Housing Policy

Is America's Primary Affordable Housing Policy Unconstitutional?

Pittsburgh-area developers argue in a new lawsuit that the city's requirement that they include affordable units in their projects is an unconstitutional taking.

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Laws forcing developers to include affordable units in their projects are common in the U.S. A new lawsuit argues that they're also unconstitutional.

On Wednesday, builders in Pittsburgh, Pennsylvania, filed a lawsuit against the city over its requirement that some of the new units they construct in mid- and larger-sized housing developments must be rented or sold at substantial discounts.

Last month, the Pittsburgh City Council approved an ordinance requiring that at least 10 percent of units in housing projects of at least 20 units be offered at below-market rates to lower-income homebuyers and tenants in Pittsburgh's Polish Hill and Bloomfield neighborhoods. Since 2019, the city has imposed identical requirements on development in the city's Lawrenceville neighborhood.

The complaint—filed by the Builders Association of Metropolitan Pittsburgh (BAMP) in the U.S. District Court for the Western District of Pennsylvania—says that mandate is an uncompensated taking that violates the U.S. Constitution's Takings Clause.

Pittsburgh's inclusionary zoning law "effectively is a tax on housing," said BAMP Executive Director Jim Eichenlaub in a press release. "It forces real estate developers—or the other 90% of the units—to subsidize the cost of the so-called 'inclusionary units.'"

The lawsuit also argues that Pittsburgh's policy violates the Pennsylvania Constitution's limits on local governments' powers and its requirement that taxes be uniform among general classes of taxpayers.

Pittsburgh neighborhood groups have generally supported inclusionary zoning on the grounds that it will stem gentrification and ensure lower-income residents see some new benefits from new, pricey construction.

Developers, in contrast, have argued that they're being forced to take a substantial haircut on the mandated affordable units without any offsetting compensation or incentives from the city.

An affordable one-bedroom apartment created under the city's ordinance would have to rent for $795 per month, per the city's planning department. A two-bedroom unit would go for $955 per month.

That compares to roughly $1,500 average monthly rents in the neighborhoods covered by Pittsburgh's inclusionary zoning policies, according to data from the rental website RentCafe. The discount is probably steeper when one considers that the city's inclusionary zoning requirements apply to new construction (or substantial renovations), which are going to be more expensive on average.

BAMP's complaint says that these affordability requirements would lead to "substantial economic losses" to developers, who are being also asked to "furnish time, talents, labor, and financial resources to construct housing for the benefit of the City and/or for the benefit of third parties favored by the City."

The lawsuit argues that this is an uncompensated taking in violation of the Constitution's Takings Clause and that Pittsburgh is imposing unconstitutional conditions on their ability to obtain building permits.

Past Supreme Court opinions have found that the Takings Clause puts limits on the kinds of conditions governments can attach to building permits, says Larry Salzman, an attorney with the Pacific Legal Foundation.

In general, if the government is going to add conditions to approving an otherwise legal construction project, those conditions have to be aimed at mitigating some public harm caused by the project, Saltzman tells Reason.

Inclusionary zoning likely violates that principle, he says.

"If building market-rate housing isn't harming anyone or causing the social problem; if the government's land-use policies are causing the housing shortage," he tells Reason. "Why are you making the developer paying for that?"

Indeed, recent research has shown that new market-rate housing (even when it's expensive, "luxury" housing) reduces demand for housing at all price levels. That would seem to improve housing affordability and availability for everyone.

The Pacific Legal Foundation has twice sued in California state courts over local inclusionary zoning policies that required people to build affordable housing or pay into affordable housing funds as a condition of developing their property.

California courts rejected those challenges, ruling instead that inclusionary zoning isn't a taking but a permissible land use regulation.

In 2019, the Supreme Court declined to take up a Pacific Legal Foundation lawsuit against Marin County, California, over its inclusionary zoning law.

But Salzman says that some justices have given indications that inclusionary zoning ordinances are something the court should take up. The lawsuit against Pittsburgh's law would give them another opportunity to tackle the issue.

