Inclusionary Zoning: Carrots Taste Better and Arent as Painful as Sticks – JD Supra

Several polls indicate that housing affordability continues to be a major issue across the nation.

As discussed in past blog posts, the Federal and state and local governments continue pushing for changes in zoning regulations to ensure that more housing units are affordable to more people in more areas.

In support of that goal, several communities, including Pittsburgh, are pursuing an approach called inclusionary zoning to ensure that residential developments include a minimum amount of housing units that are affordable to low- or moderate-income residents. The idea behind inclusionary zoning is to create mixed-income developments and neighborhoods. Municipalities are seeking to achieve inclusionary zoning by implementing either voluntary or mandatory zoning regulations.

The voluntary approach typically includes offering a developer one or more carrots (i.e., incentives). For example, in exchange for including a certain amount of affordable housing units in a development, a developer may be permitted the right to increase the developments density, height or coverage, or reduce required parking or setbacks. Other voluntary incentives include expedited approval processes or waiving/reducing fees to reduce time and costs.

While the carrot approach is preferable and usually more accepted, some communities, like Pittsburgh, choose to use the stick (i.e., mandatory) approach. Recently, Pittsburgh City Council voted to expand its mandatory Inclusionary Housing Overlay District (I-ZO) to certain other neighborhoods. The I-ZO requires that for residential developments of 20 or more housing units, at least 10% of the units must be designated as inclusionary units for rent or ownership by eligible households.

For rental inclusionary units, eligible households are those households earning no more than 50% of the areas median income. For owner-occupied inclusionary units, eligible households are those households earning no more than 80% of the areas median income. Inclusionary units must remain affordable for eligible households for an initial term of 35 years. In instances where inclusionary units or the subject property are sold during the initial 35-year term, the term automatically renews for another 35 years.

Other standards for inclusionary units in Pittsburghs I-ZO include providing that such units are: (i) distributed within and throughout the building or development; and (ii) equivalent to market-rate units within the building in all ways, including appliances, finishes and size.

To ensure inclusionary units remain affordable in accordance with these standards, a developer must not only record a deed restriction, but it also must enter into a master lease. Further, where it is not feasible for a developer to provide all of the required inclusionary units on the property, the developer can apply for special exception approval to construct the units at an alternative site. The alternative site must be owned or controlled by the developer and within of a mile of the property. Further, in contrast to the minimum 10% of the units that are required to be inclusionary when located on-site, at least 12% of the units must be designated as inclusionary to construct inclusionary units at an alternative site.

While the intended goal of Pittsburghs I-ZO may be noble, its stick approach has drawn the ire of the Builders Association of Metropolitan Pittsburgh (BAMP). Not surprisingly, BAMP has filed a federal lawsuit challenging Pittsburghs mandatory inclusionary zoning approach on the grounds that it violates the State and Federal constitutions. BAMPs complaint states, in part, as follows:

By way of the Ordinance, the City improperly seeks to shift the burden to fund low- and moderate-income housing from the general public to a select population, namely residential real estate developers. The imposition of this burden on BAMP members constitutes an improper taking of private property without just compensation, in violation of the Takings Clause of the Fifth Amendment, made applicable here by the Fourteenth Amendment, and in violation of the Due Process Clause of the Fourteenth Amendment. As such, the ordinance cannot be permitted to stand.

As more communities look to use zoning to provide for affordable housing, it is expected that there will be an increase in the number of lawsuits, especially in those communities instituting mandatory inclusionary zoning without incentives.

Remember, it is said the way to ones heart is through their stomach. In instances of zoning, carrots certainly taste better and arent as painful as sticks.

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Inclusionary Zoning: Carrots Taste Better and Arent as Painful as Sticks - JD Supra