redT Homes v. City and County of Denver

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Chief Judge Philip A. Brimmer
Civil Action No. 25-cv-01681-PAB-TPO
redT HOMES, LLC, and
redT CAPITAL PARTNERS, LLC,
Plaintiffs,
v.
CITY AND COUNTY OF DENVER,
Defendant.
ORDER
This matter comes before the Court on Defendant’s Motion to Dismiss Plaintiff’s
Second Amended Complaint for Declaratory and Injunctive Relief [Docket No. 14].
Defendant City and County of Denver (“Denver”) seeks to dismiss, pursuant to Federal
Rules of Civil Procedure 12(b)(1) and 12(b)(6), plaintiffs’ sole claim, a Takings Clause
claim brought under 42 U.S.C. § 1983. Docket No. 14 at 1. Plaintiffs redT Homes, LLC
(“redT Homes”) and redT Capital Partners, LLC (“redT Capital”) filed a response.
Docket No. 19. Denver filed a reply. Docket No. 20. The Court has jurisdiction
pursuant to 28 U.S.C. § 1331.
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I. BACKGROUND 1
Plaintiff redT Homes is a Denver homebuilder. Docket No. 11 at 1, ¶ 1. Its sister
company, redT Capital, owns properties which redT Homes develops. Id. Plaintiffs
challenge Denver’s Dedicated Fund for Affordable Housing Ordinance (“Linkage Fee
Ordinance”), Denver Rev. Muni. Code (DRMC) Ch. 27, art. V, and its Mandatory
Affordable Housing Ordinance, DRMC Ch. 27, art. X. Id. at 2-3, ¶ 4. Plaintiffs allege
that these two ordinances constitute unconstitutional conditions in violation of the
Takings Clause of the Fifth Amendment of the U.S. Constitution. Id.
A. The Ordinances and Their Impact on redT Projects
1. 	Linkage Fee Ordinance
The Linkage Fee Ordinance requires building permit applicants to pay affordable
housing linkage fees as part of new residential and nonresidential construction in
Denver in order to fund affordable housing. Id. at 4-5, ¶¶ 11, 13-14. The Linkage Fee
Ordinance applies to residential developments of fewer than ten dwelling units. Id. at 5,
¶ 13.
The Linkage Fee Ordinance is premised on legislative findings by Denver that
“[t]he extraordinary housing cost increases in Denver are driven, in part, by the pace of
population and job growth in the city, resulting in a situation where demand for housing
has far outpaced supply” and that “residential and non-residential development is
demonstrably associated with the generation of new jobs at various income levels, with
the number of jobs associated with any particular development being correlated with the
1 The facts below are taken from plaintiffs’ second amended complaint (“the
complaint”), Docket No. 11, and are presumed to be true, unless otherwise noted, for
purposes of ruling on defendant’s motion to dismiss.
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type and size of the development.” Id. at 6, ¶¶ 17-18. These legislative findings are
“supported by the ‘Denver Affordable Housing Nexus Study.’” Id., ¶ 19. The Nexus
Study underlying the Linkage Fee Ordinance relies on the argument that new housing
development creates economic activity which results in an increased workforce in need
of housing. Id., ¶ 20. The study begins by estimating the sale or rent price of a
“prototypical” residential unit and “moves through a series of linkages to the incomes of
the households that purchase or rent the units, the annual expenditures of those
households on goods and services, the jobs associated with the delivery of these goods
and services, the income of the workers performing those jobs, the household income of
those worker households, and finally to the affordability level of the housing needed by
those worker households.” Id. at 7, ¶ 21.
The linkage fees required for the issuance of a building permit currently range
from $1.99 to $7.22 per square foot of gross floor area. Id. at 5, ¶ 14.
Denver’s Department of Housing Stability enforces the Linkage Fee Ordinance
requirements, and the head of the department may reduce or waive the amount of
linkage fees if an application demonstrates that the required amount of fees exceeds
the amount that would be needed to mitigate the actual demand for affordable housing
created by the development. Id. at 5-6, ¶¶ 12, 16. Instead of paying the linkage fee, an
applicant may instead choose to comply with the Mandatory Affordable Housing
Ordinance. Id. at 7, ¶ 23.
redT Homes is seeking development approval for the West Gill Single Family
project (“West Gill project”) in Denver, which consists of four single-family residences of
three bedrooms. Id. at 11-12, ¶ 40. The West Gill property is owned by redT Capital.
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Id. The West Gill project will require payment of approximately $24,962.56 under the
Linkage Fee Ordinance (at $3.92 per square foot of gross floor area). Id. at 12, ¶ 41.
redT Homes is also seeking development approval for the South Sherman
Duplex project (“South Sherman project”) in Denver, which consists of two duplexes (for
a total of four units). Id., ¶ 42. redT Homes is the party responsible for actually paying
the fees associated with the Linkage Fee Ordinance to Denver for the South Sherman
project. Id., ¶ 44. The South Sherman project will require payment of approximately
$44,917.60 under the Linkage Fee Ordinance (at $6.17 per square foot of gross floor
area). Id., ¶ 45.
