A federal judge dismissed a homebuilder’s constitutional challenge on Tuesday to a pair of Denver ordinances that impose obligations on developers related to the affordable housing demands created by new construction.

Two related companies, redT Homes and redT Capital Partners, sued the city last year over the fees they would incur to construct six homes across two sites. The financial obligation stems from Denver’s linkage fee ordinance, which imposes a fee per square foot on new housing developments with fewer than 10 units.

“The extraordinary housing cost increases in Denver are driven, in part, by the pace of population and job growth in the city, resulting in a situation where demand for housing has far outpaced supply, especially for persons who may find jobs in Denver’s growing economy but are employed at low or moderate income levels,” the city council wrote in the ordinance’s declaration.

It elaborated that new residences lead to job growth, and a corresponding need for housing for people with lower incomes. Although the council, in establishing a fee framework, recognized the imposition on developers cannot exceed the financial impacts of the development itself, the fees “fall far below the amount of revenue that would actually be necessary to meet the demand for new affordable housing driven by the job growth that is associated with new development.”

Alternatively, developers of smaller-scale projects may comply with the city’s mandatory affordable housing ordinance by designating a portion of their units as affordable. The ordinance also permits developers to propose alternative options to meet the legislation’s goals.

The plaintiffs wrote in their complaint that they are facing linkage fees of approximately $25,000 and $45,000 for their two proposed developments. They sought to declare the affordable housing ordinances unconstitutional under the “takings clause,” which permits governments to take private property for public use in exchange for compensation. However, there must be a connection between the impact the housing development causes and the fees that are charged, and the fee must be “roughly proportionate.”

“Denver reached the remarkable conclusion that its housing shortage is caused by building more homes. Thus, it refuses to issue development permits until homebuilders like redT — the very people resolving housing affordability issues, adding much-needed supply — pay a fee into Denver’s affordable housing fund,” wrote the plaintiffs’ lawyers.

In a March 3 order, U.S. District Court Judge Philip A. Brimmer granted Denver’s motion to dismiss the lawsuit. He initially agreed with the plaintiffs that the proportionality of the linkage fees would need to be explored at a later stage of the case, based on Denver’s findings on housing affordability.

However, he concluded that the mandatory affordable housing ordinance provided an alternative, constitutional method of compliance.

“The Court finds that the Mandatory Affordable Housing Ordinance, by requiring income restrictions on certain units and requiring the recording of a deed, does not constitute a physical invasion of property,” he wrote.

Brimmer added that courts elsewhere have found that local governments’ similar conditions on affordable housing do not constitute a “taking” of private property for public use.

The case is redT Homes, LLC et al. v. City and County of Denver.