Connecticut retrenches: a proposal to save the Affordable Housing Appeals Procedure.

AuthorCarroll, Robert D.
  1. INTRODUCTION

    The Connecticut General Assembly recently enacted significant changes to the state's Affordable Housing Appeals Procedure.(1) This Note explains why these amendments, which took effect on October 1, 2000, fail to advance the statute's original purpose of increasing the amount of low- and moderate-income housing throughout Connecticut.(2) The amendments, while purporting to help low-income housing consumers, are likely to slow considerably the construction of affordable housing in the state.

    The Appeals Procedure was originally enacted to promote the construction of housing for low- and moderate-income families by providing developers an opportunity to obtain judicial review of towns' denials of their applications to develop affordable housing. The law applied both to nonprofit and public housing organizations and to private developers. It allowed private developers to appeal denials as long they placed restrictive covenants on twenty percent of the units in their development, creating so-called deed-restricted units.(3) Since the procedure was enacted more than a decade ago, private developers have constructed by far the greatest number of housing units under the Appeals Procedure, more than nonprofit or public-sector housing developers. Studies have shown that not only the deed-restricted units that private developers have constructed under the Appeals Procedure, but also the market-rate units they have produced in the same developments, have provided cheaper housing than previously was available in many towns.(4)

    The 2000 amendments to the Appeals Procedure impose more stringent requirements on private developers who want to bring appeals under the statute. The amendments increase the percentage of units to which a developer must attach restrictive covenants in order to qualify under the statute. They also require the developer to restrict the affordable units to even lower prices and for a longer period of years than before. Together, these new restrictions will significantly increase the costs of private development under the Appeals Procedure and slow the production of affordable housing in the state. The amendments may even be an intentional attempt to sabotage private developers, promoted by an alliance of affluent suburban towns and nonprofit housing organizations, both of whom would benefit from getting private developers out of the business of building affordable housing. But whatever the legislature's motivation, the amendments fail to further the goal of producing affordable housing because they cripple private developers.

    Even if nonprofit developers were able to fill all of Connecticut's needs for low- and moderate-income housing by building deed-restricted units, this would not be a good solution. Connecticut's experiment with deed-restricted affordable units has been plagued with a variety of problems. Because developers have shown that they can provide moderate-income housing at market rates as long as they can build at reasonably high densities, Connecticut should allow developers to trigger the Appeals Procedure with proposals for medium- to high-density multifamily housing developments. This procedure would build on the successes of the Appeals Procedure while eliminating the problems created by deed-restricted housing units.

    Connecticut's experience with creating and administering affordable housing units during the last decade is instructive for the many other states that have actively experimented with legislative, administrative, and judicial solutions to their own lack of affordable housing. These states' approaches have varied widely. Massachusetts and Rhode Island, for example, have created administrative appeals processes by which developers who apply to build deed-restricted affordable housing units may appeal the denial of these applications to an administrative appeals board.(5)

    Other states have established agencies to oversee municipalities' planning and zoning decisions. Following the Mount Laurel cases,(6) in which the New Jersey Supreme Court held that the state constitution mandated that suburban towns permit the construction of their "fair share" of the regional need for affordable housing, the state created the Council on Affordable Housing (COAH), a statewide regulatory agency charged with determining each municipality's "fair share" of affordable housing, and with approving the municipalities' plans for affordable housing.(7) California, Florida, Oregon, and Washington all require municipalities to submit comprehensive plans that include an affordable housing element in which the municipality analyzes its current and future affordable housing needs and proposes a way to meet those needs.(8)

    The judiciary has taken steps to deal with the problem of suburban "exclusionary zoning"(9) in other states such as New Hampshire,(10) New York,(11) Michigan,(12) Pennsylvania,(13) and Virginia.(14) Basing their decisions on the limits imposed by the state or federal constitution,(15) or by the state's zoning enabling act,(16) these courts have invalidated suburban towns' attempts to limit the growth of affordable housing.(17)

    Connecticut's approach is unique in that it has provided an effective remedy for the denial of affordable housing applications in the state's courts of general jurisdiction.(18) Connecticut's experience with the Appeals Procedure during the last decade is instructive for other states not only because it shows the benefits and drawbacks of administering an affordable housing appeals procedure in the state's courts, but also because it illustrates problems that are common to almost all statewide efforts to promote the construction and fair-share distribution of low- and moderate-income housing. These problems are linked to the deed-restriction devices used by most of the states that have enacted legislative schemes designed to promote affordable housing.(19)

    There is a debate in the economic and legal literature over the real purpose and effect of "inclusionary zoning"(20) devices like the deed restrictions relied upon by Connecticut's Appeals Procedure. Twenty years ago, Professor Robert Ellickson wrote the seminal piece on inclusionary zoning regulations, in which he argued that exclusionary municipalities were really using these devices to limit growth.(21) Ellickson's view has been widely adopted in the legal and economic literature.(22) Fifteen years later, Andrew Dietderich published an essay responding to Ellickson's critique, which outlined a theory of how inclusionary zoning devices that rely on the construction of deed-restricted units could benefit low- and moderate-income housing consumers.(23) This Note contributes to this dialogue by examining the problems that have arisen with the transfer and administration of deed-restricted housing units in Connecticut during the last decade.

    This Note discusses several problems that have resulted from Connecticut's heavy reliance on deed-restricted units in its Appeals Procedure. These problems include: (1) that it is difficult for low- and moderate-income home buyers to get mortgage financing for deed-restricted units; (2) that it is difficult for state and local officials to monitor the price and income limits on deed-restricted units and their occupants; and (3) that deed restrictions may cause low- and moderate-income homeowners to lose equity in their homes due to interest rate fluctuations. These problems are likely to occur in all state and local affordable housing programs that rely on the creation of deed-restricted housing units.

    In this Note, I argue that a better alternative would be for Connecticut to amend its Appeals Procedure so that developers could trigger it by proposing to construct market-rate multifamily housing above a specified density. This solution would not only avoid the problems associated with deed-restricted units, but would also be likely to produce more moderate-income housing by allowing developers to build multifamily housing at higher densities than towns would normally permit. This proposal relies on a longstanding literature that argues for the benefits of zoning deregulation,(24) including that deregulation is likely to decrease housing prices and lead to the creation of more low- and moderate-income housing.(25) This Note outlines a concrete way to implement the ideas proposed in this literature by arguing for a modest relaxation of the restrictions on the construction of higher density multifamily housing (that is, a partial zoning deregulation) within the structure of the Appeals Procedure.

    Part II of this Note provides a brief history of the original enactment of the Appeals Procedure, a description of how Connecticut's courts have implemented it, and estimates of the number of housing units that have been created as a result of the Appeals Procedure. Part III describes the problems that led the legislature to overhaul the statute in 2000. Part IV discusses why the 2000 amendments are likely to slow the development of affordable housing in Connecticut. Part V discusses the problems created by the deed-restricted units on which the amended statute relies heavily. Finally, Part VI proposes an alternative procedure that would allow developers to appeal the denial of proposals for market-rate multifamily housing developments above a certain density without having to create deed-restricted units.

  2. THE AFFORDABLE HOUSING APPEALS PROCEDURE

    In the late 1980s, Connecticut's legislators became concerned with what many viewed to be an affordable-housing crisis in the state.(26) The problem was affecting not only very poor people, but also those with moderate incomes, such as municipal employees, many of whom found themselves priced out of the Connecticut towns in which they worked during the buoyant 1980s real estate market.(27)

    The legislature convened a Blue Ribbon Commission in 1987 to study the extent of the need for affordable housing and to...

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