21statewideinclusionary.pdf

Statewide Inclusionary

Land

Use

Laws

and

Suburban

Exclusion

Spencer

M.

Cowan

There

is little, ifany.dispute overthe

need

for

more

low-ormoderately-priced1

housing,nor

is there

much

disagreementthat the shortageof such

housing

is

more

severe in

newer

suburbs thanincentralcities

and

older,inner-ring

suburbs.

One way

of

addressing those situations

isthrough inclusionarylanduserulesthat

make

theproduction of lower-priced

housing

an

integral partofresidentialand/or

commercial

development.

These

rulesare intendedto increase thesupply

of

low-priced

housing

and

reduce itsincreasingconcentrationinexisting

areas

of

poverty.

All inclusionary

programs

presenta trade-off forthe de\eloper. For projectssubjecttothe

inclusionary rules,thedeveloper bearsthe

burden

of

providing

some

affordableunits

(inclusionaryunits)asaconditionforreceiving

development

permits. In return, thedeveloper

receives benefitsto offset that burden.:

These

benefitsalmost

always

will includea density

bonus;thatis.thedeveloperwill beallowedto

build

more

units(bonusunits)than

would

have

been

allowed inthe

absence of

the inclusionary

rules.

The

bonus

unitscan then be sold orrented

Spencer

M.

Cowan

is

a Ph.D.

candidate

at the University

of North Carolina

at

Chapel

Hill

and

recipient

_{of a}

HUD

Doctoral

Dissertation

Research

Grant for

his

dissertation.

The

Impact of Statewide

Inclusionary

Land

Use

Laws

on

the

Supply and

Distribution

of

Housing

for

Lower-Income

Households. Mr.

Cowan

is

a

Massachusetts

attorney

and

has his

Master

s

degree

in

planning

from

the University

of

Florida.

at

market

prices. Inaddition, theinclusionary rules

may

allow or

mandate

othercostsaving

incentivestohelp defray theadditional

expense

of

providingtheinclusionary units(

Smith

etal.

1996;

Mallach

1984).

The

intendedresultisan

increasein thesupply of lower-priced housing,3

financedmostly

by

the

added

profitgenerated by

the

bonus

units(Dietderich 1996). Intheory,

no

directpublic fundingisrequired.4

Inclusionaryrules

may

be

adopted

by

an

individualmunicipality^ aslocalregulations (locally-adopted).'1

orthey

may

be enacted atthe

state level7 as part

of

thegeneral laws

and

state regulations(statewide)/

Some

statewide plans

specify the essential

program

elements

(state-designed).1'_while

others require municipalitiesto

accommodate

housing

for

lower-income

families butletlocal

government

determinetheoperating

details ofthe

program

to

accomplish

thatgoal (locally-designed)."'

Some

municipalitiesin stateswith statewide

programs have

also

adoptedtheir

own

local plans with provisions

differentfrom, but not inconsistent with, the state's;" statewide

and

locally-adopted plans are

notmutuallyexclusive.

Thisarticlewilldiscuss: 1 )the beliefs

underlying statewideinclusionaryprograms,to

show

which

aspects

of

the

problem

of

suburban

exclusion they are tryingtoaddress,

and

2) the

characteristics

of

fiveexisting statewide

programs,tohighlight thesimilaritiesand

differences

among

them.

While

statewide, the

programs

in California

and

New

Jerseyare

locally-designed

and

exhibit

many

of

the

same

operationalelementsas locally-adopted plans,

such asthe

one

in

Montgomery

County.

Mary

land.

The

programs

inConnecticut.

state-designed

and

offer adistinctlydifferent

approach.

Suburban

Exclusion

and

Statewide Plans

The

essential difference

between

statewide

and

locally-adopted inclusionaryplansisinthe

basictheory underlyingthe

two

classes

of

programs. Locally-adopted

programs

arebased

on

the premisethatthe scarcity

of

affordable

housing

in a

community

is

due

tothe

unwillingness

of

developersto

produce

such

housing. Therefore,municipalities

must

compel

developerstobuildaffordable units asa

conditionofgettingapprovalsforthe larger

project. Statewide programs,

on

the otherhand,

are based

on

the theorythat the scarcity

of

lower-priced

housing

is.atleast partially,the

deliberateand/orinadvertentresultoflocal land

use

and development

regulations.

Lower-priced

housing

isbeingexcluded (Dietderich 1996:

Davidoff

etal. 1971). Therefore, the state

must

eitherpreventmunicipalities

from

usingtheir

power

to exclude, or

compel

them

toaccept

some

affordable

housing

throughregionalor

statewideallocation.

The

connection

between

local landuse

ordinances

and

exclusionisa widely-noted

phenomenon

(Pendall2000: Farleyetal. 1993).

and

the reasons offered toexplain

why

that

may

be

soare also

numerous.

Rolleston (1987)finds threereasons

why

municipalitiesadoptthekinds oflanduseregulationsthattheydo: fiscal

concerns, reductionof negativeexternalities

and

discrimination.

The

first

two

are consistentwith

arguments

that

suburban

exclusion

may

be an

unintendedside-effect

of

legitimatelocalactions

toaddress

community

concerns (Mueller 1989;

Fischel 1985). All three are consistentwith

explanationsof

why

local

government

might,

affirmatively,

want

toexclude thepoor

(Dietderich 1996: Briffault 1990).

The

fiscal concerns are

based

on

the desire

of

local officialstoprovidethehighest possible

level

of

local servicesatthe lowestcost to residents. Since

most

municipal revenue is

from

localpropertytaxes, thisobjective

may

be

accomplished

by permitting only thoseunitsthat will contribute

more

thantheirratableshare

of

property taxes fortheexisting levelofservices

(Mueller

1989;Tiebout

1956).

That

means

that

rationally, local

government

shouldonly permit

relatively

more

expensiveresidential

development, excludingthe

poor

who

probably

willrequire

more

inlocally-fundedservicesthan

they

pay

in property taxes.

Two

commonly

identifiednegative

externalities

of

development

that localregulations

seek toprevent aretraffic congestion

and

decreasing property values

of

existinghousing

(Dietderich 1996; Rolleston 1987).

