Land use law

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As reported here, the County of Maui is attempting to address a shortage of “affordable housing” by considering a new ordinance requiring property owners who wish to develop their land to first commit a percentage of it to “affordable housing” or pay a cash “in-lieu” fee.

There are two major legal infirmities with the proposal, which is, in essence, an impact fee:  First, Hawaii’s counties have no power to enact an “affordable housing” impact fee, or require affordable housing exactions.  Second, the bill does not conform to constitutional requirements of close tailoring to mitigate any impacts on the stock of affordable housing that particular developments may cause. 

This post deals with the first issue, the power of the counties.  The constitutional issue is examined in a separate post.

REASONABLE USE OF PROPERTY IS A FUNDAMENTAL RIGHT

All questions regarding regulation of property should start at the same point: that the right to own and make beneficial use of property is a fundamental constitutional right. 

The framers of the U.S. Constitution and the Hawaii Constitution both recognized that the ability to use property is the building block to all other freedoms, and the government may not place unreasonable conditions on that right.  As noted by the U.S. Supreme Court:

The right to build on one’s own property – even though its exercise can be subjected to legitimate permitting requirements – cannot remotely be described as a “governmental benefit.”

Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987).  An “exaction” (a forced donation of land) or “impact” or “in-lieu” fees (cash payments instead of land exactions), may not impermissibly burden the right to build on one’s own property. 

HAWAII COUNTIES ONLY HAVE AUTHORITY TO ENACT IMPACT FEES WITHIN THE LIMITATIONS OF HRS § 46-142

Counties have been delegated a limited power to enact impact fees, but have no power to enact impact fees regarding “affordable housing.” 

An “impact fee” is defined by state law as:

[t]he charges imposed upon a developer by a county or board to fund all or a portion of the public facility capital improvement costs required by the development from which it is collected, or to recoup the cost of existing public facility capital improvements made in anticipation of the needs of a development.

Haw. Rev. Stat. § 46-141 (Supp. 2005).  The power of the counties to enact impact fee requirements is narrow, and must be exercised within the scope of the statutory authority.  Section 46-142 is the critical guideline for what the counties may and may not do:

(a) Impact fees may be assessed, imposed, levied, and collected by:

(1) Any county for any development, or portion thereof, not involving water supply or service; or

(2) Any board for any development, or portion thereof, involving water supply or service;

provided that the county enacts appropriate impact fee ordinances or the board adopts rules to effectuate the imposition and collection of the fees within their respective jurisdictions.

(b) Except for any ordinance governing impact fees enacted before July 1, 1993, impact fees may be imposed only for those types of public facility capital improvements specifically identified in a county comprehensive plan or a facility need assessment study.  The plan or study shall specify the service standards for each type of facility subject to an impact fee; provided that the standards shall apply equally to existing and new public facilities.

Haw. Rev. Stat. § 46-142 (1993 & Supp. 2005).

HRS SECTION 46-142(B)

Analysis of the statutory authority in a four-step process demonstrates that the proposed affordable housing bill falls outside the permissible scope of the County’s authority to enact impact fee laws.

Subsection (a) provides that impact fees “may be assessed” by the counties for development.  Thus, we start with a presumption that counties generally have the power to enact impact fee requirements, provided they do so by ordinance or agency rule.

However, the authority delegated to the counties by the statute is not unlimited or lacking specific guidelines.  Ultimate sovereignty, of course, rests with the people of Hawaii.  Haw. Const. art. I, § 1.  The people have delegated their power via the Hawaii Constitution to the state Legislature, which in turn has the power to establish counties.  See Haw. Const. art. VIII, § 1. 

Thus, a county is not a sovereign entity, but rather a political subdivision that must remain within the confines of whatever authority is delegated to it by the Legislature, no matter how narrow.

With respect to impact fees, those limitations are contained in Haw. Rev. Stat. § 46-142(b), so the second step in determining the scope of the County’s impact fee authority is focused on this critical language: “impact fees may be imposed only for those types of public facility capital improvements specifically identified in a county comprehensive plan or a facility needs assessment study.” 

Thus, if an impact fee purports to be for a “public facility capital improvement” — however that is defined — the County has no power to enact it.

A County has no power to enact affordable housing impact fees because the term “public facility capital improvement” is defined in section 46-141 to expressly exclude affordable housing:

“Public facility capital improvement costs” means costs of land acquisition, construction, planning and engineering, administration, and legal and financial consulting fees associated with construction, expansion, or improvement of a public facility.  Public facility capital improvement costs do not include expenditures for required affordable housing, routine or periodic maintenance, personnel, training, or other operating costs.

Haw. Rev. Stat. § 46-141 (1993 & Supp. 2005). 

