A Healdsburg family will get their money back in an apparent victory in their legal tussle with the city government over allegedly unconstitutionally excessive "inclusionary housing" fees they were forced to pay before being allowed to subdivide their lot and build a new home on land they already owned.
However, the family and their lawyers are warning others the constitutionally questionable ordinance that mandated the fee remains in place in the city, and encouraged others to not shy away from similarly contesting the city's attempts to force them to pay.
The settlement was announced about two months after Healdsburg residents Jessica and Chris Pilling first filed suit against their city's government.
In that lawsuit, the Pillings said they were illegally required to pay a fee of more than $20,000 to obtain a permit and zoning needed to move forward with a plan they said would allow them to build a new home for their family, while simultaneously helping the city meet a goal of increasing rental housing available in the community.
According to that complaint, the Pillings have lived in Healdsburg for years.
Healdsburg, which has a population about 11,000 people, is located in Sonoma County about 65 miles north of San Francisco.
According to the Pacific Legal Foundation, a nonprofit constitutional law organization which provided attorneys to represent the Pillings, the couple operate several businesses in the community, including a "party bike" rental business.
In 2021, the couple sought to build a new larger home for them and their three children.
At the time, the couple lived in a duplex they owned on a 1/4 acre city lot.
Under the plan crafted in consultation with architects, engineers and other development professionals, the Pillings intended to take advantage of a new California law, known as SB9, to subdivide their lot, build a new single family house on the newly created lot, and then rent out both sides of the duplex to other residents.
Under SB9, California lawmakers explicitly gave permission to landowners to divide such small lots to allow for smaller dwellings to be constructed than may have been previously allowed under restrictive city zoning codes, with the goal of increasing housing supply and making housing more affordable.
However, to move the project forward, Healdsburg city government required the Pillings to either donate land to the city or pay more than $20,000 to satisfy a so-called "inclusionary housing" fee set up by city ordinance. According to information posted on the city's website, the fee is intended to support the city's overall goal of increasing housing for low- to moderate-income households.
Under the program, new planned developments with five or more "dwelling units" must make at least 20 percent of those dwelling units "affordable to low-, moderate- or middle-income households."
Those with four or fewer new dwelling units must pay the fee or donate land in lieu of the cash fee or build affordable units somewhere else in the city.
The Pillings had no alternative but to pay the fee, according to the complaint, and did so under protest.
They then joined with Pacific Legal Foundation to file suit, accusing the city of trampling their constitutional rights.
According to the lawsuit, the city's inclusionary housing fee regime violates the Fifth Amendment and transgresses three U.S. Supreme Court rulings. According to the complaint, those three decisions, taken together, establish that city development fees for new construction must be proportional and directly related to the impact caused by the new construction.
The Pillings and their attorneys also pointed out that the city's fees also fail to account for the economic benefits of the Pillings project. By increasing housing in the community, the Pillings' project works to make housing more affordable, which they said should be in keeping with the city's goals.
"The City has it completely backward," the Pacific Legal Foundation said. "New residential development increases housing supply, which tends to lower housing prices."
Rather than fight the Pillings in court, risking a court ruling overturning the ordinance entirely, the city opted to settle and refund the Pillings their fees, the PLF said.
“We are pleased that the City has acknowledged Ms. Pilling’s right to a refund of this fee. However, the underlying unconstitutional policy remains in place,” said David Deerson, attorney at Pacific Legal Foundation.
“Legally, the government can’t use land-use permitting to force property owners to pay for problems the property owners didn’t create. As a matter of policy, the government can’t make housing more affordable by making it more costly — which is exactly what happens when the government adds legally indefensible fees in exchange for issuing building permits."
According to the PLF, the city agreed to pay the Pillings $30,000, which included a refund of the fees they paid, plus "additional compensation for inconvenience and hardship." The city also agreed to pay $5,000 in attorney fees.
In a prepared statement, Jessica Pilling said she and her family are "so glad this chapter is behind us."
“It’s frustrating that I was dismissed by city officials for over a year — taxpayers deserve better," Pilling said. "Unfortunately, the costly Inclusionary Housing Ordinance remains. To others facing this problem: Don’t give up.
"The city must do better.”
Deering similarly encouraged property owners forced to pay such fees to also "understand their constitutional rights."
“Families like the Pillings who seek to construct new housing don’t have to let the government bully them into paying for ‘solutions’ to problems they didn’t create — especially when the ‘solution’ doesn’t even solve the problem it aims to treat," Deering said.
The city did not reply to a request for comment about the case and the settlement, including a question concerning if the city intended to address any of the constitutional concerns underpinning the Pillings' legal action.