This article first took shape in the Fall of 2021 as part of a panel presentation for the annual meeting the American College of Real Estate Lawyers. In December 2021, the issues were discussed as part of a panel at the 20th Annual Alfred B. DelBello Land Use and Sustainable Development Conference sponsored by the Land Use Law Center at Elisabeth Haub School of Law at Pace University Center for Continuing Legal Education. Prof. John R. Nolon, Distinguished Professor of Law Emeritus and Counsel and Faculty Liaison to the Land Use Law Center at Pace University’s Elisabeth Haub School of Law, was especially helpful in reviewing the section on Home Rule. Later, the Journal of Comparative Urban Law and Policy chose to publish a version, still a work in progress, as it must necessarily remain as we learn more daily, as part of its Festschrift volume in honor of Prof. Arthur Christian Nelson.
Much has been written and debated about how we might provide more affordable housing to not only meet the essential need for shelter, but also to advance diversity, equity, and inclusion across the board. Fair housing and equal opportunity are what we all want in our ideal of a just society.
Note: Please download the issue PDF to view figures from this article.
Affirmative action in promoting affordability requires orchestrating a myriad of programs, initiatives, and techniques. Some attention, though, might be paid to what is holding us back, what unnecessarily blocks our way, and what keeps us from getting all that we might out of our best efforts.
Three of those roadblocks deserve the closest attention and concerted action and must be knocked down, once and for all, to get the housing that we so desperately need: the myth of Home Rule, limitations of the Fair Housing Act, and the pervasive use of private covenants and restrictions.
To understand the myth of Home Rule, one must start with the basics. The authority to plan and regulate land use is fundamentally the exercise of the police power to protect and promote the public’s health, safety, and general welfare. Chief Justice Marshall described the police power as “that immense mass of legislation, which embraces everything within the territory of a State, not surrendered to the general government.”
The Ninth and Tenth Amendments of the U.S. Constitution reserve to the states all those powers not previously delegated or prohibited to the states and the people. That gives the states the individual and exclusive responsibility for granting to local governments the authority to regulate, including regulations promoting affordable housing. Local land use regulation is an exercise of the police power.
Understanding the extent of any form of the grant of powers to local government requires a refresher course in Home Rule, the Dillon Rule, and the Cooley Doctrine. Anyone who wants to help remove the roadblocks to affordable housing needs a grasp of these concepts.
Most simply stated, Home Rule is the authority of local governments, through their charters, if they have one, and through their local ordinances, to exercise their governmental power independently, within the terms of the state constitutional requirements and statutory provisions. Home Rule fundamentally defines the degree to which those state police powers have been delegated to local governments exclusively.
Home Rule might be viewed as a long continuum, extending from the extreme of the Dillon Rule for strong state legislative control over local governance at one end, to the other extreme of the Cooley Doctrine of unfettered, independent local authority at the other end. Along this continuum, many states fall in a great, ambiguous, and increasingly ill-defined middle ground.
Spoiler alert. Herein lies the fundamental problem of the Home Rule myth: in the vast majority of instances regarding local land use regulation, there has been no immutable delegation of exclusive authority to regulate land use at the local level, yet those who oppose affordable housing continue to invoke Home Rule as a shield to any state law changes that might override what has been the exclusive province of local governments. This has resulted in the segregative effects that drive advocates to seek social, economic, and racial equity in our land use system.
In Clinton v. Cedar Rapids & Missouri Railroad Co., Iowa Supreme Court Justice John F. Dillon famously saw local governments as creatures of the state, subject to the limitations of the grant of authority to them by the state. The case was about the right of a railroad company to use the city streets for their trackage. The railroad company had its own authority from the state to expand trackage. The city objected to the railroad using the dedicated city streets and challenged whether the railroad had the right to use them under the law and, if it did, whether the city should be compensated for what it alleged was a taking of the city’s property interest. Of course, the railroad argued that it had been given all the authority it needed directly by the state.
The court held for the railroad, and in doing so Judge Dillon created the rule that came to bear his name:
The true view is this: Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. . . . [T]he legislature might, by a single act . . . sweep from existence all of the municipal corporations in the State, and the corporation could not prevent it. We know of no limitation on this right so far as the corporations themselves are concerned. They are, so to phrase it, the mere tenants at will of the legislature.
John R. Nolon, Distinguished Professor of Law Emeritus and Counsel to the Land Use Law Center at the Elisabeth Haub School of Law at Pace University, has recently written a definitive analysis of what he sees as the end of Dillon’s Rule. In his analysis, Prof. Nolon points to an important nuance in Dillon’s Rule, namely that it has two parts. The first was that created in the Clinton case, which Professor Nolon describes as the “servient entity rule,” whereby municipalities are mere “tenants at will,” whose powers may be taken back or changed at the will of the state legislature.
The second part of Dillon’s Rule is found in Merriam v. Moody’s Executors, decided a month after Clinton, in which the court established a rule of construction:
[I]t must be taken for settled law, that a municipal corporation possesses and can exercise the following powers and no others: First, those granted in express words; second, those necessarily implied or necessarily incident to the powers expressly granted; third, those absolutely essential to the declared objects and purposes of the corporation—not simply convenient, but indispensable; fourth, any fair doubt as to the existence of a power is resolved by the courts against the corporation—against the existence of the power.
Most people speak of the Dillon Rule as a monolithic rule and not one of two parts. A consequence of the multi-factor rule of construction from Merriam v. Moody’s Executors is that the Dillon Rule states apply the Dillon Rule in varying fashion. In some states, eight of them, the Dillon Rule is limited, such as in Indiana where it applies only to townships. Elsewhere, in thirty-two states, Home Rule is provided for in the state’s constitution with twenty-one of those states recognizing it as self-executing and eleven requiring enabling legislation. Finally, eight other states enable Home Rule by statute, not by their state constitutions, and limit to varying degrees what local governments may be able to use Home Rule powers. Figures 1 and 2 present Dillon Rule and Home Rule states, respectively. Another useful resource with graphics and lists of states is available on the American City County Exchange website.
Figure 1. Dillon Rule and Dillon-Home Rule States
See issue PDF page 347.
Source: Travis Moore, Dillon Rule and Home Rule: Principles of Local Governance, Neb. Legis. Rsch. Office (Feb. 2020).
Figure 2. Source of Home Rule Authority
See issue PDF page 347.
Source: Travis Moore, Dillon Rule and Home Rule: Principles of Local Governance, Neb. Legis. Rsch. Office (Feb. 2020).
The U.S. Supreme Court took up the matter in 1907 in Hunter v. Pittsburgh. There, the Court made clear that local governments were very much the subordinates of the state:
Municipal corporations are political subdivisions of the state, created as convenient agencies for exercising such of the governmental powers of the state as may be intrusted to them. For the purpose of executing these powers properly and efficiently they usually are given the power to acquire, hold, and manage personal and real property. The number, nature, and duration of the powers conferred upon these corporations and the territory over which they shall be exercised rests in the absolute discretion of the state. Neither their charters, nor any law conferring governmental powers, or vesting in them property to be used for governmental purposes, or authorizing them to hold or manage such property, or exempting them from taxation upon it, constitutes a contract with the state within the meaning of the Federal Constitution. The state, therefore, at its pleasure, may modify or withdraw all such powers, may take without compensation such property, hold it itself, or vest it in other agencies, expand or contract the territorial area, unite the whole or a part of it with another municipality, repeal the charter and destroy the corporation. All this may be done, conditionally or unconditionally, with or without the consent of the citizens, or even against their protest. In all these respects the state is supreme, and its legislative body, conforming its action to the state Constitution, may do as it will, unrestrained by any provision of the Constitution of the United States. Although the inhabitants and property owners may, by such changes, suffer inconvenience, and their property may be lessened in value by the burden of increased taxation, or for any other reason, they have no right, by contract or otherwise, in the unaltered or continued existence of the corporation or its powers, and there is nothing in the Federal Constitution which protects them from these injurious consequences. The power is in the state, and those who legislate for the state are alone responsible for any unjust or oppressive exercise of it.