On February 19, 2025, redT Homes applied for waivers from the Linkage Fee
Ordinance in connection with both the South Sherman project and the West Gill project.
Id. at 13, ¶ 48. The waiver requests stated, in part, that the “proposed linkage fee may
inadvertently hinder the development of housing in areas where affordable housing is
most needed. This will have a negative impact on the community that we are trying to
enhance in these locations through the provision of much needed housing.” Id. On
March 13, 2025, Denver denied the waiver requests. Id., ¶ 49.
2. 	Mandatory Affordable Housing Ordinance
The Mandatory Affordable Housing Ordinance is intended to promote the
construction of new affordable housing units in the city. Id. at 8, ¶ 25 (citing Docket No.
11-1 at 18-19) (Denver Revised Muni. Code § 27-218). The Mandatory Affordable
Housing Ordinance requires any development of ten or more dwelling units to provide a
certain portion of those units as affordable units. Id. The Mandatory Affordable
Housing Ordinance also gives an applicant the option to pay a fee in-lieu or negotiate
an alternative to the base affordable unit requirement. Id. at 9-10, ¶¶ 32-33.
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The Mandatory Affordable Housing Ordinance is based on legislative findings
that “[m]arket forces, including continued population growth and unmet demand for new
housing, result in highly priced housing, and a lack of economic incentive for developers
to offer a more diversified price range of housing, and therefore such housing is not
being created at a level that meets current demand” and that “[r]apid regional growth
and a strong housing demand have combined to make land and construction costs
higher, limiting the areas where affordable housing is located.” Id. at 10, ¶ 35.
For the calculation of the percentage of units that must be restricted based on
income, developments are divided into “high market” and “typical market” categories.
Id. at 8, ¶ 26. Two compliance options are available within each category, allowing
developers to select the amount of units to be set aside and adjusting the level of price
control accordingly. 	Id. For example, a “typical market” development may choose to
set aside 10% of units to be rented to persons earning 60% of the area median income
or sold to people earning 80% of the area median income, or the developer may choose
to set aside 15% of units to be rented to persons earning an average of 70% of the area
median income or sold to persons earning an average of an average of 90% of the area
median income. Id.
If the formula for determining the number of income-restricted units required
results in a fractional unit, the requirement is rounded up or down to the nearest whole
unit, except that at least one unit must be provided. Id. 8-9, ¶ 27. For four-unit
developments like the South Sherman and West Gill projects, one income-restricted unit
would be required. Id.
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Developments containing income-restricted units, or the income-restricted units
themselves, must carry out deed restrictions, restrictive covenants, or other forms of
affordability restrictions. Id. at 9, ¶ 29. The income-restricted units must be maintained
at affordable rates for a minimum term of 99 years and must be occupied by an eligible
household whose income is at or below the applicable income limit. Id., ¶ 30.
Unlike the Linkage Fee Ordinance, the Mandatory Affordable Housing Ordinance
does not permit waiver requests. Id. at 13, ¶ 51. However, an alternative to the
requirement of income restricting a unit in the new development, the developer may pay
a fee in-lieu. Id. at 9, ¶ 32. These fees are calculated differently from those in the
Linkage Fee Ordinance and range from $250,000 to $478,000 for each of a certain
percentage of units depending on the market area classification and the specific type of
residential development at issue. Id. The Mandatory Affordable Housing Ordinance
also provides that applicants may propose “negotiated alternative” compliance methods
which may be accepted at the discretion of the executive director of the Department of
Housing Stability. Id. at 9-10, ¶ 33. The applicant must “demonstrate how the proposed
negotiated alternative provides outcomes that better support the goals of the
[Department of Housing Stability] strategic plan, comprehensive plan goals, and any
small area plan applicable to the residential development.” Id. The Mandatory
Affordable Housing Ordinance includes a non-exclusive list of contemplated negotiated
alternatives, including the dedication of land, adjustment to the number, affordability-
level, or features of income-restricted units, and the provision of off-site income-
restricted units. Id. at 10, ¶ 34.
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For the South Sherman and West Gill projects, the Mandatory Affordable
Housing Ordinance in-lieu fees would be significantly higher than the Linkage Fee
Ordinance fees. Id. at 14, ¶ 52.
