A Federal Builder's Remedy for Exclusionary Zoning.

• Author: Stern, Eric E.

INTRODUCTION

Local governments have long sought to exclude "undesirable" populations from neighborhoods by using their "police power." (1) For example, until 1917, cities such as Louisville regularly barred transfer of property on white-majority blocks to African Americans. (2) By midcentury, scholars observed emergent efforts by some localities to exclude lower-income people altogether through exclusionary zoning (EZ). (3) Technical land-use controls, (4) though facially race blind (5) and often class blind, (6) practically barred the creation of affordable housing for low-and moderate-income (LMI) households by preventing economies of scale in housing construction or barring the subdivision of large existing buildings. These barriers to increasing the supply of housing units are still widely used today, and they continue to keep sale and rental prices high enough to prevent LMI households from joining a community. (7)

In 2020, EZ lies at the heart of America's affordable-housing crisis (8) and perpetuates patterns of racial and socioeconomic segregation. (9) EZ also harms American economic output by preventing low-income people from accessing the country's most lucrative regions. (10) Despite growing concern among legal scholars, (11) think tanks, (12) and federal policy-makers, (13) and despite decades of political and litigation efforts, (14) EZ shows no signs of abatement.

According to some scholars, "settled doctrine" prevents intervention by federal courts. (15) These scholars therefore focus on policy solutions by looking to federal preemption of some local land-use decisions, (16) state interventions to override local exclusionary policies, (17) and self-regulation by local elected officials (such as creating a zoning budget). (18)

I argue that such scholars offer an incomplete doctrinal analysis, and that federal courts can apply constitutional law to help alleviate the housing crisis. Because of the harms EZ causes throughout the United States, this Note argues that an as-applied challenge to EZ regulations, (19) in the form of a "builder's remedy," offers a viable new option. Under the builder's remedy approach, courts could provide relief to a builder of low-income housing--or housing built in the context of a mixed market-rate/low-income project--when the locality denies a land-use proposal because of its desire to exclude the poor. Properly understood, longstanding Fourteenth Amendment doctrine (20) prohibits governments from making local zoning decisions for the purpose of excluding the poor, regardless of the fiscal impact of those decisions.

Throughout the Note, I use the term EZ to refer to restrictive zoning motivated principally by a desire to keep LMI households out of a jurisdiction. This Note does not seek to apply the EZ label to restrictive zoning motivated principally by environmental concerns (such as risks from flooding, wildfires, overburdened infrastructure, or proximity to noxious use), even though some commentators would consider those policies EZ when they incidentally exclude the poor. Because this Note's definition of EZ is narrower than other possible definitions, its proposed builder's remedy is likewise narrower: I restrict the remedy to instances when exclusion occurs by design rather than as an incidental consequence of benign zoning decisions.

Part I of the Note describes the growth of EZ and the failure of past efforts to effectively remedy it. Part II uses existing Supreme Court precedent to make the doctrinal case for a federal builder's remedy that permits a builder of LMI housing to challenge local zoning in limited instances. Finally, Part III explains why this federal builder's remedy is normatively desirable as a means to curb EZ.

1. THE PERSISTENT PROBLEM OF EXCLUSIONARY ZONING

   This Part discusses the emergence of contemporary EZ and the practical harms of restrictive land-use regulation. It then explains why EZ persists despite repeated efforts to curtail it.

   1. The Emergence and Continued Growth of Exclusionary Zoning

      This Section focuses on three broad categories of motives for EZ: (i) social, (ii) fiscal, and (iii) environmental.

