State Mitigation Law

Nearly half the states have their own statutes requiring a permit for development in wetlands areas. Of these, three states, Michigan, New Jersey, and Oregon have been officially or effectively delegated the responsibility of issuing permits under Clean Water Act Section 404, and therefore, in these states, there is no need to obtain separate federal and state wetlands development permits.[187]

Eight states have wetlands statutes expressly authorizing mitigation banking. California[188] authorizes mitigation banks for wetlands in the Sacramento-San Joaquin Valley Region, requiring the state Department of Fish and Game to enter into a memorandum of understanding with the relevant federal agencies on wetlands mitigation (the Corps, EPA, Fish and Wildlife, Marine Fisheries, etc.) and adopt mitigation regulations in cooperation with those agencies.

The Florida wetlands statute[189] regulates mitigation as a condition of wetlands permit approval for both private and public projects. It requires the submission of a mitigation plan to the state Department of Environmental Protection and the relevant water management district, and the criteria for evaluating such a plan are similar to the federal standards for wetlands mitigation. Florida statute also expressly provides funding and a review procedure for mitigation of wetlands destroyed in the construction of the Central Florida Beltway, a state project connecting several highways into a continuous system.[190]

Louisiana[191] requires mitigation as a condition for all permits to develop coastal wetlands.[192] The Department of Natural Resources is generally authorized to adopt regulations establishing mitigation criteria, including criteria for granting credits and geographical limitations on where credits may be used. However, the statute also prohibits the Department from requiring mitigation from projects "which the secretary [of the Department] determines is primarily designed...to provide a net gain in ecological values" and authorizes the secretary to require either on-site or off-site mitigation despite any contrary provisions in department regulations if he or she "determines that the proposed mitigation is acceptable and sufficient."

Louisiana also creates a wetlands conservation and restoration program,[193] under which a wetlands conservation and restoration plan[194] is prepared and implemented by a Wetlands Conservation and Restoration Task Force consisting of the secretaries of the Departments of Natural Resources, Wildlife& Fisheries, Environmental Quality, and Transportation& Development.[195] The program is financed by the state Wetlands Conservation and Restoration Fund, which receives a set portion of the state's mineral revenues.[196]

Maryland[197] requires that there be "no practicable alternative" to developing a wetland before granting a wetlands permit and that "all necessary steps [shall be taken] to first avoid significant impairment and then minimize losses."[198] After that point is reached, mitigation is required, under standards and procedures adopted and implemented by the state Department of the Environment.[199] The Department also creates and operates mitigation sites financed, through the Nontidal Wetland Compensation Fund, from mitigation fees paid by wetland owners for whom wetland creation or restoration were "not feasible alternatives."[200] Agricultural activities (except for certain specified agricultural activities not required to obtain a wetlands permit) are expressly required to formulate a plan for mitigating any approved wetland development within three years, with deferral of mitigation if the state Department of Agriculture determines in writing that the farmer will otherwise undergo economic hardship.[201]

Maryland also has a Forest Conservation Act[202] that requires mitigation of developments in forest areas. Local governments must adopt a forest conservation program, and every proposed subdivision above a specified area is subject to that program. The developer of the subdivision must submit an acceptable forest conservation plan for the property before any subdivision plat approval. The Act provides specific criteria for quantity and quality acceptable reforestation to offset deforestation due to development. Offsite forest mitigation banking is authorized, and if mitigation cannot be accomplished either onsite or offsite, the developer must contribute to a Forest Conservation Fund in proportion to the acreage of required replacement forest. The developer must post a performance bond to ensure adherence to the forest conservation plan, and the owner of the premises must grant a conservation easement to the local government to guarantee the continued existence of the created forest.

Minnesota[203] creates a wetlands regulatory permitting program that "may not be more restrictive than the program under Section 404." [204]Wetlands cannot be drained or filled unless an equal amount of wetlands "of at least equal public value"[205] are created to replace them pursuant to a wetland value replacement plan approved by the local government under rules created by the state Board of Water and Soil Resources. [206]

New Jersey[207] requires mitigation as a condition to the approval of any freshwater wetlands permit.[208] If wetlands "of equal ecological value to those which are being lost" cannot be created on-site, mitigation credits may be purchased from the state's Wetlands Mitigation Bank. The bank is operated by a Wetlands Mitigation Council consisting of the Commissioner of Environmental Protection and six members appointed by the governor with the consent of the state Senate.[209]

Oregon[210] expressly adopts in its statute two basic principles from the federal wetland mitigation regulations. First, mitigation banking off-site is permissible only when "all on-site mitigation methods have been examined and found to be impracticable or off-site mitigation is found to be environmentally preferable," and, second, the created wetlands have to be in the same basin or subbasin for freshwater wetlands or "estuarine ecological system" for estuarine (saltwater) wetlands as the wetlands to be developed.[211] It also creates a Wetlands Mitigation Bank Revolving Fund Account, which is to finance the acquisition and operation of state wetland mitigation banks and is to be financed by the sale of credits from those banks as well as from general state revenue.[212]

The Wyoming Wetlands Act[213] authorizes the adoption of wetlands mitigation criteria and regulations of wetlands mitigation banking. Like the federal wetlands permitting process, the Wyoming system involves several agencies: the Department of Environmental Quality adopts the guidelines and regulations in cooperation with the state engineer, the water development commission, and the state Departments of Agriculture, Fish and Game, and Transportation.[214]

Provisions of the Model Statute

Section 9-403 below authorizes local governments to enact ordinances creating mitigation programs. Since the critical and sensitive areas element of the local comprehensive plan governs such areas, a local comprehensive plan with a critical and sensitive areas element must be in place before a mitigation ordinance may be adopted, and the ordinance must be consistent with that plan and element. When a development may or must provide mitigation measures pursuant to ordinance, then the provision of at least equivalent mitigation measures must either be a prerequisite to the issuance of a development permit or be included as a condition to the development permit. Mitigation measures may be prepared by the developer directly, the developer may purchase land that consists of created critical and sensitive areas, or the developer may receive credit for such created land while it remains in the ownership or responsibility of another. This last option may be exercised by the developer obtaining a conservation easement over the created area, so that it cannot be developed, if the easement is enforceable by the local government and the owner of the created land is able to maintain it as such.

