Current Issues in Inclusionary Zoning

Author(s): Cecily T. Talbert and Nadia L. Costa

Source: The Urban Lawyer, Vol. 37, No. 3 (Summer 2005), pp. 513-527
Published by: American Bar Association
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 513

Recent Developments inLand Use, Planning and Zoning Law

Current Issues in Inclusionary Zoning

Cecily T. Talbert*
Nadia L. Costa**

I. Inclusionary Zoning Programs Continue to

Proliferate inResponse to the Affordable Housing
Crisis

A. The Affordable Housing Shortage Persists

Communities across the nation continue to confront the challenges
posed by a scarcity of affordable housing.1 The impacts of this crisis
are far-reaching. Housing is inseparably linked to economic and social
opportunity. The level of access to quality employment, education, and
social support systems, as well as the availability of a wide range of
services and amenities are, in significant part, determined by where one
lives.2 As theMillennial Housing Commission emphasized:

*Cecily T. Talbert is a partner at theWalnut Creek, California office of Bingham

McCutchen LLR She focuses her practice on land use, real estate, and local government
law, and has been involved in the development of dozens of projects throughout Cali
fornia that include affordable residential units. Ms. Talbert received her J.D. from Har
vard Law School in 1988.
**Nadia L. Costa is an associate at theWalnut Creek, California office of Bingham
McCutchen LLR Her practice focuses on land use and government law, with a particular
emphasis on processing entitlements for complex mixed-use and master-planned pro
jects. Ms. Costa received her J.D. from the University of California, Berkeley School
of Law (Boalt Hall) in 2001, and a Master's degree in Social Welfare from the Uni
versity of California, Los Angeles in 1996.
1. "Affordabilityis the single greatesthousing challenge facing thenation." The
Millennial Housing Commission, Meeting Our Nation's Housing Challenges
14 (2002).More than 14million households are severelycost-burdened,spendingmore
than50% of theirmonthly income on housing.Another 17.3million aremoderately
cost-burdened, paying between 30% and 50% of their monthly income for housing.
Harvard's Joint Center for Housing Studies, The State of the Nation's
Housing 2 (2003). On any given night,hundredsof thousandsof people go homeless.
Wide gaps also remain between the homeownership rates of whites and minorities,
even among thosewith comparable incomes.Finally, housing qualityproblemspersist
in many areas. The Millennial Housing Commission, supra, at 2.
2. See Angela Glover Blackwell & Radhika K. Fox, Regional Equity and
Smart Growth: Opportunities for Advancing Social and Economic Justice
in America (2004), available at http://www.fundersnetwork.org/usr_doc/Regional_
Equity_and_Smart_Growth_2nd_Ed.pdf (last visited June 26, 2005). This report dis
cusses the interplaybetween regional development patternsand inequality/inequity,
and provides a framework for action to advance regional equity.

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514 The Urban Lawyer Vol. 37, No. 3 Summer 2005

Decent, affordable, and accessible housing fosters self-sufficiency, brings stability

to families and new vitality to distressed communities, and supports overall eco
nomic growth.3

A lack of affordable housing has significant implications for the en

vironment and growth management policies as well.

Housing is the linchpin of sustainable development and smart growth. It is inextri

cably inter-related with transportation, land use, air quality, and education. Housing
is the common connecting element or "intersection of the 3Es" of smart growth:

Prosperous Economy, Quality Environment, and Social Equity. Therefore, effective

actions to achieve thehousing supply and affordabilitygoal directly influencethe
condition of the economy, environment and equity.4

B. Reliance on Inclusionary Zoning Is Growing as

Communities Seek Ways to Increase Their
Housing Stock
Affordable
Jurisdictions are attempting to further the goals of producing affordable
units and are combating exclusionary zoning practices in various ways.
For example, some states have adopted affordable housing appeals sys
tems (as seen inMassachusetts, Rhode Island, and Connecticut).5 Cer
tain areas also rely on regional housing trusts that are funded with
inclusionary in-lieu fees (such as those inVermont, Washington, Cali
fornia, Ohio, Still others have adopted a fair share ap
and Florida).6
proach, whereby regional housing needs are allocated tomunicipalities,
which then have certain obligations to provide for their fair share of that
need (evident inNew Jersey,California, Oregon, and New Hampshire).7
Another inclusionary strategy thatmany local jurisdictions are adopt

ing is often referred to as "inclusionary zoning." In general, such pro

grams either mandate or encourage developers of new residential pro
jects to set aside a certain percentage of a project's residential units for
lower and moderate-income households. These programs are typically

3. The Millennial Housing Commission, supra note 1, at 11.

4. Bay Area Council, Bay Area Housing Profile: A Report Card on the
Supply and Demand Crisis 4 (2003). See Arthur C. Nelson & Susan M. Wachter,
Growth Management and Affordable Housing Policy, 12 J.Affordable Housing &
Cmty. Dev. L. 173 (2003).
5. See Mass. Gen. Laws eh. 40B, ?? 20-23 (2003); R.I. Gen. Laws ch. 45-53
(2004); Conn. Gen. Stat. ? 8-30g (2005).
6. Vermont Stat. Ann. tit. 10, ? 303 (2005); ARCH AffordableHousing Assis
tance Program; Sacramento Housing and Redevelopment Agency; Columbus/Franklin
County Affordable Housing Trust.
7. NJ. Stat. Ann. ? 52:27D-301 (West 1986 and Supp. 1999); Cal. Gov'tCode
? 65580 (West 2005); N.H. Rev. Stat. Ann. ? 673:2 (2005); PortlandMetro, Regional
Strategy; see Stuart
Affordable Housing Meck et al., Regional Approaches to
Affordable Housing (2003).

