A total of 15 requests were processed and approved during the 1st quarter of 2019. A noteworthy trend, no requests for review of local short-term rental regulations. This is notable because in the first quarter of 2018, there were nine requests for this issue. Environmental related issues came up in Sandwich, Massachusetts with proposed beachfront regulations. And in Birmingham, AL a storm water management ordinance was reviewed. Several requests were made by state REALTOR® associations for example, land bank legislation in Nevada, housing transfer agreements in New Jersey, solar systems and restrictive covenants in Delaware.
In Somerville, MA, located northwest of Boston, a “Condominium Conversion” ordinance was introduced that would significantly alter the rules regarding condo conversions and specific tenant notifications, tenant or city ability to purchase, relocation costs, and obligations of a landlord to find comparable housing for elderly, disabled, or low/moderate income tenants. The analysis provided by Robinson & Cole focused on the provisions that would make condo conversions unreasonably difficult, if not infeasible (ii) vagueness of a Review Board’s authority to deny or impose conversion permits (iii) tenant notice and relocation requirements (iv) the unintended consequence of discouraging the production of rental housing and (v) a flat fee for relocation benefits.
Two projects of note
Land Installment Contracts in Youngstown, Ohio: What is a land installment contract? A company (vendor) retains title to property as security for buyer’s (vendee) obligation. A vendor is defined as “any individual, partnership, corporation, association, trust or any other group of individuals however organized making a sale of property by means of a land installment contract.” The Youngstown Columbiana Association of REALTORS® is working with the City to change the ordinance that has been termed “predatory.” Companies offer land installment contracts to people as an alternative to traditional financing (bank, credit union, mortgage company). Once the agreement is in place, the company retains all property rights while the buyer has to make all payments, property improvements, etc. with vague protections and high risk of default.
Right to Survive Ordinance in Denver, Colorado: Ballot measure would create an ordinance that would establish rights for all people in public spaces. While the initiative is intended to address homelessness it does not take into account the root causes of homelessness. The ballot measure would establish five “rights” to rest and shelter in public spaces for all people whether or not they are homeless or visiting the city. The analysis provided by Robinson & Cole focused on the challenges and applications of the proposed measure.
A total of 13 requests were processed and approved during the 4th quarter of 2018. Short-term rental type regulations continue to be a top issue reviewed under the LUI. Other issues that were consistent are zoning regulations that enable property inspections. For example, in Greensboro, NC, the city is looking to reduce blight by inspections whereas San Antonio is seeking additional authority for inspections of Senior Housing. Inclusionary Zoning measures were introduced in two cities New Orleans and Longmont, CO. A Transit-Oriented Development (TOD) proposal was reviewed from Rochester, MN.
Inclusionary Zoning (IZ): Generally there are two approaches to inclusionary zoning laws: mandatory or voluntary. If IZ is required for new development there are certain specifications that a project must follow to provide affordable housing units although there may be a fee-in-lieu or off site development of the affordable units. If IZ is voluntary, developers are incentivized to build affordable units by offering a density bonus, flexibility in zoning restrictions (such as reduced parking or setback requirements), fee waivers, exemptions, favorable real estate tax treatment, favorable financing terms, and/or expedited permit review.
- Louisiana: In May 2018, Governor Edwards vetoed SB 462 which would have preempted locals from adopting mandatory IZ measures. The Governor’s veto occurred because no municipality has adopted mandatory IZ but the Governor said “if local governments in LA do not pursue” IZ policies, he may sign similar preemption legislation in 2019. In essence encouraging locals to utilize this type of affordable housing development tool.
- New Orleans: In an effort to avoid preemption, NOLA released a set of proposed mandatory IZ programs in Oct. 2018. The LUI analysis highlighted several factors. The mandatory nature of the proposals were not offset by any incentives to the affected developers which would likely have to pass the costs to buyers of market rate units. If market factors do not allow for an increase in costs, developers may be forced to reduce the amount of land costs, reduce quality of housing product, build elsewhere, or not build at all. The LUI analysis raised additional concerns and the need of the City to provide a thorough analysis of the economics of the local housing market. The analysis referenced an empirical study of affordable housing mandates in California, that concluded (i) “from an overall production standpoint, IZ has not been effective” (ii) “IZ translates into significant higher prices for market-rate homebuyers” and (iii) in addition to increasing prices, IZ leads to a decrease in new housing.”
