Action Apartment Association v. City of Santa Monica (August 28, 2008, Case No. B201176) __ Cal.App. 4th __

Plaintiff Action Apartment Association (“Action”) argued that an ordinance passed by Defendant City of Santa Monica (“City”), on its face, violated the takings clause of the Fifth Amendment of the United States Constitution and article I, section 19 of the California Constitution. Action also argued that the ordinance was an amendment to the city’s housing element and thus required approval by the Department of Housing and Community Development (“DHCD”). The Court of Appeal affirmed the trial court ruling that the Nollan/Dolan test does not apply to a facial challenge of a land use regulation. The Court further affirmed that the City’s affordable housing ordinance is not a housing element, does not amend the City’s housing element and thus does not require review by the DHCD.

Background

The City enacted Ordinance No. 2191, which imposed requirements on developers constructing multi-family housing projects in a multi-family residential district to, absent a waiver, construct affordable housing on the site or at another location. Action, an association of owners of developed and undeveloped properties, challenged the ordinance as an unlawful uncompensated taking and asserted that the decision of the United States Supreme Court in Lingle v. Chevron U.S.A. Inc., 544 U.S. 528 (2005) expanded the Nollan/Dolan essential nexus and rough proportionality test beyond the scope of an individual adjudicative decision. Action further argued that Ordinance No. 2191 could not be operative without prior review by the California DHCD pursuant to Government Code § 65585.

Takings Claim

Action argued that it was entitled to assert a facial challenge to ordinance No. 2191 utilizing the two pronged Nollan/Dolan test. The Nollan/Dolan test is a special rule developed by the United States Supreme Court applicable to land use exactions where the government demands landowners dedicate portions of their property as a condition of securing development permits. First, an “essential nexus” must exist between the “legitimate state interest” the government asserts and the exaction itself. The exaction must further the state interest. Nollan v. California Coastal Commission, 483 U.S. 825, 837. Second, the degree of the exaction required by the permit condition must bear a “rough proportionality” to the projected impact of the proposed development. Dolan v. City of Tigard, 512 U.S. 374, 391.

Both the United States and California Supreme Courts have explained that the two part Nollan/Dolan test developed for use in land exaction takings litigation applies only in the case of individual adjudicative permit approval decisions; not to generally applicable legislative zoning decisions. The heightened scrutiny of the Nollan/Dolan test has only been applied in cases where conditions are imposed on a property owner on an individual and discretionary basis.

However, Action argued that the Lingle decision changed the foregoing jurisprudence and permits use of the Nollan/Dolan nexus and rough proportionality test when mounting a facial attack on land use regulations. The Court disagreed and ruled that Action’s contention had no merit. The Court explained that in Lingle, the Supreme Court did not purport to hold the two-pronged Nollan/Dolan test applied to a facial challenge, it held that the “substantially advances” test was no longer a stand alone test for a regulatory taking. Lingle, 544 U.S. at 545. Therefore, Lingle does not alter the rule that the Nollan/Dolan essential nexus and rough proportionality test applies only in the context of judicial review of individual adjudicative land use decisions.

Housing Element Amendment Claim

Action further argued that Ordinance No. 2191 was a de facto amendment to the city’s housing element and thus required approval by the DHCD. Government Code §65585 (d) requires that 60 days prior to its adoption, an amendment to the housing element, must be submitted to the Department of Housing and Community Development. The Court explained however that nothing in Government Code §65885 required the DHCD to review an affordable housing ordinance, and the City’s ordinance was not a de facto amendment to the housing element. Thus, the City’s failure to submit Ordinance No. 2191 to the DHCD for review was not error.