Ruling blow to affordable housing

The East Greenwich Town Council nearly five years ago sought to boost the availability of affordable housing. Taking a page from other communities, the council required housing developers to provide affordable housing as part of any project or pay a fee to the town. But part of the town’s affordable housing strategy came apart last month when the R.I. Supreme Court struck down the fees.
On July 8, the justices unanimously ruled that only the General Assembly could permit such fees and that the East Greenwich Town Council overstepped its authority by imposing the fee. The decision came after a developer, North End Realty, sued the town over imposing a $200,000 fee on a planned six-house development that lacked the required affordable unit.
Neither North End Realty nor its attorney could be immediately reached for comment last week.
The court’s ruling vacates the East Greenwich ordinance and likely similar ones in Barrington, Exeter, Lincoln, North Kingstown, Richmond, South Kingstown and Westerly. In East Greenwich, the affordable housing requirement applied to projects with three or more units; other communities set different limits.
The court said that despite East Greenwich’s arguments, the R.I. Low and Moderate Income Housing Act did not authorize the town to levy a fee. And justices questioned the reasonableness of the size of the fee the town set at $200,000 for every affordable unit required but not built.
“What I think the court found most objectionable was the fact there was no set formula or calculation for how East Greenwich arrived at the $200,000,” said Jorge Elorza, a law professor at the Roger Williams University Law School.
Elorza, who follows real estate legal decisions, said he saw the decision going either way, with justices having leeway in interpreting the state’s affordable housing law. Ultimately, they read the law narrowly, noting that it was silent on fees and determining that affordable housing was a statewide concern. The ruling comes as communities attempt to meet a state mandate for affordable housing availability.
Under state law, 34 Rhode Island municipalities must have at least 10 percent of their housing stock deemed affordable. (The legislature exempted five cities from the requirement.) As of May 20, six municipalities had met or exceeded the 10 percent target, according to Rhode Island Housing. None of the eight communities with fee ordinances on their books has met the goal.
Now some officials in those towns say that if the General Assembly wants affordable housing, lawmakers must move to reverse the court’s decision.
“If they want us to accomplish that goal then we need their assistance,” East Greenwich Town Manager William Sequino Jr. said. “They set the bar and we’re trying to jump over it.”
East Greenwich was one of the first Rhode Island communities to implement a fee-in-lieu-of-development option. The money flows to an account dedicated to affordable housing.
But the lawsuit, filed 11 months after the adoption of the ordinance, put a hold on implementing the fee. (The $80,000 in the account will likely need to be returned, Sequino said.) Meanwhile a down economy meant few project proposals arriving at Town Hall, making the ordinance’s effectiveness difficult to measure, Sequino said.
But he is convinced that barring the lawsuit, the ordinance would have spurred the creation of more reasonably priced housing in a town where just 4.4 percent of housing is affordable (State law defines affordable housing as costing no more than 30 percent of household income when tied to local income levels. Included in housing costs are related expenses such as insurance and utilities.).
That’s why he plans to lobby lawmakers next session to pass legislation allowing the fees.
The poor economy, however, has clearly hampered the program as few developers seek to pursue projects of any kind.
“It hasn’t been particularly effective, mostly because the private real estate development has been so low,” said Kevin Flynn, associate director of the R.I. Division of Statewide Planning. In South Kingstown, a handful of developments have included an affordable housing component during the past four years. But Town Planner Vincent Murray said market conditions, rather than the threat of a fee, drove the developers to include less pricey housing.
Still, he called on lawmakers to permit the fee, saying it provides another tool to foster affordable housing in an era of shrinking government budgets.
“There is a need in the state certainly, but we have to have the tools to achieve it,” he said.
Westerly Town Planner Marilyn Shellman said that the fee option also provides a more palatable option for developers wary about constructing affordable housing themselves.
The fee also offers something of an escape hatch for developers cringing about building a modest house in a development filled with upscale mansions, Shellman said. And it provides an alternative when there is simply no land to fit affordable houses on a development site.
The fees also allow developers to move forward with projects without first finding qualified buyers to purchase the affordable units. Finding, qualifying and moving in buyers can be time-consuming and a potential delay may scare off developers entirely, Shellman said.
And in Westerly, the fee – about $35,000 per affordable house that is required but not built – is likely cheaper than constructing an affordable house from scratch, Shellman said.
If communities do fight to keep the fee option, they may encounter resistance from developers. Flynn, from statewide planning, said builders often oppose anything that makes projects more costly. Many opposed legislation – ultimately passed – that empowers communities to charge developers “impact fees” for developments. The fees are intended to cover some of the new community expenses the developments will bring. &#8226