HomeMy WebLinkAboutCOM 0200.047 2006-2008
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LAND USE RESEARCH y
FOUNDATION OF HAWAII ~'I
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loo Bishop Street, Ste. 1928 ~ ~-r
i Honolulu, Hawaii g68i3 ~ i '
4 Phone 5zi-47+7
+ Fax 536o13z
July to, 2ooy
The Honorable Pete Hoffmann, Chair and Presiding Member -
County Councff, County of Hawaii
333 Kilauea Avenue (Ben Franklin Building)
' 2"d Floor, Council Room
Hilo, HI 96920 BY FACSIMILE• (808) n6i-8~Iz
Dear Council Chair Hoffmann and members;
j Subject: Bill No.156, Draft 6, Ordinance to Amend Chapter tt
+ (Honsing), Article I, Section n-4(d), Hawaii County Code, to
Include Affordable Housing Requirements for Industrial Park
Developments
N[y name is Dave Arakawa, Executive Director of the Land Use Research Foundation of
Hawaii ("LURE"). LURE is a private, non-profit research and trade association whose
rz+embers include major Hawaii landowners, developers, and a utility company. One of
LURF's missions is to advocate for reasonable and rational land use planning,
legislation, and regulations affecting common problems in Hawaii.
~ LURE is opposed to the Hawaii County Council's ("Council") possible reconsideration
( o;.` Bill r56, Draft 6, based on the following:
• The law requires that the exactions proposed by Bill 256, Draft 6, to be justified
by detailed analysis, studies or reports. The Council and the County of Hawaii
("County")have not completed the required analysis of the locality's needs, and
have not completed the required thorough and detailed studies or report of the
workforce jobs required and generated by the new, or additions, or
reconstruction to existing industrial park developments and confirmation that
those prospective industrial workers aze in need of housing and would financially
qualify for such housing. We respectfully recommend that the County
+ Council seek a legal opinion from the Corporation Counsel regarding
the legality of this proposal;
• It is unconstitutional for the Council to impose requirements on industri al park
developments to build or contribute to affordable housing, unless the Council and
the County can demonstrate, based on thorough and detailed studies and reports,
a clear rational nexus and proportional nexus between such industrial lkrsk
developments and the imposition of affordable housing requirements. We
i respectfully recommend that the County Council seek a legal opinion
I from the Corporation Counsel regarding the legality of this proposal;
and
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! Comm. No.---~----e
Ref. To: '?heNadl:~/~
Ref. Uate _HIl 10 2001
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' County of Hawaii, County Council Page z
A3ordable Housing Requirements for Industrial Developments
• The Council's proposed Bill 156, Draft 6, is counter intuitive and would likely
discourage investments in new, addition, or reconstruction to existing industrial
I park developments, and is likely to result in very little job creation and minimal
affordable housing.
l Proposed Bill i66. Draft 6
Bill 156, Draft 6, proposes to amend Chapter 11 of the Hawaii County Code to require that
industrial uses fulfill certain affordable housing requirements. Specifically, the bill
proposes that "industrial enterprises generating morethan-one hundred employees on a
foal-time equivalent basis, whether new or an addition or reconstruction to existing
~ facIlities, and including one or more businesses at the same or adjacent sites, must earn
on a affordable housing credit for every four full-time equivalent jobs created."
Bill 156, Draft 6, is not based nn any detailed studies or facts, but is based merely un the
fcllowing conclusionary statements:
• "The Housing Flement of the Hawaii County General Plan (enacted as ordinance
No. 05-25) clearly states that a policy of the County of Hawaii shall be that `large
industries or developments that create a demand for housing shall provide
employee housing based upon a ratio to be determined by an analysis of the
locality's needs."'
• "The County Council finds that industrial developments which are comprised of
i multiple individual enterprises are, in fact, large industries which generate
F substantial employment and demands for employee housing. Therefore, such
industrial developments should be subject to the affordable housing
requirements articulated in Chapter 11(Housing) of the Hawai i County Code."
r Proposed Bill iS6, Draft b. is in Violation of the U.S. Constitution
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BLII 156, Draft 6, is unconstitutional, because it does not satisfy the legal requirements to
impose such affordable housing exactions on industrial uses and developments.