Just three years after Clinton v. Cedar Rapids & Missouri Railroad Co.,another state’s highest court handed down a decision in which it was argued that large numbers of local governments had essentially a vested right to Home Rule.Michigan Supreme Court Justice Thomas M. Cooley wrote a concurring opinion in 1871, in People ex rel. Le Roy v. Hurlbut, arguing that, because local governments were in existence before the states were organized, they have powers of their own, independent of the states, and that those powers were not abridged when the union was formed:
But when we recur to the history of the country, and consider the nature of our institutions, and of the government provided for by this constitution, the vital importance which in all the states has so long been attached to local municipal governments by the people of such localities, and their rights of self-government, as well as the general sentiment of hostility to everything in the nature of control by a distant central power in the mere administration of such local affairs, and ask ourselves the question, whether it was probably the intention of the convention in framing, or the people in adopting, the constitution, to vest in the legislature the appointment of all local officers, or to authorize them to vest it elsewhere than in some of the authorities of such municipalities, and to be exercised without the consent, and even in defiance of the wishes of the proper officers who would be accountable rather to the central power than to the people over whose interests they are to preside,—thus depriving the people of such localities of the most essential benefits of self-government enjoyed by other political divisions of the state—when we take all these matters into consideration, the conclusion becomes very strong that nothing of this kind could have been intended by the provision. And this conviction becomes stronger when we consider the fact that this constitution went far in advance of the old one, in giving power to the people which had formerly been exercised by the executive, and in vesting, or authorizing the legislature to vest, in municipal organizations a further power of local legislation than had before been given to them. We cannot, therefore, suppose it was intended to deprive cities and villages of the like benefit of the principle of local self-government enjoyed by other political divisions of the state.
So, why does all this somewhat arcane doctrinal history of local government law matter in the context of trying to promote affordable housing? First, those who are opposed to state and substate regional approaches that potentially override local zoning are quick to throw up the shield of Home Rule. Sometimes, it is just that locals do not want to give up local control. Sometimes, it is more sinister, as opponents are seeking to continue exclusionary land use practices.
Second, whether Prof. Nolon is right or not in believing that the Dillon Rule has faded, it is important to recognize that in those states that have a constitutional provision, the Home Rule powers may be implemented, and limited, by statute. Connecticut is one of those states. The Connecticut Constitution provides that “[t]he general assembly shall by general law delegate such legislative authority as from time to time it deems appropriate to towns, cities and boroughs relative to the powers, organization, and form of government of such political subdivisions.”
Opponents of the state taking back a bit of its delegated authority over certain aspects of land use regulation that impede the development of affordable housing like to talk about Home Rule. For example, consider this from Connecticut State Senator Tony Hwang in opposition to recent affordable housing initiatives proposed for the state’s enabling legislation, as posted on his official website:
Senator Hwang said, “I am deeply concerned about how this bill has been misleadingly purported to ‘empower’ local zoning and land use rules. In reality, this bill does not offer data proof toward improving social equity, segregation, or even affect the affordability of living in Connecticut, all concepts which I strongly believe in and support. If the legislature truly wanted to implement visionary solutions in affordable housing regulations, then we should re-explore CT General Statute section 8-30g which has not been examined since 1989. The partisan Democratic vote further raises the alarming fear of the camel’s nose under the tent regarding expansive zoning, land use legislative mandates evident by the multiple overreaching bills passed out of committees throughout the CT General Assembly this session.”
During the discussion, Senator Hwang offered two amendments, both of which failed along a party line vote. One was to prevent a one-size fits all mandate, but instead preserve “Home Rule” and “local control” on not only land use and zoning but also on education, local finances and taxation, and environmental protection. The second proposed amendment hoped to provide a better balance between the represented stakeholders on the newly created working group ensuring that local experts and members of all political backgrounds had a voice in the future of zoning and land use in the state.
The former mayor of Norwalk, Connecticut, a proponent of affordable housing, described the problem in this way:
Our Home Rule law pretty much allows towns to “maintain their character” by strictly controlling multifamily housing if they so desire. Most of the rich ones do so. This is one reason our cherished state is so “leafy.” People who cannot afford to own property with trees are invited to live somewhere else. Where? Don’t ask.
One proposal to promote affordable housing in Connecticut was to eliminate “character of the district” as a proper basis for zoning under the state’s enabling statute. “Character of the district” has been a rationale to support exclusionary zoning. Typical of the opposition to this reform, a resident of Fairfield, Connecticut, with an average home value of $662,000 and an African American population of 2.1 percent, had this response:
Today, considering “character of the district” in land use decisions continues to be fundamental as towns modify their plans and zoning regulations. By eliminating this language, our zoning boards will no longer be allowed to consider the existing built environment and the “character of the district” when they render decisions. This won’t be good for our communities.
The state legislature, in the end, did adopt the amendment.
Professor David Schleicher of Yale Law School has written a scathing critique of the National League of Cities’ proposed new Model Constitutional Home Rule Article, which would strengthen the ability of local governments to fend off efforts by the state to create affordable housing. In it, he lays bare the ways in which the Home Rule myth has been used to perpetuate exclusion:
Through the 1970s or 1980s, the central political challenge to zoning was that it was economically exclusive at the level of the individual town. Rich suburbs used zoning to reduce construction and to ensure high per capita property values, keeping outsiders from accessing the high-quality services paid for with taxes on those high per capita property values. There were well-known legal and political challenges to exclusionary zoning in the suburbs, from the Mt. Laurel cases to the Fair Housing Act’s requirement that federal agencies administer programs in order to “affirmatively further fair housing.” Well-known legal scholar Charles Haar famously argued that there should be a “constitutional right to live in the suburbs.”
But no one thought zoning had effects at the regional level. Big cities, a few progrowth suburbs and exurban areas allowed for enough construction of new housing such that people could be housed and access regional job markets.
But, starting in the 1970s and 1980s, this changed. As demand to live in them increased, big cities in our richest and most innovative metropolitan areas became less hospitable to growth, and sprawl hit some natural limits (and the few pro-growth suburbs changed their tune). Each town and city excluded new development and, in so doing, created limits on growth at the metropolitan level. When paired with strong demand, zoning restrictions started to drive up prices at the regional level in places like San Francisco and New York. This process has even stalled national economic convergence. In the hundred or so years before the 1980s, the poorest and richest states were getting closer together in per capita economic performance, as capital flowed to poor states and workers moved to richer ones. But, among strictly zoned states, this process slowed in the 1980s and has now stopped completely.
To illustrate how bad this can get, here is a resolution by a small-town land use agency, with final legislative authority as to zoning, holding up Home Rule as the rampart that should stop the state from messing with their local control:
A RESOLUTION IN SUPPORT OF “HOME RULE” IN MUNICIPAL ZONING DECISION MAKING
WHEREAS Connecticut’s towns and cities successfully use local zoning and planning processes to balance private property rights, the community’s interests, demands on infrastructure, housing needs, and economic growth; and
WHEREAS local control and decision making empowers the residents and taxpayers of each town and city to carefully tailor zoning policies that reflect its unique geography, economy, and housing market; and
WHEREAS localized decision making ensures the greatest level of accountability while allowing affected community members the greatest level of input and the platform through a public hearing to provide specific, relevant information on potential impacts that only they would have knowledge of; and
WHEREAS local control and local input enable neighbors and the local community to provide beneficial suggestions, identify errors and maximize community buy-in on zoning proposals; and
WHEREAS proposals have been introduced in the General Assembly to strip local planning and zoning processes from towns and cities; and
WHEREAS proposals have been introduced in the General Assembly to allow BY RIGHT market value multi-family development that will not generate any new affordable housing units; and
WHEREAS proposals have been introduced in the General Assembly to allow outside Housing Authorities within 15 miles radius to develop affordable housing projects within our town; and
WHEREAS BY RIGHT multi-family development can lead to exponential market value overbuilding and can cause adverse impacts to town infrastructure; and
WHEREAS BY RIGHT development gives outsized rights to builders over all other property owners and prevents local Planning and Zoning Commissions from identifying the potential impacts of their project and imposing conditions upon a developer to address those direct impacts; and
WHEREAS, eliminating public hearings and community input on zoning matters would have unintended consequences such as increased infrastructure costs, increased local property taxes, and reduced home and business values which will be borne by the town residents; and
WHEREAS each town and city already have the choice to modify or abolish its zoning ordinances if the elected town or city government decides it best serves the community’s interests; and
NOW BE IT RESOLVED the Planning and Zoning Commission of the Town of Winchester opposes State Mandated one size fits all Zoning Legislation and the ability of any outside housing authority to have jurisdiction on our town’s Affordable Housing plan and any similar legislation that would further overrule, remove, or diminish local control and decision making related to planning and zoning or affordable housing from the Town of Winchester; and
BE IT FURTHER RESOLVED that a copy of this resolution shall be sent to all State Representatives and State Senators representing this town, to all members of the State Legislature’s Planning and Development, Finance, and Housing Committees, and to all legislators sponsoring bills that remove local control of planning and zoning and affordable housing.
