THREE MOST INFLUENTIAL PLANNING CASES OF 2015: Affordable Housing, Historic Preservation and Limits to Local Government Decision-Making

November 16, 2015

by Carrie A. Richter and Edward J. Sullivan*

As authors and presenters of the case law update for the Oregon Chapter of the American Planning Association (OAPA) Legal Issues Conference, we have been asked to identify the three most influential cases of 2015.

Although the following cases may not have immediate application to the planning profession per se, they serve as bellwethers of social, legal and economic trends, giving rise to changes in public policy that affect planning and planners.

First, there is a critical shortage of affordable housing throughout the State of Oregon; it is estimated to be affecting close to 40 percent of the population within the Portland metro region. The planning for the provision of this sorely needed housing intersects directly with the Fair Housing Act prohibitions on discrimination placing the U.S. Supreme Court’s decision in Texas Department of Housing Affairs v. Inclusive Communities, Inc., at the top of this list.

The second case on our list, Lake Oswego Preservation Society v. City of Lake Oswego, deals with whether the owner consent law allows a subsequent owner of a historically designated property to remove a historic designation when the previous owner objected to the designation. This could have far-reaching implications in this rebounding housing market increasing demolition pressures.

Finally, we typically think of local government decision-makers having broad discretion to interpret their own plan policies and land use regulations. However, in Gould v. Deschutes County, we learned that LUBA’s interpretation reigns supreme.

• Equal Access to Affordable Housing

There are a number of cases and regulatory reforms that put fair and affordable housing at the top of this list. First, there was the U.S. Supreme Court’s ruling in Texas Department of Housing Affairs v. Inclusive Communities, Inc., where Justice Kennedy, writing for the majority, found that segregation by public actions in all forms violates the Fair Housing Act regardless of intent.

The Inclusive Communities Project (ICP), a non-profit organization that seeks to promote racial integration in Dallas, sued a state agency charged with allocating HUD-issued low-income housing tax credits to developers who build low-income housing projects. ICP accused the Texas agency of disproportionately allocating the tax credits to properties in poor areas in violation of the Fair Housing Act of 1968 that makes it illegal to refuse to sell, rent “or otherwise make unavailable” housing to anyone because of race, sex or other protected categories. ICP alleged that between 1995 and 2009, the state did not award tax credits for any family units in predominantly white census tracts, and instead awarded tax credits to locations “marked by the same ghetto conditions that the (Fair Housing Act) was passed to remedy.” Moreover, ICP did not allege intentional discrimination, but rather alleged that issuance of tax credits within solely high-poverty areas that results in a disparate impact on minorities, which it said was sufficient to show a violation of the Fair Housing Act.

The Civil Rights Act of 1968 and amendments to the Fair Housing Act in 1988 (the Fair Housing Amendments Act or FHAA) as well as cases applying Title VII of the Civil Rights Act of 1964, banned many acts of housing discrimination. These as anti-discrimination laws focus not just on the “mind-set of the actors” but also on the “consequences of the actions.” By its terms, the Fair Housing Act and Fair Housing Amendments Act were enacted to provide for fair housing and to prohibit unfair discriminatory housing practices. The Court observed:

These unlawful practices include zoning laws and other housing restrictions that function unfairly to exclude minorities from certain neighborhoods without any sufficient justification. Suits targeting such practices reside at the heartland of disparate-impact liability.

The Court emphasized at some length that the disparate impact test was not formulaic and must be applied flexibly. The Court also specifically expressed concern over the use of racial quotas. The test must require a “causal link” in a case such as the one before it, between the policy and discrimination so as to remove “artificial, arbitrary and unnecessary barriers” to housing. The Court concluded:

Much progress remains to be made in our Nation’s continuing struggle against racial isolation. In striving to achieve our “historic commitment to creating an integrated society,” … we must remain wary of policies that reduce homeowners to nothing more than their race.