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Land Use, Planning and Zoning Law 515

effectuated by ordinance, zoning codes, policy statements, or a local

jurisdiction's housing element or fair share plan.8
Inclusionary zoning programs usually specify that a certain percent
age of affordable units be provided as part of a project, establish af
fordability criteria for those units based upon a percentage of median
household income, and provide future sales price or rent restrictions in
order to preserve the long-term affordability of such units. In addition,
inclusionary programs often provide certain incentives and concessions
to developers to encourage the provision of affordable units9 and vari
ous alternatives to on-site affordable housing production such as in
lieu fees, land dedication, and off-site development.10
Along with increasing a community's affordable housing stock, ad
vocates of inclusionary programs point to additional related benefits of
such programs, including: (1) facilitating racial and economic integra
tion,11 (2) encouraging implementation of smart growth principles,
(3) providing housing for a diverse labor force, which helps foster a
strong economic environment, and (4) protecting against displacement
of lower income households when new investment occurs.12
At present, dozens of communities throughout the country have
adopted some kind of inclusionary zoning. Examples of such pro
grams can be found across the nation in California,13 Colorado, Florida,

8. See Dr. Robert W. Burchell & Catherine C. Galley, Inclusionary Zoning:

Pros and Cons, in California Inclusionary Housing Reader 27 (Dec. 24, 2003),
available at http://www.ilsg.org/resource_files/20276.California Inclusionary Housing
Reader.pdf (last visited June 26, 2005).
9. Such benefits to developers may include: density bonuses, expedited processing,
local tax abatements, waiver of permit fees or land dedication requirements, reduction
of required developer-provided amenities, and subsidization or provision of infrastruc
ture by the jurisdiction for the developer's project.
10. See generally Burchell & Galley, supra note 8.
11. See generally Angela Glover Blackwell, Urban Equity: Considerations of Race
and the Road Towards Equitable Allocation ofMunicipal Services: It Takes a Region,
31 Fordham Urb. LJ. 1303 (2004); Edward G. Goetz et al., The Minnesota Land Use
Planning Act and the Promotion of Low- and Moderate-Income Housing in Suburbia,
22 Law & Ineq. J. 31 (2004); Thomas A. Brown, Democratizing theAmerican Dream:
The Role of a Regional Housing Legislature in theProduction ofAffordableHousing,
37 U. Mich. J.L. Ref. 599 (2004); ChristopheCourchesne,What Regional Agenda?:
Reconciling Massachusetts's Affordable Housing Law and Environmental Protection,
28 Harv. Envtl. L. Rev. 215 (2004).
12. See Blackwell, supra note 11; Radhika K. Fox & Kalima Rose, Expanding
Housing Opportunity inWashington, D.C.: The Case for Inclusionary Zoning
9, 16 (Fall 2003), available at http://www.policylink.org/pdfs/DCIZ.pdf
(last visited
June 26, 2005); Nicholas Brunick, The Impact of Inclusionary Zoning on De
velopment 2-3 (2003), available at http://www.bpichicago.org/rah/pubs/impact_iz_

development.pdf(last visited June26, 2005).

13. One-fifthof California localities (107 cities and counties) have adopted some
form of inclusionary zoning. At least thirty other jurisdictions in the state are currently
consideringadopting some kind of inclusionaryzoning policy. See Cai. Coalition of
Rural Hous. & Non-Profit Hous. Ass'n of N. Cai., Inclusionary Housing in California

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516 The Urban Lawyer Vol. 37, No. 3 Summer 2005

Maryland,14 Massachusetts, New Jersey,New Mexico, South Carolina,

Texas, Vermont, and Virginia.15
In addition to its use in different areas of the country, inclusionary
zoning is being employed in increasingly diverse types of neighbor
hoods.16 The growing reliance on inclusionary programs in large cities
is of particular note.17 Since 2000, five major U.S. cities with popula
tions exceeding 400,000 have adopted inclusionary programs, includ
ing Boston, Denver, San Francisco, San Diego, and Sacramento.18 Other
large-city jurisdictions considering the adoption of some form of inclu
sionary zoning include Los Angeles, Washington, D.C., and New York
City.19
Determining the actual number of units produced is a challenge, due
in part to the difficulties faced by implementing jurisdictions in col
lecting and maintaining the necessary data. However, themost recent
reports indicate that in total, inclusionary zoning may well have pro
duced as many as 100,000 affordable units nationwide.20 It has been

