Homebuilders and affordable housing advocates from across the state are keeping their eyes on Barnstable, where the outcome of a court battle over a new inclusionary housing fee is expected to affect cities and towns across the state.
In an effort to gather more funds to build affordable housing, Barnstable in June 1999 instituted an inclusionary housing fee, which requires anyone building a structure that costs more than $100,000 to pay 1 percent of the total construction cost into an affordable housing fund. Also, developers wanting to subdivide land consisting of less than 10 acres must pay a fee of $500 per lot created.
A lawyer representing home owners and builders in Barnstable, arguing that the fee is really an illegal tax, asked the state Supreme Judicial Court in mid-January to strike down the fee. The SJC transferred the case to Barnstable Superior Court. A hearing for a preliminary injunction is scheduled for March 2.
If Barnstable’s building fee holds up in court, it could pave the way for other cities and towns looking to raise funds for affordable housing that are considering similar fees.
The decision will have a Cape-wide impact, said attorney Paul Revere III of Centerville, representing the plaintiffs, citing several towns on Cape Cod that are considering the adoption of similar fees. Depending on the decision, this could have a statewide impact, in terms of towns’ efforts to find funds for affordable housing.
In papers filed with the SJC in support of a preliminary injunction, Revere argued the fee is an illegal tax on the subdivision of land and construction of new residential units. A fee, he wrote, is distinguished from a tax by three common traits: it is charged in exchange for a service that benefits the person paying the fee; the party paying it has the choice not to utilize the service and avoid the charge; and a fee is collected to compensate the entity providing the service, not to raise revenue.
The party paying the fee is not getting a service, Revere argued. Furthermore, because there is no service, there is no need to compensate the government for the service since there is no service rendered, and the payee has no choice but to pay the fee, he said.
Because the fee fails those tests, Revere said, it is actually a tax, and the tax cannot be imposed on a specific group like home builders unless the town gains approval from the Legislature.
The argument submitted to the SJC added that Barnstable already receives legitimate user fees for the issuance of building permits.
The parties paying the Inclusionary Housing Fee clearly receive no benefit from the payment of such fee, Revere wrote, along with co-counsel Gerald S. Garnick and Lois M. Farmer of Hyannis. The purpose of the ordinance is to raise general revenues for the development of affordable housing in the town of Barnstable.
This is a public obligation and a public interest which the town of Barnstable has illegally placed squarely on the very limited population of those seeking to subdivide real estate and construct new residential units, the argument stated.
My clients’ position is that the town has instituted an unconstitutional tax limited to a small part of the community to meet the general obligation for Chapter 40B, Revere said, referring to the state’s anti-snob zoning laws that call for 10 percent of a town’s housing stock to be deemed affordable. It’s an illegal means to achieve a laudable goal.
Statewide ‘Danger’
On the state level, the Home Builders Association of Massachusetts is keeping close watch on the events unfolding in Barnstable and is considering filing a brief in support of the plaintiffs in the case, according to HBAM counsel Benjamin Fierro III of Boston.
This is a danger for the home building industry statewide, Fierro said. If [the fee] prevails, we’ll likely see it pop up in other towns.
While Barnstable’s inclusionary housing fee may be the first such fee in the state, the town is not unique among Massachusetts communities, Fierro said. For example, the legitimacy of an impact fee of $1,500 per newly constructed house in the town of Franklin is being argued in the courts.
Barnstable’s fee is one of the worst examples of retrograde thinking on housing, Fierro said. It’s not creative. It’s not new. It’s the same old solution of taxing people to pay for housing, except they’re only taxing the people building and buying the housing.
He added that Barnstable was actually working against affordable housing by initiating the fee.
It’s ironic that while Barnstable claims to be committed to affordable housing, they’re making it more expensive for housing in the community, Fierro said. While expressing concern about 40B, Barnstable is moving in contradiction to [Gov. Paul Cellucci’s] executive order that urges the communities to take steps to increase housing production.
Fierro said that while low-income housing should remain a focus of housing advocates, Massachusetts is experiencing a lack of supply of all housing types.
We’re short of housing that’s affordable, not just for individuals who are defined as low-income, but for the middle class and young families, Fierro said. This bylaw exacerbates the problem. If it’s replicated by other communities, it could be disastrous to our commonwealth.
As alternatives, Fierro suggested an additional 1 percent assessment for the Cape Cod Land Bank that would be designated for affordable housing or streamlining the permitting process. With a quicker process, he said builders’ costs would be reduced, and the savings would be passed on to the homebuyer.
Time is money, he said. The more time that is needed for a project, the more financing costs accumulate, and all of that is passed on to the buyer.
Barnstable is looking to use funds collected through the fee to build or preserve affordable housing units.
According to 1997 statistics from the state’s Department of Housing and Community Development, the most recent available, just 813 – or 4.3 percent – of Barnstable’s 18,569 year-round housing units are classified as affordable under Chapter 40B. But with several newly constructed houses coming on line in the past few years, that percentage is most likely lower today.
Median property sales prices among the villages of Barnstable in 1999 range from $114,900 to $182,500, according to statistics provided by Warren Information Services, a sister company of Banker & Tradesman. The state median price is $167,000.
Barnstable’s town officials did not return phone calls by Banker & Tradesman’s press deadline.
Aaron Gornstein, executive director of the Citizens’ Housing and Planning Association, said that while he was not familiar with the specifics of the Barnstable case, all options should be considered when it comes to funding affordable housing.
We have to be looking at more creative ways like this, he said. The state and federal subsidies aren’t there like they used to be. He added that additional fees would not be a deterrent to construction of new housing.
The entire cost of affordable housing shouldn’t be put on the shoulders of builders alone, Gornstein added. They’re one resource that can be used locally, but they don’t replace the need for the government to be involved.
