Wyoming’s reimbursement presents a legal risk of local housing expense laws
A small win in impact fees is happening from time to time in the expensive US housing market.
Teton County, Wyoming, officials agreed last week to refund the $24,325 in “affordable workforce housing” a homeowner had to pay to get a permit to build a single-family home.
The settlement settles a lawsuit the homeowner filed last year in Wyoming federal court. Their lawyers are in a law firm that benefits the public Pacific Legal Foundation argued that the money violates the US Constitution.
It’s a small victory for the homeowner and the child moving forward in the effort to challenge the cost of affordable housing in the area. Fees do not differentiate between a single home owner, a master developer or anyone in between.
States have promoted zoning and regulatory reform, but fees charged by local governments for affordable housing have received little attention. These fees can kill deals because the developer may not be able to get a satisfactory return from the investors.
The Foundation recently filed a similar lawsuit in California over $100,000 in fees that San Luis Obispo requires a small developer to pay. In that case, the developer may place a deed restriction on one of the four parcels and sell the house and accessory dwelling unit for $450,000 or build at market value. The deed restriction option didn’t make sense because it cost $1.325 million to build.
As in the Wyoming case, the fees are allocated to an affordable housing fund. The Foundation has already won two other California lawsuits.
Not always victory
Not all court cases are in favor of the developer. In San Diego, a developer sued the city in federal court in September 2023 over costs related to work on 1,642 units. Lawyers for the developers have argued the same unconstitutional takeover claim as the one the Foundation has raised. However, a federal judge ruled in the city’s favor in January after siding with the developer.
The main difference between the San Diego case and the San Luis Obispo appeal is their strategy. The San Diego developer challenged the city’s ordinance using state and federal law and other arguments, while the Foundation presented its case as a claim of minority takings under the US Constitution. Unlike in San Diego, the developers in San Luis Obispo had already completed the work and paid the money.
Building in an expensive area
Wyoming’s homeowner woes provide insight into broader affordability issues in the state. Teton County has become the wealthiest county in the United States per capita, based on federal data analyzed by Jackson Councilman Jonathan Schechter. Schechter wrote on his blog that the county’s $532,903 per capita income is more than six times the national average and nearly double that of the second-place county.
“By 2024, a staggering 77% of Teton County residents came from investments, one of the best numbers in the country,” he added.
The latest New York Times the story, “Welcome to Wyoming, the Frontier of America’s New Gilded Age,” describes how Jackson, the state’s largest city and a longtime attraction for the wealthy, has become an even bigger playground for the wealthy.
Jackson’s median list price is $6.39 million, according to HousingWire Intelligence. New listings have an average price of $3.57 million.
Wyoming housing needs research in the tourism-driven Teton region found that median-priced housing is unaffordable for average earners in all major industries, even in the state’s highest-paying sectors. Rent is also hard on the budget, especially for working class residents.
A one-bedroom unit rents for an average of nearly $2,900, which is 77% higher than the national average, according to Apartments.com. The Housing Affordability Dashboard describes the “affordable and workforce housing shortage” as one of the region’s most pressing issues and says many households need some form of below-market or restricted housing to stay in the community.
Wyoming lawmakers have tried to address housing affordability through legislation but have been unsuccessful. Neighboring Montana passed sweeping changes in 2023 that legalized duplexes, required cities to allow mixed-use dwellings, opened up commercial zoning to mixed-use multifamily housing, and local zoning regulations to accommodate multiple homes. Colorado, to the south, is also making housing changes.
The challenge of adding employment
Trey Scharp grew up in Jackson, Wyoming. He and his wife, Shelby, run a ranch for young men and lead hunting and fishing trips. They bought five acres in the countryside in 2021, including a small cabin on the property, which they planned to rent out after building a new family home.
According to the Foundation, the county has determined that the 1,000-square-foot cabin is too large to qualify as part of a residence. The county identified an unfinished, windowless basement of the same size. The Sharps registered the building as historically significant, exempting it from ADU size limits.
That solved one problem. The next challenge was a new house. Building codes require a foundation 10 feet deep on a slope. The Sharps decided to add windows and a kitchen to create a second rental.
Officials said it violates single-family zoning laws. The couple left the program, but were hit with the housing bill. According to a county commission study, building new homes creates jobs, and some of the workers would not earn enough to stay in Teton County.
“Basic economic principles show that new home construction increases the supply of available housing and therefore reduces – not increases – housing availability in Teton County,” the Foundation’s lawyers wrote in the lawsuit.
