America's Trial Courts Have a NIMBY Problem

Plus: the transformation of California's builder's remedy, the zoning reform implications of the Eric Adams indictment, and why the military killed starter home reform in Arizona.

Happy Tuesday and welcome to another edition of Rent Free. This week, we look at:

• California's transformation of its "builder's remedy."
• The implications of Eric Adams' indictment on his plan to add "a little more housing" in New York's neighborhoods.
• The solving of the mystery of why the U.S. Defense Department helped kill Arizona's "Starter Homes Act."

But first, we cover the latest example of a local trial court killing "missing middle" zoning reform for some pretty nitpicky reasons.

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In Arlington, Virgina, Missing Middle Is Gone Again

Late last week, a judge struck down Arlington, Virginia's missing middle reforms that had briefly allowed smaller, four- to six-unit multifamily developments in the D.C. suburb's single-family neighborhoods.

In a Friday ruling, Judge David Schell said that the county had violated a number of procedural requirements when it unanimously passed its Enhanced Housing Option (EHO) last year and had failed to adequately study the impact of increased residential density.

"The board failed to consider the localized impact of EHO developments in the neighborhoods where it would be built," said Schell, citing the county's failure to do adequate analysis of the impact EHO projects would have on tree canopy, sewer capacity, and more. Schell ruled from the bench, meaning there is no written decision. A transcript of his Friday ruling will be published by the end of the month.

Neighborhood activists who had brought the lawsuit against the EHO ordinance cheered the ruling.

"Arlington County underestimated the power of neighbors to fight for the rule of law," said lead plaintiff Marcia Nordgren in a press release.

Local YIMBY ("Yes in my backyard") activists who'd pushed for the county's missing middle reforms expressed disappointment.

"We're losing the opportunity to create more attainable homes. That's a loss. That means more people are going to move out to Leesburg, move out to Woodbridge, more people are going to be driving on Arlington's roads than walking on Arlington's streets," Jane Green, a lead with YIMBYs of NOVA, tells Reason.

The county said in a statement that it's considering its options, including appealing Schell's ruling. But in, the interim at least, the county can't issue permits for new townhomes and garden apartments.

Schell's ruling does not bode well for a similar challenge to another missing middle reform adopted by neighboring Alexandria, Virginia, in November 2023. Schell, a retired Fairfax County judge, is also overseeing that case.

The Background

More broadly, his rulings suggest even the most modest locally initiated changes to single-family zoning in Virginia will be vulnerable to court challenges.

Arlington's EHO has been in the works since 2015 when the county passed an affordable housing master plan that directed policy makers to explore ways of allowing more missing middle housing. A draft EHO was first published in May 2022, and went through multiple rounds of public comment and revision.

The final product was exceedingly modest. It allowed between four and six units of housing in single-family zones, while retaining existing limits on the height and density of new residential development in those zones.

The EHO ordinance was intended to give property owners the option of redeveloping small, older single-family homes into duplexes, small condos, and garden apartments that would be more affordable than a new, larger single-family home.

County staff nevertheless estimated that most redevelopment in the county's single-family neighborhoods would be from small single-family homes to larger single-family homes. To ensure this, the county allowed for only 58 EHO projects per year.

Those moderating limits was enough for all of the Arlington County Board to vote yes on the EHO. But it did little to mollify critics, who promptly sued after the ordinance passed.

NIMBY Courts Killing Zoning Reform Across the Country

Arlington's EHO is not the first missing middle reform to run into trouble in the courts.

In September 2023, a judge in Hennepin County, Minnesota, struck down Minneapolis' legalization of triplexes in formerly single-family-only zones on the similar grounds that the city had failed to conduct a thorough enough analysis of adding denser housing in low-density neighborhoods.

In December 2023, a judge in Gallatin County, Montana, enjoined two state laws allowing duplexes and accessory dwelling units (ADUs) in single-family neighborhoods. In that case, the judge reasoned that the two laws violated equal protection guarantees by overturning local governments' restrictions on duplexes and ADUs, while leaving private restrictive covenants barring that type of housing in place.