The U.S. Supreme Court has ruled that laws imposing mandatory affordable housing
requirements or `9inkage fees" in lieu of housing are unconstitutional, unless they pass
th e following two basic takings tests:
' "Essential Nexus" Takings Test. The affordable housing exactions or linkage
~ fees proposed fn Bill 156, Draft 6, are unconstitutional, unless the Council
proves, through a detailed study, that industrial park developments have a
substantial connection to and contribute to the housing problem that the
exactions or linkage fees are intended to remedy. The Council has the burden of
providing a detailed study including the facts and evidence to satisfy the
`Essential Nexus" test. Nollan v. California Coastal Commission, 483 U.S. 825,
837 (1987); See Commercial Builders of
N. Cal. v. Sacramento, 94i Fed 872,
874 (qth Cir. 1991); and Dolan v. City of Tigard, 512 U.S. 374, 391 n.8 (citing
Nollan) (1994)•
• "Constitutional Proportionality Nexus" Test. Bi11156, Draft 6's, affordable
housing exaction of "one affordable housing credit for every four full-time
equivalent jobs created," is also unconstitutional, because it is not supported by a
detailed study. The required study must confirm that Hawaii County has done
sufficient affordable housing planning and it must also address the lack of
affordable housing at a level proportionate to each industrial development to
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County of Hawaii, County Council Page 3
F,fforda6le Housing Requirements for Industrial Developments
p determine a reasonable percentage for the affordable housing exaction or linkage
i fees. Dolan at 391(t994)•
In particular, Bill i56, Draft 6, is unconstitutional because the Council has:
(r) Failed to complete a thorough and detailed study of the workforce jobs required
and generated by the new, or additions, or reconstruction to existing industrial
,y park developments, confirmation that those prospective industrial employees ate
f in need of housing and that those employees would financially qualify for such
housing;
(2) Failed to provide any study, legal analysis or justification of Bill 156, Draft 6,
under the "Fssential Nexus" Takings'I'est;
(3) Failed to provide any study, legal analysis or justification of Bill 156, Draft 6,
under the "Constitutional Proportionality Nexus' Test to support the proposed
requirement of one affordable unit credit for every fourfull-time equivalent jobs
created.
?,ttached is a legal memorandum prepared by Professor David Callies of the WIlliam S.
F;ichardson School of Law, addressing the Kauai County Council during their
deliberation of affordable housittg requirements for residential developments of five or
more dwelling units. and "large" resort commercial and industrial developments. The
following is an excerpt from Professor Callies' memorandum, which explains that in
order to legally justify imposing affordable housing exactions on
i landowners and developers, the government must first perform thorough
and detailed studies to establish a rational and proportional nexus between
' the projects and the demand for affordable housing:
As to housi,~tg exactions or set-asides on commercial development, the principle
-indeed virtually only -federal case approving such set-asides did so only
after the loca(gouernment requiring such set-asides engaged in thoraugh and
detailed studies of the workforce jobs required and generated by the proposed
commercial development, which requirements were then cut inhalf -far less
than the 40% which the draft County of Kauai Housing Policy Ordinance would
require of such commercial development."
Proposed Bill isEi. Draft 6, is Counterintuitive to the Development of
Q.ffordable Housnng
T'he Hawaii's history has generally shown that that overly aggressive affordable housing
r~squirements result in (i) the costs of such affordable housing requirements being
passed on to residents as increased prices of market homes; and (2) many times such
aggressive requirements result in landowners and developers postponing their projects,
H~hich result in fewer affordable units being built.
Cin the other hand, if developers are provided with incentives, it will encourage them to
build more housing supply in all price ranges for all income groups, including affordable
rentals and housing. As with other counties in the state, the County of Hawaii has an
insufficient supply of rentals and for sale units for all income groups. Maui County just
recently passed a workforce housing policy to try and address this issue, Kauai County is
also in the process of adopting a housing policy, and in its 200 session, the Legislature
was also trying to find ways to increase the supply of affordable housing.
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County of Hawaii, County Council Page q
Affordable Housing Requirements for Industrial Developments
L.URF participated in the Joint Legislative Housing and Homeless Task Force, the Mayor
of the City and County of Honolulu's Affordable Housing Advisory Committee, and
Affordable Housing Task Force created by Senate Concurrent Resolution t35 in zooq. It
Has clear to the participants in these efforts that one of the major problems is that
an overall lack of housing supply resulted irI a lack of affordable housing. It
j H-as also a consistent and common finding that in order to create more affordable
j housing opportunities, there was a need to provide more housing in all
In_icome categories. The problems of a lack of affordable housing and a lack
of overall housing supply cannot be solved by burdening landowners and
developers with aggressive County exactions and inclusionary zoning
i requirements.
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The crux of the problem is not the new jobs that are being generated but, rather, the lack
' of affordable workforce housing available. These are two related, but distinct, problems
which should not be linked together.
The connection between housing and income is generally explained as follows:
E mployers generally look for an educated work force and affordability in housing when
i locating or expanding businesses. From a public policy standpoint, if the Counties want
to attract employers to provide higher paying jobs for our residences both now in the
fitture, it is imperative that the Counties provide incentives to developers and land
owners to insure an adequate supply of housing for all income levels.
4'Je need both new employment opportunities and affordable workforce housing. Rather
t11an placing an affordable housing burden on investors who are bringing new jobs to the
market, the County might consider what could or should be done to increase the supply
of affordable workforce housing. Increasing the supply of housing would create housing
opportunities to those who could be employed in the new jobs.
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F[owever, as we have seen in our State's past, overly aggressive housing exactions and
inclusionary zoning result in increases in the price of new market homes because the
affordable homes which are sold at abelow-market price must be subsidized by the
market-priced home s developed by the same landowner or developer. Similarly, if the
Council approves Bill t56, it will result in increased costs and an unjustified burden to
new and existing industrial businesses on the Big Island.
V'Je caution the Council to carefully consider how best to balance government's
intervention in the market system for residential, industrial and commercial
` developments. Placing too many controls on the landowners and developers will
probably result in slowing the production and availability of new affordable housing
units.