The doctrinal chaos of Home Rule, grounded along that continuum of the Dillon Rule and the Cooley Doctrine, and rendered ambiguous in many places by the common law interpreting state constitutions and statutes, demands that states reform Home Rule, at least as to local land use regulation, especially for affordable housing. The plain fact is that many state and local governments simply do not know the limits of their authority, and, consequently, almost comically, Home Rule is held up as both a sword and a shield. Mostly, when locals invoke Home Rule, they do so with little or no basis in the law. And the states are wary about how far they can go. When they do attempt to promote affordable housing, they may lose, as Ohio did in City of Canton v. State where the court rejected the state’s attempt to promote affordable housing with mobile, manufactured housing because it could not meet the four-part test as a general law:
To constitute a general law for purposes of home-rule analysis, a statute must (1) be part of a statewide and comprehensive legislative enactment; (2) apply to all parts of the state alike and operate uniformly throughout the state;(3) set forth police, sanitary, or similar regulations, rather than purport only to grant or limit legislative power of a municipal corporation to set forth police, sanitary, or similar regulations; and (4) prescribe a rule of conduct upon citizens generally.
Perhaps of greater concern is, as Prof. Schleicher warns, the potential for backpedaling from where we are to a more Cooley-esque position where local governments are given greater, unbridled authority at the very time the need for affordable housing dictates statewide and substate regional mandates.
Reforms under a concept of Home Rule making clear that the state may take back some of its authority might include prohibiting certain local regulations that hinder affordable housing development. California did that with accessory dwelling units, essentially requiring local governments to allow them.
In 2021, the Governor of California signed into law Senate Bill 9 that, among other things, allows lot splits in many circumstances to create opportunities for ownership and the building of generational wealth. In the late 1970s, the Connecticut state legislature did something similar, but more targeted, with an amendment to the enabling statute that took away the right of local governments to zone out certain types of group homes of six or fewer persons when the state legislators found the exclusion intolerable:
Regulation of community residences for persons with intellectual disability, child-care residential facilities, community residences for persons receiving mental health or addiction services and hospice facilities. (a) No zoning regulation shall treat the following in a manner different from any single family residence: (1) Any community residence that houses six or fewer persons with intellectual disability and necessary staff persons and that is licensed under the provisions of section 17a-227.
Call it “creeping incrementalism,” if you will, but creeping may be better than standing still.
Reform might also be had through education, helping people understand the extent of the problem through analysis, outreach, and graphics. Desegregate Connecticut, a nonprofit advocacy organization that successfully promoted legislative reforms during the 2021 state legislative session in Connecticut, has done a remarkable job in identifying the extensive exclusionary zoning in the state. It is a model for what others can do.
Figures 3 and 4 are two illustrations from the town where I live, the first with land zoned for single-family use (everything but the light gray and green areas, which are public lands) and the second with the areas zoned for four-family and more multi-family uses (only the two dark fuchsia areas). The implications of this type of mapping are easy to see as it illustrates the epitome of sprawl, with one-acre lots predominating the landscape of a town that has extensive public water and sewer service and is just ten miles from Hartford, the fourth most populous city in the state and its capital.
Education also includes training the public decision-makers. Some states are especially effective in that. North Carolina is one that comes to mind. The School of Government at the University of North Carolina in Chapel Hill is “the largest university-based local government training, advisory, and research organization in the United States” serving more than 12,000 public officials yearly. The legislation adopted this year in Connecticut includes a provision mandating training for land-use commissioners.
Figure 3. R-40 (in purple) is single-family zoning for lots of 40,000 square feet and larger.
See issue PDF page 356.
Of all our federal laws, one would think the Fair Housing Act is always there to prevent discrimination and, in so doing, is aiding access to affordable housing for all. The Declaration of Policy is unequivocal: “It is the policy of the United States to provide, within constitutional limitations, for fair housing throughout the United States.” Unfortunately, an exemption in the Act takes away much of what the Declaration of Policy promised.
Figure 4. Areas where 4-family and more housing is permitted are in purple.
See issue PDF page 357.
The exemption is commonly known as the “Mrs. Murphy Exemption,” which precludes enforcement to overcome discrimination in dwellings intended to be occupied by four families or fewer, so long as the property owner lives there:
Nothing in section 3604 of this title . . . shall apply to . . . rooms or units in dwellings containing living quarters occupied or intended to be occupied by no more than four families living independently of each other, if the owner actually maintains and occupies one of such living quarters as his residence.
The Mrs. Murphy Exemption was a necessary compromise to get the legislation through in 1968. It is anachronistic today.
There is another exemption for single-family homes if the owner does not own more than three, limited to one sale in every twenty-four months for the homes in which the owner does not live.
Nothing says you cannot have state and local protections that go beyond the federal, including taking the wind out of the sails of the Mrs. Murphy Exemption. Some states have limited or eliminated the exceptions. A state may expand the federal exemption under certain circumstances. Here is an example from Oregon:
Discrimination in selling, renting or leasing real property prohibited. (8) The provisions of subsection (2)(a) to (d) and (f) of this section that prohibit actions based upon sex, sexual orientation or familial status do not apply to the renting of space within a single-family residence if the owner actually maintains and occupies the residence as the owner’s primary residence and all occupants share some common space within the residence.
Or a state may limit the exemption, as in Massachusetts where the exemption is cut from four units to two units, noting that “this subsection shall not apply to the leasing of a single apartment or flat in a two family dwelling, the other occupancy unit of which is occupied by the owner as his residence.”
Connecticut, this session, was the first state to include the requirement to “affirmatively further fair housing” in its zoning enabling statute, stating “(b) Zoning regulations adopted pursuant to subsection (a) of this section shall: . . . (2) Be designed to . . . (J) affirmatively further the purposes of the federal Fair Housing Act, 42 USC 3601 et seq., as amended from time to time.”
The Policy Surveillance Program, a Law Atlas Project at the Center for Public Health Law Research at Temple University Beasley School of Law, has an interactive website where you can see every state’s fair housing protections.
Local governments can and should remove their Mrs. Murphy Exemption, if they have them in local fair housing codes. They need not wait for the state to act. In 2019, the City of Shaker Heights, Ohio removed its Mrs. Murphy Exemption.
Yes, we need federal action to amend the Fair Housing Act to get rid of the Mrs. Murphy Exemption, and yes, we need state action to adopt fair housing laws that encourage affordable housing; but every big and small local government can act. Eugene, Oregon, has done just that in adopting an action-forcing analysis of fair housing choice, as outlined in Figure 5.
Figure 5. Eugene, Oregon analysis of impediment to fair housing.
See issue PDF page 360.
The latest development in promoting housing equity through impact analysis is from New York City where, on June 17, 2021, the City Council adopted a local law requiring that developers assess the impacts of their proposals on racial equity, including “how the proposed project relates to the goals and strategies to affirmatively further fair housing and promote equitable access to opportunity identified within the city’s fair housing plan . . . .” The law amends the Uniform Land Use Review Procedure and is described on the Council’s website:
This bill would require an online citywide equitable development data tool with citywide, borough wide, and where statistically reliable data is available, neighborhood level and community district level data. Data would be provided for six specific categories, and be disaggregated by race and ethnicity, where available. Racial equity reports on housing and opportunity would be required for certain land use applications, using data from the equitable development data tool. The substance of racial equity reports would vary by application type, but all would include a statement of how the proposed project relates to the goals and strategies to affirmatively further fair housing and promote equitable access to opportunity. Residential projects would state the expected rents for market rate and affordable units and the incomes needed to afford them without incurring housing cost burden. The equitable development data tool would provide the race/ethnicity for such households.
Patrick McNeill, an intern with the Center for New York Law and a student at New York Law School, reports that “the opinion of the voters on the law was very positive with the value of the research and making informed decisions based on the collected information being seen as invaluable.” He describes Local Law 78 as having
its goal to help address racial equity issues that exist as a result of land use, construction, zoning, etc. It establishes requirements for land use applications to provide information on their potential impact on racial equity in the area and thus allows elected officials to make more informed decisions and better protect communities of color from displacement and other effects.
This is a local initiative worth watching to see if it might be used elsewhere as an action-forcing strategy.
It is remarkable how many people live in homes and neighborhoods where private covenants dictate the occupants’ physical environments and how they conduct their daily activities. These controls are not obvious from outward appearances. Taking just those neighborhoods governed by homeowners’ associations (HOAs), and leaving aside all those individual lots and older subdivisions without HOAs, consider these numbers:
These pervasive covenants, some unenforceable as a matter of federal and state law, and others enforceable today, have had and continue to have, through the development patterns they dictate and perpetuate, a profound impact on the ability to develop more affordable housing.
