A Georgia Avenue NW developer is suing city officials for depriving it of “any economically viable use of its property without providing any form of compensation whatsoever” as a result of the city’s Inclusionary Zoning program.

The IZ program, which was passed by the D.C. Council in 2007 and took effect in 2009, requires developers of large new residential buildings to set aside 8 to 10 percent of the units for low- to moderate-income households at below-market rates. But because the recession froze much construction, most of the buildings that were recently constructed received their permits before IZ took effect, and only two IZ units have actually been built as of this summer.

Both of those are in a building at 2910 Georgia Ave. NW. And both, after 18 months on the market, are still unfilled. So the developer, 2910 Georgia Avenue LLC (affiliated with ASL Development Corp.), is suing the city, Mayor Vince Gray, and Department of Housing and Community Development Director Michael Kelly over the IZ regulations that it says are depriving it of the value of its property.

“Despite years of legislation, rulemaking, debate, and planning for the implementation of inclusionary zoning in the District, not a single household has taken possession of an inclusionary unit under the Inclusionary Zoning Program,” the lawsuit states. “The only effect that the Inclusionary Zoning Program has had is to discourage residential development and to deprive developers like Plaintiff of the economic value of their land.”

The developer bought the property from Howard University in 2009, when few housing starts were taking place, to build a 22-unit condo building. According to the lawsuit, zoning approval was initially granted in 2010 but then revoked due to the new IZ ordinance, taking the developer apparently by surprise and requiring it to supply two of the 22 units at a below-market price.

The lawsuit states that DHCD began marketing those two units in May 2011 and held lotteries for the units, but they produced “no qualified household ready, willing, and able to purchase these units.” Meanwhile, the other 20 units all sold within four months, for between $225,000 and $404,000. ASL’s Art Linde then asked DHCD for relief from IZ but was told that DHCD lacked the authority to release him from the IZ requirements.

According to the lawsuit, the developer’s counsel sent a letter to Kelly alleging that the IZ rules were depriving the developer of its constitutional property rights. DHCD’s counsel replied that DHCD couldn’t offer a solution at the time, and so the developer filed suit yesterday.

Kelly was not available for comment, but I expect to discuss this with him soon and will provide updates.

Photo from 2910georgiaave.com