As noted, the key issue in mitigation is evaluating the quality of the existing critical and sensitive area that is to be developed and of the area to be created. Consequently, mitigation standards are necessary. They must be consistent with the existing federal and state statutes and regulations of critical and sensitive areas, since these provisions govern in any conflict. In the area of wetlands, the federal role is so prominent that the model provides that applicable federal regulations on mitigation banking govern directly. For other critical and sensitive areas, the model provides two alternatives as to the responsibility for preparing and adopting the mitigation standards. The first involves the joint preparation of the standards by the state planning agency and environmental protection agency, after public hearing and comments from the local governments. This alternative includes the standard Growing Smart provision requiring review of the standards at least every five years. The other alternative requires the local government to include mitigation standards in any mitigation ordinance.

It must be noted that, while there are detailed criteria and procedure for reviewing wetlands mitigation banking proposals under federal law, this does not supplant, or preclude the need to develop, such procedures and criteria at the state and local government levels, since there are critical and sensitive areas other than wetlands that can equally benefit from mitigation.

9-403 Mitigation

(1) A local government may adopt and amend a mitigation ordinance, in the manner for land development regulations pursuant to Section [8-103 or cite to some other provisions, such as a municipal charter or state statute governing the adoption of ordinances].

(2) The purposes of this Section are to:

(a) preserve critical and sensitive areas;

(b) ensure that the owners of land that includes critical and sensitive areas may make reasonable use of their property by creating equivalent areas elsewhere to substitute or compensate for development upon critical and sensitive areas; and

(c) provide standards and procedures whereby the equivalency, in quantity and quality, of created critical and sensitive areas with critical and sensitive areas that are to be developed may be reliably determined.

(3) As used in this Section:

(a) "Creation," "Created," and "Creating" include both the creation of critical and sensitive areas from land that was not previously critical and sensitive and the restoration as critical and sensitive areas of land that was previously but is not presently critical and sensitive.

(b) "Federal Wetlands Mitigation Provisions" mean the following, as amended:

1. 33 U.S.C. 1251 et seq.;

2. 33 C.F.R. Parts 320-330;

3. 40 C.F.R. Part 230;

4. Federal Guidance for the Establishment, Use, and Operation of Mitigation Banks, 60 Fed. Reg. 58605 (Nov. 28, 1995);

5. Memorandum of Agreement between the Environmental Protection Agency and the Department of the Army Concerning the Determination of Mitigation under the Clean Water Act Section 404(b)(1) Guidelines (Feb. 6, 1990);

6. Fish and Wildlife Service Mitigation Policy, 46 Fed. Reg. 7644 (Jan 23, 1981);

7. National Marine Fisheries Service Habitat Conservation Policy, 48 Fed. Reg. 53142 (1983);

and all other federal statutes, regulations, policies, and memoranda of agreement, as applicable, regarding mitigation as it relates to wetlands.

(c) "Mitigation" means the substitution of critical and sensitive areas created from land that did not constitute critical and sensitive areas for critical and sensitive areas that are proposed to be subject to development and that, as a result of the development, will not constitute critical and sensitive areas.

(d) "Mitigation Program" means a requirement or authorization by a local government that the owner of a proposed development that includes or encompasses critical and sensitive areas engage in mitigation.

(e) "Mitigation Measures" mean the act of creating critical and sensitive areas, of purchasing or obtaining such land that has been created by another, or of reserving such land that has been created by another.

(f) "Mitigation Standards" mean the criteria by which the equivalence of created critical and sensitive areas with existing critical and sensitive areas is measured or determined. "Mitigation standards" include, but are not limited to, the definitions or criteria by which land is designated as a critical and sensitive area.

(g) "Reserving" means the procedure by which an owner who is to provide mitigation measures pursuant to a mitigation ordinance does so by obtaining a conservation easement over, but not title to, a critical and sensitive area created by another.

(4) A mitigation program may be adopted by a local government only by a mitigation ordinance. A mitigation ordinance is a land development regulation, and shall be adopted by the legislative body only after it has adopted a local comprehensive plan that includes a critical and sensitive areas element pursuant to Section [7-209].

(5) When a local government has adopted a mitigation ordinance, all proposed development that includes or encompasses critical and sensitive areas, where the owner proposes to develop such areas, shall either:

• This subparagraph makes it clear that mitigation is not required when critical and sensitive areas are not going to be developed; i.e., when the property will be developed but critical and sensitive areas will be left untouched. Therefore, this Section preserves the incentive to refrain from developing critical and sensitive areas in the first place rather than engage in the relatively expensive and risky mitigation process.

(a) be subject to a condition precedent to the issuance of any development permit that the owner must provide mitigation measures that are at least equivalent, in quality and quantity, to any critical and sensitive areas that are proposed to be developed. Any purported development permit issued when said condition precedent has not been satisfied is void, any provision of Section [8-501] to the contrary notwithstanding, or

(b) include as a condition to any development permit that the owner must provide mitigation measures that are at least equivalent, in quality and quantity, to any critical and sensitive areas that are proposed to be developed. Such a condition shall include a requirement that the owner provide a bond or other surety for the completion of such equivalent mitigation measures.

(6) Alternative A — State adoption of mitigation standards:
The [state environmental protection agency] shall prepare and adopt mitigation standards.

(a) Mitigation standards shall be consistent with all applicable federal and state statutes and regulations regarding the critical and sensitive areas that are the subject of the mitigation standards, including, where applicable, federal wetlands mitigation provisions.

(b) Mitigation standards and amendments thereto shall be prepared in consultation with the [state planning agency], and the mitigation standards shall be void unless adopted by both the [state EPA] and the [state planning agency].

(c) Before adopting mitigation standards or amendments thereto, the [state EPA] shall send copies of the proposed standards or amendment to all relevant state agencies[, regional planning agencies] and local governments, which shall submit written comments thereon within [30] days of receiving the proposed standards or amendment.

(d) Before adopting mitigation standards or amendments thereto, the [state EPA] shall hold a public hearing thereon. The [state EPA] shall give notice by publication in newspapers having general circulation within the state [and may also give notice by publication on a computer-accessible information network or by other appropriate means, such notice being accompanied by a computer-accessible copy of the proposed standards or amendment,] at least [30] days before the public hearing. The form of the notice of the public hearing shall include:

1. the date, time, and place of the hearing;

2. a description of the substance of the proposed standards or amendment;

3. the officer(s) or employee(s) of the [state EPA] from whom additional information may be obtained;

4. the time and place where the proposed standards or amendment may be inspected by any interested person prior to the hearing; and

5. the location where copies of the proposed standards or amendment may be obtained or purchased.

