Spokane Entrepreneurial Center v. Spokane Moves to Amend the Constitution, 2016 WL 455957 (Wa.) involved the successful gathering of signatures to put a “Community Bill of Rights,” as an amendment of the Spokane Charter, to send the matter to the voters of the city. Petitioners filed a declaratory judgment challenging the validity of the proposal. The trial court found petitioners had standing to challenge the validity of the proposal and that, on the merits, the proposal exceeded the initiative power. The Washington Court of Appeals made the opposite rulings on these issues and ordered the matter to be put to a vote. The Washington Supreme Court accepted review and posed the questions to be 1) whether petitioners had standing, and 2) whether the initiative was beyond the initiative power.
Hope Rising Community Church v. Municipality of Penn Hills, 2015 WL 7220380 (W. D. Pa.) involved a growing church congregation that leased an industrial building, making $7000 in improvements and gaining $10,000 in materials and labor donated by members. The pastor claimed that the staff gave him the verbal go-ahead, but the staff denied such a conversation. When the pastor applied for an occupancy permit, it was denied and the church was ordered to stop holding services at the site. Under defendant’s code, churches are only allowed as conditional uses in residential zones, and not permitted in the Light Industrial District where Plaintiff’s site lies. Uses not permitted outright or conditionally under the code are deemed prohibited. Defendant also denied Plaintiff’s use variance application, so the only uses recognized by Defendant are clothing distribution, food bank and volunteer meetings. The church alleges its membership attendance has dropped from 85 to from between 27 and 40.
T-Mobile West LLC v City of Medina, U.S.D.C. No. C14-1455-RSL (W.D. Wash., August 25, 2015) involved Plaintiff’s federal court challenge under the Federal Telecommunications Act (FTA) to the denial of its cell tower application. After the case was filed but before trial, the original parties (i.e., the applicant and the City) proposed a stipulated judgment that would allow the tower on the proposed site with some modifications. Intervening neighbors objected to the same.
Editor's note: Edward J. Sullivan and Carrie A. Richter were cited by the Ohio Supreme Court.
Apple Group, Ltd. v. Granger Township Board of Zoning Appeals, 2015 WL 3774084 (Ohio) arose out of a dispute over the interpretation of statutory language that Ohio townships were required to exercise their zoning powers “in accordance with a comprehensive plan,” and whether that requirement necessitated a document separate from the local zoning regulations.
In a long-awaited decision, the California Supreme Court upheld an “inclusionary zoning” ordinance by the City of San Jose that provided for construction of low and moderate-income housing by requiring a developer of 20 or more units to set aside 15% of the units for the private purchase by those with low- or moderate-incomes. The California legislature had authorized, but did not require, any particular method to provide such housing.
The Department of Housing and Urban Development (HUD) wasted no time in finalizing the new affirmatively furthering fair housing rules the day after the U.S. Supreme Court upheld disparate impact claims under the Fair Housing Act in Texas Department of Housing Affairs v. Inclusive Communities Project, Inc. (see last week’s post for a summary of that case). Disparate impact results from governmental policies that may not have been intended to create segregation, but do in fact result in segregation. The Supreme Court’s ruling upholds the Fair Housing Act’s prohibition on discrimination caused by policies or practices that have an unjustified disparate impact because of race, color, religion, sex, familial status, national origin, or disability.
The new rule requires certain public entities (“entitlement jurisdictions” that receive federal funding for housing) that have, under previous HUD rules, been required to prepare an Analysis of Impediments to Fair Housing (AI) to prepare an Assessment of Fair Housing Report (AFH). The AFH meets standardized reporting requirements, and is drafted to assist program participants in reducing disparities in housing choice, and to provide access to housing opportunities, particularly for those with protected status. The overall goal of the new reporting requirement is to expand economic opportunity and enhance quality of life.