Doing so could have massive effects on affordable housing policy in the country. One 2019 Urban Institute paper notes that at least 866 jurisdictions in the U.S. have adopted some form of inclusionary zoning.

The research on these policies is mixed, and a lot depends on the details of individual inclusionary zoning laws. In general, the more mandatory the policy is, the more affordable units it requires a developer to build, and the more affordable those units have to be, the more it raises overall prices and/or suppresses new construction. Even supposedly well-designed inclusionary zoning policies have a poor track record of creating new housing.

Pittsburgh's policy is among the most burdensome in the country. The developers' lawsuit against it could see the courts put some limits on how burdensome these policies can be.

NEXT: He Was Sentenced to Death After Law Enforcement Fabricated Evidence. A Federal Court Says He Can Sue.

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  1. Obviously the BAMP is full of racisty racist.

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  2. Could the builder make those 10% of 'affordable' units smaller in proportion to the lower rents they will command? So if a 1500 ft2 apt was $1500/mo, the $795/mo apt could be 795 ft2.
    Have builders considered this?

    1. Not allowed. And it's a pretty significant problem to route plumbing like that instead of being able to use common wetwalls.

      1. The 'not allowed' part is the significant problem. If you can get past 'not allowed', it's actually pretty easy to plumb.

        1. It's more expensive to re-route that stuff.

          1. No need to re-route if you can just tie in. Especially if you don't have to care about any code saying what you are and are not allowed to do. Especially especially if you know up front that you're going to halve/ double the units. If the municipality wants their affordable housing, they can cut their own red tape and expedite their own approvals. I'm not a fan of the policy, but there are more options than refuse or bend over and take it.

    2. Smaller units wouldn’t be “fair”.

    3. There was a Reason article about buildings in New York that were constructed with separate hallways, elevators, and exterior doors for the “affordable” units. The explicit goal was to keep the poor residents out of the amenities (like the pool and the pool) to which they were not entitled — but it was pretty obvious that the nobility did not want to rub elbows with the hoi polloi.

  3. All federal housing policy is unconstitutional

    1. ^THIS!!!

  4. My experience is that local governments pay lip service to "the need for more affordable housing," then developers - in order to secure zoning variances - propose to include some % of "affordable housing" in their development, and then the governmental unit, under pressure from residents, denies the developer the right to include "affordable housing" in its project.

    1. That's pretty much how it works--and any "affordable housing" that does get built is way out of the price range of the populations that need it, anyway.

  5. These requirements are extortion - literally. If Guido and Jimmy Peanuts told you that you had to pay them in order to run your pizza shop or laundromat, no one would argue.

    1. "No show" jobs on union work sites.

  6. Pittsburgh had a version of a land value tax until 2000. I don't whether housing has been a problem for a long time there - or whether this is a new problem for Pittsburgh.

  7. Geez, if people can't institutionalize their empathy and confiscate property to redistribute according to righteous ideals, why even have a Democratic Party?

    1. The criminal party who thinks they aren't criminal just because they use Gov-Guns instead of Personal Guns?

  8. A new lawsuit argues that they're also unconstitutional.

    Only because they are. There's literally no authority for the government of this nation or any state wherein to dictate industry prices.

    1. But will SCOTUS recognize that premise is another question?

  9. I bet I know what would lower the cost of housing.

    Bringing in half the world's population, because open borders has no negative consequences.

  10. Since developers buy property knowing the restrictions in the city they are building and since they have priced that into their purchases, it's unclear how this constitutes a taking.

    The real problem with these policies is that they just don't work.

    1. Individual Liberty and Justice....

      This type of law is the exact opposite of both of those.

      1. We're not talking about whether such laws are libertarian; they are obviously not. We are talking about whether such laws constitute a "taking" under current US law.

        And if you want to virtue-signal about "individual liberty and justice", I suggest you start with the big issues, like federal income taxes.

    2. So you're saying if you start a business in an area with mob activity you should just accept the extortion and violence? Awesome take.

    3. Except that it's a loss that goes forward into perpetuity as long as the developer owns that property. Not sure how one can price that into the land purchase, although I'm sure it's a factor somehow.