(2003), at http://www.nonprofithousing.org
(last visitedMay 11, 2005) [hereinafter
Inclusionary Housing in California]. Nearly two-thirds of these programs have been
adopted since 1990. Id. See generally National Housing Conference, Inclusionary Zon
ing: The California Experience, 3 NCH Affordable Hous. Pol'y Rev. 1 (Feb. 2004),
available at http://www.nhc.org/pdf/pub_ahp_02_04.pdf (last visited June 26, 2005).
14. See Karen Destorel Brown, Expanding Affordable Housing Through
Inclusionary Zoning: Lessons From the Washington Metropolitan Area
(Oct. 2001), at http://www.brook.edu/dybdocroot/es/urban/publications/inclusionary.
pdf (last visited June26, 2005) (a thoroughdiscussion of the accomplishmentsand
challenges facing Montgomery County, Maryland's Moderately Priced Dwelling Unit
(MPDU) ordinance); see also PolicyLink, Equitable Development Toolkit: Inclusionary
Zoning, http://www.policylink.org/EDTK/IZ/Why.html (last visited June 26, 2005).
15. See American Planning Association PAS Report, at www.planning.org/pas/pdf/
infopackinclusion.pdf. See also Joyce Siegel, Inclusionary Zoning Around the Country
(Mar. 2, 2000), available at www.inhousing.org/USA%20Inclusionary/
(compendium)
USA%20Inclusion.htm (last visited June 26, 2005) (describingelements of various
jurisdictions' inclusionary housing programs); Brunick, supra note 12, at 2.
16. See Fox & Rose, supra note 12, at 16 (discussing thepotentialpositive impact
of using inclusionaryzoning indifferentkinds of neighborhoods,includingthose that
are gentrifying, new and expanding, expensive, and those that have high concentrations
of poverty).
17. For a historical perspective on development patterns that resulted inmetropolitan
decentralization, see Blackwell & Fox, supra note 2, at 3-4.
18. See Nicholas J. Brunick, Inclusionary Housing: Proven Success in Large Cities,
Zoning Prac., Oct., 2004 (discussing the reasons for the growth of inclusionary zoning
in large cities, and describing several new large-city programs).
19. See Bill Higgins, Inclusionary Zoning and Affordable Housing After
Homebuilders Ass'n of Northern California v. City of Napa 3 (2003); see also
David Paul Rosen & Assoc., Los Angeles Inclusionary Housing Study: Final
Report (2002). Washington, D.C., also is considering implementing an inclusionary

zoning program as one strategy to help increase the supply of affordable housing. See
generally Kalima Rose et al., Increasing Housing Opportunity in New York
City: The Case for Inclusionary Zoning (Fall 2004), available at http://www.
(last visited June26, 2005).
policylink.org/pdfs/NYIZ.pdf
20. Inclusionary programs remain controversial, and debate about their level of ef

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Land Use, Planning and Zoning Law 517

reported that 34,000 affordable units have been created in California as

the result of inclusionary zoning.21 Inclusionary ordinances inNew Jer
sey are credited with producing 15,000 to 20,000 affordable units, and
those in theWashington, D.C., metropolitan area with having produced
over 15,000 affordable units.22

II. Recent Developments in the Arena of Inclusionary

Zoning

Debate, however, regarding the legality and effectiveness of inclusion

ary zoning remains.23 Given the controversial nature of the topic, it is
somewhat surprising that there are relatively few published cases bring
ing challenges to inclusionary zoning programs.24 The City of Napa

fectiveness in terms of unit production continues. See Nick Brunick et al., Vol
untary or Mandatory Inclusionary Housing? Production, Predictability
and Enforcement (Nov. 2003) (concluding that mandatory programs produce more
affordable units for a wider range of income levels), available at http://www.bpi
chicago.org/rah/pubs/voluntary_vs_mandatory.pdf (last visited June 26, 2005); Victo
ria Basolo & Nico Calavita, Policy Claims withWeak Evidence: A Critique of the
Reason Foundation Study on Inclusionary Housing Policy in the San Francisco Bay
Area, June, 2004 (refuting claims that inclusionary zoning programs are too costly and
ineffective), available at http://www.nonprofithousing.org/actioncenter/campaigns/
(last visited June 26, 2005); see also David Rosen,
downloaa7IH_countering_critics.pdf
Inclusionary Housing and Its Impact on Housing and Land Markets, 3 NHC Afford
able Hous. Pol'y Rev. 1,41 (Feb. 2004) (evaluating the effect inclusionary housing
policies has on housing production in California cities). But see Benjamin Powell &
Edward Stringham, Housing Supply and Affordability: Do Affordable
Housing Mandates Work? (Apr. 2004) (finding that mandatory programs produce
relatively few units at very high costs), available at http://www.rppi.org/ps318.pdf (last
visited June26, 2005).
21. See Inclusionary Housing in California, supra note 13, at 7.
22. See Fox & Rose, supra note 12, at 15.
23. For a discussion regarding the legal issues, see, e.g., Barbara Ehrlich Kautz, In
Defense of Inclusionary Zoning: Successfully Creating Affordable Housing, 36
U.S.F. L. Rev. 971 (2002); Laura M. Padilla, Reflections on Inclusionary Housing and
a Renewed Look at Its Viability, 23 Hofstra L. Rev. 539 (1995). For differing per
on the costs and benefits of inclusionary zoning programs, see generally
spectives
Burchell & Galley, supra note 8; Powell & Stringham, supra note 20; Andrew
G. Dietderich, An Egalitarian's Market: The Economics of Inclusionary Zoning Re
claimed, 24 Fordham Urb. L.J. 23 (1996); Lawrence Berger, Inclusionary Zoning
Devices as Takings: The Legacy of the Mount Laurel Cases, 70 Neb. L. Rev. 186
(1991); Robert C. Ellickson, The Irony of "Inclusionary" Zoning, 54 S. Cal. L. Rev.
1167 (1981).
24. See Bd. of Supervisors v. DeGroff Enters., 198 S.E.2d 600 (Va. 1973) (invali
dated a mandatory inclusionary zoning ordinance because it exceeded the locality's
police power and constituteda takingunder state law); S. BurlingtonCountyNAACP
v. Township ofMt. Laurel (Mt. Laurel I), 336 A.2d 713 (N.J. 1975) (imposed an
affirmative state constitutional on municipalities to provide a realistic op
obligation
portunity for the construction of low- and moderate-income housing); S. Burlington
County NAACP v. Mt. Laurel Township {Mt-Laurel II), 456 A.2d 390 (N.J. 1983)
(advocated set-aside programs as one way for localities to fulfill theirMt.
mandatory
Laurel obligations); Holmdel Builders Ass'n v. Township ofHolmdel, 583 A.2d 277
(N.J. 1990) (the impositionof fees,which would be dedicated to an affordablehousing