B. Alleged Deficiencies with the Ordinances
The complaint alleges that new residential development “categorically does not
have a negative public impact on housing affordability.” Id. at 18, ¶ 71. The complaint
claims that the Nexus Study is insufficient to support the ordinances because 1) “[i]t fails
to account for the downward pressure that new supply puts on pricing,” 2) “[i]t fails to
account for the ‘filtering’ effect of new housing supply, by which existing units are freed
up by new units, and by which new units become more affordable over time,” 3) “[i]t fails
to establish the causal relationship between new residential development and increased
workforce housing demands on which it relies,” and 4) “[i]t cannot explain why new
commercial and industrial development is sometimes subject to lower fees than new
residential development, despite the fact that new commercial and industrial
development is naturally more directly related to increased workforce housing
demands.” Id. at 18-19, ¶ 72.
redT did not have, and Denver did not provide, any alternative to the conditions
imposed by the ordinances. Id. at 19, ¶ 73.
II. LEGAL STANDARD
A. Rule 12(b)(1)
Federal Rule of Civil Procedure 12(b)(1) allows a party to move to dismiss a
claim for lack of subject matter jurisdiction. Fed. R. Civ. P. 12(b)(1). A dismissal under
Rule 12(b)(1) is not a judgment on the merits; rather, it is a determination that the court
lacks jurisdiction to adjudicate the claim. Creek Red Nation, LLC v. Jeffco Midget
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Football Ass’n., Inc., 175 F. Supp. 3d 1290, 1293 (D. Colo. 2016). A court lacking
jurisdiction “must dismiss the cause at any stage of the proceedings in which it becomes
apparent that jurisdiction is lacking.” Caballero v. Fuerzas Armadas Revolucionarias de
Colombia, 945 F.3d 1270, 1273 (10th Cir. 2019) (citation omitted). The dismissal is
without prejudice. Brereton v. Bountiful City Corp., 434 F.3d 1213, 1218 (10th Cir.
2006).
Challenges to subject matter jurisdiction may take two forms – a facial attack or a
factual attack – each with distinct analytical frameworks. United States v. Rodriguez-
Aguirre, 264 F.3d 1195, 1203 (10th Cir. 2001). A facial challenge focuses on the
sufficiency of the allegations in the complaint. Id. In resolving a facial challenge, “the
district court must accept the allegations in the complaint as true.” Id. By contrast, a
factual challenge allows a party to “go beyond allegations contained in the complaint
and challenge the facts upon which subject matter jurisdiction depends.” Id. (citation
omitted). In addressing a factual challenge to subject matter jurisdiction, “the court does
not presume the truthfulness of the complaint’s factual allegations.” Id. (citation and
quotations omitted); see also Stuart v. Colo. Interstate Gas Co., 271 F.3d 1221, 1225
(10th Cir. 2001) (“a court’s reference to evidence outside the pleadings does not convert
the motion into a Rule 56 motion”). “A challenge to a plaintiff's standing to bring a
particular claim is properly raised in a Rule 12(b)(1) motion to dismiss for lack of
subject-matter jurisdiction.” Creek Red Nation, LLC, 175 F. Supp. 3d at 1293.
B. Rule 12(b)(6)
To survive a Rule 12(b)(6) motion to dismiss, the complaint must contain
“enough facts to state a claim to relief that is plausible on its face.” Ridge at Red Hawk,
L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (quoting Bell Atlantic Corp. v.
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Twombly, 550 U.S. 544, 570 (2007)). A plausible claim is a claim that “allows the court
to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). While the court must accept the
well-pled allegations of the complaint as true and construe them in the light most
favorable to the plaintiff, Robbins v. Wilkie, 300 F.3d 1208, 1210 (10th Cir. 2002),
conclusory allegations are not entitled to be presumed true. Iqbal, 556 U.S. at 681.
However, so long as the plaintiff offers sufficient factual allegations such that the right to
relief is raised above the speculative level, she has met the threshold pleading
standard. See, e.g., Twombly, 550 U.S. at 556; Bryson v. Gonzales, 534 F.3d 1282,
1286 (10th Cir. 2008).
III. ANALYSIS
Plaintiffs bring one claim, pursuant to 42 U.S.C. § 1983, alleging an
unconstitutional exaction in violation of their Fifth and Fourteenth Amendment rights.
Docket No. 11 at 14-19. Plaintiffs describe their claim as both a facial and an as-
applied challenge to the ordinances. Id. at 18, ¶ 70. Denver seeks to dismiss the
complaint under Rule 12(b)(1), arguing that plaintiffs lack standing, and under Rule
12(b)(6), arguing that plaintiffs have failed to state a claim upon which relief can be
granted. Docket No. 14 at 1-2.
A. Motion to Dismiss for Lack of Standing
To establish Article III standing, a plaintiff must allege “that (1) he or she has
suffered an injury in fact; (2) there is a causal connection between the injury and the
conduct complained of; and (3) it is likely that the injury will be redressed by a favorable
decision.” Ward v. Utah, 321 F.3d 1263, 1266 (10th Cir. 2003) (quoting Phelps v.