Lastly, in April 2024, a Los Angeles County judge blocked a California state law allowing duplexes to be built in single-family zones from going into effect in five Southern California cities (but not Los Angeles proper). In that case, the judge ruled that the law was an irrational means of furthering the state's interest in affordable housing because it didn't require that newly legal duplexes be rented or sold at below-market rates.

Minneapolis's reforms were eventually saved by the intervention of the Minnesota Legislature. The Montana Supreme Court also lifted the injunction against the state's duplex and ADU laws while the case challenging them proceeds.

Double Standards

"It would appear there's a recent trend of at least some trial courts subjecting upzoning, increases in density, to a test that's different than what's been applied to zoning in general," says Charles Gardner, an attorney and research fellow at George Mason University's Mercatus Center.

Over the past hundred years, courts have generally been willing to accept any government reason for passing zoning restrictions on density and housing development, says Gardner. When it comes to more recent laws paring back those restrictions, however, courts have taken a more skeptical "nitpicking approach," he says.

The YIMBY political case for missing middle reform (sometimes called light-tough density) is that it allows a bit more housing in the most desirable neighborhoods without scaring people with the prospects of a high-rise going up next door.

The problem, it would seem, is that these modest reforms also try to increase density in areas where people are most sensitive to it. Getting a little bit more housing comes at a huge political cost. Even if reformers are successful at city hall or the state capital, a local judge can decide to undo all their hard work.

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In California, a "Builder's Remedy" Remedy?

Late last month, Gov. Gavin Newsom signed into law A.B. 1893, authored by Assemblymember Buffy Wicks (D–Oakland), that's intended to fix the state's "builder's remedy" law.

The builder's remedy is a housing nuclear option of sorts. It allows developers to build projects of unlimited density, zoning code be damned, in cities that haven't adopted state-approved plans for meeting their housing needs. Provided those projects include enough below-market-rate units, cities can't say no to them.

The builder's remedy is a theoretically powerful incentive for cities to liberalize their zoning codes and plan for more growth. Practically, ambiguities in the law have given cities lots of opportunities to stop builder's remedy projects.

A.B. 1893 tries to remedy this situation by streamlining the approval of builder's remedy projects and reducing the number of below-market-rate units they have to include. To get cities on board, it also caps the overall size of builder's remedy projects.

Approaching a Consensus

As I covered back in June, that proposed compromise proved divisive among the state's YIMBYs.

Proponents argued it was worth capping the size of builder's remedy projects if it led to a smoother approval process. More, smaller projects actually getting built was better than a few huge projects tied up in endless litigation. Critics countered that A.B. 1893 would still see projects end up in litigation, while the density caps would diminish the incentive the law provides for cities to allow more housing.

Those YIMBY critics also worried that early versions of A.B. 1893, which gave local governments carte blanche to impose additional local affordability requirements on builder's remedy projects, could defang the law entirely.

But the consensus, among critics and proponents, seems to be that the final version of A.B. 1893 ended up in a better place.

"Overall, it's probably going to result in more housing than the status quo but not necessarily more housing in the wealthiest communities," says Rafa Sonnenfeld, policy director for YIMBY Law.

"The law really tightens the screws on local governments with respect to some of the ways that they had been delaying projects without formally denying them," says Christopher Elmendorf, a professor and California housing law expert at University of California Davis School of Law.

The Wonky Details

The new law lowers the percentage of state-required, low-income units that builder's remedy projects have to include from 20 percent to 13 percent. Smaller projects of ten or fewer units don't need to include any below-market-rate units at all.

A.B. 1893, in combination with other bills passed this year, also limits cities' power to keep projects in perpetual planning limbo.

If cities hold repeated public hearings on a project, keep requiring additional application materials, or keep delaying a final vote on a project, the law treats all that as an effective denial of the project. And if a project is denied, a developer can sue. If they win, they get their attorneys' fees paid for and a court is able to shepherd the project through the approval process.

A.B. 1893 does allow localities to impose additional affordability requirements on projects, but it also gives developers an option to challenge those requirements if it would make the project infeasible. Elmendorf says that gives developers pretty strong grounds for challenging local affordability requirements.