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518 The Urban Lawyer Vol. 37, No. 3 Summer 2005

case remains themost involving a direct at

recent published decision
tack on a locality's inclusionary zoning ordinance.25
However, several recent cases have been decided inNew Jersey and
California concerning implementation of certain affordable housing
programs. Following is discussion of those cases within the applicable
a

legislative context.

A. New Jersey?Implementing theMount Laurel

Doctrine Remains a Challenge

1. the MOUNT LAUREL obligation?a brief history

of its origins and enforcement mechanisms

New Jersey's activist approach to affordable housing is a consequence

of a series of state supreme court decisions. In Southern Burlington
County NAACP v. Township ofMt. Laurel (Mount Laurel I), the state

supreme court ruled that developing municipalities have a state consti

tutional obligation to provide a realistic opportunity for the construction
of low- and moderate-income housing.26 In Southern Burlington County
NAACP v.Mt. Laurel Township (Mount Laurel II), the state supreme
court expanded theMount Laurel doctrine, holding that all municipal
ities share in this obligation.27
Mount Laurel II also established specific judicial remedies to enforce
municipalities' affordable housing obligations; these remedies neces
sarily entailed the courts overseeing implementation on a case-by-case
basis.28 In an effort to remove the judiciary from this oversight role,

trust fund, was proper); Commercial Builders of N. Cai. v. City of Sacramento, 941
F.2d 872 (9thCir. 1991) (an ordinance thatconditionscertain typesof nonresidential
building permitsupon thepaymentof a fee dedicated to an affordablehousing trust
fund did not amount to an unconstitutional taking); Homebuilders Ass'n of N. Cai. v.
City of Napa, 108 Cai. Rptr. 2d 60 (Cai. Ct. App. 2001) (upheld an inclusionary
ordinance against facial constitutional attacks); San Remo Hotel v. City and County of
San Francisco, 117 Cai. Rptr. 2d 269 (Cai. Ct. App. 2002) (upheld impositionof
affordable housing fees as a condition of approval to convert hotel from long-term
residential to tourist use).
25. InHomebuilders Ass'n ofN. Cai. V. City ofNapa, 108 Cai. Rptr. 2d 60 (Cai.
Ct. App. 2001), plaintiffsbroughtfacial constitutionalchallenges regardingtheCity of
Napa's inclusionary zoning ordinance, which imposed a mandatory 10% affordability
requirement on new residential projects. After refusing to apply the Nollan/Dolan
heightened scrutiny standard to the facts at hand and emphasizing the legitimate gov
ernmental interest in encouraging affordable housing development, the court rejected
the facial challenges. In so doing, it found dispositive the fact that the ordinance con
tained an administrative relief clause that allowed for a complete waiver of the inclu
sionary requirements should the developer establish that they were unconstitutional or
unlawful. The court did not, however, foreclose the possibility of an as-applied chal
lenge under certain circumstances. Id.
26. Mt, Laurel I, 336 A.2d 713 (N.J. 1975).
27. Mt, Laurel II, 456 A.2d 390 (N.J. 1983).
28. Id. at 420.

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Land Use, Planning and Zoning Law 519

the New Jersey Legislature passed the Fair Housing Act (FHA)29 in
1985. The FHA established the New Jersey Council on Affordable

Housing (COAH) as an administrative alternative to the courts.30

COAH is charged with the responsibility of determining the present
and prospective statewide affordable housing need and then allocating
a fair share of that need to each municipality.31
As part of this process, municipalities may voluntarily elect to com

plete housing elements and fair-share plans that address their housing
obligations and then seek substantive certification of these documents.32
COAH grants such certificationif itfinds thatthepetitioninghousing
element and plan makes achievement of themunicipality's fair share
of low- and moderate-income housing realistically possible.33 The pri
mary value of COAH certification is the protection it offers to a mu
nicipality: In the event of an exclusionary zoning lawsuit, a munici
pality that has received COAH certification may rely on a statutorily
created presumption that it is providing a realistic opportunity for the
construction of its fair share of the low- and moderate-income housing
obligation.
2. RECENT CASES RELATING TO COAH'S
ADMINISTRATIVE DUTIES