Hamilton, 122 F.3d 1309, 1326 (10th Cir. 1997)). In order to show the first element of
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standing, a plaintiff must show she has “suffered an injury in fact – an invasion of a
legally protected interest which is (a) concrete and particularized, and (b) actual or
imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife, 504 U.S. 555,
560-61 (1992) (internal quotations and citations omitted); see also Spokeo, Inc. v.
Robins, 578 U.S. 330, 339 (2016) (“Injury in fact is a constitutional requirement.”). An
injury is particularized if it affects the plaintiff in “a personal and individual way.”
Spokeo, 578 U.S. at 339 (citation omitted). “A ‘concrete’ injury must be ‘de facto’; that
is, it must actually exist;” it must be “real,” not “abstract.” Id. at 340. Furthermore, “[a]
federal court’s jurisdiction . . . can be invoked only when the plaintiff himself has
suffered ‘some threatened or actual injury.’” Warth v. Seldin, 422 U.S. 490, 499 (1975)
(quoting Linda R.S. v. Richard D., 410 U.S. 614, 617 (1973)).
Denver makes two arguments as to why plaintiffs have not alleged an injury in
fact. Docket No. 14 at 4-6. For the first injury-related argument, Denver notes that,
since the building permits are still under review and various city agencies may still
impose other burdens on the projects, it is possible that 1) plaintiffs will decide to
abandon the projects or that 2) Denver will deny the permits for another reason. Id. For
the first part of this argument, which the Court understands to be an argument that the
injury to plaintiffs is too hypothetical because plaintiffs might abandon the project, the
Court notes that plaintiffs have alleged that they applied for permits, sought a waiver of
the Linkage Fee Ordinance, and Denver denied the waiver. Docket No. 11 at 13, ¶¶ 48-
49. Plaintiffs thus allege that they were impermissibly denied a government benefit, and
“the impermissible denial of a governmental benefit is a constitutionally cognizable
injury.” Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595, 607 (2013); see
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also Palmer Kearney Mesa Props., LP v. City of San Diego, 2026 WL 125686, at *6-7
(S.D. Cal. Jan. 16, 2026) (discussing a city’s ripeness argument regarding a developer’s
permit application). For the second part of the argument, the fact that Denver may deny
the permits for other reasons does not mean that plaintiffs did not suffer an injury. See
Koontz, 570 U.S. 595 at 607 (“Nor does it make a difference, as respondent suggests,
that the government might have been able to deny petitioner's application outright
without [requiring an exaction].”). Therefore, the Court rejects the first injury-related
argument.
For the second injury-related argument, Denver argues that plaintiffs have not
suffered an injury because they no longer own the South Sherman project property.
Docket No. 14 at 6 (citing Docket No. 11 at 12, ¶ 43). Yet, Denver itself notes that, the
city building code provides that either the property owner or the property owner’s agent
shall apply for building permits, and that the person applying for the permit shall be
responsible for paying the linkage fees. Docket No. 14 at 6 (citing Denver Revised
Muni. Code § 27-156). Plaintiffs allege that, despite having sold the property, they are
still the ones responsible for paying the fees. Docket No. 11 at 12, ¶ 44. The inference
is that plaintiffs are the owner’s agent for the South Sherman project property and are
paying the linkage fees as the agent. Plaintiffs have thus sufficiently alleged an injury
for standing purposes. Moreover, even if plaintiffs did not have standing to challenge
the ordinances due to not owning the South Sherman project property, plaintiffs still own
the West Gill project property and thus have standing based on that ownership to
challenge the constitutionality of the ordinances.
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The Court finds that Denver’s argument regarding plaintiffs’ standing fails. 2
B. Motion to Dismiss for Failure to State a Claim
Denver argues that neither the Linkage Fee Ordinance or Mandatory Affordable
Housing Ordinance constitutes an unconstitutional condition on plaintiffs’ property
rights. Docket No. 14 at 7-15.
The Takings Clause of the Fifth Amendment states that private property shall not
“be taken for public use, without just compensation.” U.S. Const. amend V. The
Takings Clause applies to federal governmental entities and, through the Fourteenth
Amendment, to state and local governmental entities as well. Chicago, B. & Q. R. Co v.
City of Chicago, 166 U.S. 226, 239-241 (1897). The prohibition against taking private
property without just compensation has been extended to situations where a
government conditions the approval of a development project on the applicant
dedicating a property interest to the governmental body or public at large – what is
known as “exactions.” See Dolan v. City of Tigard, 512 U.S. 374, 384-85 (1994); Nollan
v. Cal. Coastal Comm’n, 483 U.S. 825, 837 (1987). “Extortionate demands for property
in the land-use permitting context run afoul of the Takings Clause not because they take
property but because they impermissibly burden the right not to have property taken
without just compensation.” Koontz v. St. Johns River Water Mgmt. Dist., 570 U.S. 595,
607 (2013). The Supreme Court has held that these sorts of “exactions” also occur
when the government requires citizens to expend money in exchange for development
or permitting approval. Id. at 619.
