Wyoming refund exposes legal risk for local housing fee ordinances

"The fees do not distinguish between a single homeowner, a large developer or anyone in between. States have promoted zoning and regulatory reform, but the fees that local governments impose for affordable housing funds have received little attention. These fees can kill deals because a developer may not be able to secure a satisfactory return for investors."

"In that case, the developer could either place a deed restriction on one of four parcels and sell the house and accessory dwelling unit for $450,000 or build at market rate. The deed-restricted option made little sense because it cost $1.325 million to build. Like the Wyoming case, the fees are allocated to a fund for building affordable housing."

"The developer's attorneys argued a similar unconstitutional takings claim as the one the Foundation has raised. However, a federal judge ruled in favor of the city in January after previously siding with the developer. The main difference between the San Diego case and the San Luis Obispo complaint is their strategy."

Teton County, Wyoming refunded a $24,325 affordable housing fee to a homeowner after a lawsuit challenged its constitutionality. The Pacific Legal Foundation argues that impact fees imposed by local governments on homeowners and developers violate the U.S. Constitution. These fees, which fund affordable housing but don't distinguish between individual homeowners and large developers, can make development projects financially unviable. Similar lawsuits have been filed in California, including one involving $100,000 in fees for a small developer in San Luis Obispo. While the Foundation has won some cases, outcomes vary; a federal judge ruled in favor of San Diego over a developer's constitutional takings claim in January 2024, demonstrating inconsistent judicial treatment of these fee challenges.

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