(e) At the public hearing, the [state EPA] shall permit interested persons to present their views orally or in writing on the proposed mitigation standards or amendment, and the hearing may be continued from time to time.

(f) After the public hearing and the receipt of all written comments, the [state EPA] may revise the proposed standards or amendment, giving appropriate consideration to all written and oral comments received.

(g) Mitigation standards and amendments thereto shall be considered rules of the [state EPA] and [state planning agency] for purposes of Section [4-103] of this Act, and their preparation and adoption shall be governed by the [Administrative Procedure Act] except as otherwise provided in this Section.

(h) Mitigation standards and amendments thereto shall be sent to all [regional planning agencies] and local governments within [30] days after adoption.

(i) If a local government adopts mitigation standards that are inconsistent with those adopted by the [state EPA], then any purported mitigation ordinance of that local government is void.

(j) The [state EPA] shall, at least once every [5] years, conduct a general review of the mitigation standards. The general review shall result in a written report that contains:

1. an analysis of changes in, or alternatives to, existing mitigation standards that would increase their effectiveness or reduce any identified adverse impacts; and/or

2. an analysis of why such changes or alternatives are less effective or would result in more adverse effects than the existing mitigation standards.

If the [state EPA] fails to adopt, in whole or with revisions, such a written report within five years of the adoption of the first mitigation standards pursuant to this Act or of the last adoption of a written report, the mitigation standards shall not enjoy a presumption of reasonableness, and the [state EPA] shall bear the burden of demonstrating such reasonableness.

Alternative B — Local government adoption of mitigation standards:
Local governments shall include mitigation standards in the mitigation ordinance.

(a) Mitigation standards shall be consistent with all federal and state statutes and regulations regarding critical and sensitive areas, including, where applicable, federal wetlands mitigation provisions.

(b) Mitigation standards shall be prepared by the [local planning agency] in consultation with qualified environmental scientists or engineers, or from documents or model standards that were prepared in consultation with qualified environmental scientists or engineers.

(7) A mitigation ordinance shall include the following minimum provisions:

(a) a citation to enabling authority to adopt and amend the mitigation ordinance;

(b) a statement of purpose consistent with the purposes of land development regulations pursuant to Section [8-102(2)] and with paragraph (2) above;

(c) a statement of consistency with the local comprehensive plan and the critical and sensitive areas element thereof that is based on findings made pursuant to Section [8-104];

(d) a statement of consistency with any critical and sensitive areas ordinance adopted pursuant to Section [9-101];

(e) definitions, as appropriate, for such words or terms contained in the mitigation ordinance. Where this Act defines words or terms, the mitigation ordinance shall incorporate those definitions, either directly or by reference;

(f) a provision implementing the requirements of paragraph (5) above;

(g) a recitation of or citation to the mitigation standards;

(h) provisions and procedures implementing paragraph (8) below

(i) procedures for the review of proposed mitigation measures for compliance with the mitigation standards, such review constituting part of the unified development permit review process pursuant to Section [10-201] et seq. of this Act and being consistent with paragraph (10) with regards to the mitigation of wetlands; and

(j) procedures for the inspection and evaluation of mitigation measures for compliance with proposed mitigation measures approved upon review.

(8) An owner may provide mitigation measures by reserving created critical and sensitive areas, where another person or entity retains ownership of such areas, if:

(a) the owner of the proposed development obtains a conservation easement over the created areas;

(b) the conservation easement grants the local government the right to enforce the easement;

(c) the conservation easement is submitted to the local government for review;

(d) the local government finds that the owner of the created areas is:

1. required pursuant to the conservation easement; and

2. financially and otherwise capable, to maintain the created areas in a state at least equivalent to the critical and sensitive areas proposed to be developed;

(e) the created areas are at least equivalent to the areas proposed to be developed, and all other requirements of this Section and the mitigation ordinance are complied with;

(f) the local government approves the conservation easement per the above provisions and indicates its approval on the instrument creating the easement; and

(g) the conservation easement is recorded with the county [recorder of deeds] within [30] days of such approval.

(9) Any instrument purporting to convey a conservation easement pursuant to this Section but that the local government has not indicated its approval on the instrument is void, and shall not be recorded or accepted by the county [recorder of deeds] for recording.

(10) With regards to mitigation of wetlands, the [state planning agency and state EPA] shall make all reasonable efforts to enter into a memorandum of understanding with the United States Environmental Protection Agency, Army Corps of Engineers, Fish and Wildlife Service, and the National Oceanic and Atmospheric Administration regarding mitigation review pursuant to federal wetlands mitigation provisions and the participation therein of local governments that have adopted mitigation ordinances regarding wetlands. To the extent feasible, the procedure pursuant to subparagraph (7)(i) of this Section shall be integrated with the review procedure pursuant to federal wetlands mitigation provisions.

Commentary: Land-Use Incentives

[215]

The rapid growth that many communities experienced throughout the 1990s has spawned interest in finding innovative planning, regulatory, and development approaches and techniques to managing growth and to meet community objectives such as providing affordable housing. Many new plans and land development regulations now subscribe to the principles of smart growth, which include using land resources more efficiently through compact building forms and infill development; mixing land uses, promoting a variety of housing choices, supporting walking, cycling, and transit as attractive alternatives to driving, improving the development review process and development standards so that developers are encouraged to apply the smart growth principles, and connecting infrastructure planning to development decisions to maximize use of existing facilities and ensure that infrastructure is in place to serve new development. Smart growth, in effecting a more rational use of existing developed land and buildings, effects the preservation of natural, scenic, and historic resources.

