How Far Can Cities Go Legally With Inclusionary Zoning?
The Attorney General's opinion, that inclusionary zoning ordinances are generally consistent with Minnesota law, can be found here.
This is the Housing Preservation Project's letter to the Attorney General setting out the importance of inclusionary zoning in the metropolitan area and legal arguments in support of such zoning:
July 30, 2007
The Honorable Lori Swanson
Attorney General, State of Minnesota
1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101
Re: Request for Attorney General Opinion, City of Forest Lake
Dear Ms. Swanson:
The City of Forest Lake has requested an opinion from your office regarding proposed City policies to promote affordable housing. As the Star Tribune editorial attached as Exhibit 1 indicates, the affordable housing issue is currently a critical one in the metropolitan area. Inclusionary housing policies of the sort proposed by Forest Lake are an important, and in many cases, necessary tool in addressing this critical issue. The League of Minnesota Cities Insurance Trust has issued a legal opinion to Forest Lake, attached as Exhibit 2, indicating that zoning ordinances mandating the inclusion of affordable housing in certain residential developments are not permitted under state law and may constitute compensable "takings" under the U.S. Constitution. That opinion, which presumably prompted the City's letter to your office, misconstrues the state law issue and is without any support in Constitutional law. Yet because of the League's position with Minnesota cities, the opinion, if not corrected or withdrawn, will deprive Minnesota Cities of a critically important affordable housing tool. In the Metropolitan Area it will force cities to choose between a legal opinion from their insurer and their obligations under the Metropolitan Land Use Planning Act. For that reason, we are providing your office with this memorandum, attempting to clarify the questions posed by the City's letter, on behalf of MICAH, Home Line, and the Alliance for Metropolitan Stability, all non-profit organizations advocating for affordable housing throughout the metropolitan area.
I. Background on the Forest Lake Request
In December, 2006, the City of Forest Lake settled a lawsuit which had been brought a year earlier over the City's refusal to issue a conditional use permit and subdivision approval to accommodate an affordable housing development. Part of the agreement settling the litigation required the City to review its comprehensive plan and zoning and subdivision ordinances "in order to affirmatively encourage the development of affordable housing." An Affordable Housing Task Force established by the City pursuant to the settlement recommended a city ordinance requiring that any proposed residential development of 10 or more units include 20% affordable units.
In response, the City produced a draft comprehensive
plan housing chapter for submission to the Metropolitan Council, which committed
the City to development of an inclusionary housing ordinance requiring 20% of
the units in all developments of ten or more units to be affordable to low
income households. The ordinance would
impose 30 year restrictive covenants on the affordable units and would permit
developers to deposit into an affordable housing trust fund in lieu of meeting
the affordability requirements. The
ordinance would provide benefits, such a density bonuses, to developers meeting
the affordability requirements. Such
inclusionary zoning policies are currently employed in hundreds of cities
around the country. They are generally regarded as effective
tools to produce affordable housing, address segregation, and undo the effects
of pervasive restrictive zoning practices.
But the City then sought a legal opinion from the League of Minnesota Cities Insurance Trust regarding the legality of such an ordinance. The League of Minnesota Cities responded that, based on Minn. Stat. Section 462.358, subd. 11 (hereafter, "Subd. 11"), any local affordable housing requirements may apply only upon the request of an applicant for a land use permit and must be the result of a voluntary agreement with the applicant. The opinion also suggested that mandating affordable housing would potentially result in a "taking" under the United States Constitution. This opinion badly misconstrues Section 462.358, subd. 11; ignores the Metropolitan Land Use Planning Act which supercedes Section 462.358 subd. 11 in the metropolitan area; and suggests application of Constitutional "takings" law to inclusionary zoning ordinances for which there is no precedent whatsoever. This memo is an attempt to clarify the issues involved and to correct the errors in the League of Cities opinion.
