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Lawsuit questions legality of San Luis Obispo’s inclusionary housing fee

March 10, 2026

Photo by Jeff Specht

By KAREN VELIE

As part of its attempt to promote affordable housing, the city of San Luis Obispo requires an inclusionary fee to develop in the city. A civil rights lawsuit was filed last week against the city that argues increasing the cost of building homes does not lead to more affordable housing.

Three friends – John Ruda, Shahriar “Rami” Zarnegar, and Jordan Knauer – purchased an uninhabitable home on Johnson Avenue near Orcutt Road in San Luis Obispo. The trio then tore down the home with plans to build four homes, each with an accessory dwelling unit, on the lot.

City staff then demanded the trio “pay nearly $100,000 into the city’s housing fund or sell one of the units at a little over half the cost of construction to the city’s chosen buyers,” according to the lawsuit. The developers paid the $98,900 fee and built the eight units.

The Pacific Legal Foundation, a nonprofit public interest law firm, filed a federal lawsuit against the city on March 4 that argues fees without determination of cost equal extortion. Previously, the foundation won similar cases against Healdsburg and East Palo Alto, which led to refunds.

“The city presented plaintiffs with two bad choices: give up their property rights by acquiescing to a deed-restricted inclusionary unit, or pay nearly $100,000,” according to the lawsuit. “Of course, there was an unspoken third option: don’t build at all.”​

The lawsuit argues the city’s inclusionary housing policy does not create nor contribute to the need for affordable housing or cause anyone to be unable to afford housing. However, a new development “alleviates housing affordability problems by creating new housing.”

“As a matter of logic, the city cannot make housing more affordable by making it more expensive,” according to the lawsuit. “As a matter of law, it cannot abuse its land-use permitting authority to take money or property from applicants in order to address problems that those applicants do not create.”

The lawsuit asks the court to rule San Luis Obispo’s Inclusionary Housing Ordinance is unconstitutional and that the developers are due a refund of fees along with an award for attorney fees and court costs.

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I am very glad they were turned in and it is being investigated. However, it is unfair to peg all petitions now to be in question. Part of the process is that voter names are checked against voter registrations to validate whether they are registered within the correct jurisdiction and then the signatures are checked to ensure they match the original signature on the voter registration. If not they are excluded. There’s very little room for successful fraud, although if it was a paid gatherer, he is probably being paid more than $5 per signature. It is the gatherer who is in question and of course, the individual who signed fraudulently.


0

Oops. This comment went on the wrong article. Odd.


1

“Republicans believe every day is the Fourth of July, but the democrats believe every day is April 15.” – Ronald Reagan


Keep your filthy DemoNcrat hands out of our pockets!


#NEVERVoteDemoNcratAgain


#VoteRepublican2026


8

This will be an interesting lawsuit. If the CIty of SLO settles or loses, then similar to what happened in Healdsburg where that City settled with PLF, others that paid the fees in SLO will likely file their own claims. We shall see.


16

To be opened minded, affordable housing does not only mean less expensive housing. I the market changes, affordable housing can be targeted towards foreign nationals who are looking for high end housing that disqualifies the local mentality. The most obvious is in San Francisco which is becoming a total China Town, and nobody has the right to inquire where their money comes from, we are just required by law to sell. I know this because I performed a very successful experiment, sold my mother’s home, for top dollar in San Bruno, with a FSBO sign in Mandarin Chinese.


9

Soooo, you’re part of the problem? Greedy? Maybe I’m missing your point.


-4

That’s fair, when representing a Trust, just want to be sure I got top of the published market to please my siblings. The realtors wanted to help but I told them the market will do the help and I didn’t feel good about sharing inheritance with them. It was a great 1031 and everybody was happy with none of that local bragging about getting 200K over asking stuff. Now back to my point, the truth is that there are very good reasons to raise the price to some customers, some want to pick their neighbors, and high prices usually means owner occupied housing. Look at the SLO Ranch housing with high prices, Mello-Roos tax ($4500 on top of their property tax to pay for the new overpass), association fee and stringent CCNR’s. Yes, the appeals to a certain market.


5

Jorge, I applaud and admire your acumen and dedication as a trustee. I have a couple of comments on “high prices usually means owner occupied housing.” Grover Beach is now being preyed upon by the same ‘affordable-by-design’ former SLO planning staffer and builder involved in the ‘affordable-by-design’ SLO Ranch fiasco (multiple fires, no water in hydrants, site violations, mold, material design faults & lawsuits, neglected inspections). In the case of Grover Beach, high prices don’t mean owner-occupied housing. High prices mean a significant decline in population, even as the building craze continues, housing primarily 2nd-home owners. You could argue that they are owner-occupied. You can never argue that they are meeting the stated purpose of creating housing. You can never argue that $1.4 million for a Grover townhome with no yard is affordable by any design. You can never argue this is meeting the needs of Grover citizens because if it were, the population wouldn’t be declining substantially as the housing stock grows substantially.


7

100% in regards to selling out America to a Chinese mother land lover.


5

Eff chy-nuh!


Eff ALL Chinese Nationals in America!


4

“sell one of the units at a little over half the cost of construction to the city’s chosen buyers,” , we now know how councilmember Jan Marx was able to purchase her affordable house.


88

Somehow, Marx thinks it’s honorable to deprive someone who needs affordable housing even as she touts it!


6