral argument held

January 7, 2002).

BILD is a non-profit corporation, organized and existing

under the laws of the state of California. Established in

1987, BILD is dedicated to eliminating barriers to the

American dream of home ownership. As an organization

wholly owned by the Building Industry Association of

Southern California, Inc. (“BIA/SC”), BILD represents

and advocates on behalf of more than 1750 BIA/SC

member companies in eight chapters in Southern

California, including landowners, developers, home

builders, and building industry subcontractors. of all kinds.

3

SUMMARY OF ARGUMENT

The California Court of Appeals and other state courts

have used the most rudimentary analysis when reviewing

fee ordinances, such as the City of Napa’s, and have

ignored this Court’s decisions in Nollan v. California

Coastal Commission, 483 U.S. 825 (1987) and Dolan v.

City of Tigard, 512 U.S. 374 (1994). The lower court’s

simplistic analysis ignores the reality of why a segment of

society can afford decent shelter.

Housing affordability is a nationwide problem. There are

numerous reasons why a segment of our society cannot

afford decent shelter. There are factors that influence the

amount of money a purchaser or renter can spend on

housing; and there are factors that influence the price of

satisfactory housing. In California, the lack of affordable

housing is due to job growth, a decline in the number of

homes built and the techniques local governments have

used to finance public resources. In the City of Napa, the

problem was further complicated when the government

developed an urban growth boundary thereby capping the

amount of developable land. By conducting a simplistic

analysis, the court below ignored the realities of Napa

housing problem.

4

REASONS FOR GRANTING THE WRIT

I. ALL FEES AND EXACTIONS MUST BE

REVIEWED IN THE CONTEXT OF NOLLAN

AND DOLAN.

In Agins v. City of Tiburon, 447 U.S. 255, 260 (1980), this

Court ruled that a compensable taking occurs when a

regulation either (1) fails to substantially advance a

legitimate state interest, or (2) deprives an owner

economically viable use of his property. See also John J.

Delaney, What Does It Take To Make a Take? 27 Urb.

Law. 55 (1995) (The Agins standard for a taking is a

disjunctive test.) In the case below, the California Court

of Appeals, under the first prong of Agins, determined that

the City of Napa's ordinance did not affect a Fifth

Amendment taking. Using the first prong of Agins, it

simplistically reasoned that providing affordable housing

is a legitimate state interest, and that by requiring builders

to supply that housing (by building it or paying for it), the

ordinance substantially advanced that legitimate interest.

Home Builders Association of Northern California v. City

of Napa, 90 Cal.App.4" 188, 195-96 (2001).

The lower court's reasoning, however, could be used to

shield any statute or ordinance from takings scrutiny. The

analysis in Home Builders effectively precludes the

rigorous scrutiny this Court requires to determine if land

use regulations pass Fifth Amendment muster. As this

Court recognized in Lucas, “a justification can be

formulated in practically every case, this amounts to a test

of whether the legislature has a stupid staff. We think the

Takings Clause requires courts to do more than insist upon

artful harm-preventing characterizations.” Lucas v. South

5

Carolina Coastal Commission, 505 U.S. 1003, 1025

(1992).

As the Petitioner’s brief provides, state courts are split on

whether to review a challenge to legislatively enacted fees

in the context of this court’s decisions in Nollan v.

California Coastal Commission, 483 U.S. 825 (1987) and

Dolan v. City of Tigard, 512 U.S. 374 (1994).? Petitioner’s

Petition for Writ of Certiorari at 13-19. Read together,

these precedents require first an essential nexus between

the governmental interest at issue and the actual

governmental demand made on the property owner, and

second. that the governmental demand be “roughly

proportional” to the actual impact generated by the

development project. Nollan, 483 U.S. at 837, Dolan, 512

U.S. at 391.

The Court should grant certiorari here to ensure that Agins

prong | can not be satisfied by mere, rote recitation of

legislation findings or broad policy objectives. Indeed, in

the instant case, the Court should make clear that the City

of Napa's ordinance--and all other land use regulations that

impose exactions” and/or fees as _ conditions to

development--must be assessed under the "essential nexus"

requirement of Nollan, and the "rough proportionality”

requirement of Dolan. Nollan, 483 U.S. at 837, Dolan, 512

U.S. at 391.

