Today, the Builders Association of Metropolitan Pittsburgh (BAMP) filed suit against the City of Pittsburgh in the United States District Court for the Western District of Pennsylvania challenging the City’s adoption of its Inclusionary Zoning Ordinance (IZO). The complaint challenges that the ordinance infringes on the rights of its members protected by both the United States and Pennsylvania Constitutions as well as violates state law governing municipalities operating under Pennsylvania’s Home Rule and Optional Plans Law.
Since 1938, BAMP has been an advocate for affordable housing promoting public policies that serve to make the American dream of home ownership a possibility for all. At the same time, BAMP has been a staunch defender of private property rights and opposes any attempts to limit the constitutional rights of citizens and against laws that would limit the freedoms of citizens to enjoy the rights and privileges protected under the Pennsylvania and United States Constitutions.
The ability to produce new housing at an affordable cost is challenging due to many factors. In today’s market, a limited supply of land, shortage of skilled labor, material and costs, interest rates and rising fees are all contributing to higher costs in construction. Owning or renting a suitable home is increasingly out of financial reach for many American households. In fact, according to a recent study by the National Association of Home Builders (NAHB) almost a third of the nation’s households are cost burdened and pay more than 30 percent of their income on housing. The cost of housing is determined by equations involving labor and material prices; interest rates and financing costs; federal, state and local regulations and supply and demand. The unintended cost of government regulations such as building codes and the land development approval process is having a direct impact on keeping families from achieving safe, decent affordable housing. NAHB analysis shows that regulatory requirements alone account for 25 percent of the cost of constructing a single-family home and 30 percent of the cost of a multi-family unit.
The city’s inclusionary zoning ordinance is one instance where a government requirement, with good intention, oversteps the legal authority of Pennsylvania local government and will only serve to increase the cost of housing by requiring housing developers to subsidize a specific number of housing units designated as affordable. The city’s inclusionary zoning ordinance, which has been in place in the Lawrenceville neighborhood, since 2019 was expanded last week to include the Bloomfield and Polish Hill neighborhoods. The city ordinance requires developers building a 20-or-more unit project to set-aside and designate 10% of the units as affordable housing that mandates a reduction in purchase price or rents for eligible income families. The ordinance requires the home builder to construct the residential unit exactly the same as the remaining market-rate homes including fixtures and furnishings. Society as a whole has the responsibility to work to provide affordable housing and should not place the sole responsibility upon the homebuilding industry and the consumers of new housing.
The suit seeks to overturn the ordinance imposing business practices in private development transactions. Projects involving the City that offer incentives such as government financing, tax incentives, design and density bonuses or the city’s involvement in assembling the land for redevelopment are projects where the City can, and should require an “affordable housing” component. The city’s IZO goes far beyond the City’s traditional public-private partnership in housing development by imposing mandates for subsidized housing in private market-rate projects, which places the burden of subsidizing the units on the project developer and the remaining 90% of the projects for home buyers or renters to cover the cost of the subsidy.
In reality, what the inclusionary zoning does create is a disincentive to private development of housing that is built outside of government involvement. A recent opinion published by the Wall Street Journal dated May 3, 2022 describes the unintended consequences Pittsburgh will likely experience citing the past experiences in other metropolitan areas who adopted similar requirements. BAMP supports government programs to incentivize the creation of subsidized housing, but must object to government intervention in private land transactions and development projects. The inclusionary zoning requirement has no impact on housing projects that have an element of government participation as part of the project financing, but DOES have a negative impact on housing costs in private developments.
Inclusionary programs are essentially taxes on the production of new housing. These programs increase general housing prices to cover the cost of subsidizing the designated ‘affordable’ units and, as a result, further limit the housing opportunities of moderate-income families. As such, the very goal of increasing housing affordability for city residents is hurt by the rising cost passed on to the non-subsidized units. In short, despite the assertions of its proponents, most inclusionary ordinances are just another form of exclusionary practice and are a regulatory placed upon property owners, developers and housing consumers.
While attaining affordable housing is a challenge for households across the nation, the good news for Pittsburgh is housing remains achievable for more of its citizens than in other parts or the country. According to the 2022 edition of Demographia International Housing Affordability, a study developed by the nonprofit think tank Urban Reform Institute and the Frontier Centre for Public Policy, an independent Canadian public policy think tank, Pittsburgh is ranked the most affordable housing market out of 92 cities in 8 nations. While this is welcome news for many, the effort to contain the cost of housing so all Pittsburghers can attain safe, decent and affordable housing should be a goal that we should work to achieve collectively. There is no ‘silver bullet’ solution to the challenge of making housing more affordable. The effort requires comprehensive strategies. Neither the public, nor the private sector can meet these challenges alone. Together, we must seek, implement and devise innovative solutions that enable more families in our city to achieve homeownership or have access to suitable rental housing. It is our hope and desire that while seeking to strike down this most recent government mandate, we can collectively work to address the areas that directly impact the cost of home construction and develop a workable strategy based on Pittsburgh’s rich history of public-private partnership to expand homeownership and rental opportunities.
A copy of the Complaint in “Builders Association of Metropolitan Pittsburgh v. City of Pittsburgh, et al.,” pending before the United States District Court for the Western District of Pennsylvania can be viewed on BAMP’s website, www.pghhomebuilers.com.