Wyoming Refund Exposes Legal Risk For Local Housing Fee Ordinances

Small wins on impact fees occasionally occur in costly U.S. housing markets.

Teton County, Wyoming, officials agreed last week to refund a $24,325 “affordable workforce housing” fee that a homeowner had to pay to obtain a permit to build a single-family home.

The payment settles a lawsuit the homeowner filed last year in a Wyoming federal court. Their lawyers at the public-interest law firm Pacific Legal Foundation argued that the fee violated the U.S. Constitution.

It’s a small victory for a homeowner and a baby step forward in the effort to challenge local affordable housing fees. The fees do not distinguish between a single homeowner, a large developer or anyone in between.

States have promoted zoning and regulatory reform, but the fees that local governments impose for affordable housing funds have received little attention. These fees can kill deals because a developer may not be able to secure a satisfactory return for investors.

The Foundation recently filed a similar lawsuit in California over $100,000 in fees that San Luis Obispo required a small developer to pay. In that case, the developer could either place a deed restriction on one of four parcels and sell the house and accessory dwelling unit for $450,000 or build at market rate. The deed-restricted option made little sense because it cost $1.325 million to build.

Like the Wyoming case, the fees are allocated to a fund for building affordable housing. The Foundation has already won two other California cases.

Not always a victory

Not all court cases favor the developer. In San Diego, a developer sued the city in federal court in September 2023 over fees related to a 1,642-unit apartment project. The developer’s attorneys argued a similar unconstitutional takings claim as the one the Foundation has raised. However, a federal judge ruled in favor of the city in January after previously siding with the developer.

The main difference between the San Diego case and the San Luis Obispo complaint is their strategy. The San Diego developer challenged the city’s ordinance by using federal and state law along with other arguments, while the Foundation presented its case as a narrow takings claim under the U.S. Constitution. Unlike in San Diego, the San Luis Obispo developers had already completed the project and paid the fee.

Building in an expensive county​

The Wyoming homeowner’s ordeal provides insight into the broader affordability issues in the county. Teton County has become the wealthiest county in the United States per person, based on federal data analyzed by Jackson Councilman Jonathan Schechter. Schechter wrote on his blog that the county’s $532,903 in per-capita income exceeds the national average by more than six times and is nearly double that of the second-place county.

“In 2024, a staggering 77% of Teton County residents’ income came from investments, another nation‑leading figure,” he added.​

A recent New York Times story, “Welcome to Wyoming, the Frontier of America’s New Gilded Age,” describes how Jackson, the county’s largest city and a longtime attraction for the wealthy, has become an even bigger playground for the rich.

Jackson’s median list price is $6.39 million, according to HousingWire Intelligence. New listings have a median price of $3.57 million.

A Wyoming housing needs study for the tourism-driven Teton region found that median-priced homes are unaffordable to average wage earners in every major industry, even in the county’s highest-paying sectors. Rents also strain budgets, especially for working-class residents.

A one-bedroom unit rents for an average of nearly $2,900, 77% higher than the national average, according to Apartments.com. A local affordability dashboard describes the “lack of affordable and workforce housing” as one of the county’s most urgent issues and states that many households need some form of below-market or deed-restricted housing to remain in the community.

Wyoming lawmakers have tried to address housing affordability through legislation but have not yet succeeded. Neighboring Montana passed sweeping reforms in 2023 that legalized duplexes, required cities to allow accessory dwelling units, opened commercial zones to mixed-use and multifamily housing, and overhauled local planning processes to accommodate more homes. Colorado, to the south, also enacted housing reforms.

Challenge with adding rental

Trey Scharp grew up in Jackson, Wyoming. He and his wife, Shelby, run a dude ranch 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 decided that the 1,000-square-foot cabin was too large to qualify as an accessory dwelling unit. The county pointed to an unfinished, windowless basement of the same size. The Scharps registered the structure as historically significant, which exempted it from ADU size limits.

That solved one problem. The next challenge was the new house. Building codes required a 10-foot-deep foundation on the sloped property. The Scharps decided to add windows and a kitchenette to create a second rental unit.

Officials said it violated single-family zoning rules. The couple abandoned the plan, only to be hit with the workforce housing fee. According to a county commission study, building new homes creates jobs, and some of the workers would not earn enough to live in Teton County.

“Basic principles of economics show that building a new home increases the supply of available housing and therefore mitigates—not aggravates—housing affordability in Teton County,” the Foundation lawyers wrote in the lawsuit.​