Careful Analysis and Consideration of Alternatives IS Required to DevelOD $
I Sustainable Affordable Housing Policy
We would recommend that the Council should carefully analyze all facts and da+a, and
consider al] alternatives and impacts prior to establishing and implementing its
affordable housing policy. While local government does not have an ability to influence
income or interest rates, its options are usually limited to one of the following:
• Government Approvals--(Zoning/Permitting.) Government can, based
thorough and detailed studies which establish an essential nexus and
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County of Hawaii, County Council Page g
Affordable Housing Requirements for Industrial Developments
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proportionate nexus, either require units be built as a condition of the approvals
or create incentives to stimulate the market for development of housing units;
• Gouernment Financing--(infrastructure, tax credits, public housing).
Government plays the role of actual developer in CIP for infrastructure er public
housing. Government also assists in providing tax credits for affordable housing
projects.
• Government Incentives. Other government incentives which have been made
available to developers and land owners include, expedited processing, fee
deferrals. Loans or grants and density bonuses. Homebuilders Assn of Northern
California u. City of Napa,lo8 Cal. Rptr. zd 60 (Ct. App. 2ot).
Any policy developed relating to affordable housing should consider all of the elements
that are interconnected and that influence the housing market. Focusing on one element
tiithout considering the others, or focusing on one segment of the market, will not lead
to a sustainable affordable housing policy. Furthermore, policy makers should be aware
of the impact of housing exactions in both a growing and stagnant economy. Tt wasn't
too long ago when there was an oversupply of housing because of the depressed
economy.
There is no simple solution to the affordable housing problem; however, if the goal is to
have more affordable housing produM built, we would recommend that the Council
launch various initiatives and incentives to address some of the problems identified in
etch of the interconnected elements which influence the overall housing market.
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Conclusion
LURF is opposed to the Hawaii County Council's possible reconsideration of Bill r56,
Draft 6, for the following reasons: (t) The Council and the County of Hawaii (`County")
I, have failed to prepare the constitutionally required thorough and detailed studies or
reports to justify imposing affordable housing exactions or linkage fees; (2) It is
unconstitutional for the Council to impose requirements on industrial or commercial
d~:velopments to build workforce housing, unless the Council and the County can satisfy
~ b~~th the Essential Nexus Test and the Proportional Nexus test to justify imposing
affordable housing exactions or linkage fees; and (3) The Council's proposed Bill t56,
Draft 6, is counter intuitive and would only discourage investments in industrial park
developments, and is likely to result in very little job creation and minimal affordable
housing.
~Je respectfully recommend that the County Council seek a legal opinion
from the Corporation Counsel regarding the legality of this proposal.
We appreciate the opportunity to express our opposition on this matter.
' C_: Corporation Counsel, County of Hawaii
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To: Land Use Research Foundation
From: David Catlies
In Re: Kauai Housing Policy Ordinance Draft
Date: January 3, 2007
I. INTRODUCTION
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You asked that 1 review and analyze the Kauai County draft Housing Policy Ordinance
for th.e purpose of commenting upon its constitutionality under the U.S. Constitution's Fifth
Amendment as interpreted by the U.S. Supreme Court, The draft appears to require that
resid~;ntial developments of five or more dwelling units and `9arge" resort. commercial and
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industrial developments provide workforce housing at substantially below prevailing market
prices equivalent to 30°0 of the total units constructed plus ]0% of the project's land azea, at the
time of rezoning or, presumably, if no rezoning is necessary, at a development permitting stage.
Furthermore, such workforce housing must be available within ("integrated...being mixed along
side ~nazket units") a residential project area, or suffer a further financial penalty if located
j outside such a residential project area. Substantially identical requirements apply to resort,
commercial and industrial developments of 50 or more rooms, or which are estimated to generate
100 or more new "fulltime equivalent jobs," except that affordable units may be located outside
the project area "where no residential units are produced onsite" without penalty. The sole
~ "bomis" to which a developer may be entitled is limited expedited permit processing, except for
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for projects with l00% workforce housing, at least 51% of which must be affordable, which
projects appear to be entit]ed to reduced development standards. The balance of the proposed
I Housing Policy Ordinance -indeed, most of it - is devoted to ensuring that workforce housing
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stays in the contemplated affordable housing range, through a series of transfer and buyback
s restrictions.
II. CONCLUSION
While Kauai County should be congratulated for recognizing and attempting to address
the workforce and affordable housing shortage in the county -and in particulaz, ensuring that
that contemplated workforce units remain affordable over time - it may not do so except by
constitutional means. First, the draft Housing Policy Ordinance appeazs to "exact" the
workforcelaffordablehnusing increment at an inappropriate and unconstitutional stage in the
j land development process: rezoning. The premise upon which any and all legal land
development wnditions -exactions, dedications, impact fees, in lieu fees - rests is that they aze
development driven: the contemplated project will require public facilities for which the
landowner/developer must contribute a fair shaze. Rezoning, while it may be a necessary
precedent to land use and development, neither creates nor drives the need for public facilities. It
is therefore unconstitutional to require exactions of any kind as a condition for change of use by
~ means of zoning map amendments (rezoning).