The facts of this case and others led the U.S. Department of Housing and Urban Development (HUD) to issue new rules shortly after this decision that were intended to help communities meet long-standing fair housing obligations in their use of HUD funds. These rules clarify and simplify existing fair housing requirements for HUD grantees to analyze their fair housing landscape and set locally determined fair housing priorities and goals through the submittal of an Assessment of Fair Housing. To aid communities in this work, HUD will provide open data and mapping tools to grantees, local communities and to the public on patterns of integration and segregation, racially and ethnically concentrated areas of poverty, disproportionate housing needs, and disparities in access to opportunity.

This case and the corresponding HUD rules highlight the equity associated with giving all individuals choice in selecting appropriate housing rather than focusing solely on the projected quantity of housing. But calling HUD’s Section 8 program “Housing Choice” is entirely undermined if families really have no choice about where they will live. It is also important to note that the new rules highlight the link between affordable housing and land use planning. If the land use choices that planners and housing advocates make result in continued segregation, those facts alone may violate the Fair Housing Act, which calls for awareness of the new legal landscape in affordable housing.

An equally important component of providing access to fair housing is ensuring that it is affordable. The most important event, or non-event, in land use in the 2015 Legislative Session was the failed attempt to approve House Bill 2564, which would have removed the pre-emption that prohibits local governments from adopting inclusionary zoning as a tool to advance affordable housing in our state. Lifting the ban would give local governments the option of requiring that some percentage of units be sold as affordable units to low-income buyers as part of any new subdivision or multi-family housing project. No more than 30 percent of the housing units created by a new project could have been offered at below-market rates, and local government would have provided builders with one or more additional incentives such as additional density, waiver of permit fees or expedited permit review to do so. Oregon and Texas are the only states that currently maintain a state-wide prohibition.

This past year, the California Supreme Court upheld an “inclusionary zoning” ordinance adopted by San Jose that provided for construction of low- and moderate-income housing by requiring a developer of 20 or more units to set aside 15 percent of those units for the private purchase or rental by those with low- or moderate-incomes. In California Building Industry Association vs. San Jose, the court found that inclusionary zoning requirements qualify as a “use restriction” given deference under a “reasonable relation” standard rather than the essential nexus and rough proportionality requirements required when a local government exacts property or money. Further, the ordinance was uniformly applied and had definable standards, so the danger of ad hoc application was greatly lessened. The plaintiffs in this case have sought review by the U.S Supreme Court.

• Regulation and Additional Tools for Preserving Historic Resources

In addition to affordable housing issues, Oregon’s post-recession building boom, particularly within the Portland Metro area, has led to cases highlighting the critical role that historic preservation plays in contributing to community authenticity.

ORS 197.772 is one of the few statutes regulating how local governments designate and protect historic resources. ORS 197.772(1) provides that where a property owner objects to any form of historic property designation, the local government must remove the designation. Subsection (3) of the same statute requires that the local government “allow a property owner” to remove a historic designation that was previously “imposed by the local government.” In Lake Oswego Preservation Society v. City of Lake Oswego, the Oregon Land Use Board of Appeals (LUBA), the Oregon Court of Appeals and now the Oregon Supreme Court have been asked to decide whether the term “property owner” is limited to the owner at the time that the designation was imposed or whether a person who becomes an owner after the designation was imposed, where the original owner objected to the designation, can object to a designation and cause its removal.

In 1990, the City of Lake Oswego designated the Carmen House as part of the City’s historic landmark inventory. The property owners at the time, Wilmot and Gregg, filed an objection to the designation. The Mary Caldwell Wilmot Trust, the current owner of the property, sought to remove the Carman House’s historic designation under ORS 197.772(3). The City Council granted the request to remove the historic designation concluding that the term “a property owner” is not limited to the owner at the time the property was designated. The neighbors and others appealed that decision to LUBA.

Finding no clues within the text of ORS 197.772(3), both LUBA and the Court of Appeals focused on the legislative history of the statute, coming to diametrically opposing conclusions. LUBA focused on the purpose of subsection (3), allowing property owners who “have been coerced into the historic property designation” to petition for removal. When one of the legislators was asked whether a person who bought property that had a historic designation could seek to remove it, the response was “[w]e haven’t thought about that situation.” From this analysis, LUBA concluded that the legislature did not intend for the term “property owner” to include person who become owners of property after it is designated and the City erred in removing the designation based on ORS 197.772(3).