As described in Section V below, the issue is a
critical one. The record of metropolitan
area cities in encouraging voluntary production of affordable housing has
generally been deplorable. If the League
of Cities position is endorsed by the Attorney General's Office as guidance to
cities, a critically important tool is lost and the metropolitan area is doomed
to more decades of ineffectual affordable housing planning, with the result
that thousands more low income families will pay far more than they can afford
II. The League's Memorandum Misconstrues Subd. 11
Minn. Stat. § 462.358 subd. 11 provides:
Subd. 11. Affordable housing. For the purposes
of this subdivision, a "development application" means subdivision,
planned unit development, site plan, or other similar type action. If a
municipality, in approving a development application that provides all or a
portion of the units for persons and families of low and moderate income, so
proposes, the applicant may request that provisions authorized by clauses (1)
to (4) will apply to housing for persons of low and moderate income, subject to
agreement between the municipality and the applicant:
(2) establishing maximum income limits for initial and subsequent purchasers or
renters of the affordable units;
(3) establishing means, including, but not limited to, equity sharing, or similar
activities, to maintain the long-term affordability of the affordable units; and
(4) establishing a land trust agreement to maintain the long-term affordability of the
Clauses (1) to (3) shall not apply for more than 20 years from the date of initial
occupancy except where public financing or subsidy requires longer terms.
The key, and erroneous, conclusion of the League's opinion is that "the statute stresses that local housing requirements may apply only upon the applicant's request." That is not what the statute says nor how it should be implemented in practice. The plain language of Subd. 11 does not - and cannot - interfere in any way with cities' well established discretion to deny land use applications which do not comply with city comprehensive plans and ordinances. Such plans and ordinances may, and in the metropolitan area must, include affordable housing provisions. Because Subd. 11 says nothing about whether a city may choose to condition discretionary land use decisions on inclusion by the applicant of an affordable housing component, the League is wrong to conclude that local affordable housing requirements may apply only upon the applicant's request. Accepting the League's position would lead to the absurd result that provisions of cities' comprehensive plans and zoning ordinances, provisions which are clearly authorized by law, apply only upon the request of developers.
Nationally, there are three broad types of inclusionary zoning ordinances. Some are purely voluntary - offering incentives to developers to include affordable housing. There should be no controversy about the ability of Minnesota cities to pursue such policies. There are two additional types of policies in which a city imposes a requirement for inclusion of affordable housing. One type, a mandatory policy like that proposed in Forest Lake, is very common nationally. Such policies typically provide that all developments of a certain size include an affordability component (usually 10%-20% of the units), regardless of whether the city, prior to adoption of the inclusionary policy, would have had any approval rights over the proposed development. Subd. 11 might be interpreted to limit this sort of unilateral imposition of an affordability requirement on a development, at least outside of the metropolitan area, because the statute ultimately requires an agreement on how any affordable housing component is to be implemented. Such mandatory policies are permitted in the metropolitan area because of metro-specific legislation superceding the state's general land use laws. See Section III below. The third type of inclusionary zoning ordinance, like that used in Boston, intermediate between the completely mandatory and the completely voluntary policies, ties affordable housing requirements to requests by developer's for discretionary land use concessions such as conditional use permits, variances, rezoning, or comprehensive plan changes. This type of inclusionary policy is fully consistent with Subd. 11 and may be adopted in cities throughout the state.
In a Minnesota city with local housing requirements like Boston's incorporated into its comprehensive plan and zoning and subdivision ordinances, any land use proposal which is consistent with the plan and ordinances must provide for a portion of the units to be affordable to lower income households. That proposal then triggers the provisions of Subd. 11. The city then may propose any of a number of specific affordability provisions set out in the Subd. 11. In response, the applicant may incorporate such provisions into the application and the city and the developer agree upon specific affordability provisions among those permitted by Subd. 11. Subd. 11 is thus fully consistent with a Boston-type inclusionary zoning policy.
The critical point missed by the League is that the Subd. 11 doesn't limit the circumstances which might induce a developer to include affordable housing in its proposal; rather the statute focuses entirely on what happens next. The statute does not remotely imply that a city must forgo its traditional discretion and approve a land use proposal which does not include an affordable housing component.
