C.A.R.-Backed Group Contests Multimillion-Dollar Fees on New Residential Projects in Los Altos

Early this month, Californians for Homeownership, a nonprofit organization sponsored by the California Association of REALTORS®, that aims to address California’s housing crisis through impact litigation, announced it has filed its first lawsuit challenging excessive residential development fees. The lawsuit, filed jointly with the California Housing Defense Fund, challenges new fees adopted by the City of Los Altos.

The fees being challenged in the new lawsuit include parks fees, transportation impact fees, a fee for “general government services,” and a public art fee. By the City’s own estimates, the total fees for a typical mid-sized apartment or condominium project will exceed $4 million. The lawsuit identifies defects and inconsistencies in the nexus study the City adopted to justify the new fees, as well as more fundamental issues with the City’s approach to fees.

“Under the City’s new fee regime, owners and residents of new developments will be double-charged for the same services – once in the form of fees when the project is built, and again in the form of taxes over the years that follow,” said Matthew Gelfand, the in-house litigator for the nonprofit. “The City’s fee calculation methodology assumes that new developments in the City will provide zero additional tax revenue, which is absurd.”

Each fee adopted by the City suffers from more specific flaws as well. For example, the City’s parks fee requires new developments to fund 100% of the cost of acquiring new parks based on the premise that these new parks will be exclusively used by new residents, while also requiring the same developments to fund improvements to existing parks based on the premise that new residents will instead use existing facilities. The public art fee requires developers to set aside 1% of the development’s construction cost to be given to the City to construct public art, a violation of the California Constitution’s limits on local property taxes.

Challenging fees is a new critical area of focus for Californians for Homeownership. The organization is following impact fees being adopted by other cities and counties, as well as development-related fees charged by utilities and special districts.

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