2910 Georgia Avenue LLC v. District Of Columbia

Facts

D's IZ Program requires that 8-10 percent of the gross floor area of new residential developments (or substantial additions to existing developments be used for sale or lease to eligible low- and moderate-income households at certain maximum price levels. The affordable units created by the program are referred to as inclusionary units (IZ Units) Under the IZ Program, 'no building permit shall be issued' unless the owner of the development subject to the IZ Program 'records a covenant in the land records of the District of Columbia that binds all persons with a property interest in any or all of the [property] to construct and reserve the number of inclusionary units.' The Zoning Commission delegated responsibility for developing the IZ Program to the Council of the District of Columbia (D.C. Council) and the Mayor, who subsequently delegated that authority to the Deputy Mayor for Planning and Economic Development (Deputy Mayor). The IZ Program was not implemented until certain rules and regulations were passed regarding its implementation. The Notice of Final Rulemaking for these IZ Program regulations was published on May 15, 2009. The final rules became effective on August 14, 2009, after the lengthy notice and comment process and a significant 'phase-in' period after the publication of the Notice of Final Rulemaking. P is a real estate company that invests in new housing in the District of Columbia. On November 24, 2009, over three months after the IZ Program rules became effective and applicable P purchased the property at 2910 Georgia Avenue, N.W. from Howard University. P purchased the property, then a vacant lot, for $560,000.00. P purchased this property with the intention of constructing a 22-unit condominium building. On December 23, 2009, P filed a building permit application to construct this condominium building. Even though the IZ Program was in effect as of this date, on March 30, 2010, the D.C. Zoning Office initially indicated to P that the project's zoning had been approved without requiring compliance with the IZ Program. An employee at the District's Office of Planning discovered the mistake and, in April 2010, the District informed P that its zoning approval, and accordingly its ability to acquire a building permit, would be contingent on compliance with the IZ Program. P's condominium building was the first development in the District subject to the IZ Program. Developments that are subject to the IZ Program are allowed to take advantage of 'bonus density,' which gives developers the option to 'construct up to twenty percent (20%) more gross floor area than permitted as a matter of right.' It is undisputed that, after being told in April 2010 that its development was subject to IZ regulations, P did not redesign its building plans to incorporate the 'bonus density' made available under the IZ Program, opting instead to proceed forward with the building as planned. P claims that it had 'no choice' in the matter because to incorporate bonus density at this stage, 'P would have had to spend months and tens of thousands of dollars,' and add more parking. On May 14, 2010, P subdivided the separate lots that made up the property at 2910 Georgia Avenue into a single record lot. P signed an IZ Covenant binding two of the envisioned 22 condominium units within the planned building: Unit C-02 and Unit 2-02. The building was then constructed. On September 11, 2011, after completing construction, P subdivided the building into 22 residential units and 11 parking units. P submitted a 'Notice of Availability' to Ds on May 12, 2011, indicating that the two IZ Units would be available for occupancy starting on August 1, 2011. D subsequently went through a process of running 'lotteries' and other alternative selection procedures to identify possible buyers for the units. The effort to locate a buyer for the units was unsuccessful for an extended period of time. P contends that this failure was the fault of Ds in that a requirement in the IZ Covenant that the affordability restrictions on the IZ Units were to survive any foreclosure on the property prevented would-be purchasers from using HUD-insured mortgages. P implicates in the delay selling the IZ Units Ds' failure to timely create lists of eligible buyers, understaffing, and various other alleged 'blunders' in the implementation of the IZ Program. At multiple times throughout this period, P requested that DHCD release it from having to comply with the IZ Program, but DHCD declined to do so. D claims that P refused to advertise the units at all, turned down at least one potential buyer, and at one point labeled the IZ Units as 'sold' on its website. The twenty units not affected by the IZ regulations were sold at market rates between $225,000 and $404,000, for a total of over $6 million. This earned the investors a 20% return on their investments. P also sold its IZ Units. P sued D. P eventually alleged a claim under the Takings Clause of the Fifth Amendment pursuant to 42 U.S.C. § 1983 along with substantive due process and equal protection rights in violation of the Fifth Amendment. P seeks a declaratory judgment that the IZ Program is unconstitutional, that Ds, acting under color of state law, deprived P of rights guaranteed by the United States Constitution, and that P is entitled to compensation.

Issues

Rule of Law

Holding and Decision

Legal Analysis

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