Transit Oriented Development: The City of Rochester introduced a Transit Oriented Development (TOD) ordinance to link private land use and public transportation. This is in response to “community growth issues” such as encouraging land use patterns that support cost-effective transit, reduce need for high cost road improvements to alleviate traffic congestions, denser development to grow tax base and increase revenues, and development patterns that are energy efficient with reduced climate impact. The proposal consisted of transit corridors/walkable districts with sites of dense mixed use development. TOD ordinances include form-based code development regulations which move land code from designated uses to building form. The Rochester proposal would expand the uses in the TOD District, impose minimum and maximum setback requirements, and establish neighborhood protection standards. The proposed height bonus and mixed use development were recommended for the association’s support. However, the proposed City review process for larger lot development projects (10 acres or more) would have to undergo additional scrutiny so the LUI recommended areas to improve the ordinance for long-term success and implementation of the TOD ordinance.
Blighted Areas/Property Inspections: In Greensboro, NC the City introduced amendments to the housing code that would expand the City’s authority to inspect residential dwellings targeting “blighted areas.” The City’s proposal to designate areas of blight may cause unnecessary harm to properties that are not vacant or blighted which would negatively impact property values and may harm residents in close proximity to “blight” even if their property is maintained. The association was advised to resolve ambiguities of the “blighted areas” prior to adopting the law. The proposed amendments also indicated that the “top ten percent of properties with crime or disorder problems” obtain a permit from the City. Landlords with tenants associated with crime or disorder would be required to evict a tenant-which raises concerns under the federal Fair Housing Act. Finally, the proposal places policing and enforcing the law on rental property owners rather than the City because of the responsibility for conduct that takes place on rental properties. The LUI guided the association in requesting further consideration by the City before implementing the law.
For an in-depth review of these proposals see, Land Use Memo Database.
A total of ten requests were processed during the months of July through September.
- Three jurisdictions proposed short-term rental regulations (State of Nevada; City of Salem, MA; Summit County, CO). The NV regulation came from the State Fire Marshal. Within the proposal, newer building codes were being considered. This included vague language that any short-term rental could be classified as a “lodging house.” The potential change in classification of short-term rentals would enable local governments to impose mandatory inspection or permit requirements.
- NOTE: Keep an eye out for additional resources on short-term rentals that will be released before Annual: advocacy tips and a compilation of state laws on taxation and regulations.
- Two jurisdictions proposed regulations regarding stormwater management (Greenville County, SC and City of Fort Worth, TX). In Fort Worth, the city is considering a floodplain policy that would change the city’s stormwater development review process. Flood hazard areas are identified through the city’s drainage criteria manual not Federal Emergency Management Agency (FEMA) mapped floodplains. Initial feedback suggests the areas identified will involve more uncertainty and less precision identifying flood risks than the approach used under FEMA’s NFIP program. This proposal is in the early stages and the Greater Fort Worth Association of REALTORS® has a seat on the Advisory Committee. Concerns discussed are: potential adverse impact on property values, application of development standards, potential increases to flood insurance premiums, seller disclosures, impact on city resources, confusion for lenders, etc. The City appears to be very open about the process and consistently communicating with community members and stakeholders.
- In Colorado, ballot initiative #108 proposes to amend the Takings Clause of the Colorado Constitution to require that “just compensation” be paid when private property is “reduced in fair market value by government law or regulation.” Initiative #108 is in response to ballot initiative #97 which proposes a statutory change to the setback requirements for new oil and gas development from 500 feet to 2,500 feet. Ballot #97 is spearheaded by environmental groups whereas ballot #108 is backed by the CO Farm Bureau and the oil and gas industry. If ballot measure #108 were to pass, it would apply to all government laws and regulations without exception for laws or regulations enacted for the protection of public health. Further, ballot #108 would add six words to the CO Constitution raising several questions as to how it would be implemented. The CO Municipal League Executive Director said, if initiative #108 passes, “my advice to counties and municipalities, don’t do anything – no zoning, no ordinances.” This is a huge red flag for the potential cost to cities (i.e. taxpayers) to defend lawsuits if initiative #108 were to pass.