Both

are

associated,

whether

justifiably ornot.withthe

increased density

and

multi-familyunitsthat

may

be necessary to

produce

lower-pricedunits

(Pozdena

19*87;_{Ellickson 1981). Local}

government

can. therefore, rationally

conclude

that

more

widely

scattered,single-family

housing

will helpavoid those negativeexternalities

and

zone

accordingly.12

Because

large-lot

single-familyhousingisrelativelyexpensivetoproduce,

the

poor

are excluded.

A

community

that

wants

toexclude

minorities

and

the

poor

orthat

does

not

want

affordablehousingbuiltwithinitsjurisdictioncan. easily

and

with legally sufficientreasons,adopt

zoning

and

subdivisionregulationsthat

make

the

development of

affordablehousing economically

impossible (Dietderich 1996;

Davidoff

etal.

1971:

Babcock

1966).

Although

Buchanan

v.

Warley

1

- prevents _local

government from

explicitlydiscriminatingbased

on

race, local

government

is

allowed

todiscriminatebased

on

wealth.14

and.giventhe correlation

between

wealth

and

race in thiscountry, thatachieves

substantially the

same

end

result.

Under

the

guise ofprotecting thegeneral welfare or

preserving propertyvalues.1

- _{amunicipalitycan}

limit

new housing

tosingle-family units

on

large lots. Itcan

impose

infrastructure requirements

thatdrive the costof subdivision out

of

therange

of

affordability. Itcan.through hurdles

and

delays inthepermittingprocess,

make

itclearto

prospectivedevelopersthattheywillnotgain

approval,withintime

and

costparametersthat

allow

any chance

offinancialviability, for

projectsseekingtocreatelower-priced housing

(Lugeret

al. 1997;

NIMBY

Report 1991).

keepout the

poor

and

minorities,

even

ifthat is

not

what

was

intended

(Luger

etal 1997;

Lowry

etal. 1990; Johnstonetal. 1984; Seidel 1978). If

itis

what

was

intended, thelawwillstillaccept

the profferedreasonsas sufficienttojustify the localactions.

Statewide inclusionary

programs

area direct

responsetoperceived

suburban

exclusion

(108HLR1

127

1995;Breagy

1976). Inthese

programs,thestate,as sovereign, stepsin to limit

municipalities"

power

toexclude and/or

compel

them

topermit

some

affordable housing.

There

are

two

ways

that states

have

done

this. In

one

approach, used in

New

England, the statehas

directly limitedlocal

power

and imposed

a

completeinclusionary

system on

itsconstituent

municipalitiessothatalloperate

under

exactly

the

same

rules.

The

otherapproach, used in California

and

New

Jersey,

compels

municipalitiestoaccepta"fairshare"ofregional affordable

housing

needsbutgiveslocal

governments

flexibilityin

meeting

that

responsibility. Municipalitiesarerequiredtoplan for theirregional allocationofaffordablehousing, andthe stateprovides forsanctionsforfailure to

comply."1

That strategy has ledto a variety

of

local tactics,including inclusionaryprograms.

Because

each plan islocally-designed, there is

substantial variation inthe operationaldetails

among

thevariouslocal programs, with

many

quitesimilartothe

Moderately

Priced

Dwelling

Unitordinancein

Montgomery

County.

Maryland.

Whether

theplan isstate-or

locally-designed, review

and

approval

of

development

proposals remainsatthe local level.

The

rules

forthepermittingprocess

may

be modified, but

localboardsstill

have

theresponsibilityfor

and

power

overtheinitial projectapprovals(

Lohe

2000).

The

statewide

program

isnot

one

in

which

the state takes overlocal

government's

roleindeciding

how

development

shouldoccur.

Program

Participation-

_Mandatory

_or

Voluntary

One

of

the

most

fundamental differences

between

the

two

statewide systems is

how

any

givenmunicipality's

program

determines

whether

a specific

development

proposalwillbe

governed

by

the inclusionaryrules.

The

rules

may

require

developerparticipation

(mandatory

program),or

developers

may

be

allowed

to

choose

whether

to

have

theinclusionary rulesapply(voluntary program).

Most

locally-designedplans,including

approximately

90%

of

plansinCalifornia, are

mandatory

(Burchelletal. 1994).althoughthere areexceptions.17 This

may

reflectlocal officials' beliefthatdeveloper choicesarethe reason for

theshortage

of

lower-priced

housing

intheir

community.

18

The

three statewide,

state-designed

programs

in

New

England

areall

voluntary.

Those programs

operate

on

the

premisethat local

government

exclusionisthe

dominant

reason forthe scarcity

of

lower-priced

housinginthesuburbs

and

thatdeveloperswill

produce

more

of

it iftheyarenothindered by

local

government

(Herr2000;

Stockman

1992).

The

New

Jersey program,as initiallycreated

by

the state's

Supreme

Court

in

Southern

Burlington

County

NAACP

v.

Township of

Mt.

Laurel1_"

{Mount

Laurel I)

and Southern

Burlington

County

NAACP

v.

Township

_of

Mt.

LaureP

{Mount

Laurel II),

was

a voluntary

plan. Itoriginated with

Mount

Laurel/.

where

the

Court found

thatthe local

government

was

excluding

and

ordered itto stop. Eight years

later, in

Mount

Laurel

II,the

Court found

that the

same

township

was

still"afflictedwitha blatantly exclusionaryordinance."'21

At

that point,the

Court

created a "builder'sremedy""

thatallowed developers toseek permitsincourt

forinclusionary

development.

In responseto local

governments"

complaints aboutthe impact

of

the builder's

remedy,

the state legislature created a statewide

program,

superceding the

Court'sprogram,thathas allowedmunicipalities

toadopt

mandatory

inclusionary regulations

and

avoidthe builder's

remedy

(Burchell etal. 1994;

Mandelker

1990)."

Mandatory programs

typicallyrequire a

projecttobeinclusionary ifitisoverathreshold

size.

Commonly,

thatthreshold isbased

upon

the

number

ofunitsinthe

proposed development,

althoughthatisnot theonlypossibility.

The

program

may

exempt

some

types

of

residential

developments, such asprojects thatcreate rental

subjecttoinclusionaryrequirements, withthe threshold

based on

the

number

of square feet,

prospective

employees,

or

some

other

quantifiable basis(Burchelletal. 1994;

Mandelker

1990:

Mallach

1984; Ellickson

1981).23

Voluntary

programs

induceparticipation

by

offering sufficiently large incentivesto

make

development under

theinclusionaryrules

more

attractivethan

under

theregulations that

would

otherwiseapplytothe project. Instead

of

determining

when

a project

must

beinclusionary.

voluntary

programs have

criteriatoestablish

whether

a project ordeveloper

may

beeligible

forthosebenefits.