New Jersey's administrative approach involves a complicated regula

tory scheme that has given rise to several recent lawsuits. In particular,
issues have surfaced because of a significant delay by COAH in adopt
ing the "third round" rules and regulations that set forth the method
ology by which fair share obligations will be determined.34
In In re Six Month Extension of NJ.A.C. 5:91-1, petitioners chal
lenged the validity of a COAH regulation that authorized COAH to
extend substantive certifications.35 In particular, petitioners argued that

29. N.J. Stats. Ann. ? 52:27D-301(West 1986 and Supp. 1999).

30. Id. ? 52:27D-305.
31. Id. ? 52:27D-307.
32. Id. ? 52:27D-313.
33. Id. ? 52:27D-313.
34. COAH's regulations include calculations of municipal affordable housing ob
ligations, initially for the "first round" (1987-93), and then for the cumulative "second
round" (1987-99). See N.J. Admin. Code tit. 5, ?? 93-2.1, 93-2.20, 93-5.93, App. A
(2005). The substantive rules for the "second round" were subsequently extended first
toMay 5, 2004, see 31 N.J. Reg. 578(a) and 31 N.J. Reg. 1479(a), andmore recently
toNovember 1,2004. See 35 N.J. Reg. 5467(a). Aftermuch delay and debate,COAH
the "third round" rules on November 22, 2004, which went into effect on
adopted
regardingCOAH, see COAH, at http://
December 20, 2004. For additional information
www.state.nj.us/dca/coah (last visited May 11, 2005).
35. 855 A.2d 582 (N.J. 2004). "The regulation in question provided a mechanism
for municipalities previously certified in the 'second round' to receive an extension of
their certification status, and therefore further protection from civil action remedies, for

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520 The Urban Lawyer Vol. 37, No. 3 Summer 2005

COAH had effectively imposed a moratorium on Mount Laurel com

pliance by granting extended certifications and not finalizing "third
round" numbers or releasing interim obligations.36
In deciding the merits of the case,37 the court first recognized
COAH's broad discretion in effectuating the FHA's purposes.38 Par
ticularly, given the practical difficulties in adopting the "third round"
rules, the court held that the agency's desire to extend certifications
during this interim period was within the scope of its authority.39
Nevertheless, the court invalidated the specific regulation in ques
tion, concluding that it did not comport with COAH's obligation to
conduct extensive review of certification requests and to apply clearly
articulatedstandards.40 Of particular interest was the court's chastise
ment of COAH for its delay in adopting "third round" rules, which it
characterized as "dramatic and inexplicable."41
For nearly the equivalent of one full round of Mount Laurel administration no mu

nicipality has been held to updated standards reflecting its present and prospective
fairshareof thehousing needs of itsregion.The public policies underlyingtheFHA
and theMount Laurel cases have, quite obviously, been frustrated by inaction.42

Sod Farm Associates v. Township of Springfield involved the question

of the applicability of the exhaustion doctrine in the context of COAH
actions.43 In this case, a developer and a municipality were battling
over the town's decision to adopt an ordinance that excluded the de

veloper's property as a designated affordable housing site.44During this

same period, the municipality had sought substantive certification of
its housing element and fair share plan and, therefore, had submitted
itself to COAH's jurisdiction.45 The developer requested a transfer to

up to one year following the adoption of the 'third round' rules." Id. at 586. See N.J.
Admin. Code tit. 5, ? 91-14.3 (2005).
36. In re Six Month Extension, 855 A.2d at 599.
37. Before addressing the merits of the claim, the court rejected the contention that
a public interest group had no standing, emphasizing that "a 'liberal approach' to
standing is especially important inMount Laurel litigation." Id. at 596-97.
38. Id. at 601.
39. Id. at 601-02.
40. Id. at 604.
41. Other New Jersey courts have noted the implications of COAH's delay in adopt
ing "third round" rules. See, e.g., In re Adoption of the 2003 Low Income Housing
Tax CreditQualifiedAllocation Plan, 848 A.2d 1,19 (N.J.Super.Ct. App. Div. 2004).
COAH's failure to timely promulgate "third round" fair share obligations and regula
tions, combined with COAH's practice of routinely extending "second round" sub
stantive certifications, have resulted in a "hiatus in the Mount Laurel doctrine." Id.
at 20.
42. In re Six Month Extension, 855 A.2d at 602-03.
43. 840 A.2d 885 (N.J.Super. Ct. App. Div. 2004).
44. Id.
45. Id. at 887.

