By Jessica Roy : sfchronicle – excerpt (includes audio)
Wesley Yu had a plan to create multigenerational housing on his residential property in East Palo Alto. But after getting hit with a nearly $55,000 fee from the city, the small-scale project devolved into a legal fight — one that was eventually settled in his favor.
The case underscores a broader tension in California’s efforts to ease its severe housing crisis, and how it can wind up impacting homeowners…
Yu first submitted his proposal in January 2024, and the city approved it the following October. In May, the city sent an email acknowledging an oversight on its end: Because Yu was building more than one unit of housing (both the new home and the ADU), his project was subject to the city’s inclusionary zoning laws, which have been in place since 2019. According to the lawsuit, the ordinance mandated that he either charge below-market rates to rent out one of the units or pay an in-lieu fee, known as an exaction, of nearly $55,000.
Yu decided to fight the city in court, with help from the Pacific Legal Foundation, a Sacramento-based nonprofit organization that represents property owners and individuals facing what it considers to be government overreach. (“Suing the government since 1973,” its homepage declares.)…
In this case, Waisanen said, Yu was not building market-rate housing because he wasn’t planning to charge anyone to live there. He had no immediate plans to rent out either new unit, and no plans to charge family members or his own child for staying there. The city’s ordinance would have forced him to either pay the fee or become a landlord and subsidize his tenant by charging below-market rent, Waisanen said.
The city disputed that: According to its statement, Yu could have avoided the fee by agreeing to a deed restriction that he charge affordable rates only if he rented the unit out. If he never rented out the unit, no price restriction would have come into play. The statement said Yu refused to agree to that…
Last week, Yu’s attorneys announced the city had settled the lawsuit. The city of East Palo Alto did not admit fault or wrongdoing in the settlement. But the homeowner will be allowed to proceed without paying the $54,891 affordable housing fee, and East Palo Alto agreed to pay $5,000 in attorney fees. The city is also amending the inclusionary housing ordinance in its municipal code to exclude projects like Yu’s…
In a City Council special meeting agenda from Nov. 18 that City Attorney John Le provided to the Chronicle, it was noted that Section 18.37.40 of East Palo Alto’s municipal code would be amended to facilitate small-scale lot split projects by removing the in-lieu fees.
“In September 2025, as part of a larger effort to facilitate SB 9 lot splits, the City Council adopted an amendment to the City’s Inclusionary Housing Ordinance (Ordinance No. 06-2025) to exempt parcels that are given an approval under SB 9 from the Inclusionary Housing Ordinance. The amendment mooted Mr. Yu’s claims,” Le wrote in a Nov. 18 City Council staff report that he also provided to the Chronicle. “Although the City may vigorously defend its rights in a court of law, in the interest of conserving resources, the City Council has decided to settle this matter.”… (more)