It was the second recent blow to regulations in Idaho designed to achieve stocks of affordable workforce housing.
In a ruling reminiscent of a July 3 decision that shot down the city of Sun Valley's workforce housing ordinance, 4th District Judge Thomas F. Neville ruled Tuesday, Feb. 19, that the city of McCall's requirement that 20 percent of all new development be set aside for deed-restricted housing is unconstitutional and amounts to an illegal tax.
"The city of McCall is attempting to have growth in McCall pay for growth," Neville wrote in his 31-page decision. "Whatever benefit the landowner receives is no different than a benefit received and shared by the public at large. The lack of affordable workforce housing is a problem for which the public should bear the cost to remedy rather than imposing the burden on a few landowners or developers. Therefore, the purpose of the subsidy or fee ... is for the benefit of public services at large rather than a benefit to the individual assessed."
The issue is complicated because there are different mechanisms for achieving deed-restricted housing. In Ketchum, for example, housing is procured from developers who wish to build above and beyond the city's height and density caps. That was not the case in McCall or Sun Valley. In those municipalities, housing was required as a condition for obtaining a building permit.
"I think the city of Ketchum's ordinance differs from that significantly. It's incentive-based," said Jim Fackrell, Blaine County Housing Authority executive director. "This one was more akin to the Sun Valley ordinance that was shot down."
Fackrell said that though the decision is of some concern, "I think some interesting points were noted in there, that the responsibility rests with the entire community. And I believe that there was some concern, at least in the McCall case, that the responsibility was being borne solely by the developer."
The ruling pleased the Idaho Association of Realtors and the plaintiff, Mountain Central Board of Realtors. The Mountain Central Board filed the lawsuit in 2007, claiming the city's ordinances constituted an unconstitutional taking of private property rights and an illegal tax.
"We took every step we could to get Valley County not to adopt the ordinances," said Ray Moore, President of the Mountain Central Board. "We even financed a print and radio media campaign letting citizens and officials know that adopting these ordinances was unconstitutional. Unfortunately, we were forced to bring the legal action."
Under McCall's ordinances, the deed-restricted properties are reserved for people making 100 percent to 160 percent of the median wage in Valley County. The local government would then award priority points to certain types of jobs that would qualify for the housing. Such homes would be permanently price-restricted. The ordinances mandated an equivalent in-lieu fee as an option to building such homes.
Idaho Association of Realtors President Willis Stone said that while his organization and the Mountain Central Board support affordable housing, the city of McCall went too far by imposing a disguised tax and infringing on private property rights.
"The Court recognized that, while the goal of providing affordable housing may be laudable, there is no authority for enacting ordinances which require that developers provide affordable housing or to require a subsidy from landowners to further those goals," Stone said. "Workforce housing is a community problem. It ought to have a community solution. It is not fair to balance the problem on the backs of private property owners, or the real estate industry--a very important industry in our economy."
The Realtors' attorney, David Gratton of Evans Keane LLP, said the court's decision was well reasoned.
"The court said pretty plainly that a fee charged to one segment of society to offset the burdens of the community as a whole is a tax—not a fee—and as such, is an unlawful tax," Gratton said. "Those types of disguised taxes exceed a city or county's authority. We have made this argument from the beginning. There are a line of cases in Idaho a mile long supporting us."
Realtors' association Chief Executive Kevin Price said his group and affiliated groups would continue to work with the state and local municipalities to provide affordable housing in communities like McCall, but he said there are already plenty of provisions in the law to create affordable housing in any Idaho community.
"The city simply went too far and exceeded its authority," he said. "The imposition of this burden on the landowners or developers amounts to an unlawful tax."
Price said there are developments in Valley County built under the shot-down ordinances. When the market softened, consumers had the choice of purchasing deed-restricted lots that are limited in appreciation or unencumbered lots for about the same price.
Naturally, buyers chose to purchase homes with no restrictions, he said.
"Some of these 'affordable workforce housing units' have been laying vacant for months," he said. "The people who were forced to build them are really taking a bath."
In Blaine County, Fackrell said inclusionary zoning only addresses a small portion of Blaine County's affordable housing needs.
"It was just one tool, and we need to look at all available options," he said.