The

rules

may

requirea

minimum

percentage of affordableunitsasa

conditionofparticipation,

and

they

may

restrict

eligibilitybyprohibitingfor-profitdevelopers, as

is

done

in

Massachusetts

24 and,

under

some

circumstances, in

Rhode

Island.;s In addition,

the

programs

allare self-limiting toprevent

developers

from

overwhelming any

single

municipality with affordableunitsor excessive

density. Projects arenoteligible in

any

municipalitythat

meets

statutorythreshold

criteria,such ashaving 10 percent or

more

of

its

housingstock subsidized.

Basic

Program

Elements

The

basic elements

of

an inclusionary

program

establish the

quid

pro

quo

of

the trade.

They

determine: 1)

how many

inclusionaryunits

thedeveloper

must

produce;2)

how

much

of

a

density

bonus

heorshewill receive;

and

3)other

cost-savingincentivesthat

may

be includedin

thebargainas additional

compensation

forthe

inclusionaryunits.

Set-aside

Requirement

The

first part ofthe trade the

program must

specifyisthepercentageof inclusionary units,or

set-asiderequirement.

The

California

and

New

Jersey

programs

useregional orstateauthorities

todetermineregional

housing needs

and

allocate

a"fairshare"

of

thosetoeachmunicipality,

which

may

then

impose

sufficientset-asides

on

new

development

toattain that"fairshare."

Because

the

program

detailsare specified

locally,the set-aside requirements

may

vary

from

one

municipalitytothe next. InCalifornia,

most

ofthe

programs

require a set-aside of

between

1

and

15 percent

of

thetotal

number

of

unitsin

the project, although the actual set-asidesrange

from

5to 35 percent (Burchell etal. 1994).

The

New

England

voluntary

programs

establish the set-aside percentage asthe

condition

of

eligibilityforthe density

bonuses

and

other incentives

of

theprogram. In

Massachusetts, forexample, onlyprojects

providing

25

to

30

percent affordable units

may

proceed

under

theinclusionaryrules,while

Connecticutrequires

20

percentfor

some

classes

of

projects(Burchell etal. 1994;

Stockman

1992).

Density

Bonus

Closelylinkedtothe set-asiderequirementis

the extent

of

allowable densitybonus.

The

higherthe set-aside, the greater the density

bonus

must

beto

compensate

forthe cost

of

the inclusionaryunits,allother thingsbeingequal.20

For

mandatory

programs, theadditional units

must

adequately

compensate

the developerfor

thecost

of producing

theinclusionaryunits to

avoid

two

possible negative

consequences.

If

the

bonus

isnotsufficient,theregulationscould be

found

tobe ataking, ordevelopers

may

decide tobuild

where

theirprofitsarenot so

adverselyaffected (Dietderich 1996:

Mandelker

1990;Ellickson 1981).

The

latteris less

of

a

factorifthe inclusionaryrequirementsare regionally

uniform

because developerswillfindit

harderto

move

toavoid

them and

still servethe

same

target

housing

market.27

Most

mandatory

programs

establishthe

number

of

bonus

units as

a function

of

the

number

of inclusionaryunits required,allowing

X

bonus

units forevery

inclusionary unit(Dietderich1996).

For

voluntaryprograms,thedensity

bonus

hastobe

enough

to

make

inclusionary

development

preferableto

proceeding

under

the

otherwise applicablerules(Dietderich 1996:

Stockman

1992).

The

three statewidevoluntary

programs

in

New

England

allallowthedeveloper

todeterminetheextentof density

bonus

necessaryto

make

the project

economically

viable,consideringthe set-asiderequiredfor

Only

inCalifornia

do

municipalitieshavethe

option

of

notallowingadensitybonus.

One

of

theCaliforniastatelaws

mandating

local

inclusionaryplansrequires

communities

to"grant density orother

bonuses"

(Burchell et al. 1994:

159), whileanother speaks

of

"•regulatory

concessions

and

incentives'"(Burchell etal.

1994: 159). Thatstatutorylanguage

would

appeartogive

communities

theoption of

requiring inclusionaryunitswithoutpermitting

bonus

units,although othercostsavingincentives are then required.

Additional

Cost Saving

Incentives

Finally,the

program

may

identifyadditional or alternativecostsavingincentives that

may

be

allowedforinclusionarydevelopments.

Typically,thoseinclude reducedinfrastructure,

expeditedpermitting, feewaivers,orother

exemptions

from

locallyadoptedregulatory

requirements,all

of which

are potentially

availableunderall fivestatewideprograms.

Because

voluntary plansrely

on

incentivesto

induceparticipation,theyaregenerally

more

flexibleandofferthe potential for a

wider

array

ofincentivesthan

mandatory

plans.

Inofferingothercost-savingincentives,

statewideplans

have

substantially

more

flexibility

than locally-adopted programs.

A

locally-adoptedplan islimited

by

theextentofthelocal

government's

power. Itcan only

change

local

rules.

The

state,

however,

in adoptinga

statewideplan,canofferadditional incentivesin

the

form

of

exemption from

orspecificbenefits

instate lawsor regulations.

NeitherCalifornia nor

New

Jersey

make

significantuseofthatpossibilityforthe

locally-designed

mandatory

programs

adopted

by

their

municipalities.

The

builder's

remedy

in

New

Jerseyappearstogivesubstantial benefitto

developers,but only, ineffect, in

communities

that

do

not

have COAH-certifled

housing

elements.

The

California

DHCD

may

withhold

discretionary funding

from

amunicipalityifits

housing element

does

not

comply

with state

requirements (Burchelletal. 1994:

Mandelker

1990). That

may

not directly savecosts for the

developer of an inclusionaryproject,but it

may

provide

him

orherwithadditional leveragein

negotiatingfor local permits.:s

All threestatewidevoluntary

programs

make

more

extensive use

of

theability toprovide

incentivesthrough

changes

instate law.

One

common

strategy is toreducethetime,

expense

and

uncertaintyinthepermittingprocess, a

major

concern

fordevelopers

(Luger

etal. 1997).

