Inclusionary Housing Bylaw
Source: Cape Cod Commission Model Bylaws and Regulations
Inclusionary Housing Bylaw/Ordinance for Towns in Barnstable County, MA
The Cape Cod Commission has created a model bylaw/ordinance for use by towns in Barnstable County to establish an affordable housing program. The model was drafted by the environmental services consulting firm of Horsley & Witten, Inc., in Barnstable, and the Boston law firm of Robinson & Cole.
Affordable housing has been an issue on Cape Cod for decades. Whose responsibility is the provision of housing, either for purchase or rent? What are the impacts on the Cape's economy, demographics, diversity and future settlement patterns if provisions for affordable housing are not made? Finally, are provisions for affordable housing, assuming they should be made, best left to the free market, or should government intervene?
Through years of discussion, analysis and debate, Cape Cod towns and, more recently, the Cape Cod Commission through its Regional Policy Plan, have determined that while the provision of affordable housing is the responsibility of both public and private sectors, the public sector must take the lead.
In many ways, the decision that municipalities should be primarily responsible for development of affordable housing can be traced back to 1969 and the passage of the Low and Moderate Income Housing Act, better know as "Chapter 40B" (G.L. c.40B sect. 20-24). This law requires that local governments ensure that at least ten percent of new housing units in their community are "affordable" for defined income groups in the region and community. Communities not meeting this requirement are liable to "comprehensive permit" filings by qualified developers. Comprehensive permits require a relaxation in zoning and any other locally controlled regulations that would impede the development of affordable housing even if the overall development would not be allowed by current regulations.
The bylaw/ordinance that follows allows the Cape towns a creative opportunity to develop affordable housing units. The bylaw/ordinance will result in the creation of affordable housing units in a manner approved, in advance, by the community, thus avoiding many of the unpleasant aspects of "Chapter 40B" that Cape towns experienced in the mid to late 1980s.
The annotations and commentary which follow use the numbering and headings of the model bylaw/ordinance. The annotations and commentary will not be part of your bylaw/ordinance, but will serve as a "legislative history" of the intent of the drafters and the interpretation to be given to terms and provisions.
Despite the drafters' best intentions, there is no true "model" bylaw/ordinance, particularly in an area as diverse as Cape Cod. Towns are encouraged to revise the text and annotations within this bylaw/ordinance as they determine appropriate.
01.0 Purpose and Intent: The purpose of this bylaw is to outline and implement a coherent set of policies and objectives for the development of affordable housing in compliance with the Regional Policy Plan for Cape Cod, G.L. c. 40B sect. 20-24 and various initiative programs developed by state, county and local government. It is intended that the affordable housing units that result from this bylaw/ordinance be considered as Local Initiative Units in compliance with the requirements for the same as specified by the Department of Community Affairs, Division of Housing and Community Development.
02.1 Local housing fund. An account established by: (a) the Town for the specific purpose of creating affordable housing, including use by the Town Housing Authority for the purchase of land or units, or the development of new or rehabilitation of existing dwelling units for affordable housing occupants; or (b) a housing trust or community development corporation designated by the Town and created under the laws of the Commonwealth of Massachusetts.
Commentary: This definition establishes the account and agency in charge of the account for fees-in-lieu-of affordable housing units, more fully discussed in Section 0.80.
02.2 Affordable housing unit. A dwelling unit available at a cost of no more than 30% of gross household income of households at or below 80% of the Barnstable County median income as reported by the U.S. Department of Housing and Urban Development, including units listed under G.L. c.40B sect. 20-24 and the Commonwealth's Local Initiative Program.
Commentary: This definition links the Commonwealth's Low and Moderate Income Housing and Local Initiative Programs for the purposes of determining which units count toward a Town's requirement to establish affordable housing. This definition is consistent with the definition used in the Regional Policy Plan.
02.3 Qualified affordable housing unit purchaser or tenant. An individual or family with household incomes that do not exceed 80% of the median income, with adjustments for household size, as reported by the United States Department of Housing and Urban Development (HUD) and the Commonwealth's Local Initiative Program.
Commentary: This is a commonly accepted and used definition for determining qualified purchasers or tenants for affordable housing units. For example, a family of four with an income of $38,300 or less, or an individual with an income of less than $26,800 in 1998 are qualified purchasers or tenants under this definition.
03.1 Division of Land. The division of land into ten (10) or more lots shall require a special permit from the special permit granting authority (SPGA). A special permit shall be required for land divisions under G.L. c.40A sect. 9 as well as for "conventional" or "grid" divisions allowed by G.L. c.41 sect. 81-L and sect. 81-U, including those divisions of land that do not require subdivision approval.
