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Murashige, Laura
From: David Arakawa [darakawa@lurf.org]
Sent: Wednesday, August 22, 2007 8:31 AM
To: counciltestimony@co.hawaii.hi.us
Cc: Ashida, Lincoln; 'Gladys Quinto'
Subject: HAWAII -Bill 156 Veto (Affordable housing requirement for industrial parks) LURF Testimony
Attachments: 070820 Hawaii Bill No.156 Affordable Hsg for Industrial Veto Override.doc
Please find attached testimony from the Land Use Research Foundation in opposition to the
Hawaii County Council override of Mayor Kim's veto of Bill 156. LURF's position is that Mayor
Kim's veto should remain in effect.
If you have any questions, please feel free to call me at (808) 783-9407.
Mahalo, Dave
David Z. Arakawa
Executive Director
Land Use Research Foundation
of Hawaii
700 Bishop Street, Suite 1928
Honolulu, HI 96813
Direct: (808) 521-4717 x11 ;
Mobile: (808) 783-9407
Fax: (808) 536-0132 -
E-mail: darakawa@lurf.org
www.lurf~org r\:
comm. No. Uo•51
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Ref. Date
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LAND USE RESEARCH
FOUNDATION OF HAWAII
70o Bishop Street, Ste. rg28
Honolulu, Hawaii g68r3
Phone Szi-4yr7 r
Fax 536-or3z
August 21, 2007
The Honorable Pete Hoffman
Council Chair & Presiding Officer
and Members of the Hawaii County Council
333 Kilauea Avenue, 2nd Floor Council Room
Hilo, Hawaii 96720
RE: Mayor's Veto Message Regarding Bill 156, Draft 6 (2004-2006) Relating
to Affordable Housing Requirements for Industrial Park Developments
Hawaii County Council Meeting, August 22, 2007
Dear Chair Hoffman and Council members,
My name is David Arakawa, Executive Director of the Land Use Research
Foundation of Hawaii ("LURE"), a private, non-profit research and trade
association whose members 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 regulation affecting common problems
in Hawaii. We appreciate the opportunity to provide our comments and express
our position:
• Oaaosing any motion to reconsider the Mayor Harry Kim's veto of
Bill 156, Draft 6 ("Bill 156"); and
• Opposing any further approval of Bill 156.
I. INTRODUCTION
A. Bill 156 which would to impose affordable housing requirements
on industrial park developments, is unconstitutional and counter intuitive,
thus the Council should not override the Mayor's veto. While LURE
recognizes that affordable housing requirements may be justified in many
different situations, in this particular case, LURE is opposed to the Hawaii
County Council's ("Council") possible reconsideration of the Mayor's veto of Bill
156, based on the following:
• The law requires that prior to enacting the affordable housing
requirements proposed by Bill 156; such exactions must be justified
by detailed and unbiased 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, detailed and unbiased studies or report of the workforce jobs
required and generated by the new, or an addition, or reconstruction to
existing industrial park developments and confirmation that those
prospective industrial workers are in need of housing and would financially
qualify for such housing. We respectfully recommend that the Council
follow the legal advice of the Corporation Counsel regarding the legality of
this bill;
• Based on rulings by the U.S. Supreme Court, it is unconstitutional for the
Council to impose affordable housing requirements on industrial park
developments to build or contribute to affordable housing, unless the
Council and the County can first demonstrate, based on thorough and
detailed studies and reports, a clear rational nexus and proportional
nexus between such industrial park developments and the
imposition of affordable housing requirements. We respectfully
recommend that the Council follow the legal advice of the Corporation
Counsel regarding the legality of this bill;
• Earlier this month, based on legal advice from the County of
Hawai'i's Corporation Counsel, Mayor Kim vetoed Bill 156, which
would have imposed affordable housing requirements on industrial
park developments;
• Bill 156 is counter intuitive and would likely discourage investments
in new, additional, or reconstruction to existing industrial park
developments, and is likely to result in very little job creation and minimal
affordable housing; and
• Instead of imposing affordable housing requirements, the Council and
County should encourage the creation of government incentives for
developers and land owners to develop more affordable housing.
