Berkeley Landlords Balk at City’s Hefty Fees

     SAN FRANCISCO (CN) — Berkeley’s decrepit affordable rental housing stock will stay that way because the city demands an unconscionable $34,000 “construction mitigation fee” for each new unit, building owners say in a constitutional complaint.
     Clifford and Olga Orloff sued Berkeley on Monday in Federal Court, claiming a new ordinance “unconstitutionally requires property owners to transfer massive sums of money to the city and tenants in order to exercise an essential right of property ownership: the right to redevelop property.”
     The City Council approved Ordinance 7458 on March 8. It took effect on April 7. The council claimed the fee will deter property owners from demolishing affordable housing units, but the Orloffs say that’s not the way it works.
     They say the law has the opposite effect on affordable housing: that by not allowing redevelopment of dilapidated properties the rental inventory is kept low, putting upward pressure on Berkeley’s already soaring rents.
     “In many cases, the new development increases the pre-existing housing supply and thereby eases — rather than exacerbates – pricing pressures under the law of supply and demand,” the complaint states.
     The Orloffs’ attorney David Trotter said the lawsuit stems from the Orloffs’ attempt to redevelop an 18-unit apartment building near the University of California, Berkeley. After buying it with the intention of refurbishing it, they found that the building, built around 1925, was riddled with mold, termites and dry rot, and demolition was the only way forward.
     They put in an application with the city, which took more than a year to process. Then the approval of the demolition and redevelopment was appealed, and the new ordinance was applied.
     “It’s not fair to impose new fees on an application that was in the pipeline before this ordinance was enacted 90 days ago,” Trotter said in an interview.
     The Orloffs say the $34,000 per unit construction mitigation fee is not the only unreasonable expense the city imposes on landlords who are trying to improve the housing stock. They also must pay a demolition mitigation fee for each unit, plus moving expenses for each displaced tenant, plus the “aggregate cost differential” for each tenant “to rent a ‘comparable unit’ in the same neighborhood throughout the duration of construction,” plus “fund(ing) continued rent-control protections at the same affordability levels that pre-existed demolition.”
     Even barring all these fees, the Orloffs say, the construction mitigation fee alone for their 18 apartment will cost them $612,000—before they even get started.
     They say the ordinance violates the Costa Hawkins Act, a 1995 law that made local rent control ordinances illegal in California. They say it’s also an unconstitutional taking of private property, a violation of substantive and procedural due process, and a violation of the Health and Safety Code.
     “The project is a win-win-win,” Trotter said. He said the Orloffs will add 20 rent-controlled apartment and 4 below-market apartments to Berkeley’s housing stock, remove an eyesore, and beautify a prominent part of the city.
     Berkeley’s mayor and communications director are in China at a meeting on climate change and are unable to comment, a city spokesman said.
     The Orloffs want the ordinance declared unconstitutional, and its enforcement enjoined, plus costs of suit.

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