Property Topics and Concepts
This section was composed by Planning and Law Division 2007-2008 Daniel J. Curtin Fellow Dorothy Ariail, based largely on information presented in Professor Ray Burby's Development and Environmental Management course in the Department of City and Regional Planning at UNC-Chapel Hill, Spring 2007.
Flexible Zoning Techniques
Growth Management Tools
Flexible Zoning Techniques
Basics — A floating zone is a zoning district that delineates conditions which must be met before that zoning district can be approved for an existing piece of land. Rather than being placed on the zoning map as traditional zones are, however, the floating zone is simply written as an amendment in the zoning ordinance. Thus, the zone "floats" until a development application is approved, when the zone is then added to the official zoning map. Floating zones can be used to plan for future land uses that are anticipated or desired in the community, but are not confirmed, such as affordable housing, shopping centers, and urban development projects. They can also be used for cluster zoning, planned-unit developments (PUDs), and urban development projects.
Historical and Legal Implications — Rodgers v. Village of Tarrytown, 302 N.Y. 115 (N.Y. 1951) was instrumental in establishing the legality of floating zones. The court found the rezoning was in accordance with a comprehensive plan and, as with the traditional zoning power, the town had the power to amend its basic zoning ordinance such that it reasonably promotes the general welfare. Further favorable decisions have established floating zones as a viable planning tool.
Discussion — Floating zones are helpful for communities where the direction of development and growth is uncertain or for communities that wish to achieve specific goals outlined in a comprehensive plan or other public documents. It provides flexibility for developers, who can use the zone to obtain density bonuses, height extensions, etc., in exchange for meeting other requirements or goals in the floating zone, such as affordable housing, public transit, etc. Critics, however, argue that floating zones undermine the ability of citizens to rely on the predictability of the zoning map and can favor private development over the public interest.
Basics — An overlay zone is a zoning district which is applied over one or more previously established zoning districts, establishing additional or stricter standards and criteria for covered properties in addition to those of the underlying zoning district. Communities often use overlay zones to protect special features such as historic buildings, wetlands, steep slopes, and waterfronts. Overlay zones can also be used to promote specific development projects, such as mixed-used developments, waterfront developments, housing along transit corridors, or affordable housing.
Historical and Legal Implications — As with traditional zoning, uses that can be justified as contributing to the health, safety, and welfare of the population are generally allowed to be regulated via overlay zoning. Common regulations include those for historic districts, natural resource protection, and economic development, though local governments are given broad authority to determine what regulation is in their community's best interest. As with zoning, however, communities must be careful not to violate the "uniformity clause" of the Standard State Zoning Enabling Act by ensuring that all similar properties are treated similarly. For further court opinions on the legality of overlay zoning, see Jachimek v. Superior Court, 169 Ariz. 317 (Ariz. 1991) and A- S- P Associates v. City of Raleigh, 258 S.E.2d 444 (N.C. 1979).
Discussion — Overlay zones have the potential to be very effective governmental regulatory tools. Since they tailor regulations to specific properties and districts to meet specific community goals, they can be more politically feasible to implement and can help communities meet stated goals or address specific inequities. On the other hand, they can create inefficiencies and inequities by applying regulations and restrictions to some properties and not others. Moreover, additional regulations may increase time and expense both for developers and for the public bodies involved in the development approval process.
Basics — Incentive zoning is a tool that allows a developer to develop in a way that ordinarily would not be permitted in exchange for a public benefit that would otherwise not be required. Often written into the zoning ordnance, incentive zoning allows the city to leverage variations in existing zoning standards and obtain public goods. For example, a developer may provide schools, parks, open space, plazas, low-income housing, or money, in exchange for greater flexibility in required building setbacks, floor heights, lot area, parking requirements, number of dwellings, and other minimum standards. The incentives vary by location, but governments usually calculate the incentives to balance the pubic advantage with the developer's costs and gains.
Historical and Legal Implications — Local governments have used incentive zoning to accomplish a wide range of goals, including historic preservation, economic development, and conservation. Chicago first used incentive zoning in 1957 to stimulate skyscraper construction in its downtown area and New York followed shortly after, in 1961, in an attempt to create more public spaces and conserve historical buildings. Even though it is a voluntary mechanism, there have been several legal challenges to incentive zoning. Legality varies by state, jurisdiction, and project. Generally, it is found to be legally acceptable if goals and definitions are laid out clearly in the ordinance. The benefits must offset the negative effects of the bonus and the incentives or standards cannot be ruled as a taking or an exaction. Also, some courts have found the incentives illegal if the benefit and the existing standard are not directly related. For cases on incentive zoning see generally, Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (U.S. 1978), Gillmor v. Thomas, 490 F.3d 791 (10th Cir. 2007), and Holmdel Builders Ass'n v. Holmdel, 121 N.J. 550 (N.J. 1990).