II. BACKGROUND
A. Bill 156. Draft 6. This bill would amend Chapter 11 (Housing), Article
1, Section 11-4(d), of the Hawaii County Code 1983 (2205 Edition), to include
Affordable Housing Requirements for Industrial Park Developments, by requiring
industrial park developments, consisting of multiple individual enterprises which
cumulatively generate over 100 employees on a full-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, to earn one affordable
housing credit for every four fulltime equivalent jobs created; and rezonings to
ML, MG, or MCX, approved after the effective date of this ordinance with a
potential to generate more than one hundred employees on a full-time basis must
earn one affordable housing credit for every four full-time equivalent jobs created.
B. Lack of iustification based on unbiased and detailed studies. The
affordable housing requirements in Bill 156 is not based on any unbiased and
detailed studies or facts which demonstrate and quantify the relationship or
connection between industrial development and the demand for affordable
housing, but Bill 156 is based merely on the following conclusionary statements:
"The Housing Element 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 multiple individual enterprises are, in fact, large industries
which generate 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
Hawaii County Code."
C. Mayor Kim's veto of Bill 156 based on advice from Coraoration
Counsel. On or about August 1, 2007, the County of Hawaii Office of the
Corporation Counsel advised Mayor Harry Kim ("Mayor Kim"), "that a bill
seeking to impose affordable housing requirements on non-residential
development should have as its justification and unbiased study that
demonstrates and quantifies the relationship or connection between non-
residential development and the demand for affordable housing. Such a
study has not been done (to justify Bill 156), which makes the requirement
of the bill of questionable merit and propriety." Based on those reasons,
Mayor Kim vetoed Bill 156. See, Communication 465.10 Veto Message -Bill
156 Draft 6 Relating to Affordable Housing.
D. Council Chair's attemat to override Mavor Kim's veto. We
understand that the Council Chair has scheduled a reconsideration of Mayor
Kim's veto of Bill 156 and a possible re-vote, on the Council Agenda for August
22, 2007 (veto override), based on the mistaken belief that the legal flaws in the
bill can be cured with "amendments." The misguided attempt to override the
Mayor's veto is inconsistent with the U.S. Constitution and case law, which
require that prior to enactment; such laws must be justified by unbiased and
detailed studies which establish both an "essential nexus" and a "proportional
nexus." The Council should set an example to uphold the law and legal process.
An override of the Mayor's veto will establish a dangerous public policy and
precedent of knowingly passing legislation which is not legal.
III. ANALYSIS
A. Bill 156 is in violation of the U.S. Constitution, and cannot be
cured by later "amendments." Bill 156 is unconstitutional, because it does not
satisfy the legal requirements to impose such affordable housing exactions on
industrial park developments. The U.S. Supreme Court has ruled that laws
imposing mandatory affordable housing requirements or "linkage fees" in lieu of
housing are unconstitutional, unless they first satisfy the following two basic
takings tests:
• "Essential Nexus" Takings Test. The affordable housing exactions or
linkage fees in Bill 156 are unconstitutional, unless the Council proves,
through an unbiased and 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
and County have the burden of providing an unbiased and 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, 941 F2d 872, 874 (9"' Cir.
1991); and Dolan v. City of Tigard, 512 U.S. 374, 391 n.8 (citing Nollan)
(1994).
• "Rough Proportionality Nexus" Test. Bill 156 is also unconstitutional,
because it is not supported by an unbiased and detailed study confirming
that the requirements are fair, equitable and proportionate under the
circumstances. The required study must confirm that government
agencies have done sufficient affordable housing planning and it must
also address the lack of affordable housing at a level proportionate to
each light industrial development to determine a reasonable percentage
for the affordable housing exaction or linkage fees. Dolan at 391 (1994).
