Fee to Bulldoze Rent-Controlled Units Fought

     SAN FRANCISCO (CN) – Although the Berkeley City Council finally granted a developer the right to bulldoze a rent-controlled apartment building, a federal judge indicated Friday it may not have standing to challenge the city’s demolition ordinance.
     OPHCA LLC and its majority owners Cliff and Olga Orloff sued the city in June after it amended the 1999 ordinance to require some property owners to pay a demolition mitigation fee to tear down rent-controlled apartment buildings.
     While the City Council granted the Orloffs a use permit to tear down an 18-unit building on Durant Ave. near UC Berkeley and build 56 market-rate units on the site, it also imposed a mitigation fee to offset the impact of demolishing the rent-controlled complex that infuriated the Orloffs.
     Some property owners aren’t required to pay a fee under the ordinance if their development won’t eliminate rent-controlled housing or if the building they want to tear down is too hazardous to repair, according to the city.
     The council’s decision to charge the Orloffs the fee was a win for tenants’ rights activists, who accused the developers of letting the property deteriorate so they could build more expensive apartments not subject to rent control.
     Without the protections afforded by rent control, rents can increase precipitously from year to year. The city’s rent board estimates that the median rent for a studio apartment in Berkeley was $1,450 a month at the beginning of 2016, a 12 percent increase from the same time the previous year.
     In their June complaint, the Orloffs said the city shouldn’t have slapped the “massive” fee on the Durant Ave. building because they applied for a permit to demolish it several years before the amended ordinance was approved, and called the entire ordinance unconstitutional.
     But the Orloffs’ building is vacant, and the city contends in a dismissal motion they don’t have standing to challenge the portions of the law related to occupied units.
     The Orloffs, however, argue in an opposition that those portions apply to other buildings they own around Berkeley, giving them a “concrete and particularized interest in establishing their invalidity.”
     In what was perhaps a nod to the city’s motion to dismiss, U.S. District Judge Charles Breyer said at a hearing on Friday that “the first issue I have to look at is the standing issue.”
     In response, plaintiffs’ attorney David Trotter told Breyer the Orloffs want to file an amended complaint focused on a section of the ordinance related to use permits, calling one of its conditions unconstitutional based on the U.S. Supreme Court’s 2013 decision in Koontz v. St. Johns River Water Management District.
     In Koontz, the Supreme Court found that public agencies must comply with previous decisions in Nollan v. California Coastal Commission and Dolan v. City of Tigard. Those decisions state that the government can’t require property owners to give up portions of their property in exchange for a land-use permit unless there is a “nexus and rough proportionality between the gov­ernment’s demand and the effects of the proposed land use.”
     The Orloffs argue in their opposition that the use permit condition “injects additional uncertainty” into their redevelopment project. The condition states that if any portion of a use permit is invalidated because the demolition ordinance itself is invalidated, the entire use permit becomes void.
     “That condition in itself is probably an unconstitutional condition because it basically affects property rights,” Trotter told Breyer
     Berkeley Deputy City Attorney Savith Iyengar disagreed with the Orloffs’ assessment of unconstitutionality on Friday.
     “Use permits reflect a careful balancing and very individual balancing conditions,” Iyengar responded.
     In an interview, Iyengar said invalidating a portion of a use permit upsets the balance that goes into the permit, so invalidating the entire permit is justified.
     “There’s no authority that says the city cannot have such a condition in an ordinance” or that labels it an unconstitutional taking or violation of due process, Iyengar said.
     The city also argues that the Orloffs’ mitigation-fee claims are premature because the council hasn’t yet determined the amount of their fee. Once it completes a “nexus” study on the relationship between the fee and the basis for the fee, the council will decide how much to charge the Orloffs.
     “We aren’t at the stage yet where the court can analyze the relationship because we don’t have the nexus study,” Iyengar said. “Until the study is finalized, the claims are unripe.”
     The Orloffs say that doesn’t matter. The imposition of the fee will reduce the value of their property in and of itself.
     “The coercive power of the demolition ordinance — and the fees and exactions it necessarily imposes — have been put into effect and actually applied,” the Orloffs said.

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