Incentive zoning is a technique that has received renewed attention as communities aim to inculcate smart growth principles into planning and development processes. Incentive zoning is a system by which specific incentives or bonuses are granted to a developer on condition that certain physical, social, or cultural benefits or amenities will be provided to the community. A bonus is typically provided in the form of added permissible density to a development project. This is done by increasing the allowable floor area of a project above what is permitted in the zoning ordinance or increasing the allowable number of dwelling units in a residential development. Additionally, setback, height, and bulk standards are often allowed to be modified to accommodate the added density or, in the case of affordable housing, to reduce development costs. Waivers of specific regulatory requirements or fees — such as parking standards or impact fees — are also used as an incentive for a developer to provide various amenities.

The common types of community benefits or amenities for which state and local governments have devised incentive programs are urban design, human services (which includes affordable housing), and transit access. Some programs — particularly those that include affordable housing as a bonusable amenity — allow developers may pay cash in lieu of building or supplying the amenity for which the incentive is being provided. Some states group all types of incentives — for urban design, affordable housing, transit — into an umbrella statute that authorizes local governments to use innovative land-use regulations. In several states — namely, California, New Jersey, Oregon, and Florida--the zoning and regulatory incentive statutes for affordable housing are part of a broader statewide housing program and thus are enacted separately.

Historical Development of Zoning Bonus Systems

Zoning incentive systems came into use in the late 1950s and 1960s. Cities were looking for ways to enjoin private developers in improving the appearance of the cities without spending public money. Planners were also looking for ways to lessen the rigidity of Euclidean zoning which, in its preoccupation with separating land uses, was resulting in sterile, often less than functional, central business districts and neighborhoods and creating difficulties in meeting social objectives such as affordable housing and day care. What began as an experimental technique to use zoning to improve community design, has mushroomed into a fairly common tool for meeting a range of planning objectives.

In 1957, as part of a comprehensive revision of its zoning ordinance, Chicago became the first city to enact a zoning bonus system. That system encourages developers of downtown office buildings to provide public plazas and arcades in exchange for additional density. Unlike other cities that instituted bonus programs to exact public benefits from developers, the impetus for the Chicago bonus system was to stimulate development of high-rise office buildings, too many of which, in the view of the late mayor Richard J. Daley, were being built in New York rather than Chicago. The City of Chicago's enthusiasm for offering bonuses created what is now thought of as an overly permissive system that has resulted in very large buildings with minimal public benefit at the street level.[216]

Developers in downtown Chicago may increase the floor area ratio from a base of 16 to 30 if they provide plazas and arcades. A 15 percent as-of-right increase in floor area is provided for buildings that adjoin a public open space, which in Chicago includes parks, the Chicago River, and even Lake Michigan.[217] The City of Chicago planning staff undertook two comprehensive examinations of the program in 1987 and again in 1998 in attempt to persuade the city council to substantially revise the program to make it more effective in securing public amenities. Neither of those attempts were successful, but the report and staff recommendations provide an excellent cautionary tale of bonus programs for central cities in general. Some of the findings are presented below.

New York City began its zoning incentive program in 1961 and now has the most extensive system of any city. The city uses bonuses in two ways: first, they are used to provide street-level amenities in high-density residential and commercial districts, including plazas, arcades, and shopping gallerias. Second, bonuses are used to protect the neighborhood character of certain districts.

In residential and commercial districts developers receive either floor area bonuses or are allowed to reduce lot sizes in exchange for a plaza or arcade.[218] In lower-density residential districts, floor area bonuses are available in exchange for deep front and wide side yards. In most cases the bonuses are available as of right. Bonuses for buildings that contain community facilities (e.g., libraries and museums) and large residential developments are subject to a special permitting procedures — similar to a planned unit development review process — through which the developer and the city negotiate the amenities and bonuses to be provided. All residential projects that incorporate bonuses are subject to mandatory streetscape urban design guidelines.[219] Arcades, for example, must run the length of a block and cannot be terminated by a blank wall, although they can be interrupted by a pedestrian plaza.

Incentive zoning regulations are also applied in special districts in New York City, to help achieve certain planning objectives. These districts are areas deemed to have special character or specific development issues, such as theater districts, tourist areas, and mixed use shopping and residential districts. Additional regulations — including the zoning bonuses — are applied as overlay regulations over underlying zoning in these districts. The purpose of the Special Midtown District, for example, which was enacted in 1980 is to encourage intensives development in some subdistricts such as Times Square, to protect and preserve various Broadway theaters (many of which were being demolished and replaced with office towers), and to protect the overall character of the theater district. The same basic types of amenities are provided in special districts exchange for increased floor area, but the exact requirements and design guidelines are specific to each special districts and even further refined within subdistricts. Moreover, some of the special district also apply transfer of development rights to shift development and density from one part of the district to another.

State Incentive Zoning Statutes

The authority of local governments to institute an incentive and bonus program comes from state enabling legislation.[220] At least 10 states have enacted legislation expressly enabling local governments to offer zoning bonuses and other incentives in exchange for certain public benefits. None of the statutes reviewed prescribe directly what types of amenities local governments may require or what types of bonuses they may offer.

Some state incentive statutes, including that of California, aim to achieve one specific public purpose, such as affordable housing. Many state statutes, including those of Florida, Maryland, and Rhode Island include incentive zoning on a list of innovative techniques that local governments are enabled to include in their zoning ordinance. Other techniques include transfer of development rights, design review, and density controls. The New York statute has unique provisions that require local governments that implement incentive zoning to evaluate whether existing public facilities that will serve the additional density can adequately accommodate additional development and to also prepare an environmental impact assessment on the proposed amenities.

Citing a shortage of housing for low- and moderate-income families and ever-increasing housing costs brought on in part by local government permitting processes and land-use regulations, California enacted legislation in 1979[221] requiring local governments to provide density bonuses and other incentives and concessions to developers of affordable housing. Local governments are required to enact an implementing ordinance to facilitate the incentive process. The law also requires local governments to establish procedures to waive or modify "development and zoning standards which would otherwise inhibit the utilization of the density bonus on specific sites. These procedures shall include, but not be limited to, such items as minimum lot size, side yard setbacks, and placement of public works improvements." The state department of housing and community development publishes a model density bonus ordinance that cities and counties in the state may adopt to carry out the requirements of the statute.[222]