Discussion — Since incentive zoning is intended to produce specific public amenities and types of development, it can be an effective tool for communities wishing to accomplish goals in a specific neighborhood or outlined in the comprehensive plan. It also can help increase the number public goods available in the community. Communities with a high demand for land, well-established standards and demand for specific amenities may benefit the most from using incentive zoning. For communities considering incentive zoning, it is important to consider the hidden costs that might be associated with the project, including those that might be difficult to calculate in the long-term, such as infrastructure challenges, congestion, etc.
Basics — An alternative to the traditional, conventional zoning method, performance standards regulate development by setting the desired goals to be achieved by regulation rather than regulating how those community goals are met. Instead of restricting specific uses on a property, performance requirements allow any use that meets the set standard. For example: a city ordinance might specify that all residential swimming pools must be completely screened from the public, but not require which materials be used to do so. Performance standards attempt to address the same goals desired by traditional zoning ordinances, such as environmental protection, neighborhood character, traffic control, etc., but with a greater amount of flexibility.
Historical and Legal Implications — Performance standards first came about in the 1980s and many performance standard ordinances were enacted in the 1980s and early 1990s. Though they have largely fallen out favor by many communities as a comprehensive zoning strategy, some individual performance standards are still incorporated into conventional zoning ordinances today.
Discussion — Proponents maintain that the standards are a rational way of codifying values and goals without being overly restrictive on how those goals are accomplished. Critics argue that the incredible flexibility of the standards makes administration of performance standard ordinances difficult, expensive, and ultimately too unpredictable for residents to rely on. Politically, performance standard ordinances can be difficult to adopt for this reason. The ability of performance standards to accomplish targeted goals, however, has led some communities to include some performance standards in their conventional zoning structure.
Unified Development Ordinances
Basics— A Unified Development Ordinance (UDO) is a local policy instrument that combines traditional zoning and subdivision regulations, along with other desired city regulations, such as design guidelines, sign regulations, and floodplain and stormwater management, into one document. By combining all of these regulations in a single document, a UDO is intended to streamline and coordinate the development process of permits and approvals for development projects by removing inconsistencies and eliminating outdated policies. The required permits, processes, and regulations for the development process are outlined in one place, making it easier for developers, the public, and public entities to understand the requirements. Along with the compiling of regulations and policies, UDOs use clear, consistent language and definitions, with many illustrations and tables, often in attractive, easy-to-read formats to further help stakeholders understand the regulations.
Historical and Legal Implications — UDOs became popular in the 1980s, in large part due to Michael B. Brough's publication "A Unified Model Ordinance." Since that time they have become more widely endorsed and more frequently adopted across the country. UDOs have not had any major legal challenges to date. In fact, proponents maintain that UDOs actually lead to fewer legal challenges since they tend to reduce number of inconsistencies in municipal regulations.
Discussion — UDOs can be beneficial for communities looking for a more comprehensive approach to land use regulation and economic development. A UDO is a helpful tool in accommodating neo-traditional and mixed-use development and providing a thorough and comprehensive approach to meeting goals such as environmental protection, transit, and mixed-housing types. They are perhaps most useful for cities experiencing rapid growth, where the streamlining of varied or complex development or enhanced control over economic development is desired. On account of the consolidated and streamlined requirements, UDOs afford stakeholders in the development process more predictability with respect to the standards for development and permit approval, and can allow a reduction in process costs because of the increased efficiency. Creation of a UDO, however, can be a slow and expensive process. In order for UDOs to be effective, they must be backed up with carefully drafted standards and regulations, and often require broad policy determinations to be made. The process of gathering input, preparing, drafting, and adopting the final document requires a great deal of cooperation among stakeholders, time and money. Smaller, poorer, communities therefore might find the cost of UDOs to be prohibitive. On the other hand, larger cities, where the rate and diversity of development is greater, might require more sophisticated ordinances and a more complex growth management package than a UDO can provide.
Growth Management Tools
Transfer of Development Rights
Basics — A transferable development rights program (TDR) is a market tool communities can use to achieve land preservation. The preservation is accomplished by allowing one landowner to sever her development rights in exchange for compensation from another landowner who wants her development rights to increase. TDR programs transfer the development rights of a predetermined lot — known as a sending area — to another lot, known as the receiving area. Thus, while the development rights are reduced or severed on the sending area, increased density and development is allowed on the receiving area. The sending sites are typically deed-restricted so that only appropriate uses are allowed from the rights sale onward. TDR programs can be mandatory or voluntary. With mandatory TDR programs, the sending and receiving areas are pre-designated by downzoning the sending areas and decreasing the base density of the receiving areas so more development rights must be purchased in order to build at higher densities. With voluntary TDR programs, the sending areas are not downzoned. Instead, owners retain the option to receive payment for development on their property; these transferred rights are known as development credits.