The Court of Appeals analysis of the same legislative history makes no mention of the portion of that history LUBA found important. Instead, the court highlighted that the legislation was to allow owners that were “coerced into the historic property designation” to seek removal of that designation. The court quoted from another state representative summarizing the scope of subsection (3) to include those cases where “property owners were not allowed to consent and government imposed it on them that now they would have an opportunity to remove their property from that designation.” From this, the court concluded that the amendment allows “individuals who own property on which historic designations had been involuntarily imposed by the local government – before the enactment of ORS 197.772 – to have that designation removed.” The court found that preservation advocates’ concerns that adoption of subsection (3) would have the effect of “dismantling historic districts” and a lack of response by the proponents indicated an intent to have broad effects. As a result, the court concluded that any property owner that has a local historic designation forced on their property might require removal of that designation.

The Oregon Supreme Court granted review sought by the petitioners Lake Oswego Preservation Society, who were joined by amici curiae briefs filed by the State of Oregon on behalf of the State Historic Preservation Office and the Department of Land Conservation and Development as well as a joint brief filed by Restore Oregon, the Architectural Heritage Center, the National Trust for Historic Preservation, Preservation Works and the cities of Portland, Pendleton and The Dalles. The Petitioner and amici have argued that where there is no evidence that the legislature intended to grant a right to subsequent owners to seek removal of a historic designation, such an intention cannot be inferred, particularly given the important role historic preservation plays in achieving compliance with Statewide Planning Goal 5. The only response brief, filed by the Mary Wilmot Trust, argued that “a property owner” eligible to seek removal under subsection (3) of the statute includes subsequent owners and under ORS 197.772, the owners’ unilateral wishes trump any Goal 5 considerations. Oral argument is scheduled for Nov. 11 and a decision is likely to issue during the spring of 2016.

Another case that deserves a quick mention because of the important role it may play incentivizing historic preservation is King v. Clackamas County. In this case, the owners of the former Bull Run powerhouse and adjacent day-use park and elementary school, all designated local historic resources, received comprehensive plan and zoning amendments allowing for a variety of educational, cultural and commercial uses. The owners argued and the county agreed that the uses allowed under Goal 4, generally limiting the use of forest lands to forest uses, would not provide sufficient economic return to preserve and maintain the historic structures and thus, a reasons exception to Goal 4 was granted. The petitioners argued that Goal 5 does not mandate the preservation of historic resources per se, but rather encourages local government to adopt programs to protect historic resources and the need to generate revenue through adaptive reuse of the structure is not a sufficient reason for an exception. LUBA disagreed, finding that “absent a lawful economic use of some kind, it is unreasonable to expect that the property owners will continue to maintain the historic structures, in which event the structures will effectively be demolished by neglect over time. That outcome is inconsistent with the intent of Goal 5.” Creating a connection between economic return necessary for historic preservation to success as a requirement of Goal 5 could provide an additional helpful tool for property owners searching for alternatives to demolition.

3)         The Limits to Local Government Decision-Making

For the past nine years, Thornburgh Resort Company, LLC and its successor Loyal Land, LLC have attempted to site a destination resort on 2,000 acres in Deschutes County. Annunziata Gould, a long-time opponent of this project, has continually challenged this effort. The latest challenge, Gould v. Deschutes County (Gould X), may have been the last, for the Oregon Court of Appeals latest decision identified some significant boundaries to the deference that it and LUBA must give to local government interpretations of their own plan and land use regulations. A little background is necessary.

Under the local code, siting such a resort requires a three-step process.

1. An applicant must secure approval of a conceptual master plan (CMP).
2. The county must approve a final master plan (FMP).
3. Each phase of the resort must receive site-plan review or subdivision approval.

Thornburgh received CMP approval in 2006, which was subsequently remanded by LUBA (Gould I). On further appeal, the Court of Appeals agreed with Ms. Gould, finding that LUBA had erred in part, and remanded the case (Gould II).