In failing to apply the Nollan/Dolan tests, the court below

ignored this Court’s reminder that the Fifth Amendment

“was designed to bar government from forcing some

? Even the California Supreme Court, in Ehriich » City of Culver City,

911 P.2d 429 (Cal. 1996), held that when @ cevelepmment permit exacts a

fee as a condition it is appropriate to apply the Metlea/Dolan analysis.

6

people alone to bear public burdens which, in all fairness

and justice, should be borne by the public as a whole.”

Armstrong v. United States, 364 U.S. 40, 49 (1960).

Furthermore, by not scrutinizing the matter, the court

below did not examine the reality behind the affordable

housing problem in California or the City of Napa.

Il. BUILDERS ARE NOT THE CAUSE OF

CALIFORNIA’S AFFORDABLE HOUSING

PROBLEM.

A. Housing Affordability Is Influenced By Many

Factors Outside The Control Of Builders.

There are numerous factors that affect both the price of

housing and the amount homebuyers’ can spend on decent

shelter. Material, land and labor costs, as well as

substantial administrative fees all affect housing prices.

The amount of money homebuyers can afford is influenced

by their incomes and the amount of money they must

spend on necessaries, such as food and health care.

Housing affordability is therefore a two-sided equation.

To get more citizens into decent shelter there must be both

a reduction in builders’ costs and an increase in the

homebuyer’s purchasing power. Home Builder Press,

Producing Affordable Housing: Partnerships for Profit

(1999).

> “Homebuyers” refers to both purchasers and renters.

7

In California, three factors specifically contribute to the

housing problem:

the amount of new housing built has declined,

job growth has exceeded housing, and

California’s system of local government finance has

driven up the cost of homes.

See California Budget Project, Locked Out: California's

Affordable Housing Crisis 8, 37-41 (2000), See also

Susanna Kniffen, Housing Takes Center Stage, California

Real Estate, October 2000, at 16.

In the 1990s, developers in California built about half the

number of new homes as compared to the previous two

decades.‘ Factors that are responsible for this decline

include the early 1990s recession and neighborhood

opposition to multifamily housing. California Budget

Project, Locked Out, supra, at 40. Furthermore, changes to

state law made investments in rental housing less

desirable, which discouraged production of less profitable

affordable housing. /d.

In addition, housing production failed to keep up with job

growth.* In fact, in 1999, only ten California counties built

sufficient housing to keep pace with the demand projected

for 2003. /d. at 38. Because of this job growth, the state’s

population grew by 611,000 in 2000. Donna Kimura,

State Addresses Housing Crisis With Cautious Optimism,

*“Between 1990 and 1999, building permits were issued for an average

of 110,581 units of housing each year. In contrast, permits were issued

for an average of 215,585 units per year during the 1970s and 203,369

units per year during the 1980s.” California Budget Project, Locked Out:

California's Affordable Housing Crisis 8 (2000).

5 “California’s population increased by 4.4 percent, while the supply of

housing rose by just 1.6 percent.” California Budget Project, Locked Out,

supra, at 32.

ee

8

Affordable Housing Finance, October 2001 at 48. Basic

economics offers that when demand grows and supply

does not, prices will increase.

The final factor that has led to California’s affordable

housing problem is its system of local finance. The

California Budget Project notes that

Over the past two decades, local officials

have turned to fees and exactions imposed

on new development to finance the

schools, roads, sewers, parks and other

basic infrastructure typically needed by

new housing developments. ... The

added cost of paying for facilities that

were once shared across the entire

community increases the cost of housing,

pushing homeownership further out of

reach of young families and others of

modest means.

California Budget Project, Locked Out, supra, at 40.

Thus, a variety of factors has caused the California

affordable housing problem, and it is therefore unfair to

place the burden of repairing the problem with a small

segment of society.

B. The City of Napa’s Municipal Financing

Scheme Combined with Artificial Growth

Boundaries Led to Increased Housing Prices.