Both

Massachusetts

and

Rhode

Island offer

inclusionaryproposalsthroughaunitary

permittingprocess,eliminatingthe

need

for

multiplelocal approvals. Inboth states,the

applicationgoestothelocalzoning board, which,

by

statute,

may

grant

whatever

special

exemptions

orvariances

from

pre-existing local regulations

may

be necessaryforthe projectto

proceed

and

issuethe permit.:" _{This saves}

developersthetime

and expense of

appearing

beforeseveral different

town

boards

and

reducestheopportunity for

opponents

todelay

the project with appeals

of

each separate

approval. Inaddition, Massachusetts specifies

an accelerated schedule for hearing

and

renderingadecision

on

theinitialapplicationfor

inclusionary proposals, furtherreducingthetime

needed. Iftheboard failstoact within thetime

allowed,eitherto

open

the hearing orrendera

finaldecision, thepermit isautomatically granted

(Stockman

1992)/"

Beyond

the limited

preemption

of

local regulationsthroughthebroad

powers

grantedto thelocalzoning board intheunitarypermitting

process,all threestatewidevoluntary plans

providefor a substantially

more

developer-friendly appealsprocess. In Massachusetts

and

Rhode

Island,inclusionary

developments

may

take anexpeditedappeal

of

unfavorablelocal

decisionstoa specialadministrative agency,the

Housing Appeals

Commission

(HAC)

in

Massachusetts

and

the

Housing Appeals Board

(HAB)

in

Rhode

Island. In Connecticut,the

appeal goestoa specially designatedcourt

on

an

expeditedcalendar. In all three

New

England

states,themunicipality hasthe

burden

of

proving

on

appeal that itsdecision

was

justified. Thisisa

reversaloftheordinarysituation, in

which

local

decisionsareaccordeda

presumption

of

validity,'1

and

thedeveloper

would

have

to

prove

or that it

was

"arbitrary

and

capricious." 32

Municipalitiesare

more

limitedinthereasons

they

may

usetosustainan unfavorable decision

on

appeal than thosethat

would

generallyapply

tolocalregulatory decisions.

While

theexact

statutory languagevaries

among

the threestates, the

common

element

isthatprotectingthe

"general welfare" isnot sufficient.

To

sustain an

adverselocaldecision,inbothConnecticut

and

Massachusetts, the appellateboard

must

find

thatthe public interestsjustifyingthedecision

outweigh

the

need

foraffordablehousing. In

Rhode

Island,theboard

must

find that the

decision

was

"both "reasonable"

and

"consistent

with localneeds"asexpressed inthe locality's

comprehensive

plan

and zoning

requirements""

(Burchelletal. 1994: 146).

The

impact

of

these

changes

isto increase

thedeveloper's

chances

of

getting localapproval

or prevailing

on

appeal

of

an unfavorablelocal decision. In Massachusetts,

between 1969 and

1986-7.there

were

458

applications

under

the

state's inclusionary program.

Of

those.

238

were

grantedwithoutconditions.

89

with

conditions

and

131 deniedatthe local level.

Of

the

220

applications notgranted unconditional

approval.

200

appealedtothe

HAC.

Of

those.

20

dropped

theappeal before the

HAC

could

renderitsdecision, leaving 180applications.

The

HAC

upheldthe localdenialinonly 10

of

those

cases. In 70 cases,the board reversed the local decision,

and

in 1

00

the parties settled

and

the

permit

was

issuedas agreed. Therefore,

of

the

original

458

applicationstobuildaffordable

housing.

408

receivedpermits,

and

the

developers

who

pursued

theirappealstoa

decisionbythe

HAC

received a permit in 170 of

180 cases (Burchellet al. 1994;

Stockman

1992).33 InConnecticut, as

of

the

end of

1998.

there

had

been

36

courtcasesfiled involving

28

developments

resolved

on

the merits ofthe case.

The

applicant prevailedin

28 of

those cases

involving21 developments. Inaddition,courts

rejected 4 cases in

which

an abutterappealeda localapproval(Hollister 1999).

Finally,the

Massachusetts

and

Rhode

Island

laws providefora "builder"s remedy.'"allowing

the appellateauthoritytoactually issue the permit. This savesthedeveloperthe time

and

expense

of

going

back

in front

of

the

same

local

authorities

who

renderedtheinitiallyunfavorable

decision. Italsodeprives thoseauthoritiesofthe

opportunitytoreopennegotiationsafterlosingthe

appeal.

Other

Program

Elements

Price-'Rent Ceiling

Programs,

both

mandatory and

voluntary,

usually specify the target priceorrent for the

inclusionaryunits.34 Allfive

programs

setthe

pricelevel

based

on

income. InCalifornia, the state

compels

municipalitiestoplan,throughthe

required

housing

element,forthe needsof

households

from

very-low-through

moderate-income. Locally-designed plans vary

from

targetingvery-low-

and low-income

households

only,allthe

way

toincluding

moderate-income

units.

New

Jerseyallocates the ""fairshare"

of

the regional

needs

of very-low-

and low-income

householdsto

each

municipality,

though

thelocal

inclusionary regulations

adopted

tosatisfythat allocatedshare

may

include higher

incomes

as

well

(Wish

etal. 1997; Burchell etal. 1994).

Connecticutonly allows

low-income

housingto

qualify forits

program,

while Massachusetts

and

Rhode

Island include

moderate-income

households

intheir

programs

(Stockman

1992).

Affordab

ility

Covenants

Neither

of

the statewide

mandatory

programs

sets a specificlimit

on

the length

of

timethattheinclusionaryunits

must

remain

affordable.

One

complaint abouttheearliest local

programs

inCalifornia

was

thatthe units

only

had

to

remain

affordablefor

one

year, after

which

theycould be soldatfair

market

value

(Ellickson 1981).

However,

since thesystem

requireseach municipalitytoprovideits'"fair

share"

of

affordablehousing,itis inthe

municipality'sinterest toensurethatthe units

contribute for as longas possible,with

restrictions lasting

from

fiveyearstoperpetuity

(Burchelletal. 1994).

Two

of

the statewidevoluntary

programs

do

requirethatthe inclusionary units

remain

affordablefora

minimum

periodoftime,atleast

affordable forat least

30

years.

There

are

no

timelimits

on

unitsinprojects

by government

agencies ornon-profit organizations.