A total of fourteen requests were processed during the months of April through June. There were a mix of proposed ordinance issue areas: short-term rentals, vacant properties, comprehensive plans, to name a few.
- Three jurisdictions proposed short-term rental regulations (Indian Harbour Beach, Florida; Columbus, Ohio; State of Massachusetts). In Massachusetts, a piece of legislation (H.4327) passed the House that included a liability insurance mandate for hosting platforms of short-term rentals. The hosting platform definition could include real estate brokerages, particularly if they offer online bookings for short-term rentals. Further, the legislation included a requirement that hosts make short-term rental records available to the MA Dept. of Revenue. In addition, the bill included significant restrictions: limiting the number of days hosts can rent units, a requirement for hosts to obtain a business license and only units owned by primary residents to offer short-term rentals. A stripped down version (S.2400) passed the Senate. A conference committee formed to work out the differences.
- Two jurisdictions proposed vacant property type ordinances (Oakland, California and Cleveland Heights, Ohio). The City of Oakland proposed a vacant property tax on property that is not in active use for at least 50 days per year. The tax rates ranged from $3,000 to $6,000 depending on property type. The taxes collected would be deposited in a vacant property tax fund to provide services and programs to homeless people and support affordable housing. The other city, Cleveland Heights, proposed a measure that would require a cash bond of at least $15,000 when the property is in foreclosure. The purpose of the bond is to secure continued maintenance of the property during its vacancy. Robinson & Cole recommended that the REALTOR® Association discuss the ramifications of the bond requirement for the borrower and how financial institutions recover costs and/or fees from foreclosures so the bond requirement would place additional financial burdens on property owners.
- Local governments in historical or unique areas use design standards to ensure consistency in the look of homes or buildings within the community. A city in Illinois (Oak Park) proposed design standards in response to resident complaints about newly constructed homes that are “out of character” with the existing homes. The proposal included specific compatibility standards for new roofs, dormers, upper-story additions, windows and siding. In general, there are pros and cons to design review. If carefully implemented in an area it can enhance property values. On the other hand, design standards can be costly and may exclude affordable housing development that cannot comply with the standards.
Twenty requests were processed during the first three months of 2018. Of the requests, 55 percent were related to rental regulations, primarily short-term/vacation rental regulations.
- Short-term rental (STR) regulations include rental registries and/or specific zoning areas where STRs may be permitted or prohibited. Of significant note, two communities proposed registration fees that were unreasonably higher than other jurisdictions, $1000 in Orange Beach, Alabama and $904 in Walworth County, Wisconsin. Presumably, the high fees are an effort to deter property owners from renting units on a short-term basis. Typically these fees range from $100-$250. The Baldwin County Association of REALTORS® was able to reduce the $1000 fee to $500. Further, there are two pending ballot measures in California that would ban STRs. NAR’s Issues Mobilization is also involved with efforts to prevent the STR ban in Palm Springs and South Tahoe.
- Affordable housing regulations were introduced in Telluride, Colorado. The average sales price for a townhouse/condo is over $1.1 million. Within the affordable housing package, a proposed housing mitigation fee for residential development would increase from 60 percent to 90 percent. While keeping the commercial mitigation rate at 40 percent. Housing mitigation rates are comparable to impact fees, the mitigation percentage determines the fee amount based off the new development project’s size/square footage. While the Telluride Association of REALTORS® recognize the need for affordable housing, the calculation of the mitigation fee is arbitrary, ultimately serving as a punitive measure to residential development. Not only could this proposal deter residential development in Telluride but drive it to other communities with significantly lower impact fees.
- A Formula Business Ordinance (FBO) proposed by the City of Holmes Beach, Florida was reviewed for the REALTOR® Association of Sarasota and Manatee. FBOs have come up in other communities as an effort to protect the unique character of a community and local small to medium business owners. FBOs generally seek to prohibit group or chain stores from dominating the market. The Holmes Beach proposal is notable for two reasons: (i) FBO was targeted for a specific commercial zone rather than a broad FBO applicable to all land use zones that have been proposed in other communities and (ii) an unintended consequence would have banned real estate companies with more than 11 offices in the world, such as Keller Williams. The Sarasota REALTORS® were able to amend the adopted ordinance to specifically exclude real estate franchises from the FBO, which is considered a huge win for the association.