Nationwide, traditional zoning and land use regulations,

and the use of “alternative financing techniques,” such as

the City’s affordable housing ordinance, have driven

9

housing costs to unnecessarily high levels. See Jennifer

Morgan, Zoning for All: Using Inclusionary Zoning

Techniques to Promote Affordable Housing, 44 Emory L.J.

359 (1995), Martin Leitner & Susan Schoettle, A Survey of

State Impact Fee Enabling Legislation, in Exactions,

Impact Fees and Dedications 60 (Robert Freilich and

David Bushek ed., 1995). An NAHB survey shows that in

major metropolitan areas, “development costs and fees

added an average of $21,000 to the cost of a $200,000

home in highly regulated markets.” National Association

of Home Builders, Decent Affordable Housing, It’s the

American Dream (2001).

The City of Napa is typical of a municipality that has used

alternative financing techniques to increase revenue.

According to the California Department of Housing and

Community Development, development fees for a 25-unit

subdivision in Napa add approximately $35,170 per unit.

California Department of Housing and Community

Development, Pay to Play: Residential Development Fees

in California Cities and Counties, 1999 67, Table 8

(2001).

Moreover, similar to what occurred in Napa,

municipalities around the country have enacted “urban

growth boundaries” (“UGB”) to control development. A

UGB is an artificially designated line beyond which the

government prohibits or deters development. They can

either be enacted by the legislature or passed by ballot.

Many commentators have recognized that these

“fa]rtificial land use controls, which affect the availability

of land for housing, increase housing costs in the long

run.” Candida Ruesga, The Great Wall of Phoenix?:

Urband Growth Boundaries and Arizona's Affordable

Housing Market, 32 Ariz. St. L. J. 1063, 1066 (2000); See

4

10

Wendell Cox and Ronald Utt, Smart Growth, Housing

Costs and Homeownership, 1426 The Heritage Foundation

Backgrounder 6 (2000) (Explaining that restricting the

amount of land indirectly raises the prices of homes.)

The policies of Napa County combined with the policies of |

the City of Napa are a perfect example of artificial controls

raising the cost of housing.

Napa adopted a limit line in 1975 in an

attempt to cap the city’s population at

75,000. Residential development was still

allowed in rural areas, providing a relief

valve for the residential housing market.

Then, in the early 1990s, the county

clamped down on new _ developmeni.

Residential-building permits plummeted by

74.2 percent from 1989 to 1996 as a

moratorium on residential permits took

effect in the county and a regional-housing

recession took hold in the 1990s. As the

recession gave way to the current economic

boom, building permits increased, but not as

quickly as in other parts of the Bay Area

without growth boundaries.

urban residents [also emerged] in Napa

County. As the growth controls took hold,

the average value of a single-family home in

unincorporated areas of Napa County

climbed 158.1 percent to over 373,000 from

1985 to 1997. The average value of a new

single-family home in the City of Napa

increased by less than half the rate in rural

|

An affordability wedge between rural and

11

areas (66.8 percent), but the rate of increase

doubled after the county growth controls

created an_ effective regional-growth

boundary.

Samuel Staley and Gerard Mildner, Reason Public Policy

Institute, Urban-Growth Boundaries and Housing

Affordability: Lessons from Portland 2-3 (1999).

Thus, the evidence shows it was the city’s fees and growth

controls combined with the policies of Napa County that

raised home prices and created the affordable housing

problem for the city. Government policies, not builders,

raised home prices. Therefore, unless there is truly a

“nexus” between impacts from development and the lack

of affordable housing, and the government demands are

“roughly proportional” to that impact, it is unreasonable

for the City to exact more property or add more fees to

new homes in the name of affordable housing.

C. The City’s Ordinance Simply Adds Another

Cost to Building a Home.

The impact of Napa’s ordinance on homebuilders is

severe. It requires builders to sell their product below fair

market value, or pay a fee*, even though it is the

government’s policies and regulations that force housing

prices to rise above an affordable level. The examples

* The City of Napa’s Ordinance is either a fee or an exaction, depending

on the alternative that the builder chooses. If the builder sells 10% of his

or her homes at less then fair market value, then the government has

exacted those homes for a public purpose. The other alternative is to pay

a fee that is based on the square footage of every home that the builder

wishes to construct.