Connecticutrequires a

minimum

20-year

restriction (Burchell et al. 1994). Massachusetts

imposes

no

timelimitwithinits

program

butlimits

participationto

government

agencies, non-profits

and

limiteddividendcorporations,reducingthe

probabilitythatthedeveloperwill be unwillingto negotiate substantial affordability protection as partofthe permit.

Inadditionto

any

internalrequirementsin eitherkind

of

inclusionary program,there

may

be

additionalor

more

stringent affordability

restrictions

imposed

byexternal fundingsources.

For example,

some

inclusionary projectsin

Massachusetts receive

tax-exempt

bond

financing throughstate

programs

to increase the

supply

of

rental housing.

That

program

requiresthat

40

percent

of

the units be

affordable

by households

with

incomes

lessthan

60

percent

of

median, orthat

20

percent be

affordable

by households

with

incomes

lessthan

50 percent

of

median,

and

they

must remain

affordable for a

minimum

of

15 years

(Stockman

1992).

Clustering, Off-site. Out-of-town,

and

Payments

In Lieu

Inclusionary

developments

under four

of

the

statewideplans arenot necessarilyrequiredto

integratetheinclusionary unitsintothe larger project.

Developers

may

be allowedtocluster

thoseunits in

one

area, creating asmall section

ofaffordable unitsseparated

from

the

more

expensive

market

portionofthe project.

Both

California

and

New

Jersey allow

locally-designed

programs

to

condone

thispractice,

and

neitherConnecticut nor

Rhode

Islandprohibitit.

Of

thestate-designedprograms, only

Massachusetts hasregulations against clustering,

specificallyrequiringthattheinclusionary units

be spread ratablythroughthe project.

Under

both theCalifornia

and

New

Jersey

laws,locally-designedplans

may

allowthe

developertoprovidetheinclusionary units

off-site,givingcredit forunits inotherdevelopments.

Developers can create

one

project

of

exclusively

market

housing and

another,at a different

location,withtheinclusionary unitsthat

would

have been

requiredforthe

market

project. All three state-designed plans in

New

England

requirethattheinclusionaryunitsbebuiltwithin

the

same

development.

New

Jersey goes so far asto permit

developerstoprovide

up

tohalf

of

allrequired

inclusionary unitsina differentcity or

town

throughregional contributionagreements. This

allows

suburban

developerstobuildinclusionary

units in olderurban areasto satisfy part

of

the

suburban

"fairshare" requirement.

Some

critics

have

notedthat this policy

may

work

against the

goalofincreasing

housing

opportunitiesinthe

suburbsfor

lower-income households (Payne

1996).

Forlocally-designedplansinCaliforniaand

New

Jersey,

where

participation ismandatory,

the

program

may

allow

some

developers, usually

forsmallerprojectsorthosefor

which

additional

density cannot adequately

compensate,

to

make

a

payment

inlieu insteadofactually

producing

theinclusionaryunits.

The

money

isplaced ina

fund that isthen usedtofinance affordable

housing.

Impact

of Statewide

Inclusionary

Programs

One

of

the

most obvious

advantages

of

a

statewideinclusionary

program

isthat itcan

addressthe

problem of

exclusion. Relianceon

locally-adoptedplanscannot.

Whether

locally-or state-designed, the statewide

approach

ensuresthatallmunicipalitieshaveinclusionary

rules. This,in turn,raisestheprobabilitythat

every

community

will eventually

have

some

affordable units.

When

Massachusetts adopted

itstotallyvoluntaryinclusionary

program

in 1969,

only2

of

its

35

1 cities

and towns

had 1 percent

or

more

affordablehousing.

As

of

May

2000.

that

had

increasedto23

communities

(Lohe

2000).with anadditional 14municipalitieshaving

8 percent or

more

affordable housing/*

Over

21.000 units

were produced

underthe

law

asof

October

1

999

(Krefetz 1999). In 1972. 171

Massachusettsmunicipalitieshad

no

subsidized

housing;

by

1997.that figure

was

reduced

to 54.

withthe vastmajority

of

them

located inthe

economically

moribund

western part

of

thestate

A

statewide, locally-designedtype of

program,asused inCalifornia

and

New

Jersey,

may

bepreferabletothe

New

England

model

for

two

reasons. First,the

New

England

voluntary

programs

do

not plan forthe allocationofthe

low-priced housing.

Developers

decide

where

it

will bebuilt,withoutnecessarilyconsidering

actual localorregional needs.

Only

on

appeal

are those needs assessed,

and

that is against an

arbitrary statutoryguidelineof10percent

of

the

housing stock

of

the local

community.

The two

statewide,locally-designed

programs

allocate

affordable

housing

to

communities based on

a

"fairshare" ofregional needs.

While

some

places in

New

Jersey

have

questioned their

allocation, at leastthere is

some

attempttorelate location

and

need.

Second,

voluntary plans

do

notensurethatall

communities

will

have

affordablehousing.

Developers

choose,

and

they

may

declinetopursueinclusionary projects

inextremelyhostile locationsforfear

of

reprisal

onother,non-inclusionary proposalsthe

developer

may

be planning.

Because

the

statewide, locally-designed plansrest

on

a

mandate

forall

communities

to

accomodate

a

"fairshare"allocation,every municipalitywill

have

some

affordable housing.

The

state-designedvoluntaryapproach,

however,

alsohas advantages. Locally-designed

plans can be rendered ineffective ifthere is an

imbalance between

burdens

and

incentives,

and

theyareinitially

dependent on

the

commitment

of

local officialsforimplementation(Herr 2000).

Voluntaryplans,in

which

thedeveloper

establishes

what

thebalance is.will beas effective aslongasinclusionary

development

can be

more

economically

efficientthanthe

alternative (Dietderich 1996).

Because

developers

implement

theprogram,voluntary

programs

will require littlebureaucracy

and

are

very inexpensivetoadminister.

There

is

no need

forregional authoritiestodeterminethe"fair

share"allocation,project

growth

and housing

needs,

and

oversee local plans.

There

is

no

requirementto

monitor

thebehavior

of

local

government

toensure compliance. Instead,

these functionsare lefttothedevelopers

who

initiateinclusionaryproposals.

The

onlyreal

expense

tothe stateisproviding anappellate

body

toheardeveloper complaints.

