In a rare win for dense “infill” housing in single-family neighborhoods, developer Bendare Dundat and the Master Builders Association of King and Snohomish Counties prevailed today in a lawsuit challenging a city ordinance that requires developers who want to build on small, “substandard” lots adjacent to existing developments to submit their proposals to design review, even though the original development was not subject to the same requirement. The ruling means that developers will be able to build small multifamily buildings on lots adjacent to other small developments without going through a time-consuming public process that could add thousands of dollars and months of delay to projects.

Last year, the city council decided to change the city’s land use code to require that if two unrelated but adjacent projects have a combined total of eight units or more, the second project–even if it’s smaller than the first–must go through design review, which takes months and can add tens of thousands of dollars to the cost of a project.

In a declaration included in the lawsuit, Seattle developer Graham Black said the rules had added between $70,000 and $100,000 to the cost of his six-unit townhome development in the Central District, which had to go through design review because he got his development application in to the city later than an adjacent developer. Because of “random chance,” Black says in the statement, “I am at a significant competitive disadvantage so intend to re-design my project” to allow larger townhomes that can sell for more, so that he can “recoup at least a small portion of the financial costs of delay and involved design review.” This, of course, is exactly the scenario opponents of the new law predicted when they decided to challenge the new rules in court.

The law, King County Superior Court  justice Barbara Mack wrote in her decision, “requires design review by the second applicant approved for a permit, even if the second project is smaller than the first. It imposes direct and indirect costs that are neither reasonably necessary nor a direct result of the proposed development. It is hard to fathom how costs and fees could be reasonable and necessary for the smaller project, but not for the first, more impactful project on the adjacent property. The city appears to agree that the ordinance is designed to mitigate collective impacts, not the impact of any individual project.”

Developer lobbyist Roger Valdez, whose clients include the Master Builders, says he believes developers will be able to use today’s ruling in a future lawsuit to stop the city’s Mandatory Housing Affordability-Residential program, which requires developers to make a percentage of new units they build affordable to people making less than 60 percent of the Seattle median income, or pay into an affordable housing fund. In exchange, the city is allowing taller buildings across the city.

“Our argument is going to basically that [the city’s] creating an extraction [of money from developers], because even though you’re giving me this extra density, I lose the rent revenue from the units that I have to rent-restrict or pay a fee,” Valdez says. “I’ll make it up by raising rents, but if the tolerance level of the rents [is lower than] what I have to charge, and projects start to go negative, or the lender says ‘Those rents are too high,’ then the project becomes infeasible and we’ve got a case.”

Assistant City Attorney John Schocet said today that his office had not looked at the ruling in detail, and has about a month to decide if they want to appeal.