2 Plaintiffs believe that Denver is also making a ripeness challenge due to
plaintiffs’ alleged failure to exhaust administrative remedies. Docket No. 19 at 3-5. The
Court does not understand Denver to make this argument and therefore does not reach
this issue.
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Nollan, Dolan, and Koontz are the guideposts for the Court’s analysis. In Nollan,
the Supreme Court determined that when a government entity demands the
conveyance of property in exchange a permit, the “just compensation” requirement of
the Takings Clause was potentially implicated. 483 U.S. at 834-38, 841-42. There, the
landowners applied for a permit from the California Coastal Commission (the
“Commission”) to demolish their current beachfront home and build a larger one. Id. at
828. The Commission was willing to approve the permit on the condition that the
landowners provided a public easement across their beachfront. Id. The Supreme
Court noted that “[h]ad California simply required . . . an easement . . . available to the
public on a permanent basis . . . there would have been a taking.” Id. at 831. But,
because the permit approval was essentially a land-use regulation, it would not effect a
taking so long as the regulation advanced a legitimate state interest and did not deny
the landowners economically viable use of the land. Id. at 834.
The Commission offered several legitimate governmental interests, such as
“protecting the public’s ability to see the beach” and “preventing congestion” on public
beaches. Id. at 835. However, the Supreme Court reasoned that none of these
purposes, even if legitimate, had an “essential nexus” to the easement. Id. at 836-37. It
was “quite impossible to understand how a requirement that people already on the
public beaches be able to walk across the [landowners’] property reduces any obstacles
to viewing the beach created by the new house.” Id. at 838. The permit condition
therefore violated the Takings Clause. Id. at 841-42.
The Supreme Court elaborated on Nollan in Dolan, answering the question of
whether all conditions with an essential nexus satisfy the strictures of the Takings
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Clause. In Dolan, a business owner wanted to expand her business and, to do so,
planned to redevelop her property by paving a parking lot and expanding her store. 512
U.S. at 379. A portion of her property, however, was located in a 100-year flood plain.
Id. The business owner applied for a permit to begin development; the city granted the
permit on the condition that she dedicate part of her land as a public greenway to assist
with storm drainage and another fifteen-foot strip as a pedestrian and bike path. Id. at
380, 393. The Supreme Court first looked to the essential nexus. Id. at 387. The Court
determined that such a nexus existed because there was a connection between
increased flooding that could result from development within the flood plain and the
requirement to offset such flooding with a greenway. Id. Additionally, the pedestrian
and bike path could theoretically reduce the increased congestion that may result from
the new, larger store. Id. at 387-88.
However, the Supreme Court concluded that nexus was not enough. There must
also be a “rough proportionality” between the condition and the effect of the
development. Id. at 391 (“No precise mathematical calculation is required, but the city
must make some sort of individualized determination that the required dedication is
related both in nature and extent to the impact of the proposed development.” (footnote
omitted)). The Supreme Court did not fully answer whether the condition satisfied the
rough proportionality requirement. Id. at 393-96. However, it did note that the city had
failed to demonstrate that a public, instead of a private, greenway was roughly
proportional to the effect on development, or that the path would actually, rather than
potentially, offset congestion. Id.
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Finally, in Koontz, the Supreme Court extended the essential nexus and rough
proportionality tests to situations in which a government does not demand that the
landowner give the governmental entity a real property interest but, instead, demands
that a permit seeker expend money to receive permit approval. 570 U.S. at 612-15.
There, a landowner sought to develop 3.7 acres of a 14.9-acre tract of land that was
predominantly classified as wetlands. Id. at 600. The landowner applied for a permit
from the relevant water district, which said it would grant the permit on one of two
conditions: the landowner either reduce the size of the proposed development to one
acre and grant a conservation easement on the remaining 13.9 acres or build the
development as proposed but also “hire contractors to make improvements to District-
owned land several miles away.” Id. at 602.
The Supreme Court rejected the argument that asking the landowner to “spend
money rather than give up an easement on his land” rendered the takings claim
incognizable. Id. at 611-13. Accepting such an argument, the Koontz court reasoned,
would make it “very easy for land-use permitting officials to evade” Nollan and Dolan
because officials “wishing to exact an easement could simply give the owner a choice of
either surrendering an easement or making a payment equal to the easement’s value.”
Id. at 612. Because such “in lieu of” fees are “functionally equivalent to other types of
land use exactions” and because demands for money “operate upon . . . an identified
property interest,” the Supreme Court held that monetary exactions – defined as a
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government demand for a citizen to expend money in exchange for development or
permitting approval 3 – must also satisfy Nollan and Dolan. Id. at 612-13.