03.2 Multiple Units. The construction of ten (10) or more dwelling units, whether on one or more contiguous parcels, shall require a special permit from the SPGA.
Commentary: The requirements of this bylaw/ordinance are triggered by the occurrence of the division of land into ten or more lots and/or the construction of more than ten dwelling units. Note that the division of land trigger is accomplished by either filing a plan for the subdivision of land or the filing of a so-called approval not required plan.
It is recommended that the Town adopt a companion regulation to prevent intentional segmentation of projects designed to avoid the requirements of this bylaw (e.g. subdividing one large tract into two smaller tracts, each of which will contain fewer than 10 units or phasing a development such that each phase will contain fewer than 10 units). This "anti-segmentation" bylaw can specify that parcels held in common ownership as of the passage of this bylaw cannot later defeat the requirements of this regulation by segmenting the development.
04.0 Mandatory Provision of Affordable Units:
04.1 The SPGA shall, as a condition of approval of any development referred to in Sections 03.1 and 03.2, require that the applicant for special permit approval comply with the obligation to provide affordable housing pursuant to this bylaw/ordinance and more fully described in Section 05.0.
Commentary: This provision links the requirements for obtaining a special permit with the provision of affordable housing.
05.0 Provision of Affordable Units:
05.1 The SPGA shall deny any application for a special permit for development under this bylaw if the applicant for special permit approval does not comply, at a minimum, with the following requirements for affordable units:
05.1(a). At least ten (10) percent of the units in a division of land or multiple unit development subject to this bylaw shall be established as affordable housing units in any one or combination of methods provided for below:
- constructed or rehabilitated on the locus subject to the special permit (see Section 06.0); or
- constructed or rehabilitated on a locus different than the one subject to the special permit (see Section 07.0); or
- an equivalent fees-in -lieu-of payment may be made (see Section 08.0); or
- An applicant may offer, and the SPGA may accept, donations of land in fee simple, on or off-site, that the SPGA in its sole discretion determines are suitable for the construction of affordable housing units. The value of donated land shall be equal to or greater than the value of the construction or set-aside of the affordable units. The SPGA may require, prior to accepting land as satisfaction of the requirements of this bylaw/ordinance, that the applicant submit appraisals of the land in question, as well as other data relevant to the determination of equivalent value.
The applicant may offer, and the SPGA may accept, any combination of the Section 05.1(a)(1)-(4) requirements provided that in no event shall the total number of units or land area provided be less than the equivalent number or value of affordable units required by this bylaw/ordinance.
Commentary: This section establishes the minimum number of, and methods for, provision of affordable units. Note that the applicant has four choices for providing affordable units. First, they may construct or rehabilitate units on the site subject to the special permit. Second, they may construct or rehabilitate units at a different site than the one subject to the special permit. Third, they may offer fees in lieu of the construction of affordable housing units, more fully discussed in Section 08.0. Fourth, they may offer, and the SPGA may accept, land on- or off-site for the purposes of constructing affordable units, perhaps by the Town or a non-profit entity or a subsequent developer. Finally, the applicant may propose and the SPGA may accept any combination of options one through four.
This Section is an appropriate location for including a voluntary provision for affordable housing development and, if appropriate, a provision for a density bonus for doing so. For example, while an applicant is required to create five affordable housing units in a 50-lot subdivision, their offering of seven units could be met, if the bylaw/ordinance provided for it, with a bonus of extra market rate units (e.g. two additional market rate units). The maximum number of bonus units must be specified, as well as the SPGA's method for determining the number of affordable units beyond those required that must be provided before qualifying for a bonus.
06.0 Provisions Applicable to Affordable Housing Units On- and Off-Site:
6.1. Siting of affordable units. All affordable units constructed or rehabilitated under this bylaw shall be situated within the development so as not to be in less desirable locations than market-rate units in the development and shall, on average, be no less accessible to public amenities, such as open space, as the market-rate units.
6.2. Minimum design and construction standards for affordable units. Affordable housing units within market rate developments shall be integrated with the rest of the development and shall be compatible in design, appearance, construction and quality of materials with other units. Interior features of affordable units shall comply in all respects to the minimum design and construction standards set forth in the Local Initiative Guidelines by the Division of Housing and Community Development, July 1996, or as amended.