The other incentives and concessions that local governments may provide include a reduction in setback and square footage requirements, a reduction in parking requirements, approval of mixed use zoning, and other regulatory incentives or concessions that a developer or the city may propose for which "identifiable cost reductions" can be shown. The bonuses are used less often for residential developments that will be sold because the statute requires that they remain affordable for 10 to 30 years. Such a requirement provides no opportunity for equity recapture on the part of first-time home buyers. Thus, says Linda Wheaton, a housing policy specialist with the State of California Department of Housing and Community Development, the need for housing developments that receive bonuses to remain affordable is not reconciled with overarching goals helping families build equity and financial stability through home ownership. In terms of concessions, Wheaton says the most common waiver offered by local governments and sought out by developers is the reduction in parking requirements.[223]

To implement the density bonuses, the statute enables local governments to require developers to enter into a development agreement. Such an agreement would stipulate the exact terms of the bonuses the developer would receive and the incentives and concession made by the local government. Finally, the law directs courts to uphold the decision of a city or county to grant the density bonus if it finds that there evidence that the bonus will assist the local government in meeting its share of the regional housing needs or to implement its congestion management plan. For example the law enables local governments participating in a demonstration program to grant a density bonus of at least 25 percent of the maximum permitted residential density to developers of housing within one-half mile of a mass transit station.[224] According to Linda Wheaton the latter provision is rarely used, most likely because of the lack of an associated funding source to build housing in these areas.

In addition to the inclusionary housing requirements described in the next section, California has transit-oriented development legislation that authorizes the use of density bonuses to increase development density near transit stations with the goals of creating mixed use neighborhoods with a range of housing and transportation choices and reducing both vehicle miles traveled and auto emissions. The Transit Village Development Planning Act of 1994 was linked to a demonstration program of the Department of Transportation[225] to test the effectiveness of increasing densities of residential development in close proximity to mass transit to increase the benefit from public investment in mass transit.

The transit village act enables cities and counties to prepare a transit village plan that addresses the following characteristics:

(a) A neighborhood centered around a transit station that is planned and designed so that residents, workers, shoppers, and others find it convenient and attractive to patronize transit.
(b) A mix of housing types, including apartments, within not more than a quarter mile of the exterior boundary of the parcel on which the transit station is located.
(c) Other land uses, including a retail district oriented to the transit station and civic uses, including day care centers and libraries.
(d) Pedestrian and bicycle access to the transit station, with attractively designed and landscaped pathways.
(e) A rail transit system that should encourage and facilitate intermodal service, and access by modes other than single occupant vehicles.
(f) Demonstrable public benefits beyond the increase in transit usage, including all of the following:

(1) Relief of traffic congestion.
(2) Improved air quality.
(3) Increased transit revenue yields.
(4) Increased stock of affordable housing.
(5) Redevelopment of depressed and marginal inner-city neighborhoods.
(6) Live-travel options for transit-needy groups.
(7) Promotion of infill development and preservation of natural resources.
(8) Promotion of a safe, attractive, pedestrian-friendly environment around transit stations.
(9) Reduction of the need for additional travel by providing for the sale of goods and services at transit stations.
(10) Promotion of job opportunities.
(11) Improved cost-effectiveness through the use of the existing infrastructure.
(12) Increased sales and property tax revenue.
(13) Reduction in energy consumption.

(g) Sites where a density bonus of at least 25 percent may be granted pursuant to specified performance standards.[226]

Connecticut's inclusionary zoning legislation allows local governments to provide developers with a special exemption from zoning density limits in districts that permit multifamily housing.[227] The exemption is applicable where the developer agrees to build a certain number of units of affordable housing. A local housing agency is charged with administering the program and setting thresholds to determine what sales and rent prices are to be considered affordable and the income groups that would be eligible to live in such housing. Developers must enter into a development agreement with the municipality that stipulates the number of affordable housing units being provided, the sales price or rents to be charged for the units, and deeds conveying covenants that indicate that the units will remain as affordable housing for 30 years.

Local governments in Florida are required by the state's growth management law to prepare a comprehensive plan including a housing element[228] and enact land development regulations to implement the plan. The enabling legislation for the regulations encourages the use of innovative land development regulations including incentive and inclusionary zoning, as well as provisions for transfer of development rights, planned unit developments, and impact fees.[229]

Maryland has broadly worded language in its zoning enabling legislation that permits local governments to "encourage innovation and to promote flexibility, economy, and ingenuity in development" as well as provisions authorizing increases in the permissible density or intensity of a particular use.[230] Maryland also expressly enables counties and cities to enact ordinances that "impose inclusionary zoning and award density bonuses to create affordable housing units" and "impose restrictions on the use, cost, and resale of housing . . ." [231]

Minnesota's Community-Based Planning Act of 1997 contains 11 goals for local governments to address in preparing comprehensive plans, most of which are centered on smart growth principles, such as encouraging mixing of land uses, compact development, increasing affordable housing and promoting public transit.[232] The act also created a livable communities advisory council and directed it to, among other things, develop criteria and guidelines to promote "livable" communities in the state. The council must also recommend incentives to local governments to develop community-based plans, including for example, assistance with computerized geographic information systems, builders' remedies and density bonuses, and revised permitting processes. The act lists several tools and strategies that local governments would be able to use to achieve the livable community goals, including "densities, urban growth areas, purchase or transfer of development rights programs, public investment surcharges, transit and transit-oriented development, and zoning and other official controls."

New Hampshire has a catch-all statute for innovative land-use controls that permits local planning boards or person who administers a zoning ordinance to enact 14 different types of standards, including intensity and use incentive(s), impact fees, planned unit development, cluster development, performance standards, and inclusionary zoning.[233] The statute provides no criteria or guidelines on the type or magnitude of incentive that may be provided, nor any guidance on the other innovative provisions it enables local governments to use, with the exception of impact fees.