These rules are a game changer for land use planning. HUD is proactively getting involved in the business of zoning for fair housing, not just financing units. HUD recognizes that fair housing issues may arise from factors such as zoning and land use, including the proposed location, design, and construction of housing; public services that may be offered in connection with housing (e.g., water, sanitation); and related issues. According to HUD, the AFH approach focuses primarily on assisting program participants in being better informed, and better able to set goals and priorities. In particular HUD wants to ensure that the following conditions will be taken into consideration when making funding decisions in a particular jurisdiction - patterns of integration and segregation; racially or ethnically concentrated areas of poverty; disproportionate housing needs; and housing-related barriers in access to education, employment, and transportation, among others.
While local jurisdictions will remain in local control of land use decisions and adoption of zoning regulations under the new rules, entitlement jurisdictions are called on to provide a specific analysis of land use programs that may inhibit affirmatively further fair housing. In addition to HUD’s final rule, HUD’s Assessment Tool, adopted in 2014, and guidance to be issued in the near future, will assist recipients of federal funding to use that funding and, if necessary, adjust their land use and zoning laws in accordance with their existing legal obligation to affirmatively further fair housing.
Zoning and land use laws that are barriers to fair housing choice and access to opportunity can be quite varied and the determination of whether a barrier exists often depends on the factual circumstances in specific cases. One example is zoning and land use laws that were intended to limit affordable housing in certain areas in order to restrict access by low-income minorities or persons with disabilities. The City of Black Jack took egregious zoning actions in the 1970s that prevented construction of low-income multifamily housing that had a racially discriminating effect and was found to violate the Fair Housing Act. U.S. v. City of Black Jack, 508 F.2d 1179 (1974). An example of a positive zoning action that would further fair housing would be the removal of such an ordinance. HUD intends to include additional examples in its guidance for its affirmatively furthering fair housing regulations.
Closer to home, Oregon’s 2015 legislature had a clear path to a remove a barrier to affirmatively furthering fair housing, but the Oregon Senate would not even take a public vote on House Bill 2564 to remove the constitutional ban on mandatory inclusionary zoning. Instead, the bill died in committee after having passed the House. Inclusionary zoning is a tool that requires new developments of housing to construct a particular percentage of new units for qualifying low-income home seekers. While the Oregon Senate failed to move forward, the State’s Draft Fair Housing Report 2016-2020 contains a finding that the state’s ban on inclusionary zoning “limits housing choice for persons of color and low income persons.” The AI included in the report states:
Disallowing inclusionary zoning as part of a community’s affordable housing toolkit limits the provision of affordable housing in general. In addition, limits on the use of inclusionary zoning may disproportionately affect members of protected classes to the extent that they have a greater need for affordable housing. This situation is called discriminatory effect or disparate impact.
With the fuel from the Supreme Court’s decision, as well as the new HUD regulations, Oregon’s leaders would be wise to avoid potential challenges and pick off low-hanging fruit like overturning the ban on inclusionary zoning. Such action is an easy first step to remove barriers for protected classes and avoid disparate impact challenges.
Although not garnering the rallies and applause given to the U.S. Supreme Court’s recent decisions dealing with the Affordable Care Act or same-sex marriage, the Court’s ruling considering the scope of the Fair Housing Act is likely to have just as much impact in how neighborhoods develop and in the choices protected classes of people – such as those protected by race, disability and familial status - have about where to live.
In Texas Department of Housing Affairs v. Inclusive Communities, Inc., the Inclusive Communities Project (ICP), a non-profit organization that seeks to promote racial integration in Dallas, sued a state agency charged with allocating HUD-issued low income housing tax credits to developers who build low-income housing projects. The ICP accused the Texas agency of disproportionately allocating the tax credits to properties in poor areas in violation of the Fair Housing Act of 1968 that makes it illegal to refuse to sell, rent “or otherwise make unavailable” housing to anyone because of race, sex or other protected categories. Between 1995 and 2009, the state did not award tax credits for any family units in predominantly white census tracts, and instead awarded tax credits to locations “marked by the same ghetto conditions that the FHA was passed to remedy,” ICP’s pleading states. ICP did not allege intentional discrimination, but rather whether the fact that issuance of tax credits within solely high-poverty areas that results in a disparate impact on minorities is sufficient to show a violation of the FHA.
