AGENDA #9

MEMORANDUM

TO:                  Mayor and Town Council

FROM:            W. Calvin Horton, Town Manager

SUBJECT:       Proposed Rezoning Initiative for Promoting Affordable Housing

DATE:             November 13, 2000

This memorandum responds to the Town Council’s request for more information regarding an initiative that would use zoning as a tool to achieve affordable housing objectives. Specifically, the following issues are examined:

• Which parcels would be affected in applying the Council’s latest criteria;

• Spot zoning considerations; and,

• The potential of the initiative to maintain housing affordability over time.

The attached resolution would call public hearings for March 19, 2001, to consider rezoning for affordable housing objectives.

BACKGROUND

On April 10, 2000, the Council reviewed three potential strategies for increasing the stock of affordable housing in Chapel Hill: 1) adopt a Mixed Housing Ordinance, 2) conduct a survey of other municipalities’ programs to develop additional ideas for Council consideration, and 3) establish an affordable housing incentive using the conditional use zoning and special use permit process.

At that meeting, following the adoption of a new Mixed Housing Ordinance, the Council indicated its intent to consider a related proposal to establish an affordable housing incentive through rezoning. The proposal would provide the Council, through the conditional use and special use process, a tool to encourage affordable housing in future residential developments of a higher density.

The proposal called for rezoning, to a lower density, undeveloped properties throughout Town. The owners of these properties, if they desire to develop at a higher density, could then apply for conditional use rezoning with an accompanying special use permit application. As part of the zoning and permit process, the owner would have the opportunity to offer considerations for achieving the Council’s policy for providing 15 percent affordable housing. Alternatively, the property could be developed at the rezoned lower density.

On August 28, 2000, the Council agreed to consider rezoning those properties that meet all of the following criteria:

• Privately owned property;

• Undeveloped property that is at least three acres in size, or property that is at least three acres in size and on which only one dwelling is located; and

• Properties not currently encumbered by an approved site plan (Master Plan, Special Use Permit, Subdivision, Site Plan Approval).

We understood the Council’s intent to be the consideration of rezoning to a low-density residential designation, such as Residential-1 (three dwelling units per acre). Any development proposed at a higher intensity would require a rezoning request, at which time the Council could encourage affordable housing to be included in the project.

On September 11, we proposed a process to implement an affordable housing initiative and proposed maps of properties meeting the Council’s criteria (see Attachment 1).

DISCUSSION

On September 11, the Council agreed to further refine the criteria for identifying parcels for the initiative, and directed staff to apply the additional conditions to the list of properties identified in the September 11 maps. The Council motion included the following:

• Remove properties that are not residential;

• Keep on the list for possible rezoning neighborhood commercial sites that have the potential to become residential;

• Include discussion as to continuing affordability; and

• Develop a list of properties to consider for changing the zoning to Residential-1.

A Council member also discussed the potential for “spot zoning” and provided an article by David Owens at the Institute of Government (see Attachment 2).

Non-Residential Properties

The Council requested on September 11 that non-residential parcels be omitted from the list of parcels to be considered for rezoning. However, the Council also requested that those neighborhood commercial sites that would allow residential development remain on the list for possible rezoning.

Upon further study, we have determined that all of the parcels discussed at the September 11 meeting have zoning in which residential is a permitted use.

The table below describes how those parcels are zoned.

We have removed five parcels with the following zoning: Community Commercial, Mixed Use-Office/Institutional-1, and Office/Institutional-2. Following the Council’s direction, the parcels were omitted because of the likelihood that the properties would be developed with a commercial or office use.

The removal of these properties leaves a total of 27 properties remaining for consideration for rezoning. These parcels, which range in size from 3 to 22 acres, are zoned Residential-2, Residential-3 or Residential-4. Map 1 shows that these parcels are scattered throughout Town, in the proximity of the Town limits. With the exception of properties along Homestead Road, most of the parcels are adjacent to existing subdivisions. Maps 2 and 3 show the location of each parcel.

Spot Zoning

On September 11, the Council discussed whether spot zoning could affect any of the properties listed for consideration.

Blades v. City of Raleigh, a decision of the N.C. Supreme Court, provides the following definition of spot zoning:

A zoning ordinance, or amendment, which singles out and reclassifies a relatively small tract owned by a single person and surrounded by a much larger area uniformly zoned, so as to impose upon the smaller tract greater restrictions than those imposed upon the larger area, or so as to relieve the small tract from restrictions to which the rest of the area is subjected, is called “spot zoning.”

In North Carolina, spot zoning is not necessarily illegal. Spot zoning, however, must be clearly supported by a reasonable basis to be upheld, a higher standard than normal rezoning cases where courts usually defer to the political judgment of the local decision-makers. According to David Owens of the N.C. Institute of Government, a local government “adopting a ‘spot’ zone has an affirmative obligation to establish that there is a reasonable public policy basis for doing so” (see Attachments 2 and 3).