Of course, racial, religious, and other covenants violative of federal, state, and local law are unenforceable, but they remain in the chain of title. Many people, understandably, find it disturbing to see the covenant in a title report. They do not want it to be part of the record of their ownership of the property. The perpetuation of these covenants is something states can act on, and some have. There is a recent decision in the Court of Appeals of the State of Washington regarding the state law on removing certain provisions from deeds.
The law was enacted over thirty years ago but has been subject to little interpretation. In this decision, the court held that the offending language did not have to be “physically and permanently removed from existing records,” but that it would be sufficient to declare the “language stricken, thereby removing the language as a matter of law.” In short, the offending language remains in the original documents, but it is not reflected in later recitations of title. As the court explained its reasoning:
By its plain terms, RCW 49.60.227 provides a method for repudiating racially restrictive covenants while still preserving the historical record and integrity of a property’s chain of title. This balance makes good sense. Real estate documents with racially restrictive provisions are “offensive, morally reprehensible, and repugnant.” Mason v. Adams County Recorder, 901 F.3d 753, 757 (6th Cir. 2018). But such documents are part of “our living history.” Id. A policy of whitewashing public records and erasing historical evidence of racism would be dangerous. It would risk forgetting and ultimately denying the ugly truths of racism and racist housing practices. Such an outcome cannot be squared with the antidiscrimination purposes of Washington’s Law Against Discrimination. See RCW 49.60.010.
The Supreme Court of Washington reviewed the Court of Appeals decision and held that it need not address the statute interpreted by the Court of Appeals because the legislature amended the statute under which the covenants were struck and eliminated. The Court, in reviewing the amendments and remanding the case for the trial court to reconsider it in light of the amendments, observed:
We believe that the legislature’s intent is clear and that the amendments provide a remedy that strikes the balance between keeping a historical record of racism in covenants, while also allowing homeowners to remove the repugnant covenants from their chains of title. Removing all trace of these discriminatory covenants would not effectuate the legislature’s intent to eradicate discrimination. It would destroy only the physical evidence that this discrimination ever existed. It would be all too easy for future generations to look back at these property records with no physical evidence of the discriminatory covenants and conclude that the covenants never existed at all. . . .
We must ensure that future generations have access to these documents because, although the covenants are morally repugnant, they are part of a documented history of disenfranchisement of a people. It is our history.
The objective of the statute is to enable striking the void provisions and eliminating them from the public records while preserving the original instrument so that future generations may have an accurate record of the unfortunate history and know how people later worked to right the wrong. That may prove to be the best approach.
Another example of a state statute that allows removal of unlawful restrictive covenants is in Delaware:
§ 9628. Redaction of unlawful restrictive covenant.
(a) An owner of real property that is subject to an instrument that contains a provision that is in violation of § 9605(b) of this title, including a governing document of a common interest community, may request that the recorder for the county in which the instrument is recorded redact and strike the provision from the instrument.
(b)(1) Before granting a request made under subsection (a) of this section, a recorder must submit the request and the instrument at issue to the county attorney.
a. The county attorney shall determine whether the instrument contains an unlawful restrictive covenant in violation of § 9605(b) of this title.
b. The county attorney shall inform the recorder of the county attorney’s decision . . . .
c. The recorder shall deny a request made under subsection (a) of this section if the county attorney determines that the instrument does not contain an unlawful restrictive covenant in violation of § 9605(b) of this title.
(2) The county attorney may compile a list of phrases identified as unlawful restrictive covenants in violation of § 9605(b) of this title. . . .
(c) A recorder may prescribe the form and required contents of a request under subsection (a) of this section . . . .
(e) (1) Upon request for inspection, copying, or any other public disclosure of an instrument that has had an unlawful restrictive covenant in violation of § 9605(b) of this title redacted from it under this section, a recorder shall make available only the redacted version of that instrument.
(2) A recorder may disclose the unredacted version of an instrument that has had an unlawful restrictive covenant in violation of § 9605(b) of this title redacted from it under this section only in response to a subpoena or order of a court of competent jurisdiction.
Note the involvement of the county attorney.
The Uniform Law Commission (ULC) has a Restrictive Covenants in Deeds Committee developing a uniform or model state law that will enable “an owner of land for which a discriminatory restrictive covenant appears in the chain of title to have that covenant released or expunged from the records.” The committee is charged with first developing a “general policy approach” to be approved by the Executive Committee of the ULC before the it begins to draft. The committee posts minutes of its meetings to ensure that the development of the policy and ultimately the uniform or model law may be followed. The minutes of the January 19, 2022, committee meeting provide a background on the issues and a preliminary overview of three possible legislative approaches: notice and modification, modification or redact-and-sequester, and search-and-destroy. The committee invites input, and anyone can become an “Observer” and attend the meetings by applying.
What do HOA conditions, covenants, and restrictions (CC&Rs) permissibly govern? The late Gurdon H. (“Don”) Buck, widely acknowledged as the country’s leading authority on common interest communities throughout his career, often said that the HOAs govern: “cars, kids, dogs, and trash.” But beyond the mundane, there are of course the rigid controls on design, construction, density, occupancy, appearance, maintenance, and physical changes. Designs were meant to be immutable, for the most part. People buy into the CC&R regimes to be guaranteed that their neighbors will not do anything untoward. Single-family is often meant to remain single-family. Density in dwelling units per acre is baked in.
Figure 6. A home in the Shepherd’s Creek Planned Development.
See issue PDF page 366.
What do we typically see in these CC&Rs that might affect affordability? A totally random Internet search produced a Declaration of CC&Rs for a subdivision known as Shepherd’s Creek Planned Development in Collierville, Shelby County, Tennessee. It popped up first in the search.
The Shepherd’s Creek developer has received many awards, and the gallery of homes evidences a quality high-end development. Zillow shows a five-bedroom, six-bath, 6,976-square-foot buildable plan, the price of which increased $85,000 on March 29, 2022, available now for $1,605,000. With its proposed eighty-nine luxury homes, Shepherd’s Creek is not looking like an affordable community.
What does the declaration have to say? Here are some highlights of provisions that preclude affordability:
The minimum heated livable area of any residence, excluding garages, basements, porches, storage rooms, workshops, etc., shall be not less than 3,500 heated square feet for a two-story residence.
The majority of the dwelling must be brick or stone.
Garages must be a minimum of three-car . . . .
No Lot shall be used except for residential purposes and no building shall be erected, altered, placed, or permitted to remain on any Lot other than one single family dwelling, unless otherwise provided for herein. No Lot shall be subdivided.
“Family” shall mean and refer to only those persons who live in the same household, or are related, such as father, mother, son, or daughter.
It is these types of occupancy, use, size, building materials, and density restrictions—and the difficulty in altering them—that make affordable zoning initiatives, whether initiated locally or imposed by the state or federal government, doomed to fail unless the CC&Rs can be released or amended. They are perfectly legal and enforceable, at least under current legal precedent. For example, if the CC&Rs limit development to one dwelling unit per lot, as this declaration does, there is no chance for an accessory dwelling unit.
And, in the category of “oh, by the way,” there will be no short-term rentals here; the declaration also states, “No lease may be entered into for less than a one (1) year period, and all leases must be in writing,” an issue of frequent controversy in many HOAs.
Many people, estimated at almost sixty-six million in 2013, live in homes where there are restrictive CC&Rs of various types, some of which preclude the development of affordable housing. Covenants are now found in sixty-one percent of all new dwellings according to the Community Associations Institute.
Taking just those neighborhoods governed by HOAs, these statistics evidence an ever-increasing impact:
Professor Robert C. Ellickson of Yale Law School recently published an article on the subject, with suggestions on how “stale” covenants might be addressed. It provides an excellent history and useful discussion of the principal approaches to removing unwanted covenants. The section on governmental initiatives to limit covenants provides several illustrations. Minnesota law terminates covenants when they no longer have more than nominal value. In Massachusetts, covenants are limited to thirty years unless fifty percent of the owners vote to extend the term.
Still, covenants generally, not racial and other illegal covenants, are widely respected. The Boston Zoning Code, for example, provides:
In their interpretation and application, the provisions of this code shall not be construed to repeal, abrogate, annul or in any way impair or interfere with the provisions of other regulations, laws or ordinances except Chapter 488 of the Acts of 1924, as amended, which is repealed on the effective date of this code, or with provisions of private restrictions placed upon property by covenant, deed or other private agreement, or with provisions of restrictive covenants running with the land to which the City is a party. Where this code imposes a greater restriction than is imposed or required by any of the aforesaid provisions, the provisions of this code shall prevail.