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Land Use, Planning and Zoning Law 521

the court so it could seek judicial remedies for themunicipality's al

leged failure to fulfill itsMount Laurel obligations.46
The court rejected petitioner's transfer request.47 It acknowledged
COAH's mandatory duty to determine housing needs and adopt criteria
for allocating fair share obligations. However, the court concluded that

delay in implementing those duties, or in actually producing affordable

housing, was not necessarily unconstitutional.48 Therefore, despite sig
nificant delay during the COAH review process, the court refused to
waive the requirement to exhaust administrative remedies. "Clearly, the
nature of COAH's legislatively mandated jurisdiction, the discretion
and expertise involved, and the statements of legislative intentmake
waiver [of the exhaustion of administrative remedies rule] inappropriate
where [COAH] is workingwith themunicipality and reviewing its
submission."49

Of particular relevance to the court was the state's strong policy pref
erence that exclusionary zoning disputes be resolved through COAH's
mediation and review process rather than through litigation:50

Assumption by the courts of the agency's functions fosters the potential formischief
and the prospect of conflicting and contradictory results in the court system and in
the administrative proceedings. Moreover, itwould eventually lead to the court hav

ing tomicromanage quotas and policies which the Legislature entrusted to COAH.51

Elon Associates, LLC v. Township ofHowell52 also involved the issue

of administrative exhaustion. The question presented was whether the
exhaustion requirement is applicable if COAH's grant of substantive
certification is reversed on appeal and thematter is then remanded to
COAH for reconsideration.53 Similar to the court in Elon Associates,
the court in Sod Farm Associates refused to allow what it viewed as an
"end run" around the exhaustion doctrine.54 In so doing, it also empha
sized the legislature's strong preference for use of COAH's adminis
trative procedures to secure a municipality's compliance with its afford
able housing obligations.55
In a subsequent related case, the court considered the question of the

appropriate remedy when COAH failed to reconsider the township's

46. Id.
47. Id.
48. Sod Farms Assocs., 840 A.2d at 894-95.
49. /</. at 891.
50. Id. at 888.
51. Id. at 894.
52. 851 A.2d 714 (N.J. Super. Ct. App. Div. 2004).
53. Id. at 715.
54. Sod Farms Assocs., 840 A.2d at 892.
55. Elon Assocs., 851 A.2d at 716-17.

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522 The Urban Lawyer Vol. 37, No. 3 Summer 2005

housing element and fair share plan. In In reMarch 22, 2002 Motion
to Dismiss and Intervene in the Petition of Howell Township,56 more
than three years had elapsed since the court had remanded the Elon
Associates matter toCOAH, which had still not reconsidered the town's
housing and fair share plan. The developers
element sued, seeking,
among other things, a transfer of jurisdiction from COAH.57
Despite the conclusion that COAH's delay was "inexcusable and
disturbing," the court was unwilling to grant the "far-reaching relief"
of removing the case from COAH's jurisdiction.58 The court relied, in
part, on the assumption that the remedy sought would effectively pe
nalize the township rather than COAH, and was therefore inappropri
ate.59 Further, the court echoed other courts' concerns?since COAH's
inaction was not likely limited to this case, if the court allowed for the
remedy sought the judiciary could be flooded with Mount Laurel liti
gation.60 Ultimately, however, despite this reticence, the court inter
vened into the COAH process, establishing a schedule for completion
of the remand.61
The factual circumstances inwhich the above cases arose have since
changed with COAH's recent adoption of the "third round" rules. Nev
ertheless, the complex, politically charged context of COAH and the
administration of the Fair Housing Act is anticipated to spur further
litigation. Based on these recent decisions, however, it is likely that
courts will continue to resist taking on an oversight role except under
themost egregious circumstances.
3. OTHER RECENT NEW JERSEY DECISIONS INVOLVING
AFFORDABLE HOUSING ISSUES
Two other recent NewJersey cases involve interesting questions con
cerning the implementation of affordable housing policies. The first
case addressed the treatment of affordable units in a planned develop
ment project. Brandon Farms Property Owners Ass'n, Inc. v. Brandon
Farms Ass'n, Inc. involved a 556-acre development of
Condominium
"single-family detached homes, townhouses and condominiums."62 Each
unit owner in the project was a member of a Property Owners' Asso
ciation.63 Members were divided into three classes: Class A consisted

56. 852 A.2d 258 (N.J.Super. Ct. App. Div. 2004).

57. Id. at 263.
58. Id. at 269.
59. Id. at 270.
60. Id.
61. In reMarch 22, 2002, 852 A.2d at 270. However, the decision leftopen the
question of the appropriate remedy in the event COAH failed tomeet the court's
schedule.
62. 852 A.2d 132 (N.J.2004).
63. Id.

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Land Use, Planning and Zoning Law 523

of certain single-family homeowners; Class B consisted of the remain

ing single-family homeowners and some condominium unit owners;
and Class C consisted of the remaining condominium unit owners.64
All of the affordable unit owners in the project were Class C members.65
The governance scheme was set up such that Class C members were
solely to bear the burden of Class C deficiencies even though all classes
were required to compensate for the deficiencies of Class A and Class
B members.66
The practical effect of this scheme was to insulate Class A and Class
B members from the perceived risk of nonpayment of assessments by
affordable home owners, thereby making sales of Class A and B units
more attractive.67 Plaintiffs claimed, among other things, that this gov
ernance scheme violated public policy.68 The court agreed, holding that
itwas void, in part, for violating public policy since the scheme would
result in the affordable housing unit owners bearing a disproportionate
burden of their neighbors' delinquencies.69
In In re Adoption of the 2003 Low Income Housing Tax Credit Qual
ifiedAdoption Plan, four public interest groups challenged regulations
governing the administration of the federal Low Income Housing Tax
Credit (LIHTC) program.70 The program is administered by each state's
housing credit agency, which must adopt a "qualified allocation plan"
(QAP) that is required to include certain preferences and selection cri
teria.71 The New Jersey state agency adopted the 2003 QAP, which
when implemented, would result in themajority of tax credits going to
racially segregated neighborhoods in urban areas.72 Petitioners argued
that this system fostered racial and economic segregation, thereby vi
olating federal housing law and regulations, theMount Laurel doctrine,
state constitutional provisions relevant to school segregation, and state
laws prohibiting racial discrimination.73
The court rejected this segregation argument, deferring to the agency's
discretion in implementing the state's affordable housing policies.74