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Second, unless the county can demonstrate a cleaz rational and proportional nexus
betw~xn market cost developments and the imposition ofbelow-market cost housing set-asides,it
may not require them at any stage in the land development process. What scant precedent exists
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~ for imposing such exactions on residential developments does so only when the locwl
gove~~nment requiring such exactions provides a series of bonuses to help offset the cost of the
mandatory affordable housing set-asides. Thus, for example, a recent intermediate California
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Court of Appeals so provided, but only after detailed studies and at a far lower percen'.agc (10%)
f of affordable housing set-asides and -more importantly, against the backdrop of a California
statute which, in its recently amended form, requires such bonuses as soon as the affr~rdable
units set-asides reach a threshold of 5%, and escalating sharply in terms of number and kinds of
bonuses as the percentage of affordable housing set-asides increases.
As to housing exactions or set-asides on commercial development, the principle -indeed
virhttdly only -federal case approving such set-asides did so only after the local government
requi dng such set-asides engaged in thorough and detailed studies of the workforce jobs required
j and generated by the proposed commercial development, which requirements were then cut in
half faz less than the 40% which the draft County of Kauai Housing Policy Ordinance would
require of such commercial development.
In sum, the proposed ordinance imposes the mandatory housing set-asides at the wrong
stage of the land development process, without nexus or proportionality, all required by the U.S.
Constitution's Fifth Amendment as interpreted by the U.S. Supreme Court.
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~ Ili. ANALYSIS
j A. The Constitutionality of Mandatory AffordablelWorkforce Housing (Linkage)
Mandatory affordable housing requirements or linkage fees in lieu of housing raise two
basic takings issues. The first issue is whether such fees pass scrutiny under the Supreme
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Coun:'s "essential nexus" test in Nollan v. California Coastal Commission.t Because linkage
fees ere generally a legislative form of exactions, the second issue is whether the "rough
proportionality" test in Dolan v. City of TigardZ applies. The resolution of this second issue turns
# in pact on whether a jurisdiction accepts the administrative-legislative distinction, a yuestion
which the Hawaii appellate courts have yet to resolve.
By way of background, "[tJhe broad concept of linkage describes any of a wide range of
municipal regulations that condition the gant of development approval on the payment of funds
to help finance services and facilities needed as a result of development." 3 "In the context of
developing affordable housing, linkage refers to any scheme that requires developers to mitigate
the adverse effects of non-residential development upon the shortage of housing either indirectly,
by contributing to anaffordable-housing trust fund, or directly, by actually constructing
g.,
j affordable housin a
Before addressing the issues, note that Hawai`i's impact fee statute, Hawaii I:evised
1 Statures 46-141 to 148, does not apply to housing linkage fees, and, indeed, expressly
excludes such fees from the authority granted to Hawaii's four counties to levy impact fees for
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i public; facilities. Section 46-142(b) of the Hawaii Revised Statutes states that "impact fees may
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~ 483 U.S. 825, 837 (1987).
z 512 U.S. 374, 391 (1994).
'Holmdel Builders Assn v. Holmdel, 583 A.2d 277, 284 (N.7. ]990).
° Id.; accord John A. Henning, Jr., Comment, Mitigating Price Effects with a Housing Lin!<age Fee, 78
Calif. L. Rev. 721, 722 (1990) (linkage fees are a form of exactions that levy "fees on downtown oEfi::e development
[o sub:+idize low- and middloincome housing" (foomo[e omitted)); Jane E. Schukoske, Housing Linkage:
Regulnling Development Impact on Housing Costs, 76 Iowa L. Rev. 1011, 1011 (1991) ("Housing linkage programs
requirt: or offer inducements to private developers to produce affordable housing or to pay a sum for development of
affordable housing into housing trust funds."); 1 Land Use Law § 9.23 ("A number of cities have adopted exaction
programs that require downtown office and commercial developers to provide housing for lower-income groups or
contribute to a municipal fund for the construction of such housiag." (footnote omitted)).
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be imposed only for those types of public facility capital improvements specifically identified in
a county in a county comprehensive plan or a facility needs assessment study."5 However,
Section 46-141 defines "impact fees," as "the charges rmposed upon a developer by a county or
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board to fund all or a portion of the public facility capital improvement costs required by the
development from which it is collected, or to recoup the cost of existing public facility capital
improvements made in anticipation of the needs of a development.s6 That same section also
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defines "public facility capital improvement costs," and explains that such costs "do not include
expenditures for required affordable housing."~ Although Section 46-141 does not define
"required affordable housing," Section 516-1, which concerns leaseholds, explains that a
~ "[s]u:,tainable affordable development," requires, inter alia, the satisfaction of "the state or
county agency's affordable housing requirements as set forth in the applicable state or county
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~ law, regulation, policy, or agreement."s In addition, Section 46-143(c) imposes nexus and
proportionality requirements, providing that "[a]n impact fee shall be substantially related to the
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needs arising from the development and shall not exceed a proportionate shaze of the costs
i incun•ed or to be incurred in accommodating the development."9
In view of Section 516-1, Section 4b-141's "required affordable housing" language likely
~ refers to housing exactions. For example, Section 2.94.030 of the Maui County Code requires
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s Haw. Rev. Stat. § 46-142(b) (2006).
e Haw. Rev. Sta[. § 46-141 (emphasis added).
