New York City (“New York”) has one of the most expensive real estate markets in the country. Low-income residents struggle either to buy a home or pay for rental units. In order to address this problem, the New York City Council passed an ordinance called the Mandatory Housing Act (“MHA”), which would increase the number of affordable housing units across the city. Under the MHA, developers who located new construction residential structures, including new apartment buildings, in neighborhoods that were zoned for multi-family units had to do one of two things: (1) dedicate 15% of the property to the creation of rent-restricted housing units or (2) pay a fee to the city of $10.00/square foot in the new structure. Builders who chose to pay the fee directed the money into a public housing fund. New York planned to use the fund to subsidize the cost of building new rent-restricted units for low-income residents within the next five years.
To save costs, the New York City Council delegated enforcement responsibility for the MHA to a management services corporation called the ABC Company (“ABC”). Among other duties, ABC inspected newly-constructed buildings to ensure compliance with the ordinance; imposed and collected fines from builders who violated provisions of the law; received, evaluated, granted, or denied building permit requests; and managed the growth of the public housing fund by collecting the fees paid into it and by overseeing the fund’s investments. The city council also granted ABC the authority to negotiate with, hire, and pay contractors to build affordable units around New York once the fund had grown large enough to support those projects.
Husband and Wife have been saving for over a decade to make a down-payment on a single-family house in the city. They purchased a three-bedroom, two-bathroom house that was built in 1902, was out of compliance with local building safety codes, and needed a number of improvements. Husband and Wife had $75,000 in savings that they intended to use to pay for the planned renovation. Their architect developed plans which brought the house up to code and expanded its size by more than fifty percent. At the end of the renovation, the home would still be a single-family, three-bedroom, two-bathroom house; it would simply be modern, safe, and bigger.
When they were ready to start the project, Husband and Wife applied to ABC for a building permit. A week later, an ABC inspector said that their home was located in a neighborhood that was zoned for multi-family units, which meant they were subject to the MHA. Since their renovation plans expanded the size of the existing house by more than 50%, it would be treated as new construction under the statute. As a result, they would receive their permit only if they agreed to turn part of their property into rent-restricted affordable housing units, or if they agreed to pay a $15,000 fee. Husband and Wife cannot afford to pay this fee and pay for the renovation. In addition, they do not wish to turn part of their single-family home into rental property or build a new structure on their property that could be rented to low-income families. After communicating a refusal to provide the units or pay the fee, ABC denied the permit.
You are counsel at a public interest law firm and you have taken Husband and Wife’s case. Please identify and evaluate the strengths and weaknesses of any constitutional claim or claims that Husband and Wife might raise in this lawsuit.