6.3. Timing of construction or provision of affordable units or lots. Where feasible, affordable housing units shall be provided coincident to the development of market-rate units, but in no event shall the development of affordable units be delayed beyond the schedule noted below:
|Up to 30%||None required|
|30% plus 1 unit||At least 10%|
|Up to 50%||At least 30%|
|Up to 75%||At least 50%|
|75% plus 1 unit||At least 70%|
|Up to 90%||100%|
|Fractions of units shall not be counted.|
Commentary: The table above establishes the required schedule for completion of affordable units in conjunction with the completion of market rate units. For example, a 100-lot subdivision requires 10 affordable units. Assume all 10 affordable units are to be constructed on-site. Upon completion of the 31st market rate unit, the developer must construct at least 1 affordable unit (10% of 10). After completion of the 50th unit, the applicant must have constructed at least 3 affordable units (30% of 10), and so on. Towns are free to adjust this schedule, but should bear in mind that a minimum amount of market rate units are often needed to create sufficient cash flow to make the overall project work. To that end, it is recommended that the initial affordable unit requirement not be triggered until at least one-third of the market units are constructed.
6.4. Local preference. (as established)
Commentary: Towns are free to establish local preference criteria for up to 70 percent of the affordable units under the Local Initiative Program. Local preference criteria should be designed to address truly local housing needs -- needs that are unique to the community and perhaps not found Cape-wide. Local preference criteria may not, obviously, include any discriminatory criteria beyond an individual's location of residency. Counsel should be contacted to ensure that local preference criteria does not violate provisions of federal or state law.
6.5. Marketing Plan for Affordable Units. Applicants under this bylaw/ordinance shall submit a marketing plan or other method approved by the Town through its local comprehensive plan, to the SPGA for its approval, which describes how the affordable units will be marketed to potential home buyers or tenants. This plan shall include a description of the lottery or other process to be used for selecting buyers or tenants.
Commentary: A marketing plan is considered essential to the success of affordable housing development on Cape Cod. Issues of how the units are advertised, how qualified applicants are sought and determined, and methods for reducing delays for qualified applicants are key to the use of this bylaw/ordinance. Example marketing plans and suggested affordable unit marketing strategies for developers and the Towns are available from staff at the Cape Cod Commission.
07.0 Provision of Affordable Housing Units Off-Site:
07.1 As an alternative to the requirements of Section 06.0 or 08.0, an applicant subject to the bylaw/ordinance may develop, construct or otherwise provide affordable units equivalent to those required by Section 05.0 off-site. All requirements of this bylaw/ordinance that apply to on-site provision of affordable units, shall apply to provision of off-site affordable units. In addition, the location of the off-site units to be provided shall be approved by the SPGA as an integral element of the special permit review and approval process.
Commentary: Allowing off-site provision of affordable units gives flexibility to both the developer and the Town. Towns should consider adding review criteria for the approval of off-site locations, however. For example, allowing the provision of the affordable units in undesirable portions of the community does little to promote the purposes of this bylaw/ordinance, while encouraging development or conversion of affordable units near municipal services or access to public transportation may, for some individuals, provide a significant economic savings.
08.0 Fees-in-Lieu-of Affordable Housing Unit Provision:
08.1 As an alternative to the requirements of Section 06.0 or Section 07.0, an applicant may contribute to an established local housing trust fund to be used for the development of affordable housing in lieu of constructing and offering affordable units within the locus of the proposed development or off-site.
08.1(a). Calculation of fees-in-lieu-of units. The applicant for development subject to this bylaw may pay fees in lieu of the construction of affordable units. For the purposes of this bylaw/ordinance, and based on County-wide averages, the fee in lieu of the construction or provision of affordable units is determined to be $40,000 per unit. For example, if the applicant is required to construct three affordable income units, they may opt to pay $120,000 in lieu of constructing or providing the units.
Commentary: This Section provides a cash payment option in lieu of providing affordable units. The $40,000 per unit payment is calculated as the amount required to provide the affordable housing unit discount necessary to make the unit affordable (e.g. median sale price of market rate unit minus maximum sale price of a three-bedroom affordable dwelling unit).
08.1(b). Schedule of fees in lieu of payments. Fees in lieu of unit payments shall be made according to the schedule set forth in Section 06.3., above.
Commentary: This section establishes the fee in lieu of payments schedule to coincide with the schedule for provision of units established by Section 06.3. For example, a 50-lot subdivision requires five affordable units. An applicant choosing to make fee-in-lieu-of payments would be required to pay $200,000 (5 units @ $40,000 per unit). The payment schedule would require 10 percent of the $200,000 ($20,000) after the 16th market rate unit was built, and $100,000 after the 38th market rate unit was built and so on, according to the schedule noted in Section 06.3.