The final law also allows builder's remedy projects to take advantage of streamlined approval processes if they're being built along commercial corridors or in cities that are behind on their state-set housing goals. In order to take advantage of those streamlined approval processes, however, projects must meet expensive prevailing wage (union) labor standards.

By the end of the process, YIMBY Law had adopted a "support if amended" position of A.B. 1893. They had wanted the law to preserve the original builder's remedy process—with the higher affordability requirements and unlimited density—as an option. That didn't come to pass.

"We're worried that the idea that the density is no longer unlimited cause cities to be less concerned about the consequences of builder's remedy," says Sonnefeld.

That nuclear deterrent is gone. But the state's builders have gained more conventional weapons for getting projects built over the objections of local governments.

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In New York, an Eric Adams Indictment Comes at the Worst Time for New Housing

Last week, the headlines out of New York City were all about Mayor Eric Adams' indictment on federal corruption charges. The feds allege that in exchange for illegal campaign donations and flight upgrades, Adams had agreed to do some favors for the Turkish government.

The charges come right as Adams' signature zoning reforms—known as the City of Yes for Housing Opportunity—go to the New York City Council for final consideration.

That timing is less than ideal for City of Yes supporters. As I wrote about last week, the mayor's supporters are concentrated in areas of the city that are the most skeptical of his plan to add "a little more housing" in every neighborhood.

If the charges make Adams politically toxic, he'll have less ability to whip reluctant supporters behind his housing reforms. Should the mayor be forced to resign, he'll be replaced by the city's left-wing public advocate, who has equivocated on supporting City of Yes.

But on the brighter side, some New York officials have said that, even with a hobbled mayor, they're ready to step in as champions of City of Yes. The city council will have to vote on the plan before the end of the year.

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In Arizona, an Answer to the Mystery of Why the Defense Department Opposed the state's 'Starter Homes' Bill

Back in March, Arizona Gov. Katie Hobbs incensed YIMBYs when she vetoed a bipartisan "Starter Homes" bill that would have loosened regulations on the construction of smaller, single-family homes.

The primary opposition to the bill had been Arizona's cities and their state-level, taxpayer-funded lobby, who complained about the loss of local control and refused to negotiate on the bill.

But in her veto message, Hobbs didn't mention the cities' opposition. Instead, she cited the U.S. Defense Department, which had expressed concern that the bill didn't exempt areas near military bases from new starter home development.

The Defense Department's opposition raised a lot of eyebrows at the time.

It's unusual that the military would get involved on a state housing bill at all. It was also odd that the DOD only expressed opposition after the bill had already passed the legislature, and therefore couldn't be amended. Lawmakers who supported the Starter Homes Act said DOD's objections could have easily been addressed had the department weighed in sooner.

After Hobbs' veto, Rep. Robert Garcia (D–Calif) asked the Defense Department why it had come out against the bill. In a letter to Garcia, first reported on by The Atlantic, DOD told the congressman that it'd been asked to oppose the bill by the City of Glendale, which is home to Luke Air Force base.

So, the mystery is solved. The killer of Arizona's Starter Homes Act was the most likely suspect: local governments and a governor who's heavily influenced by them.

The DOD opposition provided Hobbs some additional cover to veto a bill supported by a majority of Democrats in the legislature. But the primary movers were still cities that have historically opposed any state-level zoning liberalization.

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Quick Links

• A new poll finds that Proposition 33, a California ballot initiative that would eliminate state restrictions on local rent control policies, is leading among decided voters, reports Politico.
• San Francisco politicians are trying to get ahead of the game by advancing an ordinance that would expand rent control in the city to 100,000 more units if Prop. 33 passes.
• Speaking of rent control, Reason's Katarina Hall covers the remarkable success of the repeal of rent control in Argentina. Rental listings have increased and rents are down.
• A new study finds that the demolition of public housing improved the labor market outcomes of the children who would have grown up in the demolished public housing units. It's a timely finding, given the recent proposal from Rep. Alexandria Ocasio-Cortez (D–N.Y.) and Sen. Tina Smith (D–Minn.) to revive the federal government's role as public housing provider.
• Philadelphia is the latest city to consider banning rent-recommendation software that critics say allows landlords to "collude" and raise prices. I wrote about why those critics are wrong here.