A number of Minnesota cities have proactively sought affordable housing proposals for large available building sites by advertising their willingness to rezone the land to provide for greater density, agree to variances as to street width and set back requirements, and to issue special use permits for planned unit developments in return for proposals which included an affordable housing component. Chaska's Clover Ridge and Chanhassen's Arboretum Village are good examples. (See article on Chaska's Clover Ridge.) The agreements produced in these projects are exactly the sort of agreement contemplated by Subd. 11. Boston's ordinance makes a city wide legislative policy what Chanhassen and Chaska did in specific cases. There is nothing about Subd. 11 which implies that it authorizes regulatory relief in exchange for affordable housing agreements on a case-by-case basis, but not if applied consistently on a city-wide basis. It's possible that the League's opinion, drafted in reaction to a strict mandatory policy proposed by Forest Lake, simply ignored this sort of local housing requirement and overstated the conclusion that all such policies apply only on an applicant's request.
The statute does not contain even the slightest
implication that a city is required to approve an application for discretionary
land use concessions if no such affordability agreement can be reached. To infer one would be to unduly ties cities'
hands and overturn the well established ability of cities to control their
growth. It is well established that
cities have wide discretion to deny requests for rezoning, variances,
subdivision approvals, and special use permits and to condition approval upon
compliance by the applicant with the city's comprehensive plan and zoning
ordinances. Freundshuh v. City of Blaine, 385 N.W.2d 6, 9-11 (Minn. App.
1986)(rezoning); Hubbard Broadcasting, Inc. v. City of Afton, 323 N.W.2d 757, 763 (Minn. 1982)(special use permit); VanLandschoot v. City of Mendota Heights, 336 N.W.2d 503, 508-09,
fns 6, 7 (Minn.
1983)(subdivision, variances). It is
equally well established that policies promoting affordable housing are
legitimately part of a city's comprehensive plan. Indeed, in the metropolitan area, it is
mandatory that such policies be part of the comprehensive plan. See Minn.
Stat. § 473.859 and discussion in III
below. Further authority is found in
Minn. Stat. § 462.358 which makes
advancement of affordable housing a purpose of
subdivision ordinances throughout the state. While provision of affordable housing is not
specifically mentioned as a purpose
of Minn. Stat. 462.357, governing zoning ordinances statewide, there can be
little doubt that it is included in the phrase "promoting the public health,
safety, morals, and general welfare"
which defines the purpose of such ordinances:
It is plain beyond dispute that proper provision for
adequate housing of all
categories of people is certainly an absolute essential in promotion of the
general welfare required in all local land use regulation."
Southern Burlington County NAACP v. Mt. Laurel Township, 336 A.2d 713, 727 (N.J. 1975), cert denied, 96 S.Ct. 18 (1975); Britton v. Town of Chester, 595 A2d 492, 495-96 (N.H. 1991); Suffolk Housing Services v. town of Brookhaven, 511 N.E. 67, 69 (N.Y.App. 1987).
The statute does not give developers a right to
demand land use concessions from a city which are contrary to reasonable
provisions set out in the city's comprehensive plan and zoning or subdidivsion
ordinances. Subd. 11 does not purport to force cities to grant
discretionary permits to developers who decline to comply with city affordable
housing policies which require some form of mutually agreeable income
restrictions on a portion of the units in a project.
III. Land Use Planning in the Metropolitan Area is
Controlled by the
Metropolitan Land Use Planning Act.
Minnesota Statutes §§ 473.851 - 473.871, the
Metropolitan Land Use Planning Act (MLUPA) provides for local comprehensive
planning and land use controls within the seven-county metropolitan area,
consistent with planned and
coordinated development and growth. Minn. Stat. §
473.851. The statute requires every
metropolitan area unit of local government to adopt a comprehensive plan,
consistent with the requirements of the statute, to be reviewed by the
Metropolitan Council. Minn. Stat. §
473.858 subd. 1. Local zoning ordinances
must be consistent with the comprehensive plans. Id. The comprehensive plans must include land
use plans with a housing element:
containing standards, plans, and programs for
providing adequate housing
opportunities to meet existing and projected local and regional needs, including
but not limited to the use of official controls and land use planning to promote
the availability of land for the development of low and moderate income housing.
§ 473.859 subd.2(c).
The land use plan must also include a housing
including official controls to implement the housing
element of the land use
plan which will provide sufficient existing and new housing to meet the local
unit's share of the metropolitan area need for low and moderate income housing.
§ 473.859 subd. 4(3), emphasis added.
Authorizes Inclusionary Zoning Ordinances.