Thus, Nollan, Dolan, and Koontz require that, when a governmental entity places
a condition on an identifiable property interest, there must be an “essential nexus”
between the condition and the development, as well as “rough proportionality” between
the effect of the development and the condition. Id.; Dolan, 512 U.S. at 386, 391.
C. Whether the Linkage Fee Ordinance is an Unconstitutional Condition
Denver argues that plaintiffs’ claim fails for not sufficiently alleging a lack of
“rough proportionality.” Docket No. 14 at 8-11. Denver views plaintiffs’ complaint,
which lists various ways in which plaintiffs believe the Linkage Fee Ordinance formula is
deficient, as incorrectly asserting a right to a precise mathematical calculation. Id. at 8-
9. Denver notes that the Nexus Study recommended higher Linkage Fee Ordinance fee
rates, and that Denver decided not to charge the “maximum legally justifiable fee.” Id.
at 9. Denver also argues that the fact that Linkage Fee Ordinance provides for
individualized consideration of waiver requests demonstrates that there is “rough
proportionality.” Id. at 10-11. Finally, Denver argues that, because the compliance with
the Mandatory Affordable Housing Ordinance is an alternative to paying the linkage fee,
and that the Mandatory Affordable Housing Ordinance is constitutionally permissible,
the Linkage Fee Ordinance is also constitutional. Id. at 14-15.
3 In Koontz, the Supreme Court explained that a monetary exaction is not the
same as a tax. Id. at 615-17. The Court noted that “teasing out the difference between
taxes and takings is more difficult in theory than in practice,” and that it did not need to
decide “at precisely what point a land-use permitting charge denominated by the
government as a ‘tax’ becomes ‘so arbitrary . . . that it was not the exertion of taxation
but a confiscation of property.” Id. at 616-17 (citation omitted).
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As a threshold matter, Denver does not argue that plaintiffs fail to plead a lack of
“essential nexus” between a legitimate state interest and the permit condition. Because
a finding of an unconstitutional condition can be based on either the lack of an essential
nexus or on the lack of rough proportionality, Dolan, 512 U.S. at 386, plaintiffs’ claim
can survive even if it only alleges one of the two deficiencies. Although the complaint is
not entirely clear, the Court understands its allegation that “new residential development
categorically does not have a negative impact on housing affordability,” Docket No. 11
at 18, ¶ 71, to assert both a lack of essential nexus and a lack of rough proportionality.
Thus, plaintiffs’ claim would survive even if Denver is correct about the failure to plead a
lack of “rough proportionality.”
The Court finds that Denver is not correct about the lack of allegations of “rough
proportionality.” The Supreme Court has explained that a precise mathematical
calculation is not required in order for a permit condition to meet the “rough
proportionality” requirement. In Dolan, the Supreme Court found a lack of “rough
proportionality” based on the fact that the city permitting authority had found only that
the imposed conditions “could” mitigate issues caused by the new development, rather
than finding that the imposed conditions would or were likely to mitigate those problems.
512 U.S. at 395-96. The complaint here provides some details about how the linkage
fee calculations work, see Docket No. 11 at 6-7, ¶¶ 20-21, but the Court cannot, from
these details alone, determine whether Denver has made the requisite effort to quantify
its findings in support of the imposed condition. Instead, a dispute regarding the
sufficiency of Denver’s calculations is better addressed at summary judgment.
Similarly, Denver’s arguments about choices it made in setting the linkage fees and
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about the individualized determination and waiver process rely on facts not properly
before the Court at the motion to dismiss stage.
D. Whether the Mandatory Affordable Housing Ordinance is an
Unconstitutional Condition
Denver makes two arguments as to why plaintiffs have failed to state a claim
regarding the constitutionality of the Mandatory Affordable Housing Ordinance. Docket
No. 14 at 11-15.
First, Denver argues that the Nollan and Dolan tests apply only when the
government requires, as a condition of the permit, that the applicant permit the
government or the public to physically invade the applicant’s property. Id. at 12-14.
Because the Mandatory Affordable Housing Ordinance does not require a physical
invasion of plaintiffs’ property, Denver argues that the Nollan and Dolan requirements
do not apply. Id. As plaintiffs note, however, Docket No. 19 at 9-11, the Supreme
Court’s holding in Koontz forecloses this argument. In Koontz, the Supreme Court held
that the unconstitutional conditions doctrine applied to both monetary and non-monetary
exactions, so long as there is a “direct link between the government’s demand and a
specific parcel of real property.” 570 U.S. at 614.