Thus, a County’s general power to enact impact fees in subsection (a) of section 46-142 is expressly curtailed in subsection (b). 

Other sections of chapter 46 – the state law that establishes the limited powers of the counties – similarly do not provide any authority to assess impact fees, in-lieu fees, or exactions for affordable housing.  These provisions permit impact fees or exactions for other subjects, or limit the powers of the counties to address affordable housing issues by tools other than impact fees. 

Section 46-6 permits the counties to impose exactions, but only for “parks and playgrounds.”  Affordable housing exactions are not permitted.  Haw. Rev. Stat. § 46-6 (1993). 

Similarly, subdivision approval may be conditioned on a property owner’s agreement to provide access to beaches.  Haw. Rev. Stat. § 46-6.5 (1993).  There is no authority for affordable housing impact fees or exactions. 

Other portions of chapter 46 permit the counties to address affordable housing issues, but do not permit them to do so by enacting impact fee or exaction requirements.  For example, sections 46-15.1 and 15.2 permit the counties to develop and fund affordable housing projects either as public projects or in public-private partnerships with developers.  Counties may also issue bonds.  There is no authority in these sections, however, permitting counties to use impact fees or exactions to accomplish these goals.

The Development Agreement statute, Haw. Rev. Stat. § 46-121 et seq., permits the counties to enact development agreement ordinances providing a process for a county to enter into a voluntary agreement with a developer which may include affordable housing.

There is no authority in those sections allowing counties to impose mandatory requirements.

The constitutional problems with the bill are detailed in a separate post. 

    Continue Reading ▪ Big Problems With Maui’s Proposed “Affordable Housing” Exaction Ordinance (pt I)

The US Supreme Court today denied review to an appeal seeking to overturn Olympia, Washington’s requirement that a developer pay a “traffic impact fee” as a condition of developing a four-story office building.  In Drebick v. City of Olympia, the city demanded the developer pay the traffic impact fee even though the proposed office building was on the edge of town, and would not affect traffic. 

Exactions are land use law’s version of “pay to play.”  Local governments often condition development permits on a property owner’s agreement to “donate” land (exactions) or cash in-lieu fees (aka “impact fees”).  These demands only pass muster under the Fifth Amendment when they meet two requirements:

1.  They must have a logical connection (nexus) to the proposed development, and

2.  They must be be roughly proportional to the impact anticipated to be created by the proposed use. 

These requirements were first enunciated by the Court in Nollan v. California Coastal Comm’n and Dolan v. City of Tigard, respectively. 

They are designed to limit the obvious potential for abuse: if the government has unfettered ability to condition use permits on the owner’s concession to turn over property or money, the result, as the Court pointed out in Nollan, would be an “out-and-out plan of extortion,” and an impermissible burden on an owner’s right to make reasonable use of his or her own property. 

An example from my own experience: in a case involving an owner’s request to develop its own property, the head of the planning department testified that permission would not be forthcoming unless and until the owner agreed to give up “the goodies” (his word, not mine) for a public park, which just happened to be the most valuable portion of the parcel.  This illustration highlights another rationale for the exaction limitations — the legitimate concern that exactions would substitute as a compensation-and-due-process-free shortcut to an exercise of eminent domain power.  If the city needed a public park, it should have condemned and paid for it, not exacted it from the owner as a condition of use.  The Nollan/Dolan rules were meant to curb just this sort of demand.

The Drebick petition presented two questions: whether cash in-lieu fees are exempt from Nollan/Dolan, and whether exactions imposed by a legislature are similarly immune(disclosure: Pacific Legal Foundation filed the Drebick petition).

Denials of cert do not establish precedent, so today’s action has no effect on the law in other cases.   

Sidebar: commenting on the decision, PropertyProf Blog cheekily suggests the Court not grant review to another takings case for a few years to permit the lower courts to flush out doctrine, and to allow legal scholars to focus on other interests for a while.  Not to worry: the Kelo-Lingle-San Remo triad may have dampened whatever mojo the federal courts had for eminent domain and regulatory takings cases, even though there remain many issues, like those in the Drebeck petition, deserving of resolution.  In-lieu fees are a favorite of local governments (especially in Hawaii), even though they are of questionable constitutionality.

     Continue Reading ▪ Cert Denied in Exaction Appeal

“Man bites dog” story of the day: Kauai developer to require ag use on ag land. It’s a different twist since most of the controversy regarding “farm dwellings” and ag uses these days goes in the other direction:

The developers of the Kealanani agricultural subdivision hope to break a tradition in which agriculture-zoned lots are sold as country estates with little if any assurance that agricultural production will take place.

Their goal: to sell view lots for premium prices, but to come as near as possible to an ironclad requirement that owners farm on the property.