Justice Kennedy, writing for the majority, noted that while de jure racial segregation in housing has been unlawful for over a century, de facto segregation remains. Congress passed the Civil Rights Act of 1968 and amendments to the Fair Housing Act in 1988 (the Fair Housing Amendments Act or FHAA) as well as cases applying Title VII of the Civil Rights Act of 1964, which banned many acts of housing discrimination, as antidiscrimination laws that focus not just on the “mind-set of the actors” but also on the “consequences of the actions.” By its terms, the FHA and its amendments were enacted to provide for fair housing and to prohibit unfair discriminatory housing practices. The Court added: "These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any sufficient justification. Suits targeting such practices reside at the heartland of disparate-impact liability."
The Court emphasized at some length that the disparate impact test was not formulaic and must be applied flexibly and specifically expressed concern over the use of racial quotas. The test must require a “causal link” in a case such as the one before it, between the policy and discrimination so as to remove “artificial, arbitrary and unnecessary barriers” to housing. The Court concluded:
Much progress remains to be made in our Nation’s continuing struggle against racial isolation. In striving to achieve our “historic commitment to creating an integrated society,” we must remain wary of policies that reduce homeowners to nothing more than their race.
Justice Alito writing for the dissent, joined by Chief Justice Roberts, Justice Thomas and Justice Scalia, focused on the statutory language “because of race” and concluded that only intent or motive mattered. As a result, Congress intended to cover disparate treatment — not claims of disparate impact. Quoting from another case, Alito pointed out: “The Court acknowledges the risk that disparate impact may be used to ‘perpetuate race-based considerations rather than move beyond them.’”
This case highlights the equity associated with giving all individuals choices in selecting appropriate housing rather than focusing solely on their quantity. But calling HUD’s Section 8 program “Housing Choice” is entirely undermined if families really have no choice about where they are going to live. As importantly, it illustrates the link between affordable housing and land use planning. The land use choices that planners and housing advocates make that results in segregation can violate the Fair Housing Act even though it may be entirely inadvertent.
On April 14, the Oregon House voted to approve House Bill 2564, which would remove the preemption on local government adoption of inclusionary zoning as a tool to advance affordable housing. Oregon and Texas are the only states that currently maintain such a prohibition and most other states allow this issue to be resolved at the local level. If the ban were lifted, local governments could require that some percentage of units in a development be sold as affordable units to low income buyers as part of any new housing development. No more than 30 percent of the housing units created by a new project could be offered at below-market rates, and local government must provide builders with one or more additional incentives such as additional density, waiver of permit fees or expedited permit review to do so.
There are some who argue that repealing of the ban on inclusionary zoning is somehow incompatible with our State planning system. Nothing could be further from the truth. Goal 10 (Housing) requires that:
Buildable lands for residential use shall be inventoried and plans shall encourage the availability of adequate numbers of needed housing units at price ranges and rent levels which are commensurate with the financial capabilities of Oregon households and allow for flexibility of housing location, type and density.
To assure that this objective is realized, the legislature has imposed an obligation on most local governments to plan and provide for “needed housing,” namely housing types:
* * * determined to meet the need shown for housing within an urban growth boundary at particular price ranges and rent levels…
Needed housing includes attached and detached single-family housing and multiple family housing for both owner and renter occupancy; government assisted housing; mobile home or manufactured dwelling parks; manufactured homes on individual lots planned and zoned for single-family residential use that are in addition to lots within designated manufactured dwelling subdivisions; and housing for farmworkers.