Denver’s second argument is that affordable housing requirements such as the
Mandatory Affordable Housing Ordinance are not subject to Nollan and Dolan. Docket
No. 14 at 14. Plaintiffs respond that Nollan and Dolan apply because the Mandatory
Affordable Housing Ordinance “directly interferes with property rights grounded in
Colorado law.” Docket No. 19 at 10-11. Plaintiffs argue that Colorado law recognizes
the right of a property owner to fix the sale price of its property and that a Colorado
statute prohibits the imposition of rent controls. Id. at 12. Plaintiffs also assert that the
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Mandatory Affordable Housing Ordinance results in the government taking a property
interest in the form of the 99-year restrictive covenant imposing the affordable housing
conditions. Id. at 13. As a result, plaintiffs claim that the Mandatory Affordable Housing
Ordinance is subject to Nollan and Dolan because it allows Denver to impose
requirements that it could not otherwise impose.
“A predicate for any unconstitutional conditions claim is that the government
could not have constitutionally ordered the person asserting the claim to do what it
attempted to pressure that person into doing.” Koontz, 570 U.S. at 612. Koontz
explained that, “if the government had directly seized the easements it sought to obtain
through the permitting process, it would have committed a per se taking.” Id. The
question here is whether Denver could have imposed the Mandatory Affordable
Housing Ordinance, requiring the dedication of a certain percentage of units for sale or
lease to individuals within a certain income threshold, without effecting a taking.
Regulatory actions can constitute takings and trigger the right to compensation in
several ways. First, a per se taking occurs when the government “physically
appropriate[es] property or otherwise interfere[s] with the owner’s right to exclude others
from it.” Sheetz v. Cnty. of El Dorado, Cal., 601 U.S. 267, 274 (2024) (quoting Cedar
Point Nursery v. Hassid, 594 U.S. 139, 149–152 (2021)) (internal quotations omitted).
Second, a per se taking also occurs when the government “completely deprive[s] an
owner of all economically beneficial use of her property.” Green Room LLC v. Wyo.,
157 F.4th 1196, 1211 (10th Cir. 2025) (quoting Lingle v. Chevron U.S.A. Inc., 544 U.S.
528, 538 (2005) (emphasis omitted)). The third form of a regulatory taking is governed
by the standard set forth in Penn Cent. Transp. Co. v. New York City, 438 U.S. 104
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(1978), and considers “(1) [t]he economic impact of the regulation on the claimant and,
particularly, the extent to which the regulation has interfered with distinct investment-
backed expectations, and (2) the character of the governmental action.” Green Room,
157 F.4th at 1211 (quoting Penn Cent. Transp., 438 U.S. at 124) (internal quotation
omitted).
Plaintiffs’ response to the motion to dismiss is not altogether clear as to which
form of taking they believe the Mandatory Affordable Housing Ordinance constitutes.
But they do not assert, either in the complaint or in the response brief, that the
Mandatory Affordable Housing Ordinance has deprived them of all economically
beneficial use of their property. They also do not discuss factors relevant to the Penn
Central analysis, such as what their expectations were at the time they made their
investments. As such, the only remaining theory upon which plaintiffs’ claim could
survive is if the Mandatory Affordable Housing Ordinance physically appropriates
plaintiffs’ property or interferes with their right to exclude others from it. It is through this
lens that the Court views plaintiffs’ arguments regarding the 99-year deed restriction
and regarding Colorado property law.
Several courts have addressed similar arguments regarding affordable housing
ordinances that require the dedication of a certain percentage of units. In Palmer
Kearney Mesa Props, 2026 WL 125686, at *1, the court addressed a San Diego,
California ordinance that “requires developers of certain new developments to set aside
10% of residential units for low-income households at a cost, including an allowance for
utilities, that does not exceed 30 percent of 60 percent of median income.” (internal
quotations and citation omitted). The affordable units were to be restricted for at least
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55 years by covenants recorded in the deeds. Id. The ordinance permitted developers,
in lieu of dedicating income-restricted units, to pay fees to an affordable housing fund.
Id. The court held that the ordinance did not constitute a physical taking and that, rather
than requiring the property owner to submit to occupation, the ordinance merely
regulated the owner’s use of its own property when it voluntarily chose to enter the
rental market. Id. at *8 (citing Yee v. City of Escondido, 503 U.S. 519, 527-28 (1992)).
The court therefore found that the ordinance did not, on its own, constitute a taking, and
that an unconstitutional conditions claim under Nollan and Dolan could not survive. Id.
at *9.
In 2910 Georgia Ave. LLC v. D.C., 234 F. Supp. 3d 281, 287 (D.D.C. 2017), the
court addressed a District of Columbia law that required that “8–10 percent of the gross
floor area of new residential developments (or substantial additions to existing
developments) in the District be used for sale or lease to eligible low – and moderate-
income households at certain maximum price levels.” The law stated that “no building
permit shall be issued” unless the developer “records a covenant in the land records of
the District of Columbia that binds all persons with a property interest in any or all of the
[property] to construct and reserve the number of inclusionary units.” Id. The court
analyzed the law under the Penn Central framework and found that it did not constitute
a regulatory taking. Id. at 298-302. The court also found that the plaintiff’s claim could
not survive under a theory of physical invasion or of loss of all economic value. Id. at
302. Finally, the court found the Nollan and Dolan framework inapplicable, in part
because there had been no taking in the first place. Id. at 304-06.