12

below demonstrate the financial impacts of the City of

Napa Ordinance.

Assume that a developer wants to build a neighborhood

with twenty 2500 square foot homes.

Pursuant to the ordinance at issue, for example, the

developer has the option to sell 10% of his units at

“affordable” prices. City of Napa Municipal Code §

15.94.050(A), Petitioner’s Appendix G-29. Furthermore,

under one alternative, one-half of those units must be

“available at affordable sales prices to households whose

annual income does not exceed 100% of median income,”

and the other half must be “available at affordable sales

prices to moderate income households.” City of Napa

Municipal Code §§ 15.94.050 (H){1) & (H)(3), Petitioner’s

Appendix G-25-36. Pursuant to the City of Napa’s

Growth Management Strategy, December 12, 2000 Report

To The City Council By The Housing Element Steering

Committee, Attachment A, the “affordable” sales price

limit for a three-bedroom home for a median income

family would be approximately $165,277’ and the sales

price limit for moderately priced three-bedroom home

would be approximately $198,333." These numbers can

be compared to the price of an average three-bedroom

house in Napa, which is $365,000. Kevin Courtney, Caps

On High-end Development Not Included In City Housing

7 This number was approximated as an average of the low and moderate

sales prices.

* These prices are based on a monthly payment of 33% of gross income.

Note that the Napa Ordinance is based on a monthly payment of 30% of

gross income. Thus, the affordable sales prices provided herein are

actually higher than would be allowed under the ordinance. City of Napa

Municipal Code § 15.94.020(C), Petitioner’s Appendix G-11.

13

Plan, Napa Valley Register, December 6, 2000 (visited

Jan. 14, 2002) <http://www.napanews.com>.

A second way a builder can comply with the City of

Napa’s ordinance is by paying an “in lieu housing fee.”

Pursuant to City of Napa Municipal Code § 15.94.050 (BE),

Petitioner’s Appendix G-32, the fee is a percentage of the

“construction costs,” as determined by resolution of the

city council. Construction costs are “the estimated cost per

foot of construction, as established by the building

department of the City of Napa...” /d. Per the city’s

resolution, the fee is 1% if the “construction cost” is

between $86,700 and $115,250 and 2% if the

“construction cost” is over 115,250. City of Napa’s

Resolution R1999/161, Petitioner’s Appendix H-4.

Furthermore, pursuant to the City of Napa’s fee schedule,

valuation is based on $90.60 per square foot.

Using the example, the “construction cost” of each 2500

square foot home would be $226,500. This translates into

an “in lieu fee” of $4530° per home, or $90,600 for the

development.

Thus, the City of Napa’s ordinance attempts to make home

prices more affordable by exacting a builder’s product or

by adding another fee to the price of a home. The city’s

reasoning is hard to understand, since these additional fees

further raise the actual cost of new housing.

* Note that this $4530 fee is only one of many fees that the builder must

pay.

14

CONCLUSION

In cities around the country and especially in the City of

Napa, government has failed to seriously address the

problem of housing affordability. Specifically, the City of

Napa has instituted fees and enacted growth controls that

have increased the price of land and homes beyond which

many people can afford. Subsequently, the city enacted an

ordinance that requires a small subset of society,

residential builders, to help repair a problem caused by the

government. This “repair” takes the form of fees and

exactions that will further increase the price of a home.

The Agins test does not allow a court to make a serious

inquiry into whether an ordinance, similar to the one

enacted by the City of Napa, is reasonable. Therefore, we

suggest that the Nollan/ Dolan analysis is appropriate to

provide proper constitutional scrutiny in this matter.

For these reasons, the National Association of Home

Builders and the Building Industry Legal Defense

Foundation urge this Court to grant Petitioner’s Petition

for Writ of Certiorari and to reverse the decision of the

California Court of Appeals.

DATED: February 4, 2002

Respectfully submitted,

Thomas Jon Ward

National Association

of Home Builders