    4. It also applies to apartments that are undergoing upgrades by current owners, who may have owned the protest before this law was passed.

  11. just about the entire set of federal laws is unconstitutional.

  12. Welcome to CA dictation - Pittsburg.

    Oh lookie there; Out of the 9 City Council Member they are *ALL* Democrats.

    As-if that would be a surprise. The Criminal dictation goes wherever they go because they are Criminals. They add NOTHING positive; just wander around eating EVERYONE else's grass..

  13. If some part of the value is taken from you (short of a tax, and I'd argue about that even), then it is a "taking" and should either be compensated (by the town ponying up the difference) or stopped.

    1. No value was taken from the developer; the developer bought the land knowing the restrictions, so it was already priced into his purchasing decision.

      1. The Over-Lords rule this land!!!
        If you live here you should've know that...

        1. + /s (sarcasm)

  14. Why is the Federal govt even involved in housing? Sounds like a market based issue or at worst a local or State issue. I bet this all started with the degenerate FDR...shut down HUD (and every federal agency created after 1932...

    1. Never mind the dates, if it isn't specifically allocated to the feds in the constitution, get rid of it; it belongs to the states or the people.
      Just for laughs, print out the current cabinet, then try to find a constitutional authorization for each one.

      1. As a side benefit, the reduction in federal payroll will balance the budget, and allow cutting taxes in half (or more),

    2. "Why is the Federal govt even involved in housing?"

      Because state governments aren't doing their jobs.

      It's time to accept that if you want to take everything out of the hands of the federal government, other states need to be able to impose sanctions on those which won't behave. You can't have a free-for-all and a Union.

      1. who says they aren't behaving? builders will build housing they can sell for a profit. period. government has no business forcing the builders to make a specific type of housing. that is a huge government overreach. it is not government's role -- ever.

  15. Surprised Randi and the gang aren't out protesting. Isn't inclusionary zoning kind of like a backdoor school choice?

  16. Thank God someone finally sued the government for this taking, and taking it is. It's politically connected guys like Al Sharpton, who end up getting chosen by the government to get those rent-controlled housing units for themselves as a subsidized tenant. As I understand it, in NYC if you want to get into a rent-controlled unit, you have to pay the current tenant a large figure to get it.

    1. I'll add, the reason developers haven't sued to have these laws ruled unconstitutional long ago, is because they need government's cooperation to get permits and approvals for their real estate development, and going against the government means not getting the permits you need in the future.

      They're finally starting to realize, if you give government any concession to your freedom, it's lost forever, and it's going to affect your bottom line and eventually your business's existence (the mayor's friend also happens to be a real estate developer who'd like to see the plans you've developed, but since you can't get approval for your project, he gets the project).

  17. government has no role in creating "affordable housing" -- none. that is the job of the free market.

  18. Why is not ok to force developers to subsidize housing for low income people but then support eliminating single family zoning? Who will pay for the new schools upgraded utilities etc to support the growth? When my taxes increase isn’t that taking for a problem that’s not my responsibility?

    1. you assume that property taxes are necessary to support schools. the aren't. property taxes are unconstitutional and should be eliminated.

  19. i guarantee you that the builders involved in suing are all union democrats. they don't realize that the party they support and vote for always creates these problems. they probably voted for the city council members. but they won't see the correlation and will continue to vote for these leftists.

  20. Pittsburg, like Democrat run cities, always put in policies the have the opposite result of what they intended. We lived in Pittsburgh several years ago and bought an old house illegally cut up into apartments with the intent of returning it to a single family home. The city immediately raised our taxes citing what the home MIGHT be worth when we finished four years later. This is Democrat logic.

  21. Oh, I'm glad I managed to buy a house before that. Well, I live in Philadelphia, so I doubt something like that would happen here, but who knows. Now that I've got a house and done all the necessary renovation like installing Bathroom Cabinets Philadelphia and kitchen cabinets, I don't have to worry about my house at all because I don't even think about selling it in the future.

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