' ~ Id. The legislative history of Haw. Rev. Sta[. § 46-141 does not explain what is meant by "required
affordt~ble housing "
8 Haw. Rev. Scat. § 516-1.
' Id. § 46-143 (c).
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that individuals seeking to build hotels must "construct affordable housing at a mini!num of one
affordable housing unit for every four apartment-hotel, hotel, or motel rooms or fraction
thereof"10 Likewise, Section 11-4 of the Hawaii County Code, which is entitled "affordable
hous mg requirements" requires affordable housing when a rezoning occurs. t ~ Under Section
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11-4, when the application rezones and seeks to create "[fJive or more residential units or lots," it
must "earn affordable housing credits equal to twenty percent of the number of units or lots
(rounded to the neazest .5)."tZ Accordingly, the Hawaii impact fee statute, HRS 46-141 to
148, likely does not apply to affordable housing requirements, and, consequently, does not apply
to linkage fees because such fees necessarily concern the government's expenditures for
affordable housing.13 Nonetheless, although linkage fees may not be subject to nexus and
proportionality tests statutorily, they may still be subject to such tests under the United States,
U.S. Const. amend. V, XIV, and Hawaii Constitutions, Haw. Const. art I, § 5.
Turning to the first issue, because linkage fees are a form of exactions they are subject to
the " ~;ssential nexus" takings test under Nollan.14 Under Nollan, "a permit condition that serves
the same legitimate police-power purpose as a refusal to issue the permit should not be found to
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10 Maui, Haw., Maui County Code § 2.94.030.
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Hawaii, Haw., Hawaii County Code § 11-4.
See Holmdel Builders Assn, 583 A.2d at 284.
j 14 483 U.S. 825, 837 (1987). See Commercial Builders afN. C'al. v. Sacramento, 941 F.2d R72, 874 (9th
Cir.1991).
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be a taking if the refusal to issue the permit would not constitute a taking.s15 In addition, under
Nollan, the government. bcazs the burden of proving this nexus.rb In the context of linkage fees
in particulaz, one treatise explains that linkage fees satisfy this test "only if the municipality can
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i show that downtown development contributes to the housing probleml~ the linkage exaction is
intended to remedy."L8 There is no disagreement that Nollan's nexus test, or its close
~ equivalent, applies to linkage fees.
For example, in Commercial Builders of
N. Cal. v. Sacramento,19 the Ninth Circuit held
that am ordinance which. imposed a linkage "fee in connection with the issuance of permits for
nonresidential development of the type that will generate jobs,"20 was constitutional under
Nollan.Zt The court explained that "the [o]rdinance was implemented only after a detailed study
- is Nollan, 483 U.S. at 836 (emphasis added).
'b Dolan, 512 U.S. 391 n.8 (citing Nollan, 483 U.S. at 836).
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iv A "housing problem," 1 Land Use Law § 9.23, is the typical interest which the Counties of Hawaii
identify as a legitimate state interest in their ordinances, see, e.g., Maui, Haw., Maui County Code § 2.94.010 ("The
council fords that there is a critical shortage of affordable housing in the county."); Hawaii, Haw., Hawaii County
{ Code ?i 11-2(5) (setting forth the objective of "Requir[ing] lazge resort and industrial enterprises to address related
affordable housing needs as a condition of rezoning approvals, based upon current economic and housing
condit.ons"). In Assn of Owners v. Honolulu, 7 Haw. App. 60, 742 P.2d 974 (1987), the Intermediate Court of
Appeals of Hawai i aclmowledged the legitimacy of this interest in the context of the challenge to a condominium
declazation, stating that "affordable housing and public parking for downtown Honolulu were important to the
~ welfan, of the community." Id. at 78, 742 P.2d at 985.
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18 1 Land Use Law § 9.23.
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is 941 F.2d 872 (9tki Cir. 1991).
24Id. at 873.
" Id. at 875.
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revealed a substantial connection between development and the problem to be addressed.'>zz
Consequently, the court: found "that the nexus between the fee provision here at issue, designed
to fwther the city's legitimate interest in housing, and the burdens caused by commercial
j development is sufficie~at to pass constitutional muster."23
Even courts that decline to apply heightened scrutiny to legislatively imposed fees
3 none?heless apply some form of Nollan's essential nexus test. For instance, in San hemo Hotel
} L.P. u. City & County o/San Francisco,24 although the California Supreme Court reaffirmed that
legislatively imposed, ministerial impact fees are not subject to the tests in Nollan or Dolan,25 it
none~:heless required that there "be a `reasonable relationship' between the fee and the
deleterious impacts for the mitigation of which the fee is collecteds26 Similazly, in Holmdel
Builaers Association v. Township of Holmdel,2~ although the Supreme Court of New Jersey
concluded that legislative fees aze not subject to the heightened scrutiny of its "but-for,"
"rational-nexus" test, it still required that some relationship between the development and the
harm caused.ZS The cotnt essentially explained that "relationship between the private activity
j ~ Id.
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24 41 P.3d 87 (Cal. 2002).