64. Id.
65. Id.
66. Brandon Farms Prop. Owners Ass 'n, 852 A.2d at 135.
67. /d. at 136.
68. Id.
69. A2. at 141.
70. 848 A.2d 1 (2004). This programprovides an incentivefor theconstructionand
rehabilitation of low-income rental housing by lowering its overall cost through the
use of tax credits to developers and owners of qualified rental projects. These tax credits
are allocated to the various states according to their population. Id. at 6-7.
71. Id. at 7.
72. Id. at 9.
73. Id.
74. Id. at 13.

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524 The Urban Lawyer Vol. 37, No. 3 Summer 2005

Among other things, the court focused on the appropriate balance the
2003 QAP was attempting to strikewith respect to the need to revitalize
urban areas without unduly limiting opportunities for low-income ur
ban residents.75
Regarding theMount Laurel claim, the court first raised the question
whether the appeal was an "appropriate vehicle for addressing" the
agency's duties in theMount Laurel context.76 Notwithstanding these
concerns, the court held that the tax-credit regulations were valid since
they were not inconsistent with the FHA or COAH regulations.77
B. California's Multi-Faceted Approach to
Housing
Affordable
In California, numerous
state laws are designed to facilitate affordable
housing production.78 Following is a discussion of recent cases con
cerning two of those statutes?one that involves the development of
second dwelling units, and a second that imposes inclusionary require
ments on developments in the coastal zone, as well as an appellate
decision that arguably may have implications for resale restrictions on
affordable units.
1. ENCOURAGING THE DEVELOPMENT OF SECOND
DWELLING UNITS

Facilitating the development of second dwelling units has been rec

ognized in California as one means of increasing the supply of afford
able housing.79 State law requires that cities with second dwelling unit

75. In reAdoption of the2003 Low IncomeHousing Tax Credit QualifiedAdoption

Plan, 848 A.2d at 10.
76. Id. at 24.
77. Petitionersattacked thedensitybonus provisions of the2003 QAP, which pro
hibited a mixed-income project that had received a density bonus from receiving com
petitive ceiling credits ("9% credits"). Id. at 24-25.
78. See Cal. Gov't Code ? 65580 (Deering 2005) (requiringeach cityand county
to adopt a housing element as part of its general plan, which must, among other things,
showhow each jurisdictionplans to accommodate itsfairshareof theregionalhousing
need). See also Cal. Gov't Code ? 65589.5 (Deering 2005) (limitingtheabilityof a
local to disapprove, or require density reductions in, proposed
jurisdiction projects,
both with respect to affordablehousing projects and housing development projects
generally);Cal. Gov't Code ? 65913.1 (Deering 2005) (requiringlocal jurisdictions
to designate and zone sufficient vacant land with "appropriate standards" for residential
use tomeet low- and moderate-income housing needs); Cal. Health & Safety Code
? 33334.2 (Deering 2005) (requiringthatnot less than20% of thegross tax increments
generated from a redevelopment area must be used by the redevelopment agency to
increase and improve the community's supply of affordable housing); Cal. Health
& Safety Code ? 33413(b)(1) (Deering 2005) (mandatingthatat least 30% of all new
and substantiallyrehabilitateddwelling unitsdeveloped by a redevelopmentagencybe
affordable).
79. SeeWilson v. City ofLaguna Beach, 7 Cal. Rptr. 2d 848, 855-56 (Cal. Ct. App.
1992); Sounheim v. City of San Dimas, 55 Cal. Rptr. 2d 290, 295-96 (Cal. Ct. App.
1996).

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Land Use, Planning and Zoning Law 525

ordinances consider applications to construct these types of units min

isterially, without discretionary review or a hearing.80 Accordingly, if

the applicant's proposal meets certain statutory criteria, the local juris
diction must approve the application.81
Travis v. County of Santa Cruz*2 involved a recent challenge to a
local county ordinance that imposed certain restrictions on second
dwelling units, including occupancy and rent level restrictions designed
to ensure those units remained affordable. Plaintiff property owners

applied for and were granted permits to construct second dwelling units,
subject to the occupancy and rent level restrictions.83 They sought a
writ of mandate, claiming that these restrictions conflicted with and
were preempted by state rent control and fair housing laws, and that

they constituted an unlawful taking.84

The California Supreme Court did not reach themerits of the plain
tiffs' challenge, but rather focused on the issue of whether the claims
were timely brought.85 The court held that to the extent the suit chal
lenged the validity of conditions imposed on one of the property
owner's development permits and sought removal of those conditions,
the action was timely brought.86 The court then remanded the case for
determination on itsmerits.87
On remand, in an unpublished decision, the appellate court reviewed
the remaining plaintiff's Fifth Amendment claim.88 In deciding the
case, the court refused to apply theNollan/Dolan heightened scrutiny
standard, since the ordinance was the "result of an essentially legislative
process, and the conditions contained in it are imposed on a broad class
of property owners to further legitimate government interests. . . ."89
Applying the lesser standard of review, the court then held that there
had been no unlawful taking since the conditions imposed substantially
advanced the legitimate state interest in facilitating the provision of