Ed Sullivan and I co-author the annual comprehensive plan update for the American Bar Association’s State and Local Government Law Section. The most recent update was just published by the Urban Lawyer and you can read about it here. The article undertakes an annual survey of state and federal cases dealing with the role of the comprehensive plan (sometimes called the “General” or “Master” plan) in land use regulation. That survey and this resulting article illustrate trends in the current use of three modes of perception regarding comprehensive plans by state legislatures and state courts. The first mode, the “unitary view,” is that planning is neither essential nor possibly even relevant to zoning and land use regulation, and it is the local zoning ordinance that is dispositive. The second view, the “planning factor view,” is that a plan is relevant, but not necessarily dispositive of the validity of a land use regulation. The final view, the “planning mandate” view, is that planning is essential to land use regulation. Please review the article for specific examples and commentary on each of these views.
The trend in case law in this update demonstrates increased respect for comprehensive planning, less tolerance for the view that zoning regulations are isolated from their planning roots, and more emphasis on the role of planning when plans are amended or interpreted. We hope you enjoy the article and that the update assists you in your land use battles.
Ocean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.) was an inverse condemnation act involving two tracts—one of 34 acres on which a 9-hole golf course existed and the other consisting of 2.94 acres completely surrounded by the first. At one time, these tracts were in common ownership and used as a golf club with the smaller tract being used as a driving range. The former owner threatened the City with a taking suit because the land use designations, in the owner’s view, were insufficient to provide a viable economic use. To resolve the dispute, the owner entered into a Development Agreement with the city in 1989, whereby the golf course use would remain on the larger tract, which would be designated as open space, and the smaller tract would be used for condominium development for 84 units. By its terms, the Development Agreement would remain in force until 2003.
In 1999, before any development applications were made, the original owner sold both tracts to different corporate entities in which there was the same principal. The design of the condominium development uses were rejected on two occasions by the City. That tract was then sold to different owners, but the purchasing entity contained many of the same principals as had an interest in the golf course property. After the second proposal was denied in 2002 for the development of the condominium tract, the current Plaintiff, as purchaser, sought a further approval and an extension of the Development Agreement. While the city approved the design of the proposal, it denied an extension. The conditions placed on the design approval would not accommodate the applicant’s restaurant, pro shop and other amenities it was required to undertake according to the Development Agreement. When the Development Agreement expired, the owners of the condo tract sought approval of yet another plan, which required the owner to purchase a 1-acre piece of land from the golf course site, which they were unable to do, so the plan lapsed. The owners of the property originally designed for condominium development then sought to change the designation on both tracts to allow for a single-family development on both tracts to single-family residential. The City denied the proposal and, on appeal, that decision was affirmed.
The owners of the condominium tract brought a takings claim, alleging no viable economic use of that tract could occur and that the City’s actions resulted in a partial or total taking. At trial, Plaintiff introduced evidence to the effect that the golf course could not operate without the development of a condominium tract to support it, noting that the original golf course use never realized profit. The golf course had closed in 2008 and the owners of that tract were unable to meet its mortgage payments so that tract was foreclosed upon and there was a $1.6 million mortgage outstanding. As to the condominium property, there was testimony that it could not yield sufficient return that was economically feasible in the current condominium market. The owners of that tract accused the City of rejecting its proposals as a way of “running out the clock” on the Development Agreement.
