It is important to have explicit, enforceable rules dictating that affordable units are built before or in parallel with the market rate project in order to ensure that the units get built.
As part of their inclusionary housing programs, some communities adopt “phasing” policies that address the timing of the delivery of affordable homes. These policies help to ensure the integration of below-market homes during some or all phases of development; otherwise, delivery of the affordable component may be delayed until the market-rate construction has been completed. In some cases, particularly when a project stalls or gets scaled back, these delays can mean that affordable units are never built.
A common way to address this challenge is to build timing provisions into each project’s covenant or affordability agreement.
San Diego, California
San Diego Diego requires all major phases of development to include a provision for affordable homes. Benchmarks in the affordable housing agreements are recorded against the property and govern the developer’s ability to pull building permits.
Typically, the city allows builders to pull building permits for 50 percent of market units, and once this benchmark has been reached, no more permits for the market-rate units may be issued until work on the affordable component has started. The entire affordability requirement must be satisfied before the release of the final 25 percent of building permits for market-rate units.
There are frequently different staff members who prepare the covenants or monitor construction permits. Appointing a single employee to track phasing and other requirements can help to ensure coordination across departments.
Clarity and flexibility
As an inclusionary zoning administrator from Woodland, California, noted, “By better defining rules and regulations, it is easier for staff and future staff to enforce the policy.”
While clear terms and monitoring are key to the successful delivery of affordable homes, cooperation and the flexibility to respond to individual developers’ needs also play an important role. This helps ensure that these requirements do not become onerous or interfere with development. A practitioner in Washington state described the process of developing a phasing agreement:
“Staff works with the developer to come up with specific language related to phasing. If needed, this typically includes language that building permits of the affordable units must be issued prior to issuance of building permits of some set amount of market rate units. This might be expressed in terms of a percentage or number of units, or specifying specific buildings. We have been flexible in the approach to phasing for each project to be responsive to varying conditions for each project. But by having it explicitly addressed in the covenant, a developer cannot get any permits until a plan has been mutually agreed upon.”
In a 2006 report, Polly Marshal and Barbara Kautz, two lawyers who represent a number of California jurisdictions, carefully documented the evolving set of legal enforcement mechanisms implemented by many inclusionary housing programs.
Among the key legal issues that cities face in implementing inclusionary requirements is ensuring that developers actually build the required affordable homes. Marshal and Kautz describe the developer agreements that several communities use to record specific approved plans for the number, type, location, and timing of affordable units, and to facilitate later enforcement of these agreements.*
In some instances, development agreements are stand-alone documents. In other instances, they take the form an affordable housing plan attached as an exhibit to a master development agreement. These plans are considered along with other project plans and approved by the planning commission. Once the plans are approved, the city incorporates the terms into a development agreement, which is recorded in the land records prior to the issuance of any building permits or subdivision approval.
While these developer agreements or project plans help clarify obligations and expectations, most jurisdictions don’t rely on them exclusively as tools for enforcement of inclusionary housing requirements. Even in cases where a city might successfully sue to enforce a development agreement, it can be difficult for a judge to compel compliance once a project is completed. For example, many projects are built by special purpose companies that dissolve once a project is complete. For this reason, Marshal and Kautz report that the most experienced jurisdictions rely on withholding building or occupancy permits as a primary tool for ensuring that affordable housing obligations are met.*