New York has an umbrella incentive zoning statute that is intended to "advance the city's specific physical, cultural and social policies in accordance with the city's comprehensive plan and in coordination with other community planning mechanisms or land use techniques."[234] The law permits municipalities to amend the zoning ordinance to include bonus provisions and to evaluate the effects of any potential incentives to ensure that the district in which any additional density will be built contains "adequate resources, environmental quality and public facilities, including adequate transportation, water supply, waste disposal and fire protection." Local governments are also required to prepare a "generic environmental impact statement" (paid for in part by the developer) to determine if the granting of incentives or bonuses will have a significant effect on the environment.[235] In addition to the environmental review, the statute also requires local governments "to evaluate the impact of the bonus provisions upon the potential development of affordable housing gained by the provision of such incentives or bonus afforded to an applicant or lost in the provision by an applicant of any community amenity to the city. [236]

The New York statute includes procedures that must be followed by local governments in providing the incentives, including descriptions of the incentives, and bonuses to be provided; the community benefits and amenities that may be accepted from developers; procedures for obtaining bonuses; and provisions for a public hearing on the proposed project (but only if it would otherwise be subject to a zoning hearing). The law contains separate, although virtually identical provisions for towns and villages in New York to use incentives.[237]

Oregon's statutes implementing urban growth boundaries enable local governments to undertake "actions or measures to ensure that adequate levels of residential development are achieved withing urban growth boundaries."[238] The actions and measures include "enacting provisions permitting additional density beyond that generally allowed in the zoning district in exchange for amenities and features provided by the developer." Other actions include increasing zoned residential densities overall, providing financial incentives, redevelopment and infill strategies. The statute also permits the "removal or easing of approval standards or procedures" in order to achieve higher densities.

Rhode Island has an all inclusive statute similar to New York that authorizes local governments to use development incentives for several purposes. The incentives provide increases in the permitted use or dimension as a condition for, but not limited to:

(1) Increased open space
(2) Increased housing choice
(3) Traffic and pedestrian improvements
(4) Public and/or private facilities
(5) Other amenities as desired by the city or town and consistent with its comprehensive plan.[239]

The Model Statute

The model statute in Section 9-501 below is an adaptation and refinement of the well-drafted California statute which requires local governments to grant density bonuses of at least 25 percent, plus an additional incentive(s) or equivalent financial incentives to developers of affordable housing. In contrast to the California statute, which distinguishes between the types or categories of affordable housing (i.e., between low-income, very-low-income, and senior citizens housing), the model below makes no such differentiation, giving that discretion to local governments. The developer is required to enter into a development agreement with the local government that will formalize the manner in which the affordable housing is to be kept affordable and other administrative details relating to the project. The model statute also authorizes development incentives for increased nonresidential floor area for provision of "public benefit amenities" such as plazas, parks, and open space, access to transit stations, and overhead weather protection and street arcades. A public benefit amenity may also include provision of affordable housing as part of a nonresidential development, for which a density bonus may be granted. A local government may also adopt a "uniform incentives ordinance" that addresses both provision of affordable housing and dedication of open space and/or provision of community design amenities.

APA's evaluation of the California statute has determined that, if such program is to be successful at the local level, it is necessary to have a long-term commitment to the program by the local government as well as a dedicated source of funds. Monies such as revenues from tax increment financing initiatives and federal community development block grant (CDBG) programs are essential sources to provide subsidies for affordable housing. For example, Petaluma, California, near San Francisco, financed 100 affordable units per year between 1990 and 1999. To do that, the city has a housing trust fund that is financed by tax increment revenues in designated redevelopment areas, CDBG monies, and developer contributions in lieu of building affordable housing. The fund is used to leverage private and nonprofit investments in affordable housing. It also is used to pay for impact fees for affordable housing units in developments where 10 to15 percent of the units have been set aside for low or very low income households. As such, affordable housing projects are not necessarily excused from all fees, but, rather than coming out of the developer's pocket or being passed on to the home buyer, there is a transfer of city funds from one account to another.[240]

In San Jose, California, the city's success with regard to affordable housing is attributable to outright land acquisition, leveraged private investment using revenue generated through property tax increments in the city's redevelopment planning areas, and a flexible approach to accommodating housing development wherever possible. San Jose generates approximately $20 million per year for affordable housing through the tax increment mechanism. The city's housing agency uses that money to leverage approximately seven times that amount in private investment.

The San Jose 2020 General Plan has several mechanisms built in to encourage housing development. Adopted in 1994, it is the city's first modern plan that meets the various requirements of state law, if not the exact letter of the law. To start, the plan designates a substantial amount of land for housing development. Further it contains "Discretionary Alternate Use Policies" which allow various commercial or industrial sites to be redeveloped as housing at the discretion of the city council. For example, sites along major commercial streets and around future light rail stations may be redeveloped as high-density housing if a proposal meets the goals and policies of the General Plan. Most development in San Jose takes place through planned residential district zoning, which provides the city and developers with a lot of flexibility as to where housing may be built, but gives the city council substantial control in implementing housing goals overall. Finally, the city does provide density bonuses. Zoned densities of 12 to 25 dwelling units/acre may be increased to 25-40 dwelling units/acre if 100 percent of the units in the project are affordable. Similar bonuses are available for projects that contain all rental units.[241]

9-501 Land-Use Incentives for Affordable Housing, Community Design, and Open Space Dedication; Unified Incentives Ordinance

(1) The legislative body of a local government, in the manner for the adoption and amendment of land development regulations pursuant to Section [8-103 or cite to some other provision, such as a municipal charter or state statute governing the adoption of ordinances]:

(a) shall adopt and amend an ordinance that authorizes incentives for the provision of affordable housing; and

(b) may adopt and amend an ordinance that authorizes incentives for open space dedication and provision of public benefit amenities.

(2) The purpose of this Section is to authorize the adoption and amendment of:

(a) an affordable housing incentives ordinance in order to respond to and accommodate present and future needs for affordable housing;

(b) a community design and open space incentives ordinance to provide additional amenities for public use or benefit in new development that carry out goals and policies of a local government identified in its local comprehensive plan; and

(c) a unified incentives ordinance that incorporates subparagraphs (a) and (b) above.

(3) As used in this Section:

(a) "Affordable Housing" means housing that has a sales price or rental amount that is within the means of a household that may occupy moderate- or low-income housing. In the case of dwelling units for sale, housing that is affordable means housing in which annual housing costs constitute no more than [28] percent of such gross annual household income for a household of the size which may occupy the unit in question. In the case of dwelling units for rent, housing that is affordable means housing for which the affordable rent is no more than [30] percent of such gross annual household income for a household of the size which may occupy the unit in question.

(b) "Affordable Housing Development" means any housing development that is subsidized by the federal, state, or local government, or any housing development in which at least [20] percent of the dwelling units are subject to covenants or restrictions which require that such dwelling units be sold or rented at prices that preserve them as affordable housing pursuant to this Section.