In the metropolitan area affordable housing
provisions must be an integral part of each city's comprehensive plan and
zoning and subdivision ordinances. Every
comprehensive plan and land use ordinance must address the city's and region's
need for affordable housing in a way that "will" result in provision of
sufficient new affordable housing. Every
city must, then, reject proposals for rezonings, subdivisions, special use
permits, or variances incompatible with those provisions. This context certainly provides a rational
basis for Boston-type inclusionary ordinances.
The imposition of such ordinances necessarily results in land use
proposals which will include affordable housing components, triggering the
process for reaching agreement on affordability mechanisms established by Subd.
11. There can be no doubt then that
Boston-type inclusionary zoning ordinances and policies are authorized by
Supersedes Subdivision 11 in the Metropolitan Area.
The provisions of the Land Use Planning Act supercede the provisions of otherwise applicable planning statutes "wherever a conflict may exist." § 473.858 subd. 1. Therefore, any limitation on inclusionary zoning policies which could be inferred from the language of § 462.358 subd. 11, would be superceded in the metropolitan area by the Land Use Planning Act authorization of, and requirement for, comprehensive plans and official controls  to provide sufficient affordable housing to meet local and regional needs.
From the national experience, it is clear that
programs which simply provide incentives for developers to produce affordable
housing are far less effective than those which require developers to include
an affordable component:
Incentive zoning leaves a developer
free to build only upper income housing
if it so chooses. Fox and Davis, in their survey of municipalities using inclusionary
devices, found that while developers sometimes profited through density
bonuses, they were usually reluctant to cooperate with incentive zoning programs;
and that therefore those municipalities that relied exclusively on such programs
were not very successful in actually providing lower income housing. Id. at
1067. Sole reliance on "incentive" techniques (or, indeed, reliance exclusively
on any one affirmative device) may prove in a particular case to be insufficient
to achieve compliance with the constitutional mandate…
A more effective inclusionary device that municipalities must use if they
cannot otherwise meet their fair share obligations is the mandatory
Where practical, a municipality should use mandatory set-asides even
where subsidies are not available.
Mt. Laurel II, 456 A.2d at 445-447, citing Fox & Davis, "Density Bonuse Zoning to Provide Low and Moderate Cost Housing," 3 Hastings Const. L.Q. 1015 (1977); Minnesota Housing Finance Agency, "Study of Inclusionary Housing Initiatives," February 2002, pgs. 21, 28, http://www.mhfa.state.mn.us/about/InclusionReport.pdf (mandatory inclusionary housing produces more units than voluntary efforts).
A metropolitan area city could therefore reasonably conclude that a mandatory ordinance such as that proposed by Forest Lake is required for the city's compliance with its obligations under MLUPA. When a city exercises its traditional land use discretion so as to comply with MLUPA, Subd. 11 is superceded to the extent that any conflict may exist.
Thus, both the type of mandatory inclusionary zoning
adopted by the City of Napa and that in Boston are permissible in the
metropolitan area, as are affordability restrictions different from, or of
longer duration than, those set out in Section 462.358 subd. 11.
IV. Properly drafted inclusionary zoning policies do not constitute
The League's opinion that an inclusionary zoning ordinance constitutes a "taking" under the U.S. Constitution, for which the City would have to pay "just compensation," is wholly without merit. Such ordinances have been enacted around the country since the early 1970s. There are currently hundreds of such ordinances, many of them in the mandatory form covering any development of a certain size originally proposed in Forest Lake. There have been no successful challenges to such ordinances under the U.S. Constitution.
The League of City's reliance on the Nollan/Dolan
line of cases  is
misplaced as these decisions are simply not applicable to an inclusionary
zoning ordinance. Both of these cases
dealt with requirements, imposed ad hoc on specific individualized projects,
that developers exchange property rights for land use concessions from the
cities. The heightened judicial scrutiny
applied to such "exactions" does not apply to general land use regulations, and
there is no support in the case law for the League's application of Nollan and
Dolan to inclusionary zoning. The
U.S. Supreme Court has stated:
…we have not extended the rough-proportionality test
of Dolan beyond the
special context of exactions - land use decisions conditioning approval of
development on the dedication of property to public use. City of Monterey
v. Del Monte Dunes, Ltd, 526 U.S. 687, 702 (1999).
