## Facts

- Sacramento commissioned a study to assess low-income housing needs, the effect of nonresidential development on that need, and whether fees tied to such development were appropriate.
- The study concluded that new nonresidential development would create jobs attracting additional workers, including low-income workers, increasing demand for low-income housing and imposing related costs on the City.
- Relying on the study, the City enacted a citywide ordinance conditioning certain nonresidential building permits on payment of a per-square-foot “housing impact” fee.
- Fee revenues were placed in a housing trust fund dedicated to subsidizing or financing low-income housing.
- The ordinance required only payment of money; it did not require dedication of land or authorize a physical occupation.
- Commercial Builders of Northern California, a trade association of commercial developers, brought a facial challenge alleging the ordinance effected an unconstitutional taking under the Fifth and Fourteenth Amendments.

## Issues

1. Whether a legislatively enacted, generally applicable nonresidential development fee used to fund low-income housing is an unconstitutional taking for lack of an “essential nexus” between the fee condition and development impacts.
2. In a facial challenge to a generally applicable fee ordinance, whether the governing test is heightened exaction scrutiny associated with individualized permit conditions or the more deferential standard asking whether the regulation substantially advances a legitimate governmental interest.

## Decision

- The Ninth Circuit affirmed summary judgment for the City.
- The court held the ordinance did not effect an unconstitutional taking on its face.
- The court concluded the ordinance substantially advanced a legitimate governmental interest in addressing low-income housing demand attributable to nonresidential development.
- The court found a sufficient nexus between the fee and the projected impacts of covered development, supported by the City’s study and legislative findings.
- The court emphasized the ordinance’s general, legislative character and the absence of any claim that the fee denied economically viable use.

## Legal Principles

- A facial takings challenge to a generally applicable development-fee ordinance is evaluated under the standard asking whether the regulation substantially advances legitimate governmental interests and does not deny economically viable use.
- Permit conditions must bear an “essential nexus” to the governmental interest being served; that requirement may be satisfied for monetary impact fees when supported by reasonable, evidence-based findings linking the fee to development impacts.
- Legislatively enacted, citywide fee programs receive greater deference than ad hoc, parcel-specific exactions, particularly where the condition is a monetary fee rather than a compelled dedication of property.
- A generally applicable fee ordinance is not invalid on its face if supported by studies and findings showing the fee reasonably relates to projected impacts; project-specific disputes may be addressed through as-applied challenges.

## Conclusion

The Ninth Circuit upheld Sacramento’s housing trust fund fee as a valid, generally applicable impact-fee program, concluding that the City reasonably linked nonresidential development to increased low-income housing demand and that the fee condition bore a sufficient nexus to mitigating that impact, defeating a facial takings claim.


Commercial Builders of N. Cal. v. City of Sacramento, 941 F.2d 872 (9th Cir. 1991)