IRVINE : Low-Cost Housing Rules Spark Lawsuit

The developer of a large condominium complex near John Wayne Airport has sued the city and three City Council members, accusing them of theft for requiring that 10 of the units be given to a low-income housing organization.

The lawsuit, filed in Orange County Superior Court, is the first time that a developer has sued Irvine over low-cost-housing requirements placed on residential projects.

Douglas Plaza Ltd.’s lawsuit asks the court to overturn the requirements for such housing that the city placed on the 261-unit Metropolitan condominium project in 1989. The approval included three options for the developer to provide the housing.

Douglas Plaza chose an option to give 10 of the condos, valued at about $1.8 million, and $250,000 in cash to a nonprofit housing agency. It was the first time that a developer in Irvine had been required to give away homes to meet requirements for low-cost housing; most developers meet the rules by building a certain percentage of government-subsidized apartments.

Other options the city offered to Douglas Plaza was to rent or sell 39 units at reduced prices that low-income residents can afford.

The lawsuit alleges that all of those options for such housing are illegal and that the city’s requirement amounts to taking property without compensation or adequate justification.

City Atty. John L. Fellows III said Tuesday that the city will file a response to the lawsuit in “a couple of weeks.”

In the city’s view, the statute of limitations for Douglas Plaza to contest the requirement has run out, so the suit therefore has no legal merit, he said.

Ernest Cohen, a general partner with Douglas Plaza, could not be reached for comment Tuesday. When Cohen tried to persuade the City Council to modify the requirement for the housing in November, he said, Douglas Plaza agreed to give away the money and the units--but only because it had no alternative if it wanted to build the project.

Since the 1989 requirement went into effect, Douglas Plaza has paid the $250,000 but has not turned over the designated 10 units. The city gave $85,000 of the money to the nonprofit Irvine Community Housing Corp.; the remaining $165,000 is being kept in a trust account until the lawsuit is settled, said Peter Hersh, city planning manager.

When the Planning Commission placed the low-cost housing requirements on the Metropolitan project, it was following the guidelines for such housing then in effect, City Manager Paul O. Brady Jr. said Tuesday.

Cohen appealed the requirements in November before the City Council, arguing that they would cause the Metropolitan project to earn a profit of just 3%. He asked the council to let him pay $250,000 more in exchange for keeping the 10 units, or to work out an agreement to rent the units at a low price for 10 years.

The council rejected the appeal on a 3-2 vote.

The two councilmen who sided with Cohen said in November that the city’s requirements for low-cost housing are onerous and unfair.