Is the primary affordable housing policy in America unconstitutional?

Laws that force developers to include affordable units in their projects are common in the United States. A new lawsuit argues that it is also unconstitutional.

On Wednesday, builders in Pittsburgh, Pennsylvania, sued the city over its demand that some of the new units they’re building in mid- and large-sized housing developments must be rented or sold at deep discounts.

Last month, the Pittsburgh City Council approved an ordinance requiring that at least 10 percent of units in housing projects be offered for at least 20 below-market rates to homebuyers and low-income renters in the Polish Hill and Bloomfield neighborhoods of Pittsburgh. Since 2019, the city has imposed similar requirements on development in the city’s Lawrenceville neighborhood.

The complaint – filed by the Association of Metropolitan Builders of Pittsburgh (BAMP) in the US District Court for the Western District of Pennsylvania – says the authorization is a taking without compensation in violation of the Takings Clause of the United States Constitution.

BAMP CEO Jim Eichenlaub said in a press release that Pittsburgh’s comprehensive zoning law “is effectively a housing tax.” “It forces property developers – or 90% of other units – to subsidize the cost of the so-called ‘holistic units’.”

The lawsuit also argues that Pittsburgh’s policy violates the Pennsylvania Constitution’s limitations on local government powers and its requirement that taxes be uniform among general categories of taxpayers.

Neighborhood groups in Pittsburgh generally supported zoning on the understanding that it would halt gentrification and ensure that low-income residents would see some new benefits from expensive new construction.

By contrast, the developers have argued that they are forced to make a significant cut on affordable units without any compensation or equivalent incentives from the city.

An affordable one-bedroom apartment built under city law should be rented for $795 a month, according to the city’s planning department. A two-bedroom unit costs $955 per month.

That compares to average monthly rents of about $1,500 in neighborhoods covered by Pittsburgh’s comprehensive zoning policies, according to data from rental site RentCafe. The discount is likely to be even steeper when one considers that the city’s overall zoning requirements apply to new construction (or major renovations), which will be more expensive on average.

The BAMP complaint says that such affordability requirements will result in “significant economic losses” for developers, who are also required to “provide time, talent, labor and financial resources to build housing for the benefit of the city and/or for the benefit of the city from third parties favored by the city.”

The lawsuit argues that this is an uncompensated action in violation of the Takings Clause of the Constitution and that Pittsburgh imposes unconstitutional conditions on their ability to obtain building permits.

Previous Supreme Court opinions have found that the Takings Clause places limits on the types of conditions governments can place on building permits, says Larry Salzman, an attorney at Pacific Law Firm.

In general, if the government is to add conditions for approval of a building project that otherwise legally, those conditions should aim to mitigate some of the public harm caused by the project, Saltzman says. a reason.

He says mass partitioning is likely to violate this principle.

He says, “If the construction of housing at market price does not harm anyone or cause a social problem; if government land-use policies cause housing shortages” a reason. “Why would you make the developer pay for it?”

Indeed, recent research has shown that new market-rate housing (even when it is expensive, “luxury” housing) reduces housing demand at all price levels. This appears to improve the affordability and availability of housing for all.

The Pacific Legal Foundation has twice sued in California courts over local zoning policies that required people to build affordable housing or pay into affordable housing trusts as a condition of their property development.

California courts dismissed these appeals, ruling instead that blanket zoning is not a taking, but an allowable regulation of land use.

In 2019, the Supreme Court denied the Pacific Legal Foundation’s lawsuit against Marin County, California, over the sweeping zoning law.

But Salzman says some judges have given indications that totalitarian zoning laws are something the court should deal with. The lawsuit against Pittsburgh law will give them another opportunity to address this issue.

Doing so could have huge implications for the country’s affordable housing policy. A 2019 Urban Institute paper notes that at least 866 jurisdictions in the United States have adopted some form of totalitarian zoning.

The research on these policies is mixed, and much depends on the details of individual totalitarian zoning laws. In general, the more mandatory the policy, the more it requires the developer to build affordable units, and the more affordable those units are, the higher the overall prices and/or new construction stops. Even supposedly well-designed totalitarian zoning policies have a poor track record in creating new housing.

Pittsburgh’s policy is among the most burdensome in the country. The developers’ case against her could see the courts place some limits on how burdensome these policies can be.

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