The expert testimony before the trial court focused on the economic viability of the tracts either together or separately. Plaintiff addressed the two tracts separately due to the different ownership and uses. Plaintiff’s expert testified that the economic viability of the golf course was untenable as it was too small to compete with nearby 18-hole golf courses, especially in such a small local market and valued the golf course tract at $170,000, assuming that the City would never re-designate that tract. However, Plaintiff’s expert also said that if that tract were re-designated as low-density residential, it would be worth $8.125 million (as the resulting lots could be proximate to the ocean and near coastal waterway). However, Defendant’s appraiser valued the golf course tract at $560,000 under current zoning regulations. That appraiser admitted he had not considered whether it were economically feasible to rehabilitate and operate the now closed golf course and had no opinion as to what the difference in value would be if that tract were developed for single family use. Defendant also presented evidence on the economic viability of the two tracts combined, notwithstanding objections to that evidence by Plaintiff. That testimony concluded there was no appreciable difference between the two tracts as currently zoned and as zoned in the matter requested by Plaintiffs. That appraiser also testified that a higher value would result if the owners of the two tracts would work cooperatively. On cross-examination, the City’s expert testified the most likely development scenario was that the owners of the residential property would acquire the golf course and operate it as a loss but as an amenity to the residential use, adding that it made no economic sense for the golf course to sit idly otherwise. That expert also testified that, given the costs already incurred, it was unlikely that the golf course would ever generate a profit.
In this non-jury trial, the judge found for the City and concluded that, whether the property was treated as a single or dual tracts, there was an economically beneficial use as a golf course, finding the losses for the last ten years were the result of the use of basis costs, which would be omitted in calculating economically beneficial use— thus, deducting interest and depreciation costs, there was a viable economic use of this tract.
Plaintiff contended the refusal to amend the plan in 2008 constituted a total taking of the golf course tract and that there was no competent substantial evidence to support a contrary conclusion because Defendant’s appraiser treated the two tracts as a single unit. The Court turned first to the “relevant parcel,” i.e., to determine of the two tracts in this case should be treated as a single economic unit. The Court used three factors to make that determination: physical contiguity, unity of ownership, and unity of use. In addressing the unity of use issue, the Court considered
(1) intent of the owner, (2) the adaptability of the property, (3) the dependence between parcels, (4) the highest and best use of the property, (5) zoning, (6) the appearance of the land, (7) the actual use of the land, and (8) the possibility of tracts being combined in use of the reasonably near future.
(citing Town of Jupiter v. Alexander, 747 So. 2d 395, 400 (Fla. App. 1998)).
While the condominium and golf course tracts are two legally distinct lots and were both now undeveloped and unoccupied, there was a rebuttable presumption of separateness. However, in this case, the unity of use rebutted that presumption, noting that the two tracts were one historically until 1989 when the Development Agreement first treated them as two tracts. For development purposes, even after they were made separate, the two tracts were developed symbiotically. The Court also noted that though the two tracts were in different ownership, principals in both had a substantial overlap. Finally, there is a physical contiguity of the two tracts (the residential tract being within the golf course). The presumption of separateness that thus has been rebutted and the Court upheld the analysis by Defendant’s appraiser which treated the tracts as one in concluded that Plaintiff was not deprived of all viable economic use.
The Court agreed that a regulatory taking could result from a public agency refusal to reclassify property, particularly in the light of changed conditions, but noted that the character of the area surrounding these uses has not changed. All that changed was the real property market for golf courses. There is no requirement that a public agency guaranty a profit for a landowner faced with a changing market.
Nor did the Appellate Court find grounds for a partial takings claim in the application of the three-factor test of Penn Central Transportation Co. v. New York City, 438 U.S. 104 (1978). Plaintiff admits it did not meet the investment-backed expectations factor as it had purchased the tract with knowledge of its land use designation, but argued that the other two Penn Central factors weighed in favor of a partial taking. The Court disagreed, for while the third factor, the character of the governmental action, favored Plaintiff because the burden of the regulation fell disproportionately on Plaintiff, the first factor, the economic impact of the regulation, was not met because, as the Defendant’s appraiser concluded, the two tracts, taken together, retained an economically beneficial use. Thus, the Trial Court dismissal of the inverse condemnation claim is affirmed.
This case illustrates the point that a Court will not find a regulatory taking by focusing on a single tract if that parcel is really part of a larger parcel and no regulatory taking exists against the parcel as a whole.
Ocean Palm Golf Club Partnership v. City of Flagler Beach, 2014 WL 2217255 (Fla. App.)
We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.