. . . .

The developers clearly are trying to break the image of “agricultural subdivision” as code for “rich-folks’ estates.” Thus far, their project has generated virtually none of the rancor that has attended projects like the Big Island’s Hokuli’a. At one point, that project was halted by a court order that said it was actually an illegal use of lands earmarked by the state for agriculture.

A settlement in the case eventually allowed the project to continue, but for critics, the development remains an illustration of the so-called “fake farms,” large homes built on agricultural lands where only nominal farming is done in a show of conforming to a state requirement that homes on agricultural lands must be “farm dwellings.”

The Kealanani development’s owners association will have the ability to fine owners who fail to fulfill their agricultural commitments, Kyno said.

The enforcement mechanism will presumably be restrictive covenants (CC&Rs), but this project should not raise the Act 5 issue, which is designed to invalidate CC&Rs that prohibit (not require) ag uses on ag lands.  More on ag subdivisions, CC&Rs, and Act 5 here.

     Continue Reading ▪ Man Bites Dog: Ag Uses to be Required on Ag Land

According to this story, the County of Maui is in the process of revising its shoreline setback rules.

The county’s shoreline setback rules determine where beachfront landowners can build on their property. The current formula to determine a setback is 20 feet, plus 50 times the annual erosion rate of the property. The minimum setback is 25 feet, while the maximum is 150 feet.

The proposed amendments include increasing the base used in the setback formula from 20 to 25 feet.

Abbott said the change was needed because some landowners whose properties had zero erosion have argued they should have a 20-foot setback based on the formula.  He said the change would make the formula consistent with the minimum setback.

As I recently posted here, shoreline legal issues are a touchy subject, but in the rush to “protect” beaches, you cannot just blow by the property rights of owners.  Government escapes liability for regulations imposing “no build” easements (setbacks being a classic example) only to the extent that the regulation is closely tailored.  The reason advanced for Maui’s variable setback rules is the supposed history of beachfront erosion at particular locations, with a fixed “buffer zone” plus historical erosion rates added together to calculate the “no build zone” on a specific parcel.  The major justification for setbacks is protecting the homeowner from building on property that may eventually be eroded.

If so, it seems odd that if a shoreline parcel has had “zero erosion” that the owner should be subject to a setback at all.  What harm is caused by building where there has been no erosion, and what danger is being prevented?

    Continue Reading ▪ Review of Maui Shoreline Setback Rules Underway

More on Leslie v. Board of Appeals, 109 Haw. 384, 126 P.3d 1071 (2006), discussed previously in this post.

The property owner’s subdivision application included a portion of its parcel within the shoreline Special Management Area (SMA), even though all of the construction was planned outside the SMA.

One of the major purposes of Hawaii’s Coastal Zone Management Act (CZMA) is to encourage development mauka (upland) of the SMA, the land closest to the ocean.  The SMA boundary is the critical line in the sand – a property owner need only seek a SMA permit for “development within the SMA” as required by the CZMA if it plans development makai (oceanward) of this boundary.  It appeared the property owner proposed development as contemplated by the CZMA — all of it was mauka of the SMA line.

The county determined that the subdivision of Kiilae’s land was not “development within the SMA” since no actual construction was proposed within the SMA, and did not require the property owner to apply for a SMA permit.  However, a portion of the property being subdivided was within the SMA, even though no actual construction was planned on that parcel.

The issue before the supreme court was whether the subdivision of a parcel, a portion of which is within the SMA, requires a SMA permit.  The court held that because the owner sought subdivision of the entire parcel — its application included a portion of that parcel which was within the SMA — the impact of the entire proposed subdivision must be taken into account when determining whether a permit must be sought. 

This result, like the subdivision issue, was based on the language of the statute.  The property owner’s subdivision application included property within the SMA, and the statutory definition of “development” includes subdivision.  Once that fact was established, the result was consistent with the court’s reliance on plain stautory language.  It would have been another matter entirely, however, if the SMA portion of the property had first been subdivided out, and no part of the subdivided property was within the SMA, even if the act of subdivision were to have some effects on property within the SMA.

Thus, the second lesson that can be taken from the Leslie case is that a property owner must pay close attention to what property is included in an application, because it will be held to it. 

Disclosure: I filed an amicus brief in this appeal, supporting the position of the property owner and the county.

   Continue Reading ▪ SMA: The Line in the Sand

“When all else fails, read the instructions.” 

That old adage is the first lesson to be taken from the Supreme Court of Hawaii’s decision earlier this year in Leslie v. Board of Appeals, 109 Haw. 384, 126 P.3d 1071 (2006). Disclosure: I filed an amicus brief in that case, supporting one the arguments of the property owner and the county on a different issue. 