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~ ze Id. at 103 (citations omitted).
n 583 A.2d 277 (N.J. 1990).
zs Id. at 288.
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E that lives rise to the exaction and the public activity to which it is applies," must be "founded on
[an] actual, albeit indirect and general, impact.'>z9
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' Notably, the only part of the Nollan test that was not applied in San Remo or Holmdel
Buld,>rs Association, is the shifting of the burden ofproof to the government. That fact that the
burden ofproof shifts to the government was not cleaz in Nottan; however, the Court clarified
this fact in Dolan, because there, the Court cited to Nollan when it said that "the burden properly
rests on the city." 30 What is important, however, is that all jurisdictions at least require some
form of nexus between the harm caused by the development and the interest which the, exaction
purportedly serves. Thus, even under the California or New Jersey approach, Nollan's
i requirement that the "setme" interest be served by the exaction,31 still applies, albeit in different
terms.
The second and more difficult issue in a takings analysis of a linkage fee is whether the
Coun's "rough proportionality" test in Dolan applies.32 That test, in addition to requiring an
~ "indi ~idualized determination" of `tough proportionality," 33 also shifts the burden ofproof to the
i
Id.
3o Dolan, 512 U.S. 391 n.8 (citing Nollan, 483 U.S. at 836).
"Nollan, 483 U.S. at 836.
32 Dolan, 512 U.S. at 391. There is a split of authority on whether Dolan applies to lin'cage fee, see I
Land iJse Law § 9.23 ("Post-Dolan a court must also decide whether a linkage fee is a legislative fee subject to the
rationed basis test, or an adjudicative fee that requires an individualized determination and must satisfy the
heighG:ned judicial scrutiny requited by Dolan,").
33 Dolan, 5t2 L'. S, at 391.
9
T- 4-O J; ItS-FM:i +5_E ad53 E'Ob__9a 1~- Jt tf/ L3
I~
government to prove such proportionality.34 Although the two appellate courts which have
considered this issue in the context of linkage fees both concluded that heightened scrutiny is
inapltropriate,35the rationale in those decisions is not limited to the context of linkage fees. The
issue extends to all legit>latively imposed, non-discretionary (or ministerial) fees.
There aze essentially two major approaches to the question of legislatively intposed fees.
On o;1e hand, same jurisdictions hold Dolan's heightened scrutiny inapplicable to legislative fees
3 by virtue of the Court's rationale in Nollan. First, such jurisdictions observe that in Dolan, the
Cour: distinguished "generally applicable legislative zoning regulations" from an "adjudicative
decision." 36 Next, they note the Court's concern in Nollan that "unless the permit condition
serves the same govcmtnental purpose as the development ban, the building restriction is not a
s
valid regulation of land use but anout-and-out plan of extortion." 37 Bridging the lo;~cal gap,
E
{ these courts azgue that such regulatory leveraging (i.c, extortion) poses much less of a threat at
the legislative level thazt at the administrative leveL3B These courts thus conclude that Dolan's
1 procedural safeguards are unnecessary beyond the administrative decisiotunaking context. The
i
Ninth Circuit, Arizona, California, Colorado, New Jersey, and Oregon adhere to this approach.39
i
34 Id. at 391 n.8.
s
e
ss See San Remo, 41 P.3d at 102-03; Holmdel, 583 A.2d at 288.
s6 Dolan, 512 U.S. 7rt 391 n.8.
37 Nollan, 483 U.S. at 837 (citation and quotation marks omitted).
as See, e.g., Ehr/ich v. City ojCulver City, 911 P.2d 429, 444 (Cal. 1996).
I
I 39 See Garneau v. City ojSeattle, 147 F.3d 802, 815-16 (9[h Cir. 1998); Home Builders Assn ofCen[ral
Ariz. v. City afScottsdale, 930 P,2d 993, 1000 (Ariz. 1997); San Remn, 41 P.3d at L02-04; Krupp v. Breckem~idge
Sanitation Distric[, 19 P.3d 687, 696 (Colo. 2001) (en banc); Holmdel Builders Assn, 583 A.2d at 288; Home
Builders Assn v. Tualatin H:IIs Park & Recreation Dist., 62 P.3d 404, 406 (Or. Ct. App. 2003).
10
i .-t. 11-_-Cn~_t_,~ ?.1F, EZJ~•-~:•P ~3'~~ t 1"]/ 23
~ For example, the Supreme Court of New Jersey illustrated the applicability of this
approach to non-residential development linkage fees in Holmdel Builders Association.40 There,
~ in deciding whether to apply a "rational-nexus" test or a "reasonable relationship" test, the court
found "a sound basis to support a legislative judgment that there is a reasonable relationship
between unrestrained nonresidential development and the need for affordable residential
development "41 This relationship, the court explained, need only be "founded on the actual,
I. albeit indirect and general, impact that such nonresidential development has on both the need for
lower-income residential development and on the opporttuuty and capacity of municipalities to
meet that need." Hatmonizing its inclusionary zoning doctrine, the court noted that such zoning
is "itt~lf is based on that relationship"42
On the other hazed, a number of jurisdictions have strictly followed Dolan in the context
j of legislative monetary exactions. For example, in Town of Flower Mound v. Stafford Estates
Ltd. Partnership,43 the Supreme Court of Texas narrowly held that a legislative exaction
conce:ming off-site public improvements was properly reviewed under Dolan 44 There, the town
had the discretion to grunt Stafford, a developer, a variance from the exaction requirement,
i
III
4
i
40llotmdel, S83 A,2d at 288.
at Id.
az Id.
az 135 S.W.3d 6201;Tex. 2004).
as Id. at 622-24.
