Developer John Mozart, who sued Palo Alto over its affordable-housing program, lost his case this week after a judge upheld the legality of the program and ruled that the developer waited too long to file the lawsuit.
Mozart argued that the city is unfairly requiring him to devote 10 units in his 96-unit Sterling Park development to below-market housing. In his lawsuit, Mozart called the requirement "arbitrary and capricious" and that it essentially amounts to a "special tax."
Santa Clara Superior Court Judge Kevin McKenney disagreed and granted the city's motion for summary judgment, dismissing the case.
Mozart's development, located on West Bayshore Road, was approved in 2006. The developer's lawsuit, which was filed late last year, is thus "barred by the 90-day limitations period," McKenney ruled.
McKenney also upheld the legality of the city's program, which has been producing about 7.5 below-market-rate units of housing per year. Palo Alto has a recognized shortage of affordable housing and city planners are now trying to identify possible sites for affordable housing as part of the city's ongoing Housing Element update.
McKenney ruled that the city's below-market-rate (BMR) housing program, which allows developers to pay "in-lieu fees" to reduce the affordable-housing requirement, does not violate the state's Mitigation Fee Act, which sets limitations for developer fees.
The BMR program, "does not impose fees to defray the cost of public facilities related to a development project," McKenney wrote. "Rather, the BMR Program encourages and promotes the development and availability of affordable housing for families and individuals whose incomes are insufficient to afford market rate housing by requiring developers to provide BMR units in their developments, or alternatively, to make payments to Defendant's Housing Development Funds."