(c) "Affordable Housing Incentives" mean a density bonus and other development incentives granted under an affordable housing incentive ordinance pursuant to this Section.

(d) "Affordable Rent" means monthly housing expenses, including a reasonable allowance for utilities, for affordable housing units that are for rent to low- or moderate-income households.

(e) "Affordable Sales Price" means a sales price at which low- or moderate-income households can qualify for the purchase of affordable housing, calculated on the basis of underwriting standards of mortgage financing available for the housing development.

(f) "Bonusable Area" means space that is occupied by a public benefit amenity and that is determined by the local government to satisfy requirements under its land development regulations for additional gross floor area or dwelling units.

(g) "Bonus Ratio" means the ratio of additional square feet of nonresidential floor area granted per square foot of bonusable area.

(h) "Density Bonus" means the percentage of density increase granted over the otherwise maximum allowable net density under the applicable zoning ordinance as of the date of the application to the local government for incentives by a developer. The density bonus applicable to affordable housing shall be at least a 25 percent increase, and shall apply to the site of the affordable housing development.[242]

(i) "Development Agreement" means a development agreement authorized by Section [8-701].

(j) "Development Incentives" mean any of the following:

1. reductions in building setback requirements;

2. reductions or waivers of impact fees, application fees for development permits, utility tap-in fees, or other dedications or exactions;.

3. reductions in minimum lot area, width, or depth;

4. reductions in required parking spaces per dwelling unit or per square foot of floor area;

5. increased maximum lot coverage;

6. increased maximum building height and/or stories;

7. reductions in minimum building separation requirements, provided that such reductions do not conflict with building code requirements of the state or the local government, as applicable;

8. reductions or waivers of public or nonpublic improvements;

9. approval by the legislative body of a local government of mixed use zoning in conjunction with the housing project if commercial, office, industrial or other land uses will contribute significantly to the economic feasibility of the housing development and if the mixed use zoning is consistent with the local comprehensive plan;

10. authorization for the affordable housing development to include nonresidential uses, provided such uses or such authorization is consistent with the local comprehensive plan;

12. authorization for the affordable housing to be located in a nonresidential zoning district, provided such authorization is consistent with the local comprehensive plan; or

13. other incentives proposed by the developer of an affordable housing project or by the local government that result in identifiable cost reductions for affordable housing, including direct financial aid by the local government in the form of a loan or grant to subsidize or provide low interest financing for on- or off-site improvements, land, or construction costs.

(k) "Floor Area Ratio" means the ratio of the maximum gross floor area on a lot or parcel to the area of the lot or parcel that is permitted pursuant to the land development regulations of a local government.

(l) "Housing Costs" mean the sum of actual or projected monthly payments for any of the following associated with for-sale affordable housing units: principal and interest on a mortgage loan, including any loan insurance fees; property taxes and assessments; fire and casualty insurance; property maintenance and repairs; homeowner association fees; and a reasonable allowance for utilities.

(m) "Housing Development" means construction, including rehabilitation, projects consisting of five or more residential units, including single-family, two-family, and multiple-family residences for sale or rent.

(n) "Incentives" mean one or more of the following:

1. affordable housing incentives;

2. bonus ratio; and

3. density bonus.

(o) "Low-Income Housing" means housing that is affordable, according to the federal Department of Housing and Urban Development, for either home ownership or rental, and that is occupied, reserved, or marketed for occupancy by households with a gross household income that does not exceed 50 percent of the median gross household income for households of the same size within the housing region in which the housing is located.

(p) "Moderate-Income Housing" means housing that is affordable, according to the federal Department of Housing and Urban Development, for either home ownership or rental, and that is occupied, reserved, or marketed for occupancy by households with a gross household income that is greater than 50 percent but does not exceed 80 percent of the median gross household income for households of the same size within the housing region in which the housing is located.

(q) "Public Benefit Amenity" means one or more features for public use or benefit within or in the vicinity of a development that will entitle the development to a bonus ratio or a density bonus, as applicable, including, but not limited to:

1. shopping atriums;

2. plazas, parks, and other open spaces;

3. overhead weather protection and street arcades;

4. bicycle parking and storage facilities;

5. performing arts theaters;

6. museums;

7. access to transit stations and transit easements;

8. provision of child day-care centers;

9. provision of affordable housing as part of a nonresidential development; and

10. [other].

(r) "Unified Incentives Ordinance" means an ordinance that provides incentives for both:

1. provision of affordable housing; and

2. dedication of open space and/or provision of community design amenities;

and that complies with all requirements of this Section for both an affordable housing incentives ordinance and a community design and open space incentives ordinance.

(4) The legislative body of a local government may adopt and amend an affordable housing incentives ordinance only after it has adopted a local comprehensive plan that contains:

(a) a housing element pursuant to Section [7-207]; and

(b) a policy in written and/or mapped form that encourages affordable housing incentives.

(5) The legislative body of a local government may adopt and amend a community design and open space incentives ordinance only after it has adopted a local comprehensive plan that contains:

(a) if a density bonus for residential development for the public benefit amenity of a plaza, park, or other open spaces is authorized, a housing element pursuant to Section [7-207]; and

(b) if any other type of bonus ratio is authorized, a community design element pursuant to Section [7-214]; and

(c) a policy in written and/or mapped form that describes the relationship between the applicable public benefit amenities and the density bonus or bonus ratio and supports the granting of such density bonus or bonus ratio.

(6) An affordable housing incentive ordinance, a community design and open space incentives ordinance, or a unified incentives ordinance shall include the following minimum provisions:

(a) a citation to enabling authority to adopt and amend the ordinance;

(b) a statement of purpose consistent with the purposes of land development regulations pursuant to Section [8-102(2)] and with the purposes of this Section;

(c) a statement of consistency with the local comprehensive plan that is based on findings made pursuant to Section [8-104];

(d) definitions, as appropriate for such words or terms contained in the affordable housing incentive ordinance. Where this Chapter or Section defines words or terms, the ordinance shall incorporate those definitions, either directly or by reference;

(e) procedures for the review of applications for incentives;

(f) a requirement that every developer that is to receive incentives shall enter into a development agreement with the local government;

(g) designation of an officer or body to review and approve applications for incentives; and

(h) provisions for enforcement, including the issuance of certificates of compliance.