One

area

where

these

programs

may

fall short

of

theirgoalsisinactually

making

affordable

housing

availabletothe

households

and

groupsthat

were

previouslyexcluded.37

Wish

etal.(1

997)

notethatonly 7percent

of

households

occupying

unitscreated inresponse

tothe

Mount

Laurel decisions

had

moved

from

cities tothe suburbs,

and 66

percent

of

those

were

white.

The main

beneficiaries

of

New

Jersey's efforts

were

elderlywhite

women

(Wish

et al. 1997). In Massachusetts, thelaw

was amended

afterthe state noted that

communities

were

permittingdisproportionately

highpercentages

of

elderlyhousing

and lower

percentagesof proposalsforfamilyhousing.

Afterthe

amendment,

onlyhalf

of

a

community's

obligation

under

the

law

could

come

from

elderly

housing

(Stockman

1992).

Conclusions

Statewideinclusionary

development

programs

are essential tools inefforts toreduce

suburbanexclusion.

Without

them,municipalities

that

want

to

keep

outthe poorwill continueto

findadequate,legally-defensible

means

to

do

so.

The

poor

willbe lefttofindhousinginthe

interstitialnon-exclusionaryareas

where

they

alreadyare forcedtoreside.

The

jobs-housing

mismatch

willpersist. Povertywill

remain

concentrated:

growth

will not besmart.

Both

types

of

statewide

programs

discussed

inthisarticleoffer

promising

models,

and

neither

is clearly preferable.

Both

havecharacteristics

thatcouldbeprofitablyincorporatedintothe

other.

They

demonstrate

the

program

elements

that

must

be addressed inthedesign

of

any

inclusionary

program,

statewideor

locally-adopted,

and

the range

of

possiblechoicesfor

each of those elements. Five states

have

shown

what

can be done. Aftercareful consideration

of

theoptions, an effective

program

can be

created that will reduceexclusion,

open up

housing

optionsforthe poor,

and

stillprotect the

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Common

Destiny:Blacks

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Breagy, James. 1976. OverridingtheSuburbs. aState Legislative Effortto

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regional MobilityStrategies. Washington,

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Lowry,IraS.,and Bruce W.Ferguson. 1992.

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Davidoff.Paul,andLinda Davidoff. 1971. "Opening Affordability. Washington,

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Inclusionary Land Use Institute.

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Review,Vol. 22,p. Luger,MichaelI.,Kenneth Tempkin. Spencer

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Cowan,

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"An

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Economics ofInclusionaryZoning ReportoftheHousing

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p.23. Mallach, Alan. 1984. InclusionaryHousing

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New

Zoning." inSouthernCalifornia

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Review, Brunswick, NJ: CenterforUrbanPolicyResearch. Vol. 54.p. 1167. Mandelker, DanielR.,and RogerA.Cunningham. Farley, Reynolds. CharlotteSteeh.Tara Jackson, 1990. Planning

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MariaKrysan.andKeithReeves. 1993. Development: Cases

and

Materials. Third

"ContinuedRacialResidentialSegregationin Edition. Charlottesville,VA:

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Michie

Detroit:"ChocolateCity.VanillaSuburbs' Company.

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Nancy

A. Denton. 1993.

4,No. l.p. 1. American Apartheid: Segregation

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Fischel,William A. 1985. TheEconomics ofZoning

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Johns Payne. JohnM. 1996.

"Norman

Williams.

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Herr, PhilipB.,andAssociates. 2000. zoningfor Doctrine:

Making

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Association,January 14. 1999. 125.

Jaynes.Gerald David,and Robin

M.

Williams,Jr.,Eds. Pozdena, Randall Johnston. 1988. The

Modern

Books.

Notes

Rolleston,BarbaraSherman. 1987. "Determinantsof 1

Iuse"low-ormoderately-priced"ratherthan

RestrictiveSuburbanZoning:

An

Empirical _"affordable"initiallytoavoid confusion. The

Analysis." inJournal of

Urban

Economics,Vol. _latter

is

commonly

usedasaterm-of-arttodenote 21.p. 1. _{units pricedtobeaffordable byhouseholds}

at Schwartz,

Seymour

I.,andRobert A. Johnston. 1983. _{specific incomelevels,withhousingcostnotto}

"Inclusionary HousingPrograms,"in_{Journal of exceedasetpercentageofthatincome,based}

the

American

PlanningAssociation,Vol.49,No. _{upon marketconditions. In this article.}

l.p.3. _{"affordable" willbeused}

inthegenericsense: Seidel.StephenR. 1978. HousingCosts

and

_housingthatisrelativelymoderatelypriced.

Government

Regulations: Confronting the 2

Ifthedeveloperwerenotgiven

some

benefits. RegulatoryMaze.

New

Brunswick, NJ:

The

theinclusionaryprogram might be founda CenterforUrbanPolicyResearch. _{"taking"ifchallenged(Mandelkeretal., 1990;} Smith,

Marc

T.,CharlesJ.Delaney,and

Thomas

Liou. _Schwartzetal.. 1983).

1996. ""InclusionaryHousingPrograms: Issues 3

Ellickson(1981).however, contendsthat

andOutcomes,"inReal Estate

Law

Journal,Fall. inclusionaryregulationswillreducethesupply of

Stockman.PaulK. 1992. "Note:Anti-SnobZoningin _{affordable housing.}

Massachusetts: Assessing

One

Attempt at 4

Thatisnottoimplythatpublic fundswillnever

Openingthe SuburbstoAffordable Housing," _{be involvedinaninclusionary project.}

_The

o

o

Virginia

Law

Review,Vol. 78.p.535. _developer

_may

_{qualify for subsidiesundereither}

CD

Tiebout,Charles

M.

1956. ""APureTheory ofLocal federalorstate housingprograms,andso

may

2

2

a

CO

Expenditures,"in_{Journal of}Political

Economy,

_{prospective purchasers or rentersofthe}

Vol. 64.p.416. _{inclusionaryunits. Forexample,theproject}

_may

Wheeler, Michael. 1990. "Resolving Local

Regulatory Disputesand BuildingConsensusfor

use

Low

Income Housing TaxCreditsas partof

thefinancing package,andinclusionary unit

CD

2

I

Affordable Housing," inBuildingFoundations, _purchasers

_may

_{receivebelow-marketfinancing}

DiPasquale andKeyes, Eds. Philadelphia: _fromthestate. There isnothinginany

UniversityofPennsylvania Press. _{inclusionary programthatprecludesgovernment}

I

Wish,

Naomi

Bailin,andStephenEisdorfer. 1997. funding; itsimplyisnot arequiredpartof

o

"'TheImpact of

Mount

LaurelInitiatives:an inclusionarydevelopment.

