How municipalities are limited on affordable housing policies

Pam Hemminger is the new mayor of Chapel Hill. Affordable housing and growth were campaign issues.
Pam Hemminger is the new mayor of Chapel Hill. Affordable housing and growth were campaign issues. cliddy@newsobserver.com

In the wake of the recent elections in Chapel Hill, many people have assigned a narrative to what it means and where the town should go with growth in regards to pace, affordability and style. Often overlooked are the actual policy constraints placed on the town because it is a municipal government. This is particularly true in balancing development and affordability.

To put it bluntly, the U.S. Constitution and the broader federal system simply don’t address the independent role of municipal governments. This means that municipalities have no independent power other than what state and, to a much lesser extent, federal governments furnish them.

In this regard, North Carolina has kept a particularly tight leash on its municipalities. This is because of something called Dillon’s rule, based on the legal philosophy of John Forest Dillon, a 19th century American jurist. Dillon’s rule essentially says that municipal corporations are entirely at the will of state legislatures.

While North Carolina has not explicitly adopted Dillon’s rule, we have adopted a system that is somewhat comparable. Furthermore, in North Carolina the legislature has more or less staked out the limits of local government power and continues to do so. This is most recently seen in the sanctuary cities bill, the Asheville water and Charlotte airport controversies and the attempts to restructure Wake and Greensboro local elections.

The result is that a great deal of municipal policy options for affordability in North Carolina are foreclosed to the town government, including property tax mitigation, living wage ordinances, unauthorized taxes or tax incentives and certain alterations to impact fees. This leaves rezoning and permitting negotiations as probably one of the strongest tools a town has.

However, this tool itself has a number of serious limitations, the biggest being a reliance on having a developer who wants to build something and also wants to rezone to do it. Absent this, it is much more challenging to get affordable housing and funding from private developers. Even then it is still a negotiation – a deal has to be struck that will ideally balance achieving town goals while ensuring concept integrity for the developer.

This balance is particularly important given the almost paramount role private property ownership has played in American history. While zoning has become widely accepted as a necessity of good planning, the idea that a private person or organization has a right to dispose of property, within limits, how it sees fit is still a driving concept in American property law. This means that while municipalities can limit or encourage development to some extent, they cannot compel property owners to develop along a certain economic model or build a certain price range of homes if that is not their desire. All a municipality can do is use its tools to come to a compromise with what the town and the developer find mutually beneficial, and even this is not guaranteed if no real change is needed in the zoning or permitting for the developer to do what it wants to do with a parcel.

The takeaway is that municipalities have more limited power to control development than is often assumed, and those limitations make policy choices sharper. Municipalities don’t have the scope of power in North Carolina to tell developers that they must build housing stock, what type of housing stock they must build and how they must build it. Nor do towns have free rein of tax and ordinance power to offer incentives.

While it is certainly true that to some extent downzoning and denying rezoning requests are in the town’s purview, these won’t move the ball on affordable housing if nothing gets built. The result is and always has been a negotiation between local governments and developers.

If you want more affordable housing, that is going to involve a compromise based on what the market will bear along with the options the town has to encourage at least some of what it wants. Simply put, if the goal is to try to get affordable housing by using the town government to do a top-down economic development plan that closely controls submarkets of housing, people will be disappointed regardless of who is on the city council.

James Bartow is lawyer in Chapel Hill who serves on the Chapel Hill Board of Adjustment.