Eliminate Affordable Housing Mandates to Make Housing More Affordable

If you want to build housing on your property, can the government demand that you first give your land to someone else to live on? Or that you pay for someone else’s house (on someone else’s property) before you get a permit to build housing for yourself? You would think the answer would be a resounding, “Of course not!” But consider the case of Jessica and Chris Pilling in Healdsburg, California. It may cause you to think again. 

Jessica and her husband run Bike Healdsburg, a small “party bicycle” business offering a fun way to explore Healdsburg. Since the couple and their three young children were outgrowing the duplex where they currently live, Jessica subdivided their lot to build a new family home and an attached accessory dwelling unit (ADU) on the second lot, with a plan to rent out their current duplex.

In a state and city facing a housing crisis, the Pillings should have been rewarded. They wanted to take their property, which included housing for two families (a duplex), and double the amount of housing available by building an additional house and an ADU (sometimes called a granny flat). Healdsburg, a community that needs more housing options, should have embraced the Pillings’ plan. 

But it didn’t. Instead, Healdsburg sought to penalize the Pillings.  

Under what Healdsburg calls its “inclusionary housing” program, Healdsburg demanded that the Pillings either a) give land at no charge to the city for affordable housing purposes (that is, for someone else to live on) or b) pay a $20,134.75 fee that Healdsburg would then use toward providing affordable housing for someone else. Only upon taking one of these steps would Healdsburg permit the Pillings to build more housing on their property. Many cities in California and elsewhere have similar inclusionary housing programs, sometimes labeled affordable housing programs. 

If the city was the mafia, we would call this extortion. Given no choice, the Pillings paid the fee the government demanded. But they did so under protest: They considered this fee unfair and ineffective. 

The Pillings were right on both counts. 

Governments cannot burden homebuilders like the Pillings with costs for problems they do not create. The Supreme Court’s 5th Amendment housing decisions in Nollan v. California Coastal Commission (1987), Dolan v. City of Tigard (1994), and Koontz v. St. Johns River Water Management District (2013) established that permit conditions for new construction must be directly connected to the new construction’s impact and proportional to that impact.  

Anything above and beyond is an unconstitutional taking of private property.  

Moreover, the Supreme Court’s decision in Sheetz v. County of El Dorado confirmed that even permit conditions to build housing imposed by legislation rather than on a case-by-case basis, like Healdsburg’s general inclusionary housing program, are subject to these same rules.  

For Healdsburg’s demands on the Pillings to survive constitutional scrutiny, this permit condition — that they give up their own land for someone else’s use or pay a fee to the city so that the city can build housing for someone else — must be connected somehow to the public need that the land or money would go to. And that’s not true when it comes to the demands that Healdsburg made.  

Instead, the relationship between the fee and the demand is the opposite of the requisite connection since the Pillings’ intention to build more housing achieves what the Healdsburg inclusion housing program is trying to do — but without the payment of any fee or forced sacrifice of land. By definition, the Pillings’ plan would contribute to the overall supply of housing, thereby tending to lower — not raise — the cost of housing. This is the basic law of supply and demand. Denying a permit to build new housing would not improve housing affordability. It would mean less housing supply which would create upward pressure on the cost of housing that remained. 

Healdsburg disagrees, of course, but Healdsburg is wrong. The city justifies its demand on the grounds that the “construction of above-moderate income housing depletes the amount of available residential land while contributing to rising land prices because of a greater scarcity of developable sites.”  

That is wrong twice over. First, it ignores the downward pressure that new market-rate housing, like the housing the Pillings intend to build, has on the price of housing itself. Second, it ignores that increasing the cost of new housing by forcing you to pay more than the simple costs to build and thus forcing you to recoup that fee by increasing the price of the new housing once built, will reduce the construction of new housing units overall. Healdsburg’s demands on home builders like the Pillings do not help drive down housing costs; instead, they increase the costs.  

Thus, Healdsburg’s demands are not just unconstitutional but also counterproductive.  

Represented at no charge by Pacific Legal Foundation, earlier this year, Jessica Pilling fought back with a federal lawsuit challenging Healdsburg’s inclusionary housing program.  

Less than two months after the lawsuit was filed, Healdsburg settled. The city agreed to refund the inclusionary housing fee and pay an additional sum to Jessica to compensate her for her hardship. Healdsburg may quibble with the bottom-line implication of its own decision to settle, but it’s obvious to anyone with eyes. Healdsburg knows its program is unconstitutional and counterproductive, and thus it refunded the fee and paid Jessica Pilling.  

The settlement is a clear victory for Jessica Pilling and her family. Unfortunately, Healdsburg’s inclusionary housing program remains on the books for now. Nevertheless, the Pacific Legal Foundation will continue to fight for homeowners in Healdsburg and across the country and challenge similarly unjust policies wherever they occur. Our country needs workable solutions to the housing crisis, not government-created plans that may be well-intended but exacerbate the problem they intended to solve. 

Mark Miller is a senior attorney at Pacific Legal Foundation, a public interest law firm that defends Americans’ liberty against government overreach and abuse. 

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