09.0 Maximum Incomes and Selling Prices: Initial Sale:
09.1 To ensure that only eligible households purchase affordable housing units, the purchaser of a affordable unit shall be required to submit copies of the last three years' federal and state income tax returns and certify, in writing and prior to transfer of title, to the developer of the housing units or his/her agent, and within thirty (30) days following transfer of title, to the local housing trust, community development corporation, housing authority or other agency as established by the Town, that his/her or their family's annual income level does not exceed the maximum level as established by the Commonwealth's Division of Housing and Community Development, and as may be revised from time to time.
09.2 The maximum housing cost for affordable units created under this bylaw is as established by the Commonwealth's Division of Housing and Community Development, Local Initiative Program or as revised by the Town.
Commentary: The Division of Housing and Community Development publishes maximum income, selling prices and monthly rent ceilings for occupants of affordable income housing units (Division of Housing and Community Development, Local Initiative Program, July 1996). Individual towns are free to adjust these numbers to accommodate local needs and concerns; however, it is recommended that the Division's guidelines be reviewed prior to setting local ceilings. Staff at the Cape Cod Commission are available to assist Towns establish appropriate housing costs.
10.0 Preservation of Affordability; Restrictions on Resale:
10.1 Each affordable unit created in accordance with this bylaw shall have limitations governing its resale. The purpose of these limitations is to preserve the long-term affordability of the unit and to ensure its continued availability for affordable income households. The resale controls shall be established through a restriction on the property and shall be in force for a period of forty (40) years.
10.1(a). Resale price. Sales beyond the initial sale to a qualified affordable income purchaser shall include the initial discount rate between the sale price and the unit's appraised value at the time of resale. This percentage shall be recorded as part of the restriction on the property noted in Section 10.1, above. For example, if a unit appraised for $100,000 is sold for $75,000 as a result of this bylaw, it has sold for 75 percent of its appraised value. If, several years later, the appraised value of the unit at the time of proposed resale is $150,000, the unit may be sold for no more than $112,500--75 percent of the appraised value of $150,000.
10.1(b). Right of first refusal to purchase. The purchaser of an affordable housing unit developed as a result of this bylaw shall agree to execute a deed rider prepared by the Town, consistent with model riders prepared by Department of Housing and Community Development, granting, among other things, the municipality's right of first refusal to purchase the property in the event that a subsequent qualified purchaser cannot be located.
10.1(c). The SPGA shall require, as a condition for special permit under this bylaw, that the applicant comply with the mandatory set-asides and accompanying restrictions on affordability, including the execution of the deed rider noted in Section 10.1(b), above. The Building Commissioner/Inspector shall not issue an occupancy permit for any affordable unit until the deed restriction is recorded.
Commentary: This Section provides language to ensure that the affordable housing units remain affordable by restricting resales for at least 40 years and by granting the Town a right of first refusal to purchase the dwelling unit should a qualified purchaser, beyond the initial purchaser, not be found. The restrictions on resale are designed to encourage the homeowner to maintain and improve the property while at the same time ensure that if and when sold, the new qualified buyer is able to enjoy the same discount between sale price and appraised value. It is important to emphasize that the restrictions on resale do not block, in any way, the property owner from realizing a profit on the resale of the dwelling unit. Rather, as noted, the resale restriction passes on the initial discounted rate enjoyed by the initial buyer to the new, qualified buyer.
11.0 Conflict with Other Bylaws/Ordinances: The provisions of this bylaw/ordinance shall be considered supplemental of existing zoning bylaws/ordinances. To the extent that a conflict exists between this bylaw/ordinance and others, the more restrictive bylaw/ordinance, or provisions therein, shall apply.
Commentary: This provision establishes that where a conflict exists between this bylaw/ordinance and an existing (or future) bylaw/ordinance, the more restrictive provisions of either would apply. For example, this bylaw/ordinance requires a special permit for the division of land into ten or more lots, whereas that requirement does not currently exist in Cape town bylaws/ordinances. Section 11.0 states that the more restrictive provision applies during a conflict, thus the special permit requirements of this bylaw/ordinance would supersede (overrule) the provisions of existing bylaws/ordinances.
12.0 Review by Special Permit Granting Authority (SPGA): The Planning Board shall be designated as the SPGA under this bylaw.
Commentary: The planning board is the recommended special permit granting authority for this bylaw/ordinance.
0.13.1 If any provision of this bylaw is held invalid by a court of competent jurisdiction, the remainder of the bylaw shall not be affected thereby. The invalidity of any section or sections or parts of any section or sections of this bylaw shall not affect the validity of the remainder of the [town]'s zoning bylaw.
Commentary: This Section is a generic severability clause. Severability clauses are intended to allow a court to strike or delete portions of a regulation that it determines to violate state or federal law. In addition, the severability clause provides limited insurance that a court will not strike down the entire bylaw should it find one or two offending sections.