Appellate Court Finds that Inclusionary Housing Requirement is Not an Exaction, Therefore Challenge is Time-Barred

In a decision supportive of local inclusionary housing ordinances, the Sixth District Court of Appeal ruled that a subdivider’s challenge to a development condition requiring below market rate housing was not governed by the AB 1600 Mitigation Fee Act statute of limitations.

The case is primarily analyzed as a statute of limitations issue, but in the course of the analysis, the court finds that Sunnyvale’s affordable housing requirements were imposed as land use restrictions, and were not subject to AB 1600, the Mitigation Fee Act.  Accordingly, the applicable limitations period was 90 days based on the Subdivision Map Act and Government Code section 65009(c)(1)(E).  Since the developer did not file its challenge within the 90 day limitations period, the complaint was time-barred (Trinity Park v. City of Sunnyvale,  ___ Cal.App.4th ___, March 24, 2011).

In 1980, the City of Sunnyvale adopted an inclusionary housing ordinance that required residential developers to provide below market rate units or pay an in-lieu fee.  In 2007 the City approved Trinity Park, a 42-unit single family subdivision and imposed a condition on the related special development permit and tentative map requiring compliance with the ordinance.  In 2008, the City and developer completed an affordable housing agreement specifying that five of the units must be sold at below market rates.  Later, the subdivider sent a “Notice of Protest” to the City asserting that any sales of below market rate units were under protest pursuant to sections 66020 and 66021 of the Mitigation Fee Act.  The developer subsequently challenged the condition of approval in court, claiming it amounted to an invalid exaction under the Mitigation Fee Act, among other things.  The City demurred, arguing that the Subdivision Map Act and Government Code section 65009(c)(1)(E) statutes of limitations governed the challenge, that the complaint was filed too late, and was time-barred as a result.   The appellate court agreed.

The court rejected the developer’s contention that the inclusionary housing requirement was an exaction and thus subject to the 180-day Mitigation Fee Act limitation periods in sections 66020 and 66021.  Reviewing the language of the Mitigation Fee Act, its legislative history, and other decisions, the court determined that Act’s statute of limitations applied to “an exaction imposed on a development project to defray the costs of traditional public improvements and facilities needed to accommodate new development.”   The court further determined that the City’s inclusionary housing requirement was not such an exaction.  The appropriate statutes of limitations, according to the court, were those for challenging actions concerning a subdivision pursuant to section 66499.34 of the Map Act and conditions attached to a development permit pursuant to section 65009(c)(1)(E) of the Government Code.  Thus, the 90-day statute of limitations under sections 66499.34 and 65009(c)(1)(E) were applicable to the developer’s challenge to the inclusionary housing requirement.  Since the challenge was not filed within these time periods, the court concluded it was time-barred.

This is a good decision for local inclusionary housing ordinances.  The court’s ruling that the inclusionary requirements were not subject to the Mitigation Fee Act eliminates the Act as a potential source of challenge for similar local ordinances that are not imposed to defray the costs of public facilities for a development project pursuant to section 66020.  The decision does not insulate inclusionary ordinances from other sources of challenge, but it does limit the potential for challenge based on the Mitigation Fee Act definition of an exaction.  Apart from the inclusionary housing issue, the court reminds land use practitioners of the general rule that “the applicable statute of limitations depends on the nature of the cause of action…”.  Especially in today’s complex entitlement processes where there may be multiple types and layers of land use approvals, there may also be the potential for multiple statutes of limitations.  Determining the correct statute(s) of limitations requires a careful examination of the nature of the approval and the particular action being challenged.