      The first category, social exclusion, encompasses an incumbent community's wish to keep out others because of their class, race, or other traits. As Roderick M. Hills, Jr., shows, "cultural anxieties about the moral unworthiness of the mobile indigent" have long motivated state efforts to deter in-migration. (21) In many instances, exclusion motives might involve both class and race dynamics. (22) Though the Equal Protection Clause and the Fair Housing Act clearly prohibit race-based discrimination, (23) communities currently feel empowered to "zone out" other classes due to minimal judicial oversight. (24)

      A second set of motives involves potential financial costs to incumbents. One example of a fiscal concern is that an increase in the supply of housing units tends to decrease the market-rate price of housing, thus lowering home values for incumbents. As a result, homeowners may seek to defeat newly proposed housing developments to prevent competition. Similarly, local zoning decision-makers who view their objective as protecting their communities from financial and other risks will try to prevent an inflow of LMI households into lower-cost housing units. (25)

      Residents might also fear the impact of new housing on the local government's finances. Local governments fund their own school services, and this, according to Richard Briffault, "provides an incentive for exclusionary zoning and other land use practices whereby affluent communities seek to exclude the less wealthy." (26) Even if a newly constructed apartment building for LMI households brings in more tax revenue than a single-family home, for example, the marginal cost of educating children from the additional units might exceed the marginal increase in property tax revenue. In that case, the development--all else equal -could be a net fiscal cost to the municipality, which a municipality might try to prevent through EZ.

      The third category of motives for EZ relates to the environmental risks posed by new housing. In a seminal case concerning New York's Village of Belle Terre, for instance, a local zoning ordinance prohibited occupancy of single-family homes by three or more unrelated people. (27) The less-than-one-square-mile town sought to exclude boarding homes and fraternity houses from the neighboring university. (28) The Supreme Court held that municipalities generally may limit new housing when that housing poses reasonably foreseeable environmental risks, and it found that the Village's fears about congestion and noise were supported by evidence. (29)

      Given fiscal and environmental concerns, EZ might seem like a perfectly rational tool for jurisdictions that are only concerned with the wellbeing of preexisting stakeholders and ignore their effects on outsiders. (30) After all, the principal persons harmed by EZ are builders and would-be residents, who frequently do not reside in the jurisdiction and therefore lack political power to hold local zoning officials accountable. (31) The resulting asymmetry in incentives helps explain the continued vitality of EZ. (32) A locality's exclusion of LMI outsiders, however, often imposes significant externalities.

   2. Harms of Exclusionary Zoning

      The harms of EZ include severe rent burdens for families, the perpetuation of racial segregation, fiscal harm to already distressed communities, and national economic harm. They are mostly borne by Americans outside the exclusionary jurisdiction. (33)

      First, EZ contributes to the nation's affordable-housing crisis. (34) Land-use regulations, in many communities, limit the supply and type of housing available and consequently raise prices. (35) While existing homeowners benefit from higher home values secured by EZ, (36) existing renters, the homeless, and those seeking to move into a jurisdiction are often forced to pay more for housing than they would have in the absence of EZ. In2o15,47.7% of renter households in the fifty-three largest U.S. metropolitan areas spent at least 30% of their pre-tax income on rent and were therefore "rent burdened" according to the federal government's definition. (37) More than 24% of large metropolitan-area renter households spent at least 50% of their pre-tax income and were therefore "severely rent burdened." (38) Beyond limiting a household's capacity to spend money, the high cost of housing directly increases the odds of housing instability, which can entail evictions, environmental damage, and emotional harm. (39) These burdens of housing instability fall disproportionately on black and Hispanic households. (40)

      Second, EZ further entrenches patterns of racial segregation. (41) Depending on the regional dynamics, EZ can lead some LMI households to stay within highly segregated inner cities, but it can also push LMI households to the fringes of metropolitan areas. Michelle Wilde Anderson explains that "exclusionary zoning interacts with cities' magnetic pull on wage earners to generate unregulated, peripheral development for low-income families." (42) LMI households frequently move to unincorporated portions of counties, where basic government services are absent (43) or land is more likely to be contaminated. (44) Although the precise impact of EZ on segregation is not yet quantified, Anderson's research helps demonstrate the harm that EZ imposes on LMI populations.

      Third, EZ shifts funding burdens for school and municipal expenses to already fiscally constrained localities. Because public schools throughout the United States are predominantly funded through local property taxes, (45) local zoning authorities that exclude poor residents force other jurisdictions with lower-cost housing to bear those education costs. Such costs compound the growing risk of local-government insolvency and bankruptcy throughout the United States. (46)...