In prior LURF testimony in opposition to Bill 156, we submitted a legal
memorandum prepared by land use expert, Professor David Callies of the
William S. Richardson School of Law, addressing the Kauai County Council
during their deliberation of affordable housing 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 landowners and developers, the
government must first perform thorough and detailed studies to establish
both a rational nexus and a proportional nexus between the projects and
the demand for affordable housing:
`;4s to housing exactions orset-asides on commercial development, the
principle -indeed virtually only- federal case approving such set-asides
did so only after the local government requiring such set-asides engaged
in thorough and detailed studies of the workforce jobs required and
generated by the proposed commercial development, which requirements
were then cut in half -far less than the 40% which the draft County of
Kauai Housing Policy Ordinance would require of such commercial
development."
B. Case law confirms that imposing an affordable housing condition
on the Project is unconstitutional. There are several "landmark" cases
regarding municipalities imposing zoning conditions or exactions which affect
landowners' property rights. These landmark cases establish limits on the
ability of cities, counties and other government agencies to use zoning and
land use regulations to compel landowners to make unrelated public
improvements. In an effort to provide the Council with an explanation and
guide for crafting affordable housing conditions which meet constitutional
requirements, we are providing the following summaries of U.S. Supreme Court
and other case law, which involve exactions, impact fees or affordable housing
requirements which were either overturned as unconstitutional, or cases here
such requirements were upheld as constitutional.
Nollan v. California Coastal Commission, 483 U.S. 825 (1987).
Established the "Essential Nexus" Test and overturned a permit condition
imposed by the California Coastal Commission to require land owner
Nollan to dedicate a public beach easement as a condition to building a
larger home. In Nollan, the U.S. Supreme Court held, among other
things, as follows:
o Required that before imposing such requirements on the
landowner, the government must satisfy an "Essential Nexus
Test" -proving that the "same" interest be served by the
government's permit condition/exaction;
o '...unless the permit condition serves the same governmental
purpose..., the building restriction is not a valid regulation of land
use but 'an out-and-out plan of extortion."'
o Where there is no evidence of an "essential nexus" between the
development (building an extension to a home) and the problem
that the exaction seeks to address (beach access), the exaction
cannot be upheld"
• Dolan v. City of Tigard, 512 U.S. 374 (1994). Later, the Supreme Court
further applied a "Rough Proportionality" Test and overturned the City
of Tigard's requirement that as a condition for approval of a variance to
expand her plumbing store and parking lot, landowner Dolan was
required to dedicate land (1) for a public greenway along an adjacent
creek to minimize flooding and (2) for apedestrian/bicycle pathway. In
this case, the Supreme Court applied atwo-prong test, as follows:
o First, the city has the burden of satisfying the Essential
Nexus Test -whether there is an "essential nexus" between
the permit conditions and a legitimate state interest;
o Second, under the Fifth Amendment, the city is required to
satisfy the Rough Proportionality Test -the city must make
some sort of individualized determination that the degree (or
proportion) of the dedication exaction required by the permit
is "reasonably related both in nature and extent to the impact
of the proposed development"; and
o The Court held that:
¦ The city failed to meet its burden of establishing an
essential nexus for the public greenway -that the public
greenway path requirement was necessary to offset the
increased traffic which would be caused by Dolan's
expansion;
¦ The city also failed to make an individualized
determination that the required dedications were
related, both in nature and extent/proportion, to the
proposed impact;
• The city's requirement for a public greenway path was
excessive, and the city cannot justify the conditions
imposed on the Dolan's permit, and thus fails to satisfy the
Rough Proportionality Test.
• Commercial Builders of Northern California v. City of Sacramento,
941 F.2d 872 (9"' Cir. 1991). A federal court upheld an ordinance which
imposed an affordable housing "linkage fee" in connection with the
issuance of permits for nonresidential development of the type that will
generate jobs. The City of Sacramento's affordable housing
requirements were upheld, based on the following:
o The ordinance was implemented only after the City of
Sacramento commissioned a detailed study, which revealed a
"substantial connection between development and the problem to
be addressed."
o Sacramento's detailed study included facts, statistics and
evaluation, which supported:
¦ The need for low income housing ;
¦ The effect of non-residential development on housing
demand;
¦ The conclusion that nonresidential development is a "major
factor in attracting new employees to the region" and that
the influx of new employees "creates a need for additional
housing in the City."