In 2008, the county took action on remand again, approving the CMP, including 42 conditions of approval, some of which required an approved FMP before they could be satisfied. Gould appealed this decision to LUBA, and LUBA affirmed (Gould III).

In 2009, the Court of Appeals similarly affirmed (Gould IV). Meanwhile, the county approved Thornburgh’s FMP. Gould appealed the FMP to LUBA (Gould V). LUBA remanded the decision and the Court of Appeals affirmed (Gould VI).

In 2010, LUBA remanded the FMP to the County.

The county code provides the approval is void in two years if the permit is not “initiated” within that time period. A permit is “initiated,” in cases where construction is not required, when “the conditions of a permit or approval have been substantially exercised and any failure to comply fully with the conditions is not the fault of the applicant.” Ten days before the permit was to expire, the landowner asked the county for a declaratory ruling that its permit had been “initiated” and the County determined that the CMP had been “initiated.” Ms. Gould appealed this decision to LUBA (Gould VII). Owing no deference to a hearings officer’s interpretation, LUBA found that the applicant need not show that all 42 of the conditions were satisfied, but that “the 42 conditions of approval, viewed as a whole, have been substantially exercised.” The Court of Appeals affirmed (Gould VIII).

On remand, the county concluded that 19 of the conditions were satisfied; one condition was “substantially exercised” and 22 of the conditions “required the occurrence of a contingency that did not occur.” The county also found that the failure to comply with the 23 remaining conditions was not the applicant’s fault “because of the three-step process for approving destination resorts.”

The county explained that in creating the three-step process, it “never intended that the general two-year expiration” would require completion of all of the CMP conditions within that timeframe because that would be “practically impossible.”

Not surprisingly, Gould appealed this decision to LUBA (Gould IX).

LUBA remanded the decision, finding that the county could not “revisit” or reinterpret the “substantially exercised” requirement once LUBA had already resolved it to require consideration of all of the conditions of approval. In other words, under the “law of the case” principle, once LUBA interprets a local code provision and no further appeal occurs, the county may not interpret it differently on remand.

Gould also challenged the county’s finding that the applicant was not at fault for its failure to comply with the conditions because of the complexity of the local process. LUBA must affirm a local government’s interpretation of its own regulations so long as the interpretation “plausibly accounts for the text and context” of the provisions. LUBA found that “while it is perhaps unusual” for the county to blame its own complex land use approval structure for the failure to comply with the conditions, such an interpretation was not implausible.

Again, it should come as no surprise that Gould asked the Court of Appeals for review (Gould X).

On appeal, the Court found the county failed to explain why the complexity of the process or the nature of the contingent conditions made it impossible for an applicant to comply with the conditions within two years. The interpretation that the applicant is excused from fault solely because the process is too complex failed to take into account the applicant’s efforts to avoid such a contingency, which made the county’s interpretation implausible. Although the local government has the first bite at the interpretation apple, judicial efficiency allows LUBA to make an interpretation binding on a local government when it fails to appeal an adverse decision.

It is unclear whether this case will be the end of this odyssey for Gould and her dedication to stopping this destination resort.

This case stands for the proposition that local government decision-making of local code contains some important limits.

1. A plausible interpretation is one that fully considers all of the relevant code text; and
2. Where the local government policy-maker fails to make an interpretation in the first instance or fails to appeal an adverse decision, it will be bound by LUBA’s interpretation in perpetuity.

* The authors participated in a number of these cases.

Carrie A. Richter is an owner specializing in land use and municipal law in the Portland office of Garvey Schubert Barer. Richter is the former Chair of the Portland Historic Landmarks Commission and the former Chair of the Planning and Law Division of the American Planning Association. She can be reached at 503-228-3939 or at crichter@gsblaw.com.

Edward J. Sullivan is a retired partner in the Portland office of Garvey Schubert Barer. He practiced land use and municipal law for more than 40 years. Sullivan is a Past Chair of the State and Local Government Law Section of the American Bar Association. He can be reached at esulliva@gmail.com.