Analysis ofthe CharacteristicsofApplicantsand

_As

_usedinthis article,"municipality"will refer to

o

_Occupants," inSeton Hall

Law

Review,Vol. 27,p. both incorporated localgovernments (suchas

1268.

cities,towns, villages,boroughs, etc.)and

counties.

TableofCases " _{Localgovernmentcanonlyexercise}

_power

Beckv.

Town

of

Raymond,

118

NH

793.394

A2d

847 _delegatedto

itbythestate, andsowhether any

(1978)

_community

_can actuallyadopt aninclusionary

Board

of Appealsv. Housing AppealsCommitteein _ordinance isamatterofstatelaw. In

some

states.

Department of

Community

Affairs,363

Mass

339. _{such asMaryland, local governments havesuch}

294

NE2d

393(1973) authority, which is

why

Montgomery

County

Brittonv.

Town

ofChester,

134NH434,

595

A2d930

couldcreateitsModeratelyPricedDwellingUnit (1991) _ordinance. Inotherstates,likeNorthCarolina.

Buchanan

v. Warley,245U.S.60(1917

)

whether localgovernment hasthatauthorityis

James

v. (altierra,402U.S. 137(1971) unclear.

Southern Burlington County

NAACP

v. Township of _Statesdo

nothave unlimited power,particularlyif

Mt.Laurel,336

A2d

713(N.J.)appealdismiessed _there isa

"home

rule"provision inthestate

&

cert,denied.423U.S.808(1975){MountLaurel _{constitution.}

When

_{Massachusetts}

first adopted

f) _{its inclusionary law.itsright todo}

so

was

Southern Burlington Count}-

NAACP

v. Township of _{challengedasan infringementoflocal}

Mt. Laurel,92N.J. 158.456

A2d

390(1983) _{governments'rightsunderthe}

_{Commonwealth's}

(Mount

LaurelIT)

_home

_{ruleamendment.}

_The

_claim

_was

_rejected.

Milage ofArlington Heightsv. Metropolitan _however,

in

Board

ofAppealsv.

Housing

Housing DevelopmentCorporation,429U.S.252 _AppealsCommitteeinDepartment of

Community

Affairs,363

Mass

339,294

NE2d

393(1973).

Statewideprograms,as usedinthis article,are those adopted by stategovernment with

some

affirmativerequirementfor localactionor limitationonpre-existinglocalpower. This definition includes thelawsinCalifornia, Connecticut, Massachusetts,

New

Hampshire,

New

Jersey, and

Rhode

Island. Notincludedas "statewide" programsare thosestate laws authorizing,but not requiring,localgovernment

toadoptinclusionary regulations, as in

Maryland.

InConnecticut, PublicActs 89-311,codified as

ConnecticutGeneralStatutes,§8-30g. In Massachusetts,Chapter774 oftheActsof1969, codified asMassachusetts General Laws,

Chapter40B,§§ 20-23. In

Rhode

Island,Public

Laws

of1991,Chapter 154,§I.codified as

Rhode

IslandGeneralStatutes45-54-1 etseq.

InCalifornia,there areseveralprovisionsofstate lawthatapply. In

New

Jersey,

New

Jersey Statutes52:27D-301 etseq.

Forexample, Nantucket, Massachusetts, hasa

mandatoryinclusionaryrequirementforall

commercial developments ofover 4,000 square

feet enclosed space.

In fact,the righttoprohibitmulti-familyunits

frombeingbuiltinthesame neighborhoodas single-familyhouseswasfundamental tothe originalsanctioningofzoningbythe

Supreme

Court oftheUnited States in VillageofEuclidv.

AmblerRealtyCo.,272U.S.365(1926). Justice

Sutherland,inhismajorityopinion, wrote:

"Withparticularreferencetoapartment houses, it

is pointedoutthatthe development ofdetached

housesections is greatlyretardedbythe

coming

of apartment houses,which hassometimes

resulted indestroyingthe entiresection for private house purposes; that in such sections veryoften theapartmenthouseisamereparasite, constructed inorderto takeadvantage ofthe

open spaces and attractive surroundings created

bythe residential characterofthedistrict." (Euclidv.Ambler.272U.S.365,394 (1926)).

245U.S. 60(1917).

Localregulations can'texcludeminorities,of

course, since the

Supreme

Courtruledthat local ordinancesthatexcludebased on racewere

unconstitutional in

Buchanan

v. Warley.

However,the

Supreme

Courthas,throughits

decisions, leftanyjudicialremedy for

economically exclusionary zoningtothestates. InJamesv. Valtierra,402U.S. 137(1971),the Court refused to grantprivileged statustothe

pooras ithadinpolltaxandcriminallawscases, anditfoundalaw requiringareferendumfor approvalofallaffordable housingtobe race-neutral. In Worthv.Seldin.AllU.S.490(1975),

theCourt deniedreliefsoughtbyoutsiders (residents, developersand non-profits) seeking tochallengeexclusionarypracticesofanother jurisdictiononthebasisthattheplaintiffsfailed to

show

specific injuryfromthedefendant town's actions. Finally, in _{Ullage of}ArlingtonHeights

v. Metropolitan Housing Development

Corporation.429U.S.252(1977), theCourtruled

thatdisproportionate impactisnot sufficientto invalidate zoningdecisions; theremustbe evidenceofintentionaldiscriminationtoamount

to a violation ofequal protection. Thesecases

leftmatters largelytothestatesunless there

was

clearevidenceofraciallydiscriminatory motives.

Atthestate level,thelaw

may

bedifferent,and

discriminationbasedonwealth

may

be prohibited. Courts in

some

stateshavelimited theimpactofexclusionaryregulationsbyfinding stateconstitutional or statutory limitationsthat

imposeobligationstoconsiderregional housing

needs inlocalregulationsanddecisionmaking.

See Southern BurlingtonCounty

NAACP

v.