80. Cal. Gov't Code ? 65852.2(a)(3) (Deering 2005).

81. The intent of the legislature is that any adopted second unit ordinances have the
effect of providing for the creation of second units, and any requirements imposed are
not so onerous as to unreasonably restrict the creation of such units. Cal. Gov't Code
?? 65852.2, 65852.150 (Deering 2005).
82. 94 P.3d 538 (Cal. 2004).
83. Id.
84. Id. at 539-40.
85. Id.
86. Id.
87. In all other respects, the court held that the action was time-barred. Id. at 776.
88. With respect to the preemption argument, the appellate court left this question
to the trial court to determine on remand. Travis v. County of Santa Cruz, No. H021541,
2004WL 2801083 (Cal. Ct. App. Dec. 6, 2004).
89. Id. at *6-7.

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 526 The Urban Lawyer Vol. 37, No. 3 Summer 2005

affordable housing, and that they did not deprive the owner of all eco
nomically viable use of the property.90
2. INCLUSIONARY ZONING MANDATES WITHIN
COASTAL ZONES

Coalition of Concerned Communities, Inc. v. City of Los Angeles91

involved a question of the interpretation of a California statute92 that
imposes an inclusionary requirement on new housing
developments
constructed within the coastal zone.93 Plaintiff citizen groups claimed
that this provision applies to a proposed project that is partially within
the coastal zone, even though no housing would actually be constructed
within that zone.94
However, the court rejected this contention. In so doing, it held that
the statute in question is not applicable if the development does not
propose to construct any housing or even private amenities within the
coastal zone.95 Because in the case at hand, the project included only
some infrastructure and construction of a public view park within the
coastal zone; the court determined that it neither affected existing
affordable housing, nor had a new housing impact within the zone, and
therefore, the statute did not apply.96
3. FURTHERING THE AFFORDABLE HOUSING
PRODUCTION GOAL THROUGH RESALE
RESTRICTIONS
A recent Ninth Circuit decision presented the question of whether resale
restrictions in the rent control context could constitute a taking. In
Cashman v. City ofCotati91 mobilehome park owners brought a federal
takings challenge against the city's rent control ordinance. The ordi
nance in question limited the rent increases that park owners could

charge the tenants for the land upon which the tenants' mobile home
coaches control provisions were also in place, which
sat.98 Vacancy
prevented park owners from charging a new base rent or increasing the
existing rent for a mobilehome space when ownership of a mobilehome
coach was transferred and the coach remained in place.99 The stated

90. Id. at *9.

91. 101 P.3d 563 (Cal. 2004).
92. See Cal. Gov't Code ? 65590(d) (Deering 2005).
93. Coalition ofConcerned Comtys., 101 P.3d 563 (Cal. 2004).
94. Id. at 565-66.
95. Id.
96. Id. at 566-67. The court, however, left open the question of whether the inclu
sionary requirementwould apply if the project proposed to build private amenities
within the Coastal Zone, such as a golf course or other
sporting facility. Id. at 565.
97. 374 F.3d 887 (2004).
98. Id. at 890.
99. Id.

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Land Use, Planning and Zoning Law 527

purpose of the ordinance was to stabilize rental rates and provide

affordable housing for lower income and elderly residents.100
Petitioners argued that the ordinance was effectually a taking because
it did not substantially advance the purported government interests.101
Specifically, they claimed that the ordinance permitted tenants to cap
italize on their below-market rents by selling their coaches for a pre
mium.102 The court agreed, holding that a rent control ordinance that
does not provide for a mechanism to prevent the capture of such pre
mium, and the result is an increase in the cost of such housing, is
unconstitutional as a matter of law.103 The court reasoned that absent
such a mechanism, the ordinance failed to substantially advance the
interest of providing and maintaining affordable housing.104
Cashman arose in the rent control context, and did not involve an

inclusionary zoning program. However, itmight be argued that this

case provides some guidance to jurisdictions in terms of resale restric
tions on affordable units?that is, the need for such restrictions to be
set up so as to further the interest of providing and maintaining the
affordable housing stock rather than simply transferring value from the
developer to the initial affordable unit owner.

III. Conclusion

As the affordable housing crisis persists, more and more jurisdictions

are relying on inclusionary zoning programs in the hopes of increasing
their affordable housing stock. This trend is likely to persist given the
current state of jurisprudence, which tends to view the adoption of
inclusionary zoning programs as a proper exercise of local police power
used to advance legitimate government interests. It is anticipated, how
ever, that the implementation of such programs will continue to spur
controversy and litigation.

100. Id.
101. Id. at 891.
102. Cashman, 374 F.3d at 891.
103. Id. at 897.
104. Id.

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