¦ An evaluation of the appropriateness of exacting fees in
conjunction with such developments to pay for housing;
¦ An estimate of the percentage of new workers in the
developments that would qualify as low income workers
and would require housing;
¦ A calculation of the fees for development;
¦ A drastic reduction of the above calculations, such that the
final calculations were reduced by 50%; and
¦ The City establishment of a Housing Trust Fund Ordinance.
• Home Builders Assn of Northern California v. City of Napa, 108 Cal.
Rptr. 2d 60 (Ct. App. 2001). The city's 10% affordable housing
requirement was upheld as constitutional, based on the following:
o Detailed studies.
¦ Over 700 pages of documentation;
¦ A detailed study of various affordable housing solutions,
much like the City of Sacramento; and
¦ Significant findings based on the studies;
o Significant incentives and benefits for developers and land
owners. Developers and land owners were provided significant
benefits, including expedited processing, fee deferrals, loans or
grants and density bonuses; and
o Reasonable and proportionate requirements. The final
required affordable housing set-aside was limited to 10% of all
newly constructed units.
The above summaries are based on our review of the pertinent case law;
however, we respectfully recommend that the Council should seek a legal
opinion from the Corporation Counsel regarding the above-summarized case law
and the legality of imposing affordable housing requirements.
C. Based on legal advice from Hawaii County Corporation Counsel,
Mayor Kim vetoed Bill 156, which would have imposed affordable housing
requirements on industrial park developments. LURF submitted prior
testimony in opposition to Bill 156 and a legal memorandum prepared by
Professor David Callies, which warned that Bill 156 was unconstitutional, and
suggested alternatives to incentivize more affordable housing. Notwithstanding
LURF's efforts, the Council approved Bill 156. However, after consultation with
Corporation Counsel, Mayor Kim vetoed Bill 156 based on legal grounds raised
in LURF's testimony and Professor Callies' memo. In his attached veto
message, Mayor Kim provided the following reason for his veto:
"It has been pointed out to me by the Office of the Corporation
Counsel that a bill seeking to impose affordable housing
requirements on non-residential development should have as its
justification an unbiased study that demonstrates and quantifies the
relationship or connection between non-residential development and
the demand for affordable housing. Such a study has no been done,
which makes the requirements of this bill of questionable merit and
propriety. For this reason, Bill 156 Draft 6 has been vetoed."
D. Bill 156 is counterintuitive to the development of affordable
housing. Hawaii's history has generally shown that that overly aggressive
affordable housing requirements result in (1) 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, which result in fewer affordable units being
built.
On 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. We understand that the
County of Hawaii has an insufficient supply of rentals and for sale units for all
income groups. In 2006, Maui County passed an affordable housing policy to try
and address this issue; however, its requirements are so costly that it is
discouraging the development of new market and affordable housing projects.
Kauai County is also in the process of adopting a housing policy, and in its 2007
session, the Legislature was also trying to find ways to increase the supply of
affordable housing. Over the years, Honolulu's affordable housing policy has
resulted in the production of approximately 13,000 units.
In 2004, LURF 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 135. It was clear to the participants in these efforts that
one of the major problems is that an overall lack of housing supply
resulted in a lack of affordable housing. It was also a consistent and common
finding that in order to create more affordable housing opportunities, there
was a need to provide more housing in all income catectories. 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 government exactions and inclusionary zoning requirements.
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: Employers generally look for an educated work force and affordability in
housing when locating or expanding businesses. From a public policy
standpoint, if the State and counties want to attract employers to provide higher
paying jobs for our residences both now in the future, it is imperative that the
State and counties provide incentives to developers and land owners to insure an
adequate supply of housing for all income levels.
We need both new employment opportunities and affordable workforce
housing. Rather than placing an affordable housing burden on investors who are
bringing new jobs to the market, the government should 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.
However, 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 imposes an affordable housing
requirement in this matter, it will result in increased costs and an unjustified
burden to new and existing industrial businesses in Hawaii County.