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In Home Builders Ass'n of Greater Chicago v. City of Chicago, 213 F. Supp. 3d
1019, 1022 (N.D. Ill. 2016), the court addressed a Chicago, Illinois ordinance that
applied to certain residential housing projects of more than ten units. The ordinance
required that, for these projects, the developer “either (1) dedicate ten percent of the
new units as affordable housing for rent or sale for thirty years, or (2) pay a fee of
$100,000 per required unit into an affordable housing fund.” Id. The court began its
analysis of the Takings Clause claim by assessing whether the ordinance effected a
taking. Id. at 1023-1025. The plaintiffs contended that the ordinance constituted a
physical invasion of their property rights because it interfered with their right to set the
price for which they would sell the property and because the ordinance required a
recorded encumbrance on the property. Id. at 1025-26. The court rejected these
arguments. For the first argument, the court found that, while owners typically had the
right to set property prices, regulations such as rent controls are not per se takings. Id.
at 1026 (collecting cases). For the second argument, the court found that the
requirement to record the affordable-housing restriction did not rise to the level of
creating a public property right or public easement, and thus did not constitute a
physical taking either. Id. at 1027.
The Court agrees with the analysis of these three cases. The Court finds that the
Mandatory Affordable Housing Ordinance, by requiring income restrictions on certain
units and requiring the recording of a deed, does not constitute a physical invasion of
property as required to establish a per se taking. 4 It also does not involve the kind of
4 The Court shares the skepticism expressed in Home Builders regarding the
impact on the analysis of a state prohibition on rent controls. See 213 F. Supp. 3d at
1028. Plaintiffs cite Phillips v. Washington Legal Found., 524 U.S. 156, 164 (1998), for
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monetary exaction that was at issue in Koontz. Thus, the Mandatory Affordable
Housing Ordinance is not subject to the unconstitutional conditions analysis under
Nollan and Dolan, and plaintiffs complaint must be dismissed insofar as it challenges
the Mandatory Affordable Housing Ordinance. Moreover, because the Mandatory
Affordable Housing Ordinance is an alternative to Linkage Fee Ordinance compliance,
Docket No. 11 at 7, ¶ 23, and because the Mandatory Affordable Housing Ordinance is
an alternative that does not violate Nollan and Dolan, the Linkage Fee Ordinance is not
an unconstitutional condition. See Koontz, 570 U.S. at 596 (“Had [plaintiff] been offered
at least one alternative that satisfied Nollan and Dolan, he would not have been
subjected to an unconstitutional condition.”). The Court therefore finds that plaintiffs’
challenge to the Linkage Fee Ordinance must also be dismissed.
The Court will grant Denver’s motion and will dismiss plaintiffs’ claim without
prejudice.
the proposition that the Court should consider state law in its analysis. Docket No. 19 at
10-11. In Phillips, there was no question that the government was obtaining property
without compensation. See id. at 159-163. The issue was whether the plaintiffs had an
interest in the property that was being taken, thus requiring an examination of state law.
Id. at 164-165. The Court finds the present situation to be different, as the relevant
question is whether the Mandatory Affordable Housing Ordinance constitutes a taking.
But even if state law impacted the analysis, it is not clear that it would make a difference
here. As plaintiffs note, Colo. Rev. Stat. § 38-12-301 restricts rent control in Colorado.
Docket No. 19 at 12. The Colorado Supreme Court has interpreted rent control to mean
“allowable rent capped at a fixed rate with only limited increases.” Town of Telluride v.
Lot Thirty-Four Venture, L.L.C., 3 P.3d 30, 35 (Colo. 2000). The Mandatory Affordable
Housing Ordinance restricts the sale or lease of the income-restricted units not based
on rent or sale price, but on the income level of the buyer or lessee. See Denver
Revised Muni. Code § 27-224. And although the law requires prices be kept
“affordable” to buyers and lessees of those income levels, see id. § 27-224(a), (f), it is
not clear to the Court that such requirements fall within the Colorado Supreme Court’s
interpretation of the rent control law.
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IV. CONCLUSION
It is therefore
ORDERED that Defendant’s Motion to Dismiss Plaintiff’s Second Amended
Complaint for Declaratory and Injunctive Relief [Docket No. 14] is GRANTED. It is
further
ORDERED that plaintiffs’ second amended complaint, Docket No. 11, is
DISMISSED without prejudice. It is further
ORDERED that this case is closed.
DATED March 3, 2026.
BY THE COURT:
___________________________
PHILIP A. BRIMMER
Chief United States District Judge
___________________________
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