Township ofKit.Laurel.336 A.2d713 (N.J.)

appealdismissed

&

cert,denied.423 U.S.808

(1975)(MountLaurelI)and SouthernBurlington

County

NAACP

v. Township of

Ml

Laurel.92

N.J. 158.456 A.2d 390(1983){MountLaurelII).

whichestablished the rule in

New

Jersey. Beckv.

Town

ofRaymond, 118

NH

793,394

A2d

847

(1978),andBrittonv.

Town

ofChester.

134NH

434,595

A2d

930(1991).didthesamein

New

Hampshire. Otherdecisionshave lookedto regionalconsiderations

when

examiningzoning

in

New

York.PennsylvaniaandCalifornia.

NorthCarolina allowscitiestoadopt zoning

regulations "[f]or the purpose of promoting

health,safety,morals orthegeneralwelfareofthe

community,"N.C.GL. §160A-38I. "The

regulationsshallbemade...with aviewto conservingthevalueofbuildings..." N.C.G.L. >;160A-383. Countieshavethesameauthority under§153A-340 and_§153A-341

.

InCalifornia, thestate Department ofHousing and

Community

Developmentreviewsthelocal housing elements and

may

withhold

discretionaryfundingfrommunicipalities

whose

housing elements donotcomply withstate requirements. In

New

Jersey,communities

whose

administrativeagencyestablished as partofthe legislativereactiontothe

Mount

Laurel decisions,areexposedtopotential builder's

remedy lawsuitsinstatecourt.

One

voluntary planis inOrangeCounty. California. Originally,thecountyhada

mandatory plan, but itchanged. Thecounty has

been one ofthemostsuccessful inthe state at

producing affordableunits,with over 6,400 ofthe statewidetotalof20.000units.

Most

ofthe

Orange County unitswere producedunderthe

mandatoryprogram(Burchelletal. 1994).

They

may. verywell, alsorecognizethattheir

own

actions

may

havecontributed tothe problem. Thereisnoevidenceto indicatethat thelocalpreferenceformandatoryprogramsisan attempt todeny anyresponsibilityforthe shortageofaffordablehousing inthecommunity.

It

may

be anhonestefforttoaddress the possibility thatbothgovernmental and private sectordecisionshaveplayeda rolein the creation of exclusionary suburbs.

336A.2d713(N.J.)appeal dismissed

&

cert, denied.423U.S.808(1975).

92N.J.158.456 A.2d 390(1983).

Southern Burlington County

NAACP

v.

Township ofMt.Laurel,92t<U. 158.198,(1983).

Toavoidthebuilder'sremedy,a

community

had

to adopta housing elementthatpresented a reasonableprospectofmeetingits"fairshare" obligation. Thatplanhadtobecertifiedby

COAH.

Upon

certificationby

COAH.

the

community wouldreceive asixyearexemption

frombuilder'sremedy lawsuits.

Some

New

Jersey municipalitieshavenotsoughtcertification,and

so the builder'sremedy remainspossibleinthose jurisdictions.

California,withitsvarietyoflocally-designed programs,offersexamples ofthesecriteria.

Underthe Massachusetts law. only government

agencies,non-profitsandlimiteddividend corporationsareeligible.

Underthe

Rhode

Island law,for-profits

may

qualify iftheprojectisforrentalhousingandthe inclusionary unitswillremainaffordable forat least30years.

Otherprogramrequirements

may

affecttheextent

ofdensity bonus needed to compensatethe developer. Forexample,thelowertheallowable priceofthe inclusionaryunits, relative to their costof production,the greater thecompensation

needed.

Forexample, withastrictlylocal plan,the developer only hasto

move

tothenext town.

Withauniform statewideplan,heorshewould haveto

move

toanotherstate. Inthe latter situation, thedeveloper obviously would less likelyserve the

same

housingmarketasheorshe

would

ina

move

from one towntothe next.

Wheeler(1990) describesthelocalpermitting

processasnegotiation.

The

threatofthe possiblelossofstate funding could be onefactor adeveloper could usetoconvincethelocal permit grantingauthority that themunicipality

would

bebetteroffallowingthe inclusionary projectthan not.

Forexample, withoutthe unitary permitting process, a developermight havetosubmitone

applicationtorezonetheproperty from single-familytomulti-family,increaseallowabledensity, reduce frontageandsetback requirements, and

increase

maximum

floor arearatio toconformwith theproposal.

He

or she might needseparate approvaltosubdividetheparcelintomultiple buildinglotsonceitisrezoned. Then heorshe

might needacertificateof compliance fromthe

localconservationcommission,a certificateof adequatepublicfacilitiesfromthetrafficsafety committee,etc.

Inpractice, there aretechniqueslocalboards can usetoslow permitting, but theprocess isstill

fasterthanhavingtoobtain multiplepermits (Stockman. 1992).

A

legaldoctrinewhichallowscourtstopresume

that localactions are validandrequires a party challengingto provethatthey werenot.

The

"rationalreasonablebasis." "clearly erroneous."and"arbitrary andcapricious" language is

commonly

used as thestandard of review indecisionsonappealsoflocal

government actions. There areotherbasesupon

whichalocaldecisioncould be overturned,

includinglackof proceduraldueprocess.

The

regulation upon whichthedecision isbased

may

have been beyondthe authority ofthe

municipalityto adopt.

The

standardscitedare those applicabletochallengestoaprocedurally proper decision basedupon a statutorily sound

localregulation.

Itshould be noted that70 ofthepro-developer

HAC

decisionswerewithoutconditions. That

means

thatthepermitsweregrantedasoriginally requestedbythedeveloper, without conditions

towhich heorshemight haveagreedhad the

localgovernmentnegotiatedapermit acceptable tothe developer.

One

reason

why

Idonot considerOregon's

becauseitdoesnotlimitthe priceor rentofany

units.

The programiscalled theTax

Exempt

Loansto

EncourageRentalHousing

(TELLER). The

Commonwealth

has otherprogramswith other requirements,both forrental and ownership

units.

Thatfigure isbasedon

my

analysisofdatafrom

Massachusetts

DHCD,

MHFA

and other sources.

Thegoalsforthe

Mount

Laurel decisions and

subsequentlegislationcreating

COAH

were: ""To provide housing opportunities in the suburbs forpoorurban residents

who

had been

excludedby pastsuburban zoningpractices.

Toameliorateracialandethnic residential segregation by enabling blacks and Latinosto