Healdsburg’s ‘inclusionary housing’ keeps homes unaffordable
You can’t make housing cheaper by making it more expensive. But that’s what Healdsburg’s so-called “Inclusionary Housing Program” tries paradoxically to do. Jessica Pilling and her lawyers at Pacific Legal Foundation (where I work) understand that. When the City charged Jessica approximately $20,000 in inclusionary housing fees as a condition of her residential development permit, we filed a lawsuit to challenge the program. Recently, the City agreed to settle the case, refunding the fees that Jessica had paid under protest.
The program works like this. When you apply for a permit to build new housing in Healdsburg, the City requires a fee based on the project’s square footage. If you prefer not to pay, there are other options: You could dedicate off-site land to the City for affordable housing, or if you’re building a multi-unit project, you can enter a covenant promising to set aside some portion of those units at below-market rates for a term of fifty-five years. The City calls this “inclusionary housing,” but similar policies, known as “inclusionary zoning,” exist all over the country. Unfortunately, these kinds of policies not only fail to deliver on their promise of promoting housing affordability — they are also subject to serious constitutional challenges.
To understand why these policies fail to achieve their goals, consider the basic economics of supply and demand. Imposing high costs on residential housing developers makes it more difficult to build, reducing supply. With steady demand, lower supply means higher prices and less affordability. While the fees charged under the program are earmarked to subsidize affordable housing, developers faced with high fees may choose to build fewer units, or not build at all. The result is less development, making it more difficult to find affordable housing.
There is also a more fundamental problem. Besides being counterproductive, these policies may also be unconstitutional. The issue comes down to the Fifth Amendment’s foundational protection against the government taking private property for public use.
Because permit applicants are in a precarious situation — they depend on government approval before they can use their land — there is a significant risk of an abusive power relationship between the government and the applicant. That’s the theory behind the doctrine of unconstitutional conditions and its application to land-use permit applications as outlined by the Supreme Court in cases like Nollan v. California Coastal Commission and Dolan v. City of Tigard.
To prevent unfair government demands, the Supreme Court developed a simple rule to determine when permit conditions cross the line into unconstitutional takings: When the government demands property as a condition of granting a permit, that demand has to be tightly related in both kind and magnitude to the public impacts of the development in question. For example, if a new building could cause flooding, the government can constitutionally demand that the developer contribute funds or an easement for stormwater management as long as the demand is proportionally related to the actual flood risk created by the development.
But inclusionary zoning policies like Healdsburg’s lack that causal connection. Residential development doesn’t create the need for affordable housing; if anything, it helps to address the problem by increasing supply and putting downward pressure on prices. Therefore, Healdsburg’s policy uses the permitting context as an excuse to make people pay for problems they didn’t create — problems they are even helping to solve.
There is more work to be done. In the settlement agreement with Jessica, the City acknowledged that she was entitled to a refund of the housing fees they charged her. But the policy remains in place. While the City indicated to The Healdsburg Tribune that it no longer will apply the policy to lots created under SB9, that may be a red herring; there are exceedingly few such lots in Healdsburg, and the constitutional flaws with the policy exist irrespective of SB9. And like countless other inclusionary zoning policies across California and the nation, it remains subject to constitutional challenge.