The case began when Kiilae Estates asked the County of Hawaii to approve a subdivision of its land.  The county subdivision code contains a long list of information that “shall” be submitted with preliminary subdivision plats.  The long-standing practice of the county Planning Department, however, was to defer submission of these materials until after the review of the preliminary subdivision plans.  It made more sense, the Department claimed, to wait until later in the process when the developer’s plans are more complete, and thus the information would be more useful to planners.    Continue Reading ▪ Court to Government: Read the Statute

What happens when a religious institution claims that local land use regulations impermissibly burden its First Amendment rights to freedom of religion?  A recent case decided by the Ninth Circuit, Guru Nanak Sikh Society of Yuba City v. County of Sutter, 456 F.3d 978 (9th Cir. 2006) (Aug. 1, 2006), illustrates the conflict. 

After its proposal to develop a temple on one parcel was denied, a Sikh group sought a conditional use permit (CUP) from Sutter County, California, to construct a temple on another parcel designated for agricultural use.  The County planning department recommended approval, with a series of conditions designed to mitigate the proposed temple’s impact, such as limiting the number of people attending the temple to 75, and several design modifications to the building.  The Sikhs accepted the conditions. 

After a public hearing at which members of the public opposed the CUP, mainly on the basis of noise, traffic, interference with neighboring agriculture operations, and predicted lowering of property values in the area, the county planning commission narrowly approved the application, subject to the conditions.  Several neighbors appealed to the county Board of Supervisors which denied the CUP. 

The Ninth Circuit first held that the denial of the CUP was a “substantial burden” on the temple’s free exercise of religion.  The Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA) thus applied, and required the government to show that the burden on religion was outweighed by a “compelling governmental interest.”  In other words, before the government may deny a religious institution a specific land use permission, it must have a very good reason, and be able to prove it.  In this instance, the court found that the County’s denial of the temple’s first request, combined with the County’s denial of the CUP even after conditions to mitigate impacts had been accepted by the Sikhs, was a substantial burden on their religious freedom:

Because the County’s actions have to a significantly great extent lessened the prospect of Guru Nanak being able to construct a temple in the future, the County has imposed a substantial burden on Guru Nanak’s religious exercise. 

The County did not offer any countervailing “compelling interests,” and did not even attempt to meet the burden of persuasion imposed on it by RLUIPA.  The Ninth Circuit also determined that RLUIPA was a valid exercise of Congress’ power to enforce the Fourteenth Amendment, and its power to enforce the Free Exercise Clause of the First Amendment. 

This case shows that RLUIPA continues to be a powerful tool to prevent land use authorities from undue interference with a religious use of property.

    

   Continue Reading ▪ Religious Land Use Trumps Local Permit Denials

The Hawaii Supreme Court recently decided a case that provides some guidance to those who practice in the often ill-defined space between executive agencies and the courts, a place land use lawyers and their clients frequently find themselves.

In Hui Kakoo Aina Hoopulapula v. Board of Land and Natural Resources (Sep. 21, 2006), the court confirmed that in order to properly demand a “contested case” (a trial-like administrative hearing) and thus preserve a right to judicial review of agency action, the party demanding the hearing must follow the agency’s rules to request it, even if it appears futile to do so.

In that case, the electric company asked the State Board of Land and Natural Resources for a long-term lease of brackish water from a Big Island aquifer for “industrial use and fire suppression” for a generating plant. 

Parties who have long objected to the generating plant objected to the proposed lease and orally asked the Board for a contested case at a public hearing the Board scheduled on the electric company’s request.  The Board rejected the oral request for a contested case and issued the lease after a public auction.  The objectors did not file a written request for a contested case with the Board, as required by the Board’s rules of procedure.

The objectors then sought judicial review in circuit court of the issuance of the lease, and the denial of the contested case.  Circuit court review of administrative agency action is limited to appellate review of the administrative record produced after a contested case.  Thus, if no contested case is held in the agency, the circuit courts lack subject matter jurisdiction. 

The circuit court, finding that no contested case was conducted by the Board, determined it lacked jurisdiction, and the supreme court affirmed, never reaching the substantive issues raised by the objectors.  Lack of jurisdiction prevented the courts from considering the case at all.

The key holding of the case is that a proper written demand for a contested case is a jurisdictional prerequisite to judicial review.  Even when the agency has denied an oral demand.  The court held that the agency’s “no” may not have really meant “no,” and the objectors may have been able to change the agency’s mind with a written demand for a contested case. 

No demand for a contested case means no contested case is conducted, and no contested case means that a party disappointed with the result of agency action cannot run to court and seek reversal.

    Continue Reading ▪ Contesting Contested Cases