As reported here, the County of Maui is attempting to address a shortage of “affordable housing” by considering a new ordinance requiring property owners who wish to develop their land to first commit a percentage of it to “affordable housing” or pay a cash “in-lieu” fee.
There are two major legal infirmities with the proposal, which is, in essence, an impact fee: First, Hawaii’s counties have no power to enact an “affordable housing” impact fee, or require affordable housing exactions. Second, the bill does not conform to constitutional requirements of close tailoring to mitigate any impacts on the stock of affordable housing that particular developments may cause.
This post deals with the first issue, the power of the counties. The constitutional issue is examined in a separate post.
REASONABLE USE OF PROPERTY IS A FUNDAMENTAL RIGHT
All questions regarding regulation of property should start at the same point: that the right to own and make beneficial use of property is a fundamental constitutional right.
The framers of the U.S. Constitution and the Hawaii Constitution both recognized that the ability to use property is the building block to all other freedoms, and the government may not place unreasonable conditions on that right. As noted by the U.S. Supreme Court:
The right to build on one’s own property – even though its exercise can be subjected to legitimate permitting requirements – cannot remotely be described as a “governmental benefit.”
Nollan v. California Coastal Comm’n, 483 U.S. 825 (1987). An “exaction” (a forced donation of land) or “impact” or “in-lieu” fees (cash payments instead of land exactions), may not impermissibly burden the right to build on one’s own property.
HAWAII COUNTIES ONLY HAVE AUTHORITY TO ENACT IMPACT FEES WITHIN THE LIMITATIONS OF HRS § 46-142
Counties have been delegated a limited power to enact impact fees, but have no power to enact impact fees regarding “affordable housing.”
An “impact fee” is defined by state law as:
[t]he charges imposed upon a developer by a county or board to fund all or a portion of the public facility capital improvement costs required by the development from which it is collected, or to recoup the cost of existing public facility capital improvements made in anticipation of the needs of a development.
Haw. Rev. Stat. § 46-141 (Supp. 2005). The power of the counties to enact impact fee requirements is narrow, and must be exercised within the scope of the statutory authority. Section 46-142 is the critical guideline for what the counties may and may not do:
(a) Impact fees may be assessed, imposed, levied, and collected by:
(1) Any county for any development, or portion thereof, not involving water supply or service; or
(2) Any board for any development, or portion thereof, involving water supply or service;
provided that the county enacts appropriate impact fee ordinances or the board adopts rules to effectuate the imposition and collection of the fees within their respective jurisdictions.
(b) Except for any ordinance governing impact fees enacted before July 1, 1993, impact fees may be imposed only for those types of public facility capital improvements specifically identified in a county comprehensive plan or a facility need assessment study. The plan or study shall specify the service standards for each type of facility subject to an impact fee; provided that the standards shall apply equally to existing and new public facilities.
Haw. Rev. Stat. § 46-142 (1993 & Supp. 2005).
HRS SECTION 46-142(B)
Analysis of the statutory authority in a four-step process demonstrates that the proposed affordable housing bill falls outside the permissible scope of the County’s authority to enact impact fee laws.
Subsection (a) provides that impact fees “may be assessed” by the counties for development. Thus, we start with a presumption that counties generally have the power to enact impact fee requirements, provided they do so by ordinance or agency rule.
However, the authority delegated to the counties by the statute is not unlimited or lacking specific guidelines. Ultimate sovereignty, of course, rests with the people of Hawaii. Haw. Const. art. I, § 1. The people have delegated their power via the Hawaii Constitution to the state Legislature, which in turn has the power to establish counties. See Haw. Const. art. VIII, § 1.
Thus, a county is not a sovereign entity, but rather a political subdivision that must remain within the confines of whatever authority is delegated to it by the Legislature, no matter how narrow.
With respect to impact fees, those limitations are contained in Haw. Rev. Stat. § 46-142(b), so the second step in determining the scope of the County’s impact fee authority is focused on this critical language: “impact fees may be imposed only for those types of public facility capital improvements specifically identified in a county comprehensive plan or a facility needs assessment study.”
Thus, if an impact fee purports to be for a “public facility capital improvement” — however that is defined — the County has no power to enact it.
A County has no power to enact affordable housing impact fees because the term “public facility capital improvement” is defined in section 46-141 to expressly exclude affordable housing:
“Public facility capital improvement costs” means costs of land acquisition, construction, planning and engineering, administration, and legal and financial consulting fees associated with construction, expansion, or improvement of a public facility. Public facility capital improvement costs do not include expenditures for required affordable housing, routine or periodic maintenance, personnel, training, or other operating costs.
Haw. Rev. Stat. § 46-141 (1993 & Supp. 2005).
Thus, a County’s general power to enact impact fees in subsection (a) of section 46-142 is expressly curtailed in subsection (b).
Other sections of chapter 46 – the state law that establishes the limited powers of the counties – similarly do not provide any authority to assess impact fees, in-lieu fees, or exactions for affordable housing. These provisions permit impact fees or exactions for other subjects, or limit the powers of the counties to address affordable housing issues by tools other than impact fees.
Section 46-6 permits the counties to impose exactions, but only for “parks and playgrounds.” Affordable housing exactions are not permitted. Haw. Rev. Stat. § 46-6 (1993).
Similarly, subdivision approval may be conditioned on a property owner’s agreement to provide access to beaches. Haw. Rev. Stat. § 46-6.5 (1993). There is no authority for affordable housing impact fees or exactions.
Other portions of chapter 46 permit the counties to address affordable housing issues, but do not permit them to do so by enacting impact fee or exaction requirements. For example, sections 46-15.1 and 15.2 permit the counties to develop and fund affordable housing projects either as public projects or in public-private partnerships with developers. Counties may also issue bonds. There is no authority in these sections, however, permitting counties to use impact fees or exactions to accomplish these goals.
The Development Agreement statute, Haw. Rev. Stat. § 46-121 et seq., permits the counties to enact development agreement ordinances providing a process for a county to enter into a voluntary agreement with a developer which may include affordable housing.
There is no authority in those sections allowing counties to impose mandatory requirements.
The constitutional problems with the bill are detailed in a separate post.