An important decision illustrating the difficulties in removing covenants that roadblock affordable housing is Viking Properties, Inc. v. Holm. There the court severed a racial covenant and declared it void. That was easy. But then it had to deal with a covenant limiting development to one dwelling on one-half acre or more. Because it was able to sever the racial restriction, the court turned to the density restriction. Although no affordable housing claim was made, the Growth Management Act was alleged to mandate densification in the developed areas. The court rejected the argument and firmly held that the density restrictions did not violate public policy:
Quite separate from the racial restriction, the last two sentences provide that only one dwelling may be built on each one-half acre of land. Not only is this the logical, common-sense construction of the covenant’s language, it is also the construction that best guards “the homeowners’ collective interests.” It has been so understood for over 50 years.
The instant case is an appropriate vehicle to illustrate the effect of public policy. In contrast with the racial restriction, it cannot be maintained that the density limitation has a “tendency to evil,” nor has the legislature explicitly expressed an intent to override contractual property rights, let alone invalidate those that predate the GMA . . . .
Third, although the City’s zoning regulations call for a minimum density of four dwelling units per acre, nothing in the regulations compels property owners to develop their parcels to any particular minimum density. . . . Moreover, the City has correctly conceded that it “has no authority” to enforce or invalidate restrictive covenants, CP at 201, and explicitly accounted for the existence of such covenants in its comprehensive plan by forecasting that areas subject to covenants would experience less future growth than other areas within the City. Finally, the city’s planning manager, on advice of the city attorney, determined that the covenant was not in irremediable conflict with city policy, and that the City “would process building permits on a lot with area that exceeded the minimum densities under the code for the land use district as a nonconforming lot.” CP at 310. Accordingly, the density limitation does not violate public policy.
Over the horizon targeting takes special skill. Just as those engaged in warfare must attempt to see beyond what their eyes take in to wage a successful attack, we must do what we can to discern how these covenants, now and in the future, beyond our present time horizon, will affect our efforts to create more affordable housing. We do not know, but it is reasonable to expect, that some people learning about state and local initiatives to promote affordable housing may be even more interested in private covenants to fend off affordable housing. Developers may include restrictive covenants in contemplation of what the market wants. Indeed, that is most often the case, and homebuyers are stuck with contracts of adhesion. If they want that lot or that home, they have to buy into the restrictions laid down before the first lot or home goes on the market.
At best, the extent of this reaction to government-led affordability efforts is a “known unknown.” It would be a good research project for a graduate student in planning to determine the extent to which there may be increased use of private covenants in response to affordable housing initiatives. The discussion that follows starts with fixing the problems created in the past and then addresses how to avoid problems in the future. Perhaps the order ought to be the other way around. Truly, both need to be done at once.
There are several ways in which we might remove or diminish the effect of covenants that are roadblocks to affordability. Not all have been tried, and the effectiveness of others has been questionable, at least as they are presently used.
What can be done? The Community Associations Institute supports fair housing and advocates for better legal mechanisms to enable removing discriminatory covenants, but it does not address covenants that preclude greater affordability, such as through increasing density. There is nothing that precludes most HOAs from amending their CC&Rs, though in some instances it may be difficult or even impossible without a 100% vote, or supermajority, of the unit owners.
Even voluntary amendments can run into problems, as seen in a recent Arizona case where CC&R amendments were struck down because they were somehow outside the unit owners’ expectations of the scope of the restrictions. While the amendments created greater limitations on affordability, rather than increasing the potential for affordability, the takeaway is the same. Dale A. Whitman, the former James E. Campbell Professor of Law at the University of Missouri in Columbia who retired in 2007, in a posting on the listserv DIRT List, has given us a rather complete view of the decision that is important to understanding the limitations on even voluntary amendments:
Kalaway owned a 23-acre lot in a five-lot subdivision. The other lots were smaller, ranging from 3.3 to 6.6 acres. A set of restrictive covenants covered the subdivision, and provided that they could be amended by a majority vote of the lot owners.
In 2018 the other lot owners, without Kalaway’s knowledge or consent, amended the covenants. According to the court, “the new restrictions include limiting owners’ ability to convey or subdivide their lots, restricting the size and number of buildings permitted on each lot, and reducing the maximum number of livestock permitted on each lot.”
Kalaway brought this action to have the new restrictions declared unenforceable. His argument was based largely on Dreamland Villa Community Club, Inc. v. Raimey, 224 Ariz. 42, 226 P.3d 411, 420 (Ariz. App. 2010). Dreamland involved a group of subdivisions which had been subjected to a majority vote amendment (like the present case) that changed them by placing them, for the first time, in an association that had the power to assess annual dues or fees against their owners. The Arizona Court of Appeals had struck down this amendment because the original declarations did not provide “proper notice that such servitudes could be imposed non-consensually under the generic amendment power.” In effect, the court had held that this sort of change was simply too great and too unexpected.
The Arizona Supreme Court adopted the reasoning of Dreamland and applied it here. It held that “future amendments cannot be “entirely new and different in character,” untethered to an original covenant. Otherwise, such an amendment would infringe on property owners’ expectations of the scope of the covenants.”
So how did the changes here fare under the court’s standard? Not very well at all. The court struck down the following changes because they were too far afield from the original covenants, too different in character, and too unexpected.
1. A requirement a dwelling must have at least 60% living space and at most 40% garage space.
2. The 50-foot front setback of the original covenants was now applied not only to structures, but to all improvements, such as driveways, patios, and landscaping. (The effect was apparently to freeze the existing front yards in their present state.)
3. Voting, which was on a per-lot basis, would remain allocated to the original lots in the event of lot splits or subdivisions, thus diluting the votes of the owners of new lots.
4. The original declaration allowed up to six livestock per 3.3 acres. The amendment limited the definition of livestock to only chickens, horses, and cattle. The amendment also capped the total number of livestock per lot at 15, irrespective of the size of the lot. (The court was highly dubious of defining chickens as livestock.)
These changes were all struck down by the court, as well as numerous limitations on the size, height and location of non-dwelling structures, and several amendments imposing limitations and requiring approvals for improvements and subdivision of lots.
First off, it is likely that covenants are constitutionally protected “private property” in most states and that taking them would require compensation for any loss in value. So sayeth none other than Gideon Kanner, Professor of Law Emeritus at the Loyola Law School in Los Angeles, in response to my “All Points Bulletin,” sent to more than a dozen of California’s best known land use gurus about how to rid ourselves of these pesky covenants. Prof. Kanner: “In California covenants running with the land are a property right that is compensable in eminent domain. See So. Calif. Edison Co. v. Bourgerie (Cal.).” Turns out, Prof. Kanner won the case for the property owner. The question in Bourgerie was this:
The sole question at issue is whether a building restriction in a deed constitutes “property” for purposes of article I, section 14, of the California Constitution so that compensation must be made to a landowner who has been damaged by the construction of an improvement which violates the restriction on land acquired by eminent domain.
The court interpreted Article I, section 14, of the California Constitution, which provides in relevant part, “Private property shall not be taken or damaged for public use without just compensation having first been made to . . . the owner . . . .”
The court overruled a forty-three-year-old precedent to find the taking of a restriction was compensable:
Under the minority view, compensation is denied to persons whose property may have been damaged as a result of the violation of a valid deed restriction, thereby placing a disproportionate share of the cost of public improvements upon a few individuals. Neither the constitutional guarantee of just compensation nor public policy permit such a burdensome result.
Nothing precludes federal, state, and local governments from using their power of eminent domain to remove covenants impeding affordability. Nothing, of course, except the backlash from the notorious Kelo v. New London decision. In many places, it did not just chill governmental use of eminent domain, it cryogenically froze it. While there are kinder and gentler ways for government to get what it needs, targeted, limited eminent domain with modest takings might be appropriate as part of a variety of techniques.
To avoid the cost and trouble of going to court when the compensation is disputed, a local, adjudicatory process might be required as a step precedent to litigation to see if the compensation can be resolved short of judicial proceedings. Yes, it would be a ripeness requirement, similar to the one that the U.S Supreme Court did away with, but it could save time and expense for all the stakeholders. Consider it a form or pre-litigation mediation.
One question is, what would be the extent of compensation? No one knows. More “known unknowns.” The value of exclusivity might be greater in the marketplace than we wish to acknowledge. On the other hand, freeing up some land for more intensive use might create value. One ADU design-build consultant in California claims, “With an average cost per square feet of approximately $470 in the City of Los Angeles, your new 1,000 square foot, detached ADU could increase your property value by an average of $470,000,” and “For an investment of around $250,000, homeowners in Los Angeles can add an average of $470,000 to the value of their property.”