11
t ~"d: "E'aq^S 18GPS265:- # 1P! 23
3
jj whica Stafford had requested and was denied.45 While analogizing to Nollan and Dolan, the
3 court reasoned:
i
i
It is enough to say that we can find no meaningful distinction between the
condition imposed on Stafford and the conditions imposed on Dolan and
the Nolhms. All were based on general authority taking into account
individual circumstances. Dolan's request for a variance was denied. "Che
Town wits authorized to grant, and did grant, exceptions to the general
requirement that roads abutting subdivisions be improved to specified
standazds. Stafford applied for an exception and was refused, but the
Town nevertheless considered whether an exception was appropriate:'b
Mon~ver, a number of other jurisdictions, like the United States District Court for thr, Eastern
District of Virginia, Washington, and Ohio, also apply Dolan to legislative exactions, but have
not explicitly decided the issue.47
The Hawaii appellate courts have not decided this issue, and indeed, in In re lYater Use
Permit Applications,48 t!he Supreme Court of Hawaii declined to address it, stating that "[w]e
i need not address the additional question whether and to what degree Nollan and Dolan extend
beyond land dedications to include monetary exactions such as those presently at issue."av
I
as Id. at 624.
i
ae Id. at 641 (footnotes omitted). The ordinances of the County of Hawaii which require affordable
housing requirements, do not provide for variances from such requ'vementc. Thus, the applicability of the analysis
~ in Town ojFlowerMound v. Stafford Es[ates Ltd. Partnership, 135 S. W.3d 620, 641 (Tex. 2004) (footnote omitted),
' is questionable.
f
"See Nat'(Ass'n at Home Builders v. Chesterfield County, 907 F. Supp. 166, 768 (E.D. Va. 1995), afFd,
' 92 F.3d 1180 (4th Cir. 1996); Home Builders Assn v. City ofBeavercreek, 729 N.E.2d 349, 356 (Ohio 2000);
Trimer Dev. Co. v. King County, 877 P.2d 157, 194 (Wash. 1994) (en banc).
i~
as 94 Elawai i 97, 9 P.3d 409 {2000).
a9 id. at 184 n.102, 9 P.3d at 496 n.102 (citations omitted).
12
1
9-Oi;~1o~PM; t90252E3153 PO=°°°?1 ic/ 23
Accordingly, the applicability of Dolan to legislatively imposed impact fees remains undecided
in Hawaii.
B. A Review of Cases Dealing With Inelusionary Affordable Housing Programs
Among the cases that rejected a local government's attempt to require a mandatory set-
! aside of dwelling units £or affordable housing is Board of Supervisors v. DeGroff Enterprisesso
Then:, Fairfax County amended its zoning ordinance to require "the developer of fifty or more
f, dwelling units in several zoning districts to commit himself, before rezoning or site plan
approval to build at least 15% of these dwelling units as low and moderate income
housing...."s~ The trial court found that the amendment was invalid on the grounds that the
Board of Supervisors e~+:ceeded its authority under the State's zoning enabling act, the
amendment was an improper delegation of legislative authority, and the amendment was
arbitrary and capricious. On appeal, the Supreme Court of Virginia agreed with the trial court:
[T]he zoning enabling act does not authorize the governing body of a co~.zary to control
compensation for the use of lands or the improvements thereon ...The amendment .
~ exceeds the authority granted by the enabling act to the local governing body because it is
socio-economic zoning and attempts to control the compensation for the use of land and
the improvements thereon Of greater importance, however, is that the amendment
requires the developer or owner to rent or sell 15% of the dwelling units in the
development to (persons of low or moderate income at rental or sale prices not fixed by a
free market s~
More recently, the Virginia Circuit Court in Kansas-Lincoln, h.C. v. Arlington County
i
I Boartl53 found that the County did not have the authority to include a requirement that a
50 198 S.E.2d 600 ('Ja. 1973).
s ~ Id. at 601.
52Id. at 602.
57 66 Va. Cir. 274 ('Ja. Cir. Ct 2004).
13
~-O "~to~FM:i !:95.^F.3 :Fia FOnS_=~~~~ a 2C/ 2i
1
developer provide affon~able housing as part of the land development process in the zoning and
land use regulation, nor the authority to require an affordable housing contribution as part of the
site plan approval process.sa Specifically, the court stated
[t]here is no authority for the County Boazd to require site plan applicants to make
~ affordable housing contributions to the County Housing Reserve Fund or provide
affordable housing units as part of the County's site plan approval process. Moreover, the
County is not authorized to require site plan applicants who seek to provide affordable
I' housing through the bonus density program to also make a contribution to the affordable
housing fund as that requirement is specifically prohibited by Va. Code g I5.?-2304.ss
The court found that the requirement was outside the legislative authority provided to Arlington
County by the Virginia General Assembly and was, therefore, illegal and invalid.
