Latest Developments In Maui Affordable Housing Exaction Case

For a while now, we've been meaning to post the latest order in the Maui affordable housing case from the U.S. District Court, Kamaole Pointe Development LP v. County of Maui, No. 07-00447 DAE (D. Haw.), but for one reason or another, haven't had the chance until now. 

The case is a challenge to the County of Maui's "workforce housing" ordinance, enacted in in 2006, which imposes a 40% to 50% affordable requirement on new housing developments of five or more units, and on an application to subdivide a lot into five or more parcels. In lieu of providing actual units, a developer may either pay a fee equivalent to 30% of the total project sales, donate improved land of the same value, or donate raw land valued at 200% of the in-lieu fee. Ordinance 3418 is posted here.  I posted on the case earlier here.

The complaint asserts claims for "unconstitutional conditions," regulatory takings, substantive due process, equal protection, and claims under Hawaii law. The Complaint for Declaratory and Injunctive Relief (filed Aug. 23, 2007) is posted here (note, the Complaint was amended on Sep. 6, 2007). The court earlier dismissed the "unconstitutional conditions" claim, holding it was a regulatory takings claim and was not ripe under Williamson County because the plaintiffs had not pursued a state compensation remedy. That order is posted here.

On November 25, 2008, the court issued an Order Denying Plaintiffs' Motion for Partial Summary Judgment; and Order Granting in Part and Denying in Part Defendants' Motion for Summary Judgment. The court held that the Williamson County ripeness rules also apply to the due process and equal protection challenges, which were not ripe because the property owner had not obtained a "final decision" from the County:

In this case, there is no dispute that Plaintiffs brought an appeal to the County Council requesting a waiver from the strictures of the Ordinance. The appeal for a waiver was denied. It is also undisputed that Plaintiffs have not  filed any formal application or submitted a development plan under the Ordinance. Thus, while Plaintiffs may have received a sufficient denial of a variance in the form of the Council’s waiver rejection, it is clear from the record that Plaintiffs have not received a final decision from the Council rejecting their development plan. Under the final decision jurisprudence, Plaintiffs' as-applied due process and equal protection claims must fail because they are unripe.

Slip op. at 14. The court noted that the Ninth Circuit applies the final decision prong of Williamson County's ripeness rule to substantive due process and equal protection challenges. Slip op. at 11 (citing Hoehne v. County of San Benito, 870 F.2d 529, 532 (9th Cir. 1989); Kinzli v. City of Santa Cruz, 818 F.2d 1449, 1455-56 (9th Cir.), as amended, 830 F.2d 968 (1987), cert. denied, 484 U.S. 1043 (1988); Shelter Creek Dev. Corp. v. City of Oxnard, 838 F.2d 375, 379 (9th Cir. 1988), cert. denied, 488 U.S. 851 (1988); Herrington v. County of Sonoma, 857 F.2d 567, 569 (9th Cir. 1988)). The district court noted "the policy behind requiring a final decision before a court can adjudicate [due process and equal protection] claims is that 'it is generally impossible to determine the extent of the infringement absent a final determination by the relevant governmental body.'" Slip op. at 12 (quoting Sinaloa Lake Owners Ass'n v. City of Simi Valley, 882 F.2d 1398, 1404-05 (9th Cir. 1989), overruled on other grounds Armendiz v. Penman, 75 F.3d 1311, 1326 (9th Cir. 1996)).  

The final decision rule has at least some semblance of logic applied to regulatory takings, where the Supreme Court has established a rule that the value remaining after regulation is applied to property is relevant to the question of whether the property has been taken. But the Ninth Circuit's application of this requirement to due process and equal protection claims has little logical basis, and virtually no support in the constitutional text. Why should it matter that some use might be able to be made of property if the government is acting arbitrarily, without notice and opportunity to be heard, or treating one property owner differently than another? The constitution is violated when even in the course of a preliminary decision about what uses can be made of property the government acts badly, not just when (as in regulatory takings) the government does not recognize its obligation to pay just compensation. But a District Court obviously cannot overrule circuit law, even when a rule makes no sense, so the court was bound to apply the Ninth Circuit's Hoehne rule, so any challenge to the rule itself will have to wait until appeal. 

The court also held that it would not be futile for the property owner to have submitted a development plan, even though the owner claimed that doing so would be cost-prohibitive and would force it to operate at a loss.  Slip op. at 15. The Ninth Circuit's futility rule requires that in order to prove that submitting an application for development would be futile, the property owner must -- and we are not kidding here -- submit an application and see whether it gets denied. And if that application is denied, the property owner must ask for a "variance." See Kinzli v. City of Santa Cruz, 818 F.2d 1449 (9th Cir. 1988). Again, a District Court is in no position to overrule binding circuit precedent, no matter how silly it may be, although the court in Kamaole Pointe at least recognized the "inherent contradiction in having an exception to an application requirement require submission of applications" --

This Court recognizes the inherent contradiction in having an exception to an application requirement require submission of applications. See Zilber v. Town of Moraga, 692 F. Supp. 1195, 1199 (N.D. Cal. 1988) (criticizing the logic of Kinzli’s "meaningful application test). Kinzli and its progeny, however, indicate that the "meaningful application" requirement that triggers the futility exception is designed to provide a forum for developers who have repeatedly submitted legitimate development plans to local agencies only to have them continuously delayed or denied. Moreover, this Court is bound by Ninth Circuit authority which has, in this area of law, repeatedly reinforced the "meaningful application" test. See Zilber, 692 F. Supp. at 1200 (acknowledging that "although this Court is less than comfortable with the Kinzli rule, it is well established in this circuit and therefore binding upon the Court").

Slip op. at 17, n.1. Although it dismissed the substantive due process and equal protection claims, the court held the procedural due process claim was ripe because the plaintiff asserted that the County did not provide adequate procedures in evaluating its appeal for a waiver, and thus was not a "'challenge to the application of land use regulations' to the land." Slip op. at 21. This split-decision underscores the strange dichotomy in the federal courts between "land use" and property cases and cases which seek to vindicate other constitutional rights. See, e.g., slip op. at 18, n.2 (dismissing the substantive due process claim on ripeness grounds because it involved application of land use regulations). We thought the Crown Point case finally ditched that distinction (as we noted here), but maybe, that, like the final decision and futility rules, must wait for appeal.

Finally, the district court disposed of the state law claim the County was without power to enact the ordinance because only the State can impose an "affordable housing impact fee." "Impact fees" as defined in Haw. Rev. Stat. § 46-141 are limited to those imposed to fund public facility capital improvements required by the development. The court held that this definition does not include the in-lieu fee required under the County's ordinance because the money collected goes into the general affordable housing fund and is not earmarked for offsetting capital improvement projects attributable to the development. Slip op. at 32. This seems like circular reasoning, as noted in this post.

Trial on the remaining issue is set for December 2009.