In City of Monterey, four dissenting justices joined the majority in this part of the decision, "rejecting extension of 'rough proportionality' as a standard for reviewing land-use regulations generally." Id. at 733 (Souter, J., concurring and dissenting).
Courts which have specifically considered the issue have held that the far more deferential review applied to general zoning ordinances is to be applied to inclusionary zoning provisions. In Southern Burlington County N.A.A.C.P. v. Township of Mt. Laurel, 456 A.2d 390 (N.J. 1983)(Mt. Laurel II), the New Jersey Supreme Court rejected the claim that mandatory inclusionary zoning ordinances were takings under the U.S. Constitution. Pointing out that virtually all physical zoning provisions have implications for the socio-economic use of the property, the Court concluded that there was no basis for a distinction between mandatory inclusionary zoning provisions and any other sort of zoning regulations. Then, in a case decided subsequent to the Nollan decision, the New Jersey Supreme Court held that "the rational-nexus test is not apposite in determining the validity of inclusionary zoning devices…" Holmdel Builders Ass'n v. Township of Holmdel, 583 A.2d 277, 288 (N.J. 1990).
Most recently, the California Court of Appeals declined to apply the Nollan/Dolan analysis to a
facial challenge to the Napa,
inclusionary zoning ordinance. Home
Builders Ass'n v. City of Napa, 108 Cal. Rptr. 2d 60 (Ct.
App. 2001). The Home Builders
decision was based in substantial part on decisions holding that Nollan/Dolan review is applied to individualized city
review of particular developments whereas generally applicable legislation,
such as mandatory inclusionary requirements for specific types of development,
"warrant(s) the more deferential review that the Dolan court recognized
is generally accorded to legislative determinations." Id.
at 65-66. The Court in Dolan
distinguished general zoning laws by noting that they were essentially
legislative determinations made about classes of property rather than
essentially adjudicative decisions like the building permit on a specific
parcel at issue in Dolan. Dolan,
at 385. Minnesota Courts have adopted that
analysis, noting that Dolan "applies
only to adjudicative determinations that condition approval of a proposed land
use on a property transfer to the government" and does not apply "to a
citywide, legislative land-use regulation."
Arcadia Development Corp. v. City
552 N.W.2d 281, 286 (Minn.App. 1996).
Thus the Nolan/Dolan exaction
analysis simply does not apply in situations where no property transfer by the
developer is required or where the inclusionary requirement is of general
applicability - as in a city's comprehensive plan and zoning and subsidivion
ordinances, as proposed by Forest
The deferential standard for review of general zoning laws was set out in Agins v. City of Tiburon, 447 U.S. 255 (1980). There, the Court held that such laws would not effect a taking if they "substantially advanced legitimate state interests" and did not deny an owner "all economically viable use of his land." Id. at 260; Arcadia Development Corp., 552 N.W.2d at 286. Requiring housing developments to include affordable housing substantially advances the legitimate state interest in the provision of affordable housing as evidenced by Minn. Stat. §§ 473.851 - 473.871. Especially given the incentives which would be provided to developers in an ordinance like that proposed by Forest Lake, an affordability requirement affecting twenty percent of the units certainly does not deprive an owner of all economically viable use of the land. Concret Pipe & Prods. v. Construction Laborers Pension Trust, 113 S.t. 2264, 2291 (1993)("mere diminution" in value, however serious, is insufficient to demonstrate a taking); Arcadia Development Corp., 552 N.W.2d at 286.
There is one concern related to Nollan and Dolan
raised by the proposed Forest
Lake ordinance. Permitting a fee in lieu of meeting the
affordability requirement raises concern that the fee may be considered an
exaction. Commentators have suggested
that it might be a good practice to avoid such an alternative.
V. The issue is a critical one and the League of City's opinion inflicts
severe harm on efforts to produce affordable housing
As noted above, the Metropolitan Land Use Planning Act places heavy emphasis on the importance of each metropolitan area jurisdiction maximizing its efforts to produce its fair share of the areas need for affordable housing. The tool which the Metropolitan Council has relied upon most heavily since 1995 to effect this legislative goal is the Livable Communities Act (LCA). The LCA makes cities which negotiate affordable housing goals with the Metropolitan Council eligible for a variety of grant programs. Most cities have negotiated goals for production of affordable housing for the period 1995 through 2010. In a recent report, the Council took stock of the success of these cities in meeting their goals through 2005. The results were extremely disappointing. Two thirds of the way through the 15 year period to which the LCA goals applied, cities with affordable housing production goals had yet to produce 65% of their goals for homeownership, and 73% of their goals for affordable rental housing. See, report attached as Exhibit 3.
