Real Estate Alert
September 3, 2009
Authors:
Collin W. Brown
collin.brown@klgates.com
+1.704.331.7531
David H. Jones
david.jones@klgates.com
+1.704.331.7481
K&L Gates is a global law firm with
lawyers in 33 offices located in North
America, Europe, Asia and the Middle
East, and represents numerous GLOBAL
500, FORTUNE 100, and FTSE 100
corporations, in addition to growth and
middle market companies,
entrepreneurs, capital market
participants and public sector entities.
For more information, visit
www.klgates.com.
New NC Law Designed to Permit More
Affordable Housing Developments
Developers of affordable rental and for-sale housing are often frustrated by the
opposition of neighborhood groups. Their complaints range from traffic impacts to
fears that housing which is affordable to lower-income families will reduce
surrounding property values to concerns, often unsubstantiated, that crime will
increase. These opponents are vocal and influential with zoning officials who are
asked to provide entitlements to permit the development of affordable housing. The
result of successful opposition to affordable projects in middle and upper income
neighborhoods is a concentration of affordable housing in high poverty
neighborhoods.
On August 28, 2009, Governor Purdue, to the surprise of many observers, signed
Session Law 2009-533 which provides a strong impetus for local elected and zoning
officials to allow affordable housing to be developed in spite of neighborhood
opposition.
According to the new law, a local government is in violation of North Carolina’s Fair
Housing Act (the “Act”) if its land use decisions and permitting actions discriminate
against a development based on the fact that the development includes affordable
housing units. By adding land use decisions to the list of potential violations of the
Act, the legislature has exposed local governments to new and substantial liability.
This is especially significant because of the broad remedies available in lawsuits
brought under the Act. Not only does the Act authorize injunctive and equitable
relief, but a party aggrieved by discriminatory practices may also be granted actual
and punitive damages. Furthermore, a prevailing party may be awarded court costs
and attorney’s fees.
The law applies to existing or proposed developments that contain affordable
housing units for families or individuals with incomes below eighty percent of the
area median income. The statutory language does not indicate that a development
must include a minimum number or percentage of units in order to qualify for
protection. Thus, it appears that mixed income developments are protected as long
as they contain some number of affordable units.
To prove a violation of the Act, a party must show that a local government’s action
or inaction in a land use or permitting matter has the effect of discriminating against
affordable housing. A party may use direct or circumstantial evidence to prove that a
local government’s action is intentionally discriminatory against affordable housing.
Intent is present if the local government’s discriminatory act is “motivated in full, or
in any part at all,” by the presence of affordable housing units. A violation of the Act
can also occur if a local government’s actions or inactions have discriminatory
effects, even if those impacts are unintended.
Real Estate Alert
However, in this case, there is no violation if the
local government can prove that its actions are based
on legitimate governmental interests and any
resulting discriminatory effects are unintentional.
It is important to note that there is one clear
exception to this law. Local governments may make
land use decisions that are obviously intended to
prohibit development of affordable housing units if
the decision is based on “considerations of limiting
high concentrations of affordable housing.”
However, the statute gives no guidance regarding
what constitutes a “high concentration.” All North
Carolina jurisdictions are required to affirm that
every rezoning decision they make is consistent with
existing adopted land use plans for the jurisdiction.
Localities should consider amending those plans to
include, if they do not already, policies on the
location of affordable housing, or adopting separate
affordable housing locational policies, and including
in their consistency statements an affirmation of a
rezoning decision’s compliance with those policies.
Adopting locational policies that address levels of
concentration of affordable housing will provide
elected officials with guidance in making these
decisions.
It should be much easier for a jurisdiction to reject
an affordable housing development on the basis that
the proposed location is in an area that already has
sufficient affordable housing, if there is a policy in
place that is clear, rational, and fact based.
Presumably, though, such a policy would be subject
to judicial scrutiny to insure that it is rational and
fact based and not a ruse for avoiding the intent of
the new law.
In North Carolina jurisdictions, all zoning decisions
are typically preceded by public hearings where
citizens can express their concerns about or support
of a proposed new development. If a local zoning
board or city council turns down an affordable
housing project following a public hearing where the
only point that the opposition speakers made was
that their property values would be reduced, would it
be possible for the board or council to argue that the
decision was not “motivated in any part” by the
presence of affordable housing? If a local zoning
board turned down an affordable housing project
due to traffic concerns, and the following year
allowed a project that was not classified as
affordable, but that had the same density as the
affordable project, then would that be
circumstantial evidence of the same motivation?
What would happen in a jurisdiction that would
appear to have adequate infrastructure, but which
routinely rejects all multi-family rental projects and
routinely approves all projects where the median
home price exceeds $500,000? Is that
circumstantial evidence of an intention to reject
affordable housing solely because it is affordable?
To argue their cases for affordable housing
developments, developers and advocates should be
prepared to demonstrate the adequacy of
infrastructure in existence or be prepared to make
those expenditures necessary to make the
infrastructure adequate for development. They also
need to understand housing patterns within the
jurisdiction and demonstrate that affordable housing
is not already concentrated in the neighborhood in
question.
In some North Carolina jurisdictions, zoning
decisions are a quasi-judicial proceeding requiring
sworn testimony and findings of fact. In other
jurisdictions, however, zoning proceedings are far
more informal and the record often does not reflect
the reasons underlying the decisions.
To try to avoid some of the issues raised above,
local governments should, at a minimum, be much
more specific in their findings as to why land use
decisions were made, even if the jurisdiction does
not utilize a quasi-judicial process otherwise. A
simple show of hands or voice voting “aye” or “no”
following a motion to approve may no longer be an
adequate way to make zoning decisions that affect
affordable housing developments in North Carolina.
September 3, 2009
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Real Estate Alert
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September 3, 2009
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