Historical and Legal Implications — The legality of TDR programs has not been completely or uniformly resolved as courts across the country have ruled differently. Some have determined the TDR program at issue to be a taking, while other TDR programs have been upheld. See e.g., West Montgomery County Citizens Asso. v. Maryland-National Capital Park & Planning Com., 309 Md. 183, 188 (Md. 1987); Penn Cent. Transp. Co. v. New York City, 438 U.S. 104 (U.S. 1978); and Fred F. French Investing Co. v. New York, 39 N.Y.2d 587 (N.Y. 1976). Generally, however, when adopting these programs, communities should take care to abide by the requisite state enabling legislation and local regulation, and use definitions and language that are consistent with that authority. Further, takings issues are more likely to be avoided when the programs preserve the residual use for the land, and provide options to the land owners, rather than making the program mandatory.
Discussion — The desire for a TDR program arises when the public recognizes the significance of a resource, such as open space, agriculture or historical buildings, and wishes to preserve it. Therefore, TDR programs are usually the most helpful in communities experiencing rapid greenfield development in relatively rural and pastoral areas. TDR programs give communities the ability to achieve open space preservation as well as compact, centered development. TDRs are a way to compensate property owners for the development potential of their property and allow them to receive some lost economic value if their property is downzoned. However, TDR programs can be ineffective if there are no purchasers for the development rights. Therefore, these programs can only work in communities where there is demand for high-density zoning and a general consensus on preservation goals. Further, community education is essential, otherwise the resistance to the program could make the program politically infeasible to adopt. TDRs also require a lot of time and planning to restructure the zoning, and require an oversight agency to regulate the market, so the program can have higher administrative costs than traditional zoning.
Inclusionary Housing Regulation
Basics — Inclusionary housing regulation, or inclusionary zoning, is a growth management tool used by local governments to require developers to make a percentage of housing units in new residential developments affordable to low income households. The concept is the same as that of incentive zoning. In return for the affordable housing, developers receive desired variations in the standards of the zoning code, such as density bonuses, variances, setbacks, etc. The specific percentage that must be affordable differs by community, but typically ranges from 10-25%. The definition of affordable also varies, since housing stock that is considered "affordable" varies by area. Inclusionary zoning can be mandatory or voluntary; mandatory programs require developers to build affordable housing in exchange for development rights, while voluntary programs allow the developers the option to do so.
Historical and Legal Implications — The legality of inclusionary ordinances depends on the ordinance requirements and the jurisdiction. Courts have ruled differently. For example, New Jersey has upheld inclusionary requirements as a permissible tool for local governments to fulfill their obligation to provide affordable housing. See Southern Burlington County NAACP v. Township of Mt. Laurel, 456 A.2d 390 (N.J. 1983) (Mt. Laurel II). Other courts, however, have struck down mandatory inclusionary zoning requirements. See Board of Supervisors v. De Groff Enterprises, Inc., 214 Va. 235 (Va. 1973). The biggest legal challenges have dealt with improper takings and developer exactions. Before enactment of an inclusionary ordinance, research into precedent in the applicable state and jurisdiction is necessary to determine the required parameters.
Discussion — Inclusionary zoning is an excellent tool to help a community increase its affordable housing stock in targeted areas. By making affordable housing available in developments throughout the jurisdiction, governments are able to better create mixed-income, integrated communities, rather than communities with concentrated poverty or wealth. Empirical research indicates that these communities can have a wide range of positive impacts on a community. These policies tend to be most successful in communities with larger populations or those that are experiencing growth so that the demand for residential development and affordable housing is fairly high. Market demand, the type of regulations, whether mandatory or voluntary, and the type and degree of the incentive all play a role in whether the program is effective at accomplishing the community's goal. On the other hand, depending on the jurisdiction, legality, especially of mandatory programs, can be questionable. Inclusionary zoning also puts a higher cost burden on developers and has the potential to raise the cost of market-rate purchasers as the developers simply cost-shift the sale price. There can be a lot of resistance, both from the developers as well as the broader private sector, for inclusionary housing regulations, which has the potential to make these programs politically infeasibile.
Tax Increment Financing
Basics — Tax-Increment Financing (TIF) creates a redevelopment district in which infrastructure improvements and/or project developments are financed based upon an anticipated future increase in property values. The idea is that the development improvements will eventually result in higher property taxes and therefore, the financing "increment" is justified. TIF can be initiated either by a private developer or the municipality itself. Once the redevelopment district is determined, a base property value assessment is performed, and the revenue to agencies other than the redevelopment authority is "fixed" at a present-day amount. Any increase in tax revenue through increase in property value will accrue to the redevelopment authority. The TIF district is created for a set time period, usually between 5 and 30 years, and once the time period ends, the increase in revenue from the property value increase reverts to the baseline taxing structure. In other words, the money would begin to accrue back to the municipality, county, schools, etc., rather than to the redevelopment authority.