(7) An affordable housing incentives ordinance or a unified incentives ordinance shall also include the following minimum provisions:

(a) a requirement that, where a developer proposes a housing development within the jurisdiction of the local government, the local government shall provide the developer with affordable housing incentives for the production of affordable housing within the development if the developer meets the requirements set forth in paragraphs (11) and (12) below; and

(b) provisions to ensure that once affordable housing is built through subsidies or other means as part of a housing development, its availability will be maintained through measures that establish income qualifications for affordable housing renters or purchasers, promote affirmative marketing measures, and regulate the price and rent, including resale price, of affordable housing units.

(8) A community design and open space incentives ordinance or a unified incentives ordinance shall also include the following minimum provisions:

(a) a statement of the types or categories or public benefit amenities for which a bonus ratio or density bonus shall be authorized, the amount of the respective bonus ratio or density bonus, and the zoning use district or overlay district to which public benefit amenity and the respective bonus ratio or density bonus apply;

(b) locational and other development standards for the public benefit amenities, including a statement of the minimum bonusable area that a public benefit amenity must contain in order to be eligible for a bonus ratio or a density bonus; and

(c) requirements for permanent public access to the public benefit amenity, including signage indicating the nature of the public access, secured by either:

1. a conveyance of the plaza, park, or other open space, or access to transit stations or transit easements, to the local government or appropriate governmental unit as a public use as a condition of approval of the development permit, provided that the conveyance is in a form approved by the attorney of the local government or governmental unit; or

2. where the public benefit amenity will not be owned by the local government or another governmental unit, provisions in the development agreement requiring permanent maintenance by the property owner, except that permanent public access may be limited to normal business hours.

(9) An affordable housing incentives ordinance or a unified incentives ordinance may require that any new housing development within the jurisdiction of the local government contain at least [15] percent affordable housing if such a requirement is consistent with a policy contained in the local comprehensive plan. The incentives offered to the developer, whether density bonuses, development incentives, or both, shall be of at least equivalent financial value to the cost of making the affordable housing units affordable.

(10) A community design and open space incentives ordinance or a unified incentives ordinance may:

(a) include a manual of graphic and written design guidelines to assist developers in the preparation of applications for community design and open space incentives, but such guidelines shall be advisory only;

(b) include a statement of the maximum bonusable area that a public benefit amenity may contain in order to be eligible for a bonus ratio or a density bonus;

(c) include a provision that allows the developer to provide the public benefit amenity offsite as a condition of receiving a bonus ratio or density bonus, including standards of proximity of the development to the offsite public benefit amenity; and

(d) be adopted as an overlay district to all or portions of existing zoning use districts. The boundaries of the overlay district shall be shown on the zoning map pursuant to Section [8-201(3)(o)].

(11) Where a developer proposes a housing development that is to be an affordable housing development, the local government shall either:

(a) grant a density bonus and at least one development incentive, unless the local government makes a written finding that the development incentive is not necessary to reduce the price or rent of the dwelling units in order to ensure that they are affordable housing; or

(b) provide, in lieu of subparagraph (a) above, development incentives of equivalent financial value based upon the land cost per dwelling unit. The value of such equivalent development incentives shall at least equal the land cost per dwelling unit that would result from a density bonus and shall contribute significantly to the economic feasibility of providing the affordable housing units.

(12) The development agreement entered into between the developer of a housing development that is to be an affordable housing development and the local government shall include provisions to ensure the availability of affordable housing for sale or rent.

(a) The development agreement shall provide for a period of availability for affordable housing as follows:

1. Newly constructed low- and moderate-income sales and rental dwelling units shall be subject to affordability controls for a period of not less than [15] years, which period may be renewed pursuant to the development agreement;

2. Rehabilitated owner-occupied single-family dwelling units that are improved to code standard shall be subject to affordability controls for at least [5] years.

3. Rehabilitated renter-occupied dwelling units that are improved to code standard shall be subject to affordability controls on re-rental for at least [10] years.

4. Any dwelling unit created through the conversion of a nonresidential structure shall be considered a new dwelling unit and shall be subject to affordability controls as delineated in subparagraph (a) 1 above.

5. Affordability controls on owner- or renter-occupied accessory apartments shall be applicable for a period of at least [5] years.

6. Alternatives not otherwise described in this subparagraph shall be controlled in a manner deemed suitable to the local government and shall provide assurances that such arrangements will house low- and moderate-income households for at least [10] years.

(b) In the case of for-sale housing developments, the development agreement shall include the following affordability controls governing the initial sale and use and any resale:

1. All conveyances of newly constructed affordable housing dwelling units subject to the affordable housing incentives ordinance that are for sale shall contain a deed restriction and mortgage lien, which shall be recorded with the county [recorder of deeds or equivalent official]. Any restrictions on future resale shall be included in the deed restriction as a condition of approval enforceable through legal and equitable remedies.

2. Affordable housing units shall, upon initial sale, and resale in the period covered by the development agreement, be sold to eligible low- or moderate-income households at an affordable sales price and housing cost.

3. Affordable housing units shall be occupied by eligible low- or moderate- income households during the period covered by the development agreement.

(c) In the case of rental housing developments, the development agreement shall include the following affordability controls governing the use of affordable housing units during the use restriction period:

1. rules and procedures for qualifying tenants, establishing affordable rent, filling vacancies, and maintaining affordable housing rental units for qualified tenants;

2. requirements that owners verify tenant incomes and maintain books and records to demonstrate compliance with the agreement and with the ordinance;

3. requirements that owners submit an annual report to the local government demonstrating compliance with the agreement and with the ordinance.

(d) The development agreement shall include a schedule that provides for the affordable housing units to be built or rehabilitated concurrently with the units that are not subject to affordability controls.

(13) The approval of incentives shall constitute a development permit. The incentives shall be part of the unified development permit review process established pursuant to Section [10-201].

(14) This Section does not limit or require the provision of direct financial aid by the local government, the provision of publicly-owned land, or the waiver or reduction of fees, including impact fees pursuant to Section [8-602], or of dedication or exaction requirements pursuant to Section [8-601].

(15) The [state planning agency or state department of development] shall by [date] prepare and distribute a model affordable housing incentives ordinance and related guidelines to assist local governments in complying with this Section.

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