Cases upholding inclusionary housing programs are distinguishable. In Commercial
Builders of Northern California v. City ofSacramento, the Ninth Circuit held that a City of
Sacrvnento ordinance was constitutional under Nollan. The ordinance conditioned certain types
of nonresidential building permits upon the payment of a fee. The fee was intended to offset the
cost of affordable housing burdens caused by low-income workers who moved there for jobs.
`I The G~urt found that it was not an unconstitutiona] takingsb In analyzing the facts of the case
with the then four-year old Nollan test, the court stated:
We ...agree with the City that Nollan does not stand for the proposition that an exaction
ordinance will be upheld only where it can be shown that the development is directly
responsible for the social ill question. Rather, Nollan holds that where there is no
evidence of a nexus between the development and the problem that the exaction seeks to
address, the exaction cannot be upheld. Where, as here, the Ordinance was implemented
~ only after a detailed study revealed a substantial connection between development and
~ -
i
i
4 54 Id. at 286.
ss Id.
se Id. at 873 (9th Cir. 1991).
I
i
~ 14
i- S-Oi=11:5-PM: in.~.-~-2f ~1B3 ~50°55P ~i~ 21/ 13
f
the problem to tie addressed, the Ordinance does not suffer from the infirmities that the
Supreme Court disapproved in Nollan 57
The court was impressed with and convinced by the city-wide findings that explained non-
i
residential development would be a major factor in attracting new employees to the region and
~ that the introduction of these new residents necessitated affordable housing.58
Similarly, in Flolmdel Builders Assn v. Township of
Holmdel, the court held that the fact
the Township utilized development fees rather than mandatory set-asides to accomplish the goal
of of fordable housing did not negate a real and substantial relationship or nexus between the
linkage fees and the development.59 Although development fees were not site-specific in the
same sense as mandatory set-asides, they tazgeted land-related regulations because t`tey were
I
specifically designed and applied to aid in the creation of affordable residential hou: ing 60
In Home Builders Assn of
Northern California v. City ofNapa,bt the city enacted an
inclusionary zoning ordinance requiring that 10 percent of all newly constructed units must be
affordable after the city made significant findings and studied possible affordable housing
~ solutions 62 The ordinance offered developers two alternatives. First, developers of single-
family units could satisfy the inclusionary requirement through an "alternative equivalent
propnsal" such as a dedication of land, or the construction of affordable units on another site.
~ s' Id. at 875.
~,I sa Id. at 873.
I~~ sv Holmdel, 583 A.2d at 288 (N.I. I990).
bold. at 288.
t
108 Cal. Rptr. 2d 60 (Ct. App. 2001).
bz ld. at 62.
15
1
1
Developers of multifamily units could also satisfy the 10 percent requirement through an
"alternative equivalent proposal" if the city council determined that the proposed alternative
r
resulted in affordable housing opportunities equal to or greater than those created by the basic
l
inclusionary requirement 63 As a second alternative, a residential developer could choose to
j satisfy the inclusionary requirement by paying an in-lieu fee. All fees generated through this
{
optien were deposited into a housing trust fund, and could only be used to increase tmd improve
F, the supply of affordable housing in the City.64
Developments that included affordable housing were entitled to a variety of benefits
including expedited processing, fee deferrals, loans or grants, and density bonuses that allow
more intensive development than otherwise would be allowed.bs In addition, the ordinance
I permitted a developer to appeal for a reduction, adjustment, or waiver of obligations under the
~ ordinance "based upon the absence of any reasonable relationship or nexus between the impact
of the development and ...the inclusionary requirement.i66
Plaintiffs, anon-profit corporation and an association ofbuilders, contractors, and related
' trade:> and professions involved in residential construction, sought to have the inclusionary
4
zoning ordinance declared facially invalid because it: (1) was an impermissible taking under both
' state and federal law; arid (2) violated the Due Process Clause of the United States
I -
63 Id
i
b4 Id.
1 as Id at 62.63.
~ Id. at 63.
16
1
1
Constitution.b~ On appeal, the California Court of Appeals upheld the ordinance against the
facial constitutional challenges ea With respect to the takings claim, although acknowledging
that the ordinance imposed significant burdens on developers, the court found relevant that it
~ also ;arovided benefits to those complying with its terms.bo
However, this decision must be read in the context of California's statutory mandatory
1 bonus requirements.70 As recently amended and effective on January 1, 2005, the statute
requires requires a 20°/a density bonus as soon as a developer reaches a threshold of 5% of its
units affordable to very low income households or10% of its units are affordable to low income
households, and increases in density bonuses of 2.5% for each additional increase of 1 % of very
i
low income units, 1.5% for each additional 1 % in ]ow income units, and 1 % for increase in
moderate income units, up to a maximum density bonus of 35% when a project proviites either
~ 11% very low income units, 20% low income units, or 40% moderate income units. I do not
understand the proposed Kauai Housing Policy Ordinance to provide such density bonuses in
any firm.
i
i
I b' Id.
I
w Id_ at 63-67.
69 Id_ at 64.
70 Cal. Gov. Code Section 659]5-65918, as amended
17