Affordable Housing

Workforce Housing in the Bozeman MT real estate and other business markets has been a contentious issue. The Bozeman City Commission, with the input from Bozeman’s “Affordable Housing Task Force,” has approved an affordable housing ordinance.

Often referred to as “Inclusionary Housing” or “Inclusionary Zoning,” the concept of Workforce Housing seeks to promote the production of affordable housing by requiring developers dedicate a percentage of housing units in a future development at a specific price as low- and moderate-income housing to be used to help ensure adequate housing exists for the community’s workforce, i.e., teachers, fire fighters, police, etc.

Always a contentious issue, with valid concerns surfacing like resale caps, maintenance guidelines, equity caps, segregation by socio-economic class, qualification caps, etc., the recent Idaho case, in which Idaho REALTORS® took the issue to court in Idaho and won, may very well encourage other REALTOR® Associations around the country to take the issue to court in their communities.

Here is the February 2008 Idaho REALTORS® Press Release:

Press Release

REALTORS® APPLAUD COURT DECISION ON AFFORDABLE WORKFORCE HOUSING

For Immediate Release

Contact: Melissa Gray, 208-342-3585, mgray@idahorealtors.com

(Boise) February 21, 2008–The Idaho Association of REALTORS® (IAR) and the Mountain Central Board of REALTORS® (MCBR) applauded the court decision made Tuesday which struck down an ordinance enacted by the city of McCall mandating private builders and developers to build and deed restrict properties for “workforce housing” In 2007 the MCBR filed a lawsuit against the city of McCall seeking a declaratory ruling that McCall’s ordinance was an unconstitutional taking of private property rights, an illegal taxing scheme and that the city exceeded its jurisdiction and authority in passing the ordinances.

“We took every step we could to get the jurisdictions in Valley County not to adopt the ordinances,” said Ray Moore, President of the Mountain Central Board of REALTORS®. “We even financed a print and radio media campaign letting citizens and officials know that adopting these ordinances was unconstitutional. Unfortunately, we were forced to bring the legal action.”

Among other things, the ordinances required that developers and builders set aside, build and deed restrict 20 percent of a development for “workforce housing.” Under the ordinances, the deed restricted properties are then reserved for people making 100% to 160% of the median wage in Valley County. The local government would then award priority points to certain types of jobs that would qualify for the housing. Such homes would be permanently price-restricted. The ordinances mandated an equivalent “in lieu of” fee as an option to building such homes.

IAR President Willis Stone said that while his organization and MCBR support affordable housing the city of McCall went too far by imposing a disguised tax and infringing on private property rights.

“The Court recognized that, while the goal of providing affordable housing may be laudable, there is no authority for enacting ordinances which require that developers provide affordable housing or to require a subsidy from landowners to further those goals,” Stone said. “Workforce housing is a community problem. It ought to have a community solution. It is not fair to balance the problem on the backs of private property owners, or the real estate industry – a very important industry in our economy.”

The 4th Judicial District Court included the following points in the Memorandum Decision:

• “These restrictions go much further than merely regulating the use of property; instead, they essentially regulate ownership of the property by dictating to whom a unit may be sold or rented.”

• “This Court concludes such ‘regulation’ is arbitrary and unreasonable as a land use provision.”

• “This Court is convinced that the imposition of the subsidy or fee required under Ordinance Nos. 819 and 820 are, in reality, a tax, and not a regulation.”

The REALTORS®’ lead attorney, David Gratton of Evans Keane LLP said the court’s decision was well reasoned and thorough.

“The Court said pretty plainly that a fee charged to one segment of society to offset the burdens of the community as a whole is a tax – not a fee – and as such, is unlawful tax. Those types of disguised taxes exceed a city or county’s authority.” Gratton said. “We have made this argument from the beginning. There are a line of cases in Idaho a mile long supporting us.”

IAR Chief Executive Kevin Price said his group and affiliated groups would continue to work with the state and local municipalities to provide affordable housing in communities like McCall. But he said that there were already plenty of provisions in the law to create affordable housing in any Idaho community.

“The City simply went too far and exceeded its authority. The imposition of this burden on the landowners or developers amounts to an unlawful tax. In addition, the ordinances go much further than the City’s authority to regulate the use of property. By dictating to whom a housing unit may be sold or rented, the City has improperly attempted to regulate property ownership. We certainly agree with the Court’s determination that this “regulation” is arbitrary and unreasonable” Price added. “There are other jurisdictions in Valley County that have enacted these ordinances. We will be watching carefully to ensure that those ordinances are repealed in a timely manner.”

“There are developments in Valley County constructed under the ordinances. When the market softened, consumers had a choice between purchasing deed-restricted lots that can’t appreciate in price, or unencumbered lots for the same price. Naturally, buyers chose to purchase homes with no free-market restrictions. Some of these “affordable workforce housing units” have been laying vacant for months. The people who were forced to build them are really taking a bath.”

The Idaho Association of REALTORS® represents over 9400 REALTORS® in Idaho. For more information about the group go to our website at http://www.idahorealtors.com/ For more information about the National Association of REALTORS® go to http://www.realtor.org/

Seven months after Bozeman’s contentious Workforce Housing Ordinance went into effect, the affordable homes it sought to create are eight to 12 months from completion, said Steven Herron, the newly hired administrator of the Workforce Housing Program.

The lag between the ordinance passing and homes actually built is not far from the best-case scenario imagined by city planners when discussions of the workforce housing ordinance began last year, said Chris Saunders, assistant director of planning and community development for Bozeman.

“The expectation was we would not be seeing homes being constructed until the following year,” Saunders said. “That would be a very vigorous pursuit of development.”

Herron was hired in mid-February to lead the workforce housing program, which requires developers of some subdivisions to price a portion of their homes or condominiums under $200,000 and trains Bozeman residents for homeownership. While those houses await construction, Herron is working to educate families who make under $70,000 a year and direct them toward other ownership programs now in place and many of which offer low-interest loans and down payment assistance.

Today, Herron said, two developments are slated to build affordable housing with tentative completion dates between late fall and early 2009:

* Norton East, a 125-unit development, eight of which will be workforce housing units;

* and Laurel Glen, a development of 103-single household residential lots and eight multi-household lots, with 12 workforce housing units planned.

A third development being planned for Story Mill Road also will contribute homes to the program, Saunders said. A total of 34 lower-priced homes are expected to come out of that development over several phases, he said.

None of the developments has received final plat approval.

The Bozeman City Commission adopted the ordinance in hopes of giving working class families n those who make under $70,000 a year n wider options in owning a home in Bozeman. Developments using more than 5 acres of land for housing fall under the ordinance.

The houses are required to blend into the surrounding neighborhood with cheaper interiors than the higher-priced houses, Herron said.

Critics of the Workforce Housing Ordinance said it would interfere with the Bozeman housing market and drive up the price of houses not covered by the ordinance.

Saunders said building requests are down so far this year, but there are a multitude of factors that could be contributing, including a feeling among builders that the housing market in Bozeman is saturated.

“We have not seen anyone come in and say, ‘Because of the workforce housing we are not going to develop,’” he said.

Herron also is working with developers to convince them there is a demand to be met with homes priced under $200,000, even without a push from the city commission.

“Bozeman is a potential gold mine for homes under $200,000,” he said. “There is a huge shortage of these homes and lots of eager, well-qualified people who want them. What choices does a developer have? Build more expensive homes that might sit vacant alongside already overbuilt inventories, or venture into a new untapped but potentially lucrative market?”