The general rule, Owens says, is that the “smaller the tract, the more likely the rezoning will be held invalid.” Context is important: a one-acre parcel in an urban core may be considered large, while the same-sized tract in a rural area would be considered small.

Owens cites the following factors that courts use in establishing whether the rezoning is reasonable:

• Is the rezoning consistent with the comprehensive plan?

• Are there physical conditions present that distinguish this site from its neighbors (topography, utilities, road access)?

• How much of a change in use could take place if rezoned?

• How do the potential new uses relate to existing land uses in the area? The greater the disparity, the more likely the rezoning is to be held illegal.

• How do the harms and benefits to the owner, the neighbors, and the community weigh out?If the rezoning is granted, will it greatly benefit the owner? Will he or she be seriously harmed if it is denied? The same questions must be asked for the neighbors and the community at large, and then the effects on all three must be balanced.

The rezoning that has to be evaluated is the proposed Residential-1, not the speculative later higher density zoning. According to the Town Attorney, a determination as to whether the rezoning of any specific parcel included in this initiative is “spot zoning” would need to be addressed after consideration of the information received at the public hearing on a case by case basis.

Long-Term Housing Affordability

At the public hearing, the Council requested information on how affordable housing units might remain affordable over time.  A relevant example is provided in the Boulder, Colorado Revised Code (1981).   The City of Boulder enacted new inclusionary zoning provisions in early 2000.

The Boulder regulations define “permanently affordable unit” as:

“a dwelling unit that is pledged to remain affordable forever to households earning no more than ten percent more than the HUD low income limit for the Boulder Primary Metropolitan Statistical area, or for developments with two or more permanently affordable units, the average cost of such units to be at such low income limit, with no single unit exceeding ten percent more than the HUD low income limit, through contractual arrangements, restrictive covenants, and resale restrictions, subject to reasonable exceptions, including, without limitation, subordination of such arrangements, covenants, and restrictions to a mortgagee.  No unit shall be considered as permanently affordable until the location, construction methods, and techniques used to ensure that the dwelling unit will remain affordable have been approved by the city manager.”

In Chapel Hill, if an owner chose to apply for a conditional rezoning and special use permit after this downzoning, the Council would be able to require as a condition of approval that a developer achieve long-term affordability.  The City of Boulder requires that applicants for residential development projects enter into permanently affordable housing agreements with the city, prior to approval of any development review.  These agreements specify the number, type, location, approximate size, and projected level of affordability of permanently affordable housing units.

A key to ensuring affordability is having the Town or a nonprofit housing entity accountable to the Town being in the legal chain of title to property, so that no future transactions could occur without the knowledge of the Town or nonprofit entity, and to ensure that future buyers also meet the low-income eligibility criteria.  The following are possible ways this could occur:

·        In the case of Boulder, Colorado, the code requires the developer to execute restrictive covenants and additional agreements.

·        In consideration for providing financing or other contributions, the Town could record a Deed of Trust and Promissory Note imposing long-term affordability conditions on the property, such as we do now for units for which the Town provides assistance.

·        If an owner chose to apply for a conditional rezoning and a special use permit, the Town could require the developer to make an agreement with the Community Land Trust in Orange County to make the units permanently affordable through the land trust mechanism; or the Orange Community Development Corporation could hold title to the property and create land trust restrictions on the property.

ANALYSIS OF PROPOSAL

Arguments in Support

The proposal hinges on the assumption that owners of the properties affected by this initiative would return to the Town, prior to proceeding with development plans, to apply for zoning allowing a higher intensity of development. Through the special use and conditional use process, the Town could then seek to have 15 percent of the dwelling units be affordable. The table below lists the zoning categories that permit a higher intensity of development than Residential-1 (three units per acre).

It is difficult to predict how property owners would apply to have their property rezoned in the future, if they choose to do so at all. If we assume they apply to return their property to the current zoning intensity, the Town could require through the rezoning process as many as 133 units to be affordable. However, that number assumes the properties are built to the maximum density possible, which is unlikely due to environmental constraints. The table below shows how many units could be built on the parcels according to the maximum densities the parcels’ current zoning permits.

Arguments Against

It is impossible to predict how many, if any, of the affected property owners would apply to have their property rezoned to residential high density in the future. If no or few rezoning proposals result, the proposal has the potential to produce a different result: Lower density and more expensive housing than what otherwise would have been built.

We believe there are several problems that could undermine the initiative’s goal of promoting affordable housing:

One issue is the uncertainty surrounding future rezoning requests. The initiative will not work if property owners do not apply to rezone their property to a higher allowable density permitted under Residential-1. Owners could choose to develop at Residential-1 density (three units per acre) rather than take the trouble to go through the Town’s conditional use rezoning and special use process.