We caution the Council to carefully consider how best to balance
government's intervention in the market system for residential, industrial and
commercial developments. History has shown that placing too many controls on
the landowners and developers will result in slowing the production and lack of
availability of new affordable housing units.
E. Careful Analysis and Consideration of Alternatives is Required to
Develop a Sustainable Affordable Housing Policy. We would recommend
that the Council and County should carefully analyze all facts and data, and
consider all alternatives and impacts prior to establishing and implementing an
affordable housing policy. Government can, based unbiased and detailed
studies which establish an essential nexus and proportionate nexus, both require
units be built as a condition of the approvals and create incentives to stimulate
the market for development of housing units. While county and State
governments do not have an ability to influence income or interest rates, its
options may include the following:
• Government Approvals (District Boundary Amendments, Zoning and
Permitting). With cooperation from policy makers and all administrative
agencies, Government can expedite the permitting process for projects
which include an affordable housing requirement, without sacrificing a
thorough review to protect health and safety. Expediting the permitting
process will result in more housing product on the market and lower sales
prices;
• Government Financing--(infrastructure, tax credits, public housing).
Government can play the role of actual affordable housing developer and
support capital improvement funding for infrastructure or public housing.
Government can also assist in providing tax credits for affordable housing
projects.
• Government Incentives. Other government incentives which have been
made available to developers and land owners include, density bonuses,
fee exemptions, grants or loans and expedited permit processing.
Homebuilders Assn of Northern California v. City of Napa, 108 Cal. Rptr.
2d 60 (Ct. App. 201).
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 without 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. It wasn't too long ago when there was
an oversupply of housing in Hawaii, 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 product built, we would recommend
that the Council work with the State to launch various initiatives and incentives to
address some of the problems identified in each of the interconnected elements
which influence the overall housing market.
E. The Council should support "Incentives" to encourage the
development of affordable housing. Land owners and developers respond to
incentives. Thus, to encourage industrial land owners and developers to build
affordable housing, LURF respectfully recommends that the Council and County
work with the State, landowners, developers and other stakeholders to determine
the proper amounts or levels of affordable housing incentives, including, but not
limited to the following:
• Density bonuses
• Fast-track permit processing
• Monetary subsidies
• Fee waivers, fee reductions and fee deferrals
• In-lieu payment alternatives
• Off-site alternatives
IV. RECOMMENDATION
LURF respectfully recommends that prior to imposing any affordable
housing conditions on industrial properties, the Council and County should
implement the following,
• Complete the required unbiased and detailed studies. The Council
and County should work with the private sector to conduct the required
unbiased and detailed studies prior to imposing requirements and
conditions which would require industrial park developments to provide
workforce or affordable housing or workforce or affordable housing credits;
• Satisfy the "Essential Nexus" and "Rough Proportionality" Tests as
required by the U.S. Suareme Court. As explained in LURF's prior
testimony, and in the case summaries provided above, the Council and
County should confirm with the Corporation Counsel that the required
studies satisfy the essential nexus and rough proportionality tests and that
all affordable housing requirements and conditions will comply with
constitutional requirements; and
• Include incentives to arovide affordable housing. Consistent with
recent federal cases and the practices in many other jurisdictions,
affordable housing exaction requirements should also be accompanied by
incentives for land owners and developers.
V. CONCLUSION
LURF is opposed to a Council reconsideration and override of the
Mayor Kim's veto of Bill 156, for the following reasons:
1) The Council and County have failed to first prepare the
constitutionally required unbiased and detailed studies to justify
imposing affordable housing exactions or linkage fees;
2) It is unconstitutional for the Commission to impose requirements on
industrial developments to build or fund affordable housing, unless
the Council and County first satisfies both the Essential Nexus Test
and the Rough Proportional Nexus test to justify imposing
workforce or affordable housing exactions or linkage fees; and
3) The intent of Bill 156, to impose workforce or affordable housing
conditions on light industrial lands, 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.
We appreciate the opportunity to express our position on this matter.
Cc: Corporation Counsel, County of Hawaii
j:\counties\county of Hawaii\070820 Hawaii Bill No. 156 affordable housing for industrial veto override.doc