A kinder and gentler approach would be to offer cash payments, maybe through an auction, to keep the cost as low as possible. Those HOAs willing to amend their CC&Rs and open up their enclaves to further development and densification, that would include affordable units, could bid for government compensation. In this reverse auction, government would offer to pay HOAs for releasing their affordable-housing-restricting covenants and committing to develop affordable housing. The HOAs willing to do both at the least cost would win. Why would they ever do that? Many HOAs are strapped for cash, especially the older ones without adequate capital reserves. A natural disaster can put them underwater, literally and figuratively. That happened with the North Pier Villas Homeowners Association, forced into bankruptcy when their forty-two-unit Carolina Beach, North Carolina condominium was severely damaged in Hurricane Dorian in 2019. The HOA could not afford the repairs, especially with a downturn in timeshare revenues. They were forced into bankruptcy and a sale.
The awards might be vested and escrowed, with payment released upon certificates of occupancy being issued for the affordable units. The cost of acquiring the releases could be offset by tax increment financing with the new revenues from the infill development. It might be that developers looking for development opportunities could do much the same, but privately through brokers who would seek out opportunities and help make offers to purchase development rights created with the release of restrictions. Even a modest program of enabling accessory dwelling units could help increase the supply of smaller, more affordable homes, better suited to the changing demographics of single-person households.
In 2021, the Governor of California signed into law legislation that enables setting aside of certain private covenants that preclude affordable housing developments:
This bill would make any recorded covenants, conditions, restrictions, or limits on the use of private or publicly owned land contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale that restricts the number, size, or location of the residences that may be built on the property, or that restricts the number of persons or families who may reside on the property, unenforceable against the owner of an affordable housing development, as defined.
California Assemblyman Richard Bloom authored the legislation. His Office issued a summary of the bill:
AB 721 will clarify that these density restrictions in private covenants cannot be used to curtail an affordable or supportive housing development that is otherwise consistent with local zoning. The bill proposes that an owner of a property who commits to building 100% affordable units for lower income households may build as many units as the local zoning code and land use laws would allow.
The soundbite version is that AB 721 takes aim at the number, size, and location of homes allowed under covenants and restrictions on how many people and families can reside within a development. The development must be 100% affordable, below market rate. The covenants are not released or removed; they are just declared unenforceable against the affordable housing developer. That seems a distinction without a difference.
The Act, provided in the Appendix, is not all that long, and reading it in its entirety may be helpful. The crux of AB 721 is this:
Recorded covenants, conditions, restrictions, or private limits on the use of private or publicly owned land contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in real property that restrict the number, size, or location of the residences that may be built on the property, or that restrict the number of persons or families who may reside on the property, shall not be enforceable against the owner of an affordable housing development, if an approved restrictive covenant affordable housing modification document has been recorded in the public record as provided for in this section, except as explicitly provided in this section.
Restrictive covenant is defined:
“Restrictive covenant” means any recorded covenant, condition, restriction, or limit on the use of private or publicly owned land contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest that restricts the number, size, or location of the residences that may be built on the property or that restricts the number of persons or families who may reside on the property, as described in subdivision (a).
In responses to my All Points Bulletin (APB) to leaders in California land use law, I hoped to learn more about how AB 721 may be the San Andreas fault of restrictive covenants. Turns out, there seems to be not even a tremor.
One veteran of several decades in land use law said:
Thanks for reaching out. I can see that this law would not allow an HOA to enforce CC&Rs that preclude ADUs or second units.
I wonder if this new law “voids” conservation easements that have been required on approvals of tentative maps and other development approvals that preclude certain areas from being developed. Contra Costa County (because of the involvement of influential environmental groups) typically requires this type of conservation deeds. I would think so, right? How do they become “unenforceable”? I cannot imagine the holder of the deed (whoever that may be) will give it up. How do they get removed from title?
Good question. It turns out Assemblymember Brooks saw that coming and neatly excluded restraints on enforcement of conservation restrictions:
(g) (1) Subject to paragraph (2), this section does not apply to:
(A) Any conservation easement, . . . that is recorded . . . , and held by any of the entities or organizations set forth in Section . . . .
(B) Any interest in land comparable to a conservation easement that is held by any political subdivision and recorded in the office of the county recorder of the county where the land is situated.
Some people, who are concerned about the obvious need to protect private property rights and the private contracts in these covenants but who are also equally troubled by the lack of affordable housing, are torn. One of the respondents to the APB most clearly expressed this conundrum. In response, maybe the answer is compensation and a strong bias in favor of voluntary action, such as with the reverse auction.
It seems likely that compensation will be due unless common law develops that makes some of these covenants unenforceable as contrary to public policy. So, far, however, there does not appear to be any move in that direction.
If someone pays a premium for property in Phase 1 of a development that is exclusive, restricted, and gated, and then the developer sells off the proposed later three phases and they are stripped of the covenants as to density and house size, resulting in a significant loss of value, is that compensable taking? This could be a variation of Bormann v. Board of Supervisors in and for Kossuth County in which the Iowa Supreme Court invalidated a right-to-farm law by eliminating the right of those living close to farms to bring nuisance actions. It imposed a kind of easement on their property, which could only be done if just compensation were paid. That is something to ponder. Many of these cases, however, are destined to devolve into valuation battles. The damages may prove to be negligible.
Bryan Wenter, a land use planner and lawyer in Walnut Creek, California, who is an astute observer of the realities of California’s state-level affordable housing advocacy, is outspoken in his critique of what this legislation means:
Thanks for reaching out on this. I am aware of it but not tracking it. Fortunately, restrictive covenants have never been a barrier to any housing development project I have handled. Unfortunately, the things that are barriers are more systemic and much harder to legislate away due to lack of legislative will to do so for a variety of purely political reasons. In my view, the legislature and governor are only partially serious about addressing California’s housing supply problem, which will only be fixed if they ever decide to squarely take on some hard issues.
. . .
There are lots of ways of slicing things, but we need to do things like eliminate CEQA for housing projects (or seriously curtail CEQA review), eliminate discretion in considering housing projects (or seriously curtail discretion), make project opponents pay for the cost of their administrative appeals and litigation and be on the hook for paying the developer’s attorney fees when they lose, make project opponents post bonds when they challenges housing projects, limit standing under CEQA and in housing project challenges, etc. We also need to talk about the fact we have a housing SUPPLY problem that has an affordable component. The problem is not principally an affordability problem, as folks are now erroneously saying and as plays into the hands of the opponents, who have figured out that if they lard up projects with heavy affordable obligations, they may kill those projects.
Another California land use planner and lawyer whom I have been pleased to know for forty-five years, Deborah M. Rosenthal, FAICP, of FitzGerald Kreditor Bolduc Risbrough LLP in Irvine, had many great insights on this legislation and what we can expect, as well as the problems generally in California (similar to other places we assume):
These are my personal views, based primarily on experience with California housing development over the past 35 years. I actually think that certain members of the legislature are absolutely serious about increasing the affordable housing supply, but they are so focused on higher density northern California projects in urban areas that they are missing the point that high density doesn’t belong everywhere. A one-size solution doesn’t fit every community, and it’s been hard to get them to focus on Inland or SoCal projects.
Orange County, where I live, is almost entirely controlled by CC&Rs for planned subdivisions, most of them imposed as conditions of approval to cover infrastructure/maintenance costs since Prop 13 was adopted during the 1970s. Just like pre-1950 CC&Rs incorporated racial covenants, the more recent ones impose use restrictions, pet exclusions, design requirements, landscape palettes, and every other possible rule known to homeowner groups. About 20 years ago, the Legislature adopted a law that overruled covenants that completely prohibited solar panels. Two or three years ago, the Legislature adopted a law that arguably allowed ADUs on any property that was large enough, regardless of CC&Rs, So, the new laws on affordable housing that you cite follow these other similar laws that have affected the enforceability of CC&Rs. On the other hand, pet lovers lost out when the California Supreme Court held that CC&Rs prohibiting even totally indoor pets were enforceable. Nahrstedt v. Lakeside Village, 8 Cal.4th 361 (1994). The State Legislature overruled this decision, holding that CC&Rs could not be enforced to the extent of at least one pet. Cal. Civ. Code §4715.
