Developer's Substantive Due Process Claim Denied By United States Supreme Court

By Christopher B. Hanback and Leo G. Rydzewski

On March 25, 2003, the Supreme Court of the United States issued a decision in a much-heralded developer-rights case that has broad implications for all real property owners. In Cuyahoga Falls v. Buckeye Community Hope Foundation (U.S. 2003), the Supreme Court held that a municipality may use referenda to block affordable housing projects that satisfy zoning requirements but are disfavored by its citizens for allegedly discriminatory reasons. According to the Supreme Court, a municipality does not violate the Fourteenth Amendment's prohibition on deprivations of property without due process when it gives effect to such a referendum and denies a property owner the benefit of existing favorable zoning. However, the Court failed to provide clear guidance on what constitutes a protected property interest.

The case was filed by a nonprofit developer (Buckeye) that proposed to use low-income tax credits to build a 72-unit affordable housing apartment complex on property already zoned for multifamily housing in the nearly all-white city of Cuyahoga Falls, outside Akron, Ohio. The proposed apartment complex satisfied all applicable zoning requirements, and Buckeye was only required to submit a site plan acceptable to the city council. The city council in fact approved the site plan over the discriminatory objections of numerous local residents, including the mayor, who were reluctant to admit a more diverse group into their community and who expressed angry opposition because of the likelihood that the property would be occupied by families with children and African-Americans.

Refusing to accept the city council's determination, however, a group of determined residents collected enough signatures to submit the city council's decision to a voter referendum. City officials then stayed the effectiveness of the site plan approval pending the result of that referendum, and refused to issue Buckeye a building permit. The state Supreme Court ultimately ruled that the referendum violated the state constitution, and following that decision, Buckeye built the now-occupied affordable housing complex.

Buckeye brought this suit in federal court alleging that the city's refusal to issue a building permit pending resolution of the referendum violated its constitutional rights to equal protection and substantive due process, as well as its statutory rights under the Fair Housing Act. Buckeye sought money damages suffered from the delay it experienced in building the project including loss of an initial allocation of tax credits, HOME funds and private funding commitments. The federal district court granted summary judgment for the city, but the U.S. Court of Appeals for the Sixth Circuit reversed, holding that there were genuine issues of material fact with respect to all three issues.

The Sixth Circuit found that the discriminatory statements made by local residents, and the fact that no other site...