A 2003 study, "The Next Decade of Housing in Minnesota" found 171,062 metropolitan area households whose incomes were at or below 60% of area median income paying more than 30% of income for housing (above the federal standard, generally considered the maximum affordable housing cost). The study estimated that at least an additional 22,000 low income households, new to the metropolitan area in the decade 2000-2010, would be unable to find affordable housing. The inability of most metropolitan area jurisdictions to facilitate production of affordable housing, evidenced by their unmet LCA goals dramatically demonstrates the need for new tools, such as inclusionary zoning ordinances. As noted in Sec. III.B., above, inclusionary zoning policies which require affordable housing are more effective than those which merely provide incentives.
The League of Minnesota Cities Insurance Trust insures many Minnesota and metropolitan area cities and its lawyers represents them in land use cases. The League's opinion then will have a serious chilling effect on cities seeking to improve their affordable housing performance by using the most effective tools available. Their insurer, and the entity that will defend them, has publicly indicated that they will be legally liable if they impose any sort of mandatory inclusionary zoning requirement, even, apparently, one which is imposed only when a developer seeks assistance which is purely at the discretion of the city.
The League's opinion virtually assures that metro area cities collectively will continue to substantially fail to meet their legal obligation under the Metropolitan Land Use Planning Act to plan and provide for the region's affordable housing needs for low income families. It is based on a serious misinterpretation of Minnesota law and Constitutional precedent and must be rejected.
s/ Jack Cann
 According to Nicholas Brunick, "The Impact of Inclusionary Zoning on Development," available at http://www.bpichicago.org/rah/rihi_pubs.html, there were, as of 2003, 118 programs in Massachusetts, 266 in New Jersey, at least 107 in California, and another 2-3 dozen cities around the country including the D.C. metro area, North Carolina, New Mexico, Florida, Illiniois, Vermont, and Colorado. Madison, Wisconsin also has an ordinance.
 Barbara Ehrlich Kautz, "In Defense of Inclusionary Zoning: successfully Creating Affordable Housing," 36 U.S.F.L.Rev. 971, 988; Minnesota Housing Finance Agency, "Study of Inclusionary Housing Initiatives," February 2002, pg. 21, http://www.mhfa.state.mn.us/about/InclusionReport.pdf.
 For instance, the City of Napa zoning ordinance, upheld by the California Court of Appeals in 2001, requires that 10% of all newly constructed units be affordable. Home Builders Ass'n v. City of Napa, 108 Cal. Rptr. 2d 60, 62 (Ct. App. 2001).
 Kautz, fn 2 above, 36 U.S.F.L.Rev. at 997-998; Note, however, that the first ordinance in the country was held to be a taking under the Virginia state constitution, because it required some units to be sold or rented at other than market value, a standard that is far more stringent than that universally employed under the U.S. Constitution. Board of Supervisors of Fairfax County v. DeGroff Enterpirses, 198 S.E.2d 600, 602 (Va. 1973).
 Nollan v. California Coastal Commission, 483 U.S. 825 (1987)(requiring, in an exaction case, an "essential nexus" between city's condition for approval and the impact of the proposed project); Dolan v. City of Tigard, 512 U.S. 374 (1994)( requiring, in an exaction case, a "rough proportionality" between the conditions imposed and the project's impact).
Housing Preservation Project, July 2007
Star Tribune Editorial published on July 17, 2007.
PDF - 196 KB Exhibit 2: Legal Opinion of League of Minnesota Cities
Legal opinion from League of Minnesota Cities Insurance Trust regarding inclusionary housing in Forest Lake.
PDF - 459 KB Exhibit 3: Metropolitan Council LCA Progress Report
This February 2007 report from the Metropolitan Council describes the progress of each LCA city in meeting its affordable housing goals through 2005.
PDF - 813 KB