There is an interesting legal question that I have occasionally discussed one of my neighbors who is a well-respected local judge. The racial covenants and, to the best of my knowledge, the solar exclusions were found by the Legislature to violate public policy and, therefore, to be unenforceable by the courts. Private individuals did not have the right to enter into contracts that violated public policy, even voluntarily. The judge had no problem with finding the contract clause had no applicability in this situation (although it was a hypothetical discussion). The new affordable housing rule overriding local regulations and covenants does not find that exclusion of affordable housing is a violation of public policy, nor does it cite the existence of a 50-year-old housing “emergency” for support. Instead, it finds creation of affordable housing is a matter of statewide, not local concern, which gives the Legislature a right to overrule local regulation. Matters of statewide concern, though, do not necessarily reach private agreements. Although the new State legislation appears to prohibit private density or use restrictions, it does not directly address contract issues arising when CC&Rs prohibit higher density housing as a matter of private contract and community expectation. BTW, I have almost never seen a CC&R that prohibits affordable housing or requires a minimum house size—minimum lot sizes and use restrictions are much more common.
Bryan [Wenter] points out that restrictive covenants are rarely used to prevent affordable housing. In the real world, this makes sense. The recent legislation allows 100% affordable projects to be built at higher density regardless of private restrictions. Almost no developer wants to build 100% affordable units unless they are set up specifically to manage the multiple funding sources needed to package a reasonably sized project. The cost of relatively small lots in Beverly Hills, for instance, would never justify a 2–4 unit affordable project, and even the ADU legislation simply assumes smaller units will be affordable. Although I didn’t dig into the statute, requirements for prevailing wages increase costs up to 30% and can kill any interest in affordable projects. Plus, the paperwork would make a small affordable infill project impossible.
As a result, despite its best intentions, this legislation is likely to have a very limited impact because it requires higher-density development that overrides CC&Rs to be 100% affordable. Unless the stars align, this situation doesn’t come up very often, especially where land values are high. The real problem arises when the legislature allows significantly higher density (including a development bonus) surrounded by low-density residential in return for a minimal (15%) number of affordable units. Not to sound cynical, but most of my experiences with these situations involve relatively isolated properties where there is totally inadequate public transportation to serve high-density affordable housing and the Legislature simply assumes poor people don’t need cars or other services.
Given that Orange County has a few high-density nodes surrounded by huge expanses of low or moderate density suburban housing, with pitifully limited public transportation, I am a big fan of ADUs and hope cities will develop ways to encourage them. For the most part, ADUs have been successfully “sold” as granny/adult children flats and there is usually plenty of room for them to be tucked into existing backyards. Even my own 20-unit HOA is in favor of allowing smaller second units to serve aging parents or Gen [fill in the alphabet] children. Unfortunately, to date, I haven’t seen developers or manufactured housing companies figure out how to propose ADUs on more than a one-at-a-time or single-lot basis. Some cities are very supportive. Others want architect-designed ADUs before they will even begin review. We need “off the shelf” or manufactured designs that cut costs and approval time to the minimum.
Enjoy your presentation. As usual, the devil is in the details. In this case, the details include the contract clause and the challenge that 100% affordable housing projects are rarely feasible without substantial public financial support. ADUs or second units offer a middle ground with a modest increase in density and the possibility of significant financial advantages to both the landlords and tenants.
Finally, or perhaps first and foremost, we need to avoid the problem of restrictive covenants precluding affordability by requiring an impact assessment in all land use permitting applications in which the CC&Rs are a part. The private CC&R regulation is as important, maybe more important, than the public regulation. No government should approve a residential development without reviewing the declaration. Land use regulations should establish standards of what is acceptable in the private regulation. Most restrictions should not be in perpetuity but might be time-limited. Amendments of CC&Rs should be subjected to an affordability impact analysis.
There is a lot to unpack in these suggestions. What is remarkable is that there is little in the literature about action-forcing strategies at the permitting stage to avoid encumbering property in ways that discriminate and preclude redevelopment to enable affordability.
There is so much we can do and so much that must be done to promote affordable housing. We will not get where we need to be if we do not remove unnecessary roadblocks. A careful review of state constitutional and statutory law is critical to amend them as necessary to bring order to the chaos that currently exists with regard to Home Rule. Eliminating unacceptable exemptions from fair housing under federal, state, and local law will advance the cause of diversity, inclusion, and social, economic, and racial equity. Ridding ourselves of those private covenants and other restrictions that create and perpetuate social silos is important. People have the right to manage their private property in concert with others through private restrictions. At the same time, we have the legal and moral responsibility to do what we can to promote development of more affordable housing. It is, and will continue to be, a difficult balancing problem and to some extent a zero-sum game. In the context of land-use controls, we sometimes use the theory of the “average reciprocity of advantage,” wherein we may suffer some disadvantage by subjecting ourselves to the common interest, but, at the same time, when working together we get the reciprocal advantage of a better community. That applies here as to removing the roadblocks.
Assembly Bill No. 721
CHAPTER 349
An act to add Section 714.6 to the Civil Code,relating to real property.
[Approved by Governor September 28, 2021.Filed with Secretary of State September 28, 2021.]
BILL TEXT
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1.
The Legislature finds and declares all of the following:
(a) The lack of available and safe affordable and supportive housing equitably distributed throughout California presents a crisis for Californians that threatens the health of California citizens and their communities.
(b) The Legislature has previously taken action to expand access to affordable and supportive housing.
(c) Recorded covenants burdening real estate have historically been used to perpetuate discrimination and racial segregation in housing throughout the state and have hampered the effectiveness of efforts to expand the availability of affordable and supportive housing.
(d) The safety and welfare of the general public is promoted by eliminating, with limited exceptions as specified herein, the ability of recorded covenants, conditions, restrictions, or private limits on the use of land to prevent the construction or maintenance of additional affordable and supportive housing particularly in areas that have historically excluded this type of housing.
(e) Ensuring access to affordable and supportive housing and the production of additional affordable and supportive housing is a matter of statewide concern and is not a municipal affair as that term is used in Section 5 of Article XI of the California Constitution. It is the intent of the Legislature that this act therefore apply statewide to all cities and counties, including charter cities, and to all conditions, covenants, restrictions, or private limits on the use of land, whether recorded previous to the effective date of this act or recorded at any time thereafter.
SEC. 2.
Section 714.6 is added to the Civil Code, to read:
714.6.
(a) Recorded covenants, conditions, restrictions, or private limits on the use of private or publicly owned land contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest in real property that restrict the number, size, or location of the residences that may be built on the property, or that restrict the number of persons or families who may reside on the property, shall not be enforceable against the owner of an affordable housing development, if an approved restrictive covenant affordable housing modification document has been recorded in the public record as provided for in this section, except as explicitly provided in this section.
(b) (1) The owner of an affordable housing development shall be entitled to establish that an existing restrictive covenant is unenforceable under subdivision (a) by submitting a restrictive covenant modification document pursuant to Section 12956.2 of the Government Code that modifies or removes any existing restrictive covenant language that restricts the number, size, or location of the residences that may be built on the property, or that restricts the number of persons or families that may reside on the property, to the extent necessary to allow the affordable housing development to proceed under the existing declaration of restrictive covenants.
(2) (A) The owner shall submit to the county recorder a copy of the original restrictive covenant, a copy of any notice the owner believes is required pursuant to paragraph (3) of subdivision (g), and any documents the owner believes necessary to establish that the property qualifies as an affordable housing development under this section prior to, or simultaneously with, the submission of the request for recordation of the restrictive covenant modification document.
(B) Before recording the restrictive covenant modification document, pursuant to subdivision (b) of Section 12956.2 of the Government Code, the county recorder shall, within five business days of receipt, submit the documentation provided to the county recorder by the owner pursuant to subparagraph (A) and the modification document to the county counsel for review. The county counsel shall determine whether the original restrictive covenant document restricts the property in a manner prohibited by subdivision (a), whether the owner has submitted documents sufficient to establish that the property qualifies as an affordable housing development under this section, whether any notice required under this section has been provided, whether any exemption provided in subdivision (g) or (h) applies, and whether the restriction may no longer be enforced against the owner of the affordable housing development and that the owner may record a modification document pursuant to this section.
(C) Pursuant to Section 12956.2 of the Government Code, the county counsel shall return the documents and inform the county recorder of the county counsel’s determination within 15 days of submission to the county counsel. If the county counsel is unable to make a determination, the county counsel shall specify the documentation that is needed in order to make the determination. If the county counsel has authorized the county recorder to record the modification document, that authorization shall be noted on the face of the modification or on a cover sheet affixed thereto.
(D) The county recorder shall not record the modification document if the county counsel finds that the original restrictive covenant document does not contain a restriction prohibited by this section or if the county counsel finds that the property does not qualify as an affordable housing development.