Secondly, if the properties are developed under Residential-1 zoning, the initiative could result in higher housing prices and reduced housing choice. Houses on large lots, due to land and infrastructure costs, generally are more expensive than houses built on smaller lots. The difference, however, may be marginal comparing houses built under Residential-1 zoning (1/3-acre lots) with Residential-2 (1/4-acre lots) zoning. Development at Residential-1 densities of the 174 acres affected by the initiative would result in a maximum of 522 dwelling units, compared to the 881 maximum allowed on these parcels under the current residential zoning.

Another issue is the fact that rezoning to a higher density could be problematic due to neighborhood opposition. Proposals to increase density often generate neighborhood opposition, especially in areas where existing density is relatively low.

PROCEDURAL ISSUES

Zoning Justification. Article 20 of the Development Ordinance establishes the intent of Zoning Atlas Amendments by stating that, “In order to establish and maintain sound, stable, and desirable development within the planning jurisdiction of the Town it is intended that this chapter shall not be amended except:

a)         to correct a manifest error in the chapter; or

b)         because of changed or changing conditions in a particular area or in the jurisdiction generally; or

c)         to achieve the purposes of the Comprehensive Plan.”

We believe the justification for the Zoning Atlas Amendments as called for in this rezoning proposal would not relate to either a manifest error or changing conditions. An argument for rezoning the parcels to the lower density is that it would achieve the purposes of the Comprehensive Plan, specifically the goal of promoting affordable housing.

A question for the Council to consider is how the initial change of zoning of the properties to Residential-1 would achieve the affordable housing goals of the Town’s Comprehensive Plan. The Council could determine it is willing to accept a higher density for affordable housing, and run the risk that the goal will not be achieved. In the event that higher density zoning is not requested with an affordable housing component, the rezoning to Residential-1 would serve other purposes of the Comprehensive Plan, such as limiting the impact on schools and infrastructure.

Notice. Prior to the public hearings, Town policy requires that notice of the hearings be mailed to all owners of the property proposed for rezoning, as well as all property owners within 1,000 feet of each parcel to be rezoned. Because the parcels are scattered throughout Town, the notice requirement could be substantial (see Maps 2 and 3).

Hearings. The Council could hold the required hearings concurrently on all of the parcels designated for rezoning, with each parcel listed individually. However, the Council would be required to take a separate vote on the proposed rezoning of each parcel.

To address concerns that rezoning a parcel could be considered “spot zoning,” David Owens (see Attachment 3) recommends that the public hearing record should reflect “consideration of legitimate factors for differential treatment of the property involved.” A local government “adopting a spot zone has an affirmative obligation to establish that there is a reasonable public policy basis for doing so,” he wrote.

Such issues would be addressed in public hearing memoranda.

Protest Petitions.  Owners of parcels proposed for rezoning and surrounding parcels would have the opportunity to submit a protest petition for each individual piece of property. If submitted and determined sufficient, a three-fourths vote by Council would be required.

RECOMMENDATION

In April 2000 the Council asked for options for achieving affordable housing. We offered the option of reducing the intensity of zoning and then using the conditional use zoning and special use permit process as a possibility. The Council decided to pursue this option.

As we have studied this proposal further, we are finding that achieving affordable housing objectives through rezoning could be complex, with no assurance of success. We believe, however, that the Council could reasonably conclude either to pursue or not pursue the initiative.

If the Council wishes to proceed, we recommend that the Council adopt the attached resolution calling public hearings for March 19, 2001.

MAPS

1. Proposed Rezoning Initiative (p. 10)
2. Northern Area (p.11).
3. Southern Area (p. 12)

ATTACHMENTS

1. September 11, 2000 memorandum: Proposed Rezoning Initiative (begin new page 1).
2. Excerpt from Institute News on spot zoning issue, by David Owens of the Institute of Government (p. 29).
3. Article on spot zoning by David Owens (p. 30).

A RESOLUTION CALLING PUBLIC HEARINGS TO CONSIDER REZONING (2000-11-13/R-14)

WHEREAS, the Town Council has adopted a Mixed Housing Ordinance and policies seeking 15% of housing units in developments be affordable; and

WHEREAS, the Town Council on April 10, 2000, indicated its intent to consider zoning undeveloped property in Chapel Hill to reduce the allowable intensity of development to achieve affordable housing objectives;

NOW, THEREFORE, BE IT RESOLVED by the Council of the Town of Chapel Hill that the Council calls public hearings for Monday, March 19, 2001, at 7 p.m. in the Council Chamber, Town Hall, 306 N. Columbia Street, to consider zoning property in Chapel Hill to reduce the allowable intensity of development as shown in Map 1 of the Council’s agenda materials of November 13, 2000.

This, the 13th day of November, 2000.