A federal judge in San Diego threw out billionaire developer Geoffrey Palmer’s high-profile challenge to the city’s inclusionary affordable-housing rules, leaving his big Kearny Mesa project squarely under the 10% affordable-unit requirement or in-lieu fees. The ruling is a major legal setback for a developer known for tangling with cities over housing regulations, and city officials and housing advocates say it cements San Diego’s power to make large market-rate projects help pay for affordability.
What the court said
In an order signed by U.S. District Judge Dana M. Sabraw, the court granted the City’s motion to dismiss and ruled that Palmer’s claims lack a cognizable legal theory, tossing the case with prejudice. Palmer and his co-plaintiffs had argued that San Diego’s Inclusionary Affordable Housing Regulations were an unconstitutional taking and ran afoul of both state and federal law. The order walks through the case’s procedural history and knocks down the plaintiffs’ facial and as-applied takings theories, according to the court order posted at Justia.
Local background
Palmer first brought the federal lawsuit in September 2023 after asking the city for an administrative waiver from the inclusionary regulations for a large Kearny Mesa project. Local reporting indicates that in late 2022 he sought to have the project exempted and is now finishing a 1,642-unit complex at Clairemont Mesa Boulevard and Convoy Street, with additional large proposals lined up in Grantville, as reported by CBS 8.
Palmer's record
Palmer is a prolific, and often polarizing, figure in Southern California real estate. Forbes has reported that he has amassed a substantial apartment portfolio and agreed to a proposed $12.5 million settlement in a 2022 class action accusing him of improperly holding on to tenants’ security deposits.
Legal implications
Because the judge dismissed the complaint with prejudice, this round of Palmer’s federal court offensive is over at the district level, although he can still try his luck with an appeal. The order details why many of his constitutional and statutory arguments did not stick, leaving administrative tools and the city’s waiver process as the more realistic paths forward for the developer. The full order is posted on Justia.
What this means for projects
San Diego policy requires certain new developments to set aside 10% of units for low-income households or pay in-lieu fees that flow into the Affordable Housing Fund. City guidance currently pegs the in-lieu fee at about $25 per square foot. That leaves Palmer’s Kearny Mesa build and other large market-rate projects on the hook for either income-restricted units or the fee unless City Hall grants a waiver. The city’s information bulletin spells out the program’s rules and the waiver steps for developers seeking relief, according to the City of San Diego Development Services.
Bottom line
The ruling keeps the fight mostly in San Diego’s own permit lanes for now and signals that big-market builders cannot count on a quick federal escape hatch from the city’s inclusionary housing rules. Palmer’s projects will continue through local review, and any further challenge from him is likely to surface in administrative proceedings or on appeal rather than in a rebooted trial-court case.