(E) A modification document shall be indexed in the same manner as the original restrictive covenant document being modified. It shall contain a recording reference to the original restrictive covenant document, in the form of a book and page or instrument number, and date of the recording. The effective date of the terms and conditions of the modification document shall be the same as the effective date of the original restrictive covenant document, subject to any intervening amendments or modifications, except to the extent modified by the recorded modification document.
(3) If the holder of an ownership interest of record in property causes to be recorded a modification document pursuant to this section that modifies or removes a restrictive covenant that is not authorized by this section, the county shall not incur liability for recording the document. The liability that may result from the unauthorized recordation shall be the sole responsibility of the holder of the ownership interest of record who caused the unauthorized recordation.
(4) A restrictive covenant that was originally invalidated by this section shall become and remain enforceable while the property subject to the restrictive covenant modification is utilized in any manner that violates the terms of the affordability restrictions required by this section.
(5) If the property is utilized in any manner that violates the terms of the affordability restrictions required by this section, the city or county may, after notice and an opportunity to be heard, record a notice of that violation. If the owner complies with the applicable affordability restrictions, the owner may apply to the agency of the city or county that recorded the notice of violation for a release of the notice of violation, and if approved by the city or county, a release of the notice of violation may be recorded.
(6) The county recorder shall charge a standard recording fee to an owner who submits a modification document for recordation pursuant to this section.
(c) (1) Subject to paragraph (2), this section shall only apply to restrictive covenants that restrict the number, size, or location of the residences that may be built on a property or that restrict the number of persons or families who may reside on a property. This section does not apply to any other covenant, including, but not limited to, covenants that:
(A) Relate to purely aesthetic objective design standards, as long as the objective design standards are not applied in a manner that renders the affordable housing development infeasible.
(B) Provide for fees or assessments for the maintenance of common areas.
(C) Provide for limits on the amount of rent that may be charged to tenants.
(2) Paragraph (1) shall not apply to restrictive covenants, fees, and assessments that have not been consistently enforced or assessed prior to the construction of the affordable housing development.
(d) In any suit filed to enforce the rights provided in this section or defend against a suit filed against them, a prevailing owner of an affordable housing development, and any successors or assigns, or a holder of a conservation easement, shall be entitled to recover, as part of any judgment, litigation costs and reasonable attorney’s fees, provided that any judgment entered shall be limited to those costs incurred after the modification document was recorded as provided by subdivision (b). This subdivision shall not prevent the court from awarding any prevailing party litigation costs and reasonable attorney’s fees otherwise authorized by applicable law, including, but not limited to, subdivision (d) of Section 815.7 of the Civil Code.
(e) Nothing herein shall be interpreted to modify, weaken, or invalidate existing laws protecting affordable and fair housing and prohibiting unlawful discrimination in the provision of housing, including, but not limited to, prohibitions on discrimination in, or resulting from, the enforcement of restrictive covenants.
(f) (1) Provided that the restrictions are otherwise compliant with all applicable laws, this section does not invalidate local building codes or other rules regulating either of the following:
(A) The number of persons who may reside in a dwelling.
(B) The size of a dwelling.
(2) This section shall not be interpreted to authorize any development that is not otherwise consistent with the local general plan, zoning ordinances, and any applicable specific plan that apply to the affordable housing development, including any requirements regarding the number of residential units, the size of residential units, and any other zoning restriction relevant to the affordable housing development.
(3) This section does not prevent an affordable housing development from receiving any bonus or incentive pursuant to any statute listed in Section 65582.1 of the Government Code or any related local ordinance.
(g) (1) Subject to paragraph (2), this section does not apply to:
(A) Any conservation easement, as defined in Section 815.1, that is recorded as required by Section 815.5, and held by any of the entities or organizations set forth in Section 815.3.
(B) Any interest in land comparable to a conservation easement that is held by any political subdivision and recorded in the office of the county recorder of the county where the land is situated.
(2) The exclusion from this section of conservation easements held by tax-exempt nonprofit organizations, as provided in subparagraph (A) of paragraph (1), applies only if the conservation easement satisfies one or more of the following:
(A) It was recorded in the office of the county recorder where the property is located before January 1, 2022.
(B) It is, as of the date of recordation of the conservation easement, held by a land trust or other entity that is accredited by the Land Trust Accreditation Commission, or any successor organization, or is a member of the California Council of Land Trusts, or any successor organization, and notice of that ownership is provided in the text of the recorded conservation easement document, or if that notice is not provided in the text of the recorded conservation easement document, the land trust or other entity provides documentation of that accreditation or membership within 30 days of receipt of either of the following:
(i) A written request for that documentation.
(ii) Any written notice of the intended modification of the conservation easement provided pursuant to paragraph (3).
(C) It was funded in whole or in part by a local, state, federal, or tribal government or was required by a local, state, federal, or tribal government as mitigation for, or as a condition of approval of, a project, and notice of that funding or mitigation requirement is provided in the text of the recorded conservation easement document.
(D) It is held by a land trust or other entity whose purpose is to conserve or protect indigenous cultural resources, and that purpose of the land trust or other entity is provided in the text of the recorded conservation easement document.
(E) It, as of the date of recordation of the conservation easement, burdens property that is located entirely outside the boundaries of any urbanized area or urban cluster, as designated by the United States Census Bureau.
(3) (A) At least 60 days before submission of a modification document modifying a conservation easement to a county recorder pursuant to subdivision (b), the owner of an affordable housing development shall provide written notice of the intended modification of any conservation easement to the parties to that conservation easement and any third-party beneficiaries or other entities that are entitled to receive notice of changes to or termination of the conservation easement with the notice being sent to the notice address of those parties as specified in the recorded conservation easement. The notice shall include a return mailing address of the owner of the affordable housing development, the approximate number, size, and location of intended structures to be built on the property for the purposes of affordable housing, and a copy of the intended modification document, and shall specify that it is being provided pursuant to this section.
(B) The county recorder shall not record any restrictive covenant modification document unless the county recorder has received confirmation from the county counsel that any notice required pursuant to subparagraph (A) was provided in accordance with subparagraph (A).
(h) This section shall not apply to any settlement, conservation agreement, or conservation easement, notice of which has been recorded, for which either of the following apply:
(1) It was entered into before January 1, 2022, and limits the density of or precludes development in order to mitigate for the environmental impacts of a proposed project or to resolve a dispute about the level of permitted development on the property.
(2) It was entered into after January 1, 2022, and limits the density of or precludes development where the settlement is approved by a court of competent jurisdiction and the court finds that the density limitation is for the express purpose of protecting the natural resource or open-space value of the property.
(i) The provisions of this section shall not apply to any recorded deed restriction, public access easement, or other similar covenant that was required by a state agency for the purpose of compliance with a state or federal law, provided that the recorded deed restriction, public access easement, or similar covenant contains notice within the recorded document, inclusive of its recorded exhibits, that it was recorded to satisfy a state agency requirement.
(j) For purposes of this section:
(1) “Affordable housing development” means a development located on the property that is the subject of the recorded restrictive covenant and that meets one of the following requirements:
(A) The property is subject to a recorded affordability restriction requiring 100 percent of the units, exclusive of a manager’s unit or units, be made available at affordable rent to, and be occupied by, lower income households for 55 years for rental housing, unless a local ordinance or the terms of a federal, state, or local grant, tax credit, or other project financing requires, as a condition of the development of residential units, that the development include a certain percentage of units that are affordable to, and occupied by, low income, lower income, very low income, or extremely low income households for a term that exceeds 55 years for rental housing units.
(B) The property is owned or controlled by an entity or individual that has submitted a permit application to the relevant jurisdiction to develop a project that complies with subparagraph (A).
(2) “Affordable rent” shall have the same meaning as defined in Section 50053 of the Health and Safety Code.
(3) “Lower income households” shall have the same meaning as defined in Section 50079.5 of the Health and Safety Code.
(4) “Modification document” means a restrictive covenant modification document described in paragraph (1) of subdivision (b).
(5) “Restrictive covenant” means any recorded covenant, condition, restriction, or limit on the use of private or publicly owned land contained in any deed, contract, security instrument, or other instrument affecting the transfer or sale of any interest that restricts the number, size, or location of the residences that may be built on the property or that restricts the number of persons or families who may reside on the property, as described in subdivision (a).
SEC. 3.
If the Commission on State Mandates determines that this act contains costs mandated by the state, reimbursement to local agencies and school districts for those costs shall be made pursuant to Part 7 (commencing with Section 17500) of Division 4 of Title 2 of the Government Code.
