By Roland Murphy for AZBEX
The National Association of Homebuilders recently released an overview of Inclusionary Zoning laws around the United States.
Prepared by Hinckley, Allen & Snyder LLP, the 106-page “Policy, Practical, and Legal Challenges to Inclusionary Zoning: A Resource Manual for NAHB Members” offers a state-by-state look at inclusionary zoning and “provides a list of policy, practical and legal strategies that NAHB members may adopt when dealing with inclusionary zoning proposals, as well as an accessible guide to state statutory and case law authority for municipal or county governments to enact inclusionary zoning ordinances,” according to the announcement.
While inclusionary zoning is often combined with other legislative and policy issues in discussions on housing affordability, the report follows a multifaceted but narrow legal definition. The announcement says, “‘Inclusionary zoning’ is defined as any municipal or county ordinance that requires or allows a property owner, builder or developer to restrict the sale or resale price or rent of a specified percentage of residential units in development as a condition of receiving permission to construct that development. This definition covers both voluntary inclusionary programs—in which the owner/builder/developer has an option to impose price restrictions, usually in return for certain incentives—and mandatory programs — in which the price or rent restrictions are a condition of approval. This definition also includes ordinances that allow payment of a fee as a way to opt out of an inclusionary program.”
Inclusionary Zoning in Arizona
Despite the appeal of inclusionary zoning among liberal housing policy advocates and the state’s increasingly leftward political shift in recent years, Arizona remains one of four states that have some statutory prohibitions against inclusionary zoning.
The two primary pieces of legislation against inclusionary zoning in Arizona are The Private Property Rights Protection Act—Arizona Revised Statutes 12-1131, also known as Proposition 207—and ARS 11-819.
Voters approved Prop 207 in 2006. The measure restricts eminent domain and entitles landowners to compensation if a land use law is enacted that reduces a property’s fair market value. Nearly every zoning package regarding property use includes a statement of compliance asserting it does not violate the prohibition.
ARS 11-819 is more specific. It prevents counties from adopting general plan provisions, land use regulations and conditions for building or use permits that establish a set price for residential housing units or lots or that require units or lots “to be designated for sale or lease to any particular class or group of residents.” However, it does allow for the creation of incentives, density bonuses and other voluntary conditions intended to increase low- and moderate-income housing.
Cities and counties have made use of the second section of ARS 11-819 for a range of projects. Generally speaking, the governmental body and the developer agree that the development will dedicate a specific number or percentage of units for availability at lower-than-market rates in exchange for variances like height or density maximums. Since development agreements are technically voluntary and result from mutual negotiations for individual projects, the parties are free to set wider terms than would be possible under set mandates. Similar provisions have been used for public benefit considerations like art installations and communal gathering areas.
East Valley Representative Melody Hernandez, D-District 8, introduced a bill this January that would have repealed ARS 11-819, among other measures increasing municipal control over zoning and development issues. That bill was held in committees after a second read in the House.
Other Inclusionary Legislative Efforts
Inclusionary zoning was one of many affordability-related topics targeted by former legislator Steve Kaiser in various bills in the last few years. Some of the measures, including the proposed but eventually tabled House Bill 2674 co-sponsored by Democratic Representative César Chávez, that would have established “zoning by right” for housing development on some commercially zoned properties, were apparently intended to spark zoning reform discussions and serve as a “shot across the bow” for municipalities like Scottsdale, Fountain Hills and Sedona, among others, that have embraced an anti-development stance in recent years. (AZBEX Feb. 8, 2022; Feb. 15, 2022; Feb. 22, 2022)
The takeaway message from HB 2674 was that local bodies need to take action on affordable housing development, themselves, or else the State might step in and do it for them.
Kaiser moved from the House to the Senate in the last election and kept up his efforts at legislative reform. Early in the most recent legislative session, he introduced another controversial bill that would have given developers permission by right to build multifamily projects on any property near a light rail or streetcar line, significantly revised downward the parking requirements for new multifamily construction, established strict zoning request approval timelines and limited the public comment/opposition timelines and options on planned developments. The changes would have applied in any municipality with more than 25,000 residents.
That bill once again encountered opposition from various “neighborhood preservation” groups and municipalities, particularly in the form of the League of Arizona Cities and Towns. Over the course of the session, Kaiser and the League reached a compromise that raised the population minimum to 50,000 residents, required cities to approve Auxiliary Dwelling Units (detached backyard casitas) and allowed developers with approved proposals to create properties without waiting for additional inspections.
Municipalities subject to the law would also have had to enact at least two out of three infill development-targeted policies, including designating acceptable areas to build duplexes, triplexes or quadplexes, allowing manufactured housing community construction and/or allowing home construction on lots as small as 5KSF. (AZBEX June 14, 2023)
That bill ultimately failed, and Kaiser resigned his Senate seat to spend more time with his family and to lead the Arizona Prosperity Project, a non-profit he founded to develop conservative policies and increase conservative representation in the Legislature and on school boards.
Local Affordability Programs
The degree of inclusionary and other affordability-related autonomy granted to municipalities despite the general inclusionary zoning prohibitions has led to some creative programming around the state.
One of the most comprehensive programs is the City of Tempe’s Hometown for All initiative, proposed in 2020 and approved in early 2021. Under the program, 50% of some permitting fees paid by developers go to the Tempe Coalition for Affordable Housing. According to the press release announcing the initiative, “The funds could be used to buy and rehabilitate properties, or to buy land and request competitive offers from developers or nonprofit partners to build affordable or workforce units.”
The City of Phoenix recently announced its own planned program for Auxiliary Dwelling Units. A new proposal would allow backyard casitas, duplexes and triplexes, which housing advocates call “the missing middle” in housing supply development, since they fall between individual single-family homes and traditional multifamily developments.
While the proposal has the support of housing advocates, some neighborhood groups like the Arizona Neighborhood Alliance, have expressed concern the program could lead to a surge in new short-term rentals, which are a constant source of irritation for both neighborhood groups and housing advocates alike.
Resident groups oppose STRs because they feel the rotating residents bring crime, public nuisance behavior and other problems to their areas. Advocates oppose them because they take viable long-term housing units off the market. Under state law, cities can impose some regulations on STRs, such as requiring registration, but they cannot prohibit them.
Phoenix’s proposal seeks to limit the potential for ADUs to be used as STRs. A special permit would be required to build or rent the units, which would be restricted to building on single-family lots, and the owner would be required to live on the property full-time.
The measure is expected to go before the Phoenix City Council in September.