Historical and Legal Implications — Use of TIF began in the 1950s, in California, as a method of supplementing federal urban renewal funds. Today, all states except for Arizona, have passed enabling legislation that allows municipalities to utilize TIF. In the past, many states have required that the TIF meet a public purpose. To meet this requirement, the courts have required: (1) a finding of blight in the redevelopment area, and evidence that the investment will not only improve the area, but allow for a change in assessed value; or (2) a showing that "but for" the financing, the intended project would not be able to come into fruition. The recent trend, however, has been a loosening of those standards as local governments have increasingly seen the need to offer developer incentives to attract business.
Discussion — TIF has been used across the country to direct funding towards specific development projects and specific neighborhoods. Proponents of TIF maintain that it is a very efficient, effective tool, for finding funding for public projects that otherwise might have been impossible to obtain and for channeling funding towards improvements in economically distressed areas. Critics, however, maintain that TIF often results in gentrification since TIF districts are usually implemented in blighted, poorer areas. Further, many question whether TIF actually serves a public purpose. They maintain that TIF gives too many incentives and entitlements to developers, who would have developed in that area even without the TIF monetary incentive, thus taking needed funding away from government entities.
Adequate Public Facilities Ordinances
Basics — An adequate public facilities ordinance (APFO) is a growth management tool communities use to help coordinate the timing and provision of public infrastructure with new development. Also known as concurrency, an APFO allows the government to delay new development projects by prohibiting the issuance of development permits if existing government services, such as water, sewer, roads, schools, fire, police, etc., cannot support the development. Before the developer can apply for development permits, she must be able to show that there are adequate resources currently available in the community. APFOs are not to be used as de facto moratoria, but simply as a tool to help government control the pace of development. If the government denies the developer permits due to the unavailability of resources, the government's capital improvement plan must show a good faith effort to make those resources, or infrastructure, available.
Historical and Legal Implications — In 1969, Ramapo, New York became one of the first municipalities to institute an APFO. Today, APFOs are common across the county, with some states — Washington and Florida — even requiring that the local governments adopt them. APFOs have, however, been challenged in court as unconstitutional violations of the Due Process, Equal Protection and the Just Compensation clauses. Courts have decided differently, based on the applicable state legislation. Ordinances that are not mandatory and do not overly burden or deprive the landowner of all economically viable use of the property can generally withstand a takings claim, and most courts have not found the ordinances to result in a Due Process or Equal Protection violation. Working within the state framework is critical for local governments looking to craft an effective, legal APFO.
Discussion — APFOs are one of the most effective land use tools for pacing development and growth, especially in areas with a robust housing market. Since they help maintain the fiscal integrity of the community and adequacy of existing resources, communities are generally supportive of APFOs. APFOs, however, are not without critics. Many argue that APFOs have many unintended consequences: discouraging infill development, forcing developers to leave and develop in other communities, and creating de facto moratoria. APFOs are also quite data intensive and require a number of experts to design the standards and administer the program. When accompanied with a capital improvements plan and a governmental commitment to provide the necessary facilities, an APFO can be a helpful tool for many communities.
Basics — An impact fee is a growth management tool used to help pay for the expansion of public infrastructure by requiring developers to pay their proportionate share of the costs. They are intended to help ensure that there is an adequate availability of public facilities and facilitate fiscally responsible growth. Usually charged when the occupancy permit is issued, impact fees can only be used to help offset the costs associated with that particular development. The funds cannot be charged to correct existing deficiencies in public facilities in the community at large.
Historical and Legal Implications — Like most development tools, the legality depends on the jurisdiction and the applicable state statutes. Impact fees raise a number of legal issues and as their use has grown in popularity, there have been a number of legal challenges. Generally, impact fees that are related to the development assessment are upheld, though different jurisdictions use different standards. Some courts have applied the "rational nexus" test. Others have required that the fee be "reasonably related" to the needs of the development, while other courts have required that the fee used be "specifically and uniquely attributable" to the needs of the new development.
Discussion — Overall, impact fees are an efficient growth management tool that communities can use to ensure the fiscal integrity of the community and the adequacy of public facilities. These fees can be very helpful for local jurisdictions that are dealing with high residential population growth and seeking ways to reduce the economic burden on existing residents. They do, however, add to the administrative process of the local jurisdiction and fee calculations can be difficult to determine. Further, although generally popular with communities and residents, not all stakeholders like impact fees and politically they may difficult to pass. Real estate developers and realtors are less receptive to impact fees because they increase the cost of doing business in an area by increasing the price of development and home building. This also can have a negative impact on affordable housing since, shifting the burden of infrastructure improvement to developers means the costs get passed on to new homebuyers.