Housing crisis

How owner occupancy regulation is contributing to the housing crisis

A city ​​concerned about blight demands that a grocery store be operated by Trader Joe’s or Whole Foods rather than a dollar store chain? In a 1975 decision, the New York high court said no, rejecting a zoning commission’s requirement that a grocery store be owned and operated by a specific high-end chain. The court held that zoning cannot regulate property.

Zzoning treaties have long cited the maxim that zoning governs usesnot users. In other words, zoning governs What going where, but he can’t say who go where.

Except, that is, when it comes to housing. Historically, itbears across the country have looked the other way in cases where zoning requires the unit to be occupied by the person who owns it. These owner occupancy requirements have the effect of limiting the supply of housing, thereby affecting affordability and reducing tenants’ choices of where to live.

Owner occupancy requirements are devious attempts to lock in tenants

Big cities and towns Argue that owner occupancy requirements ensure that absentee landlords and tenants do not cause blight. Moreover, rightly or wrongly, many people accuse “investors” for some or all of the current housing affordability crisis.

Restrictions on rentals appear in zoning codes, homeowners association rules, rules issued by subsidized lenders and local ordinances. For example, when California preempted local bans on duplex conversions and lot splits in the Housing Opportunity and More Efficiency (HOME) Act, commonly referred to as SB9, it specifically allowed local governments to adopt homeowner requirements for such splits. Owner occupant requirements are particularly common in the zoning rules around secondary suites (UDA), a sample of which is summarized in Table 1.

Table 1: Owner occupancy rules are common for ADUs

Jurisdiction Coded Terms
washington d.c. DC Mun. Reg. Tit. 11, § 11-U253.5 “The main dwelling or the accessory apartment must be occupied by its owner for the duration of the use of the accessory apartment. »
denver Denver, Colorado Zoning Code § Owners of ADUs in single dwelling areas must “occupy either the primary dwelling or the use of the ADU as [their] legal and permanent residence. . . as evidenced by voter registration, vehicle registration or similar means.
Provo City, Utah Provo, Utah City Code §§ 14.06.020,14.30.030(4) For single-family properties with ADU, “either the main dwelling or the ADU must be occupied by an owner occupier”, although the owner may take a “good faith temporary absence” in certain circumstances. Landlords must provide documentation to the city to prove landlord occupancy upon request.
Bellingham, Washington. Bellingham, Washington Mun. Code § 20.10.036(B)(4)(c) Owners of ADU buildings must register clauses that they “will live on the premises, whether in the main or secondary accommodation”, which are also binding on successive owners. One-year exceptions are provided for in the event of “difficulties”. Owners must submit periodic affidavits confirming continued occupancy.
Fairfax County, Virginia. Fairfax County. Zoning Ordinance § 4102.7.B “Either the secondary dwelling or the main dwelling must be occupied by the owner.
Greenwich, Conn. Greenwich, Connecticut Mun. Code § 6-99 “The registered owner must reside either in the secondary dwelling or in the principal dwelling. An affidavit acknowledging residence is required from the owner.
Eagan, Minnesota. Eagan, Minn. Ordinance Code § 11.70.32 Owners must “reside either in the principal residence or in the ADU as a permanent residence” for at least 185 days per calendar year.
Brookhaven, New York Brookhaven, NY City Code § 85-258 “The owner(s) of the lot on which the accessory apartment is located must reside in . . . either the largest dwelling or the accessory apartment. No other owner shall collectively or individually hold a percentage greater than that of the occupying owner. »
Nassau County, Fa. Nassau County. Dev. Code § 28.15(K) “In cases where the secondary suite is used for rental property, the existing single family home on the parcel must be the owner’s principal residence and hold an active homestead exemption [from property taxes].
New Haven, Conn. New Haven, Conn. Ordinance No. OR-2021-0014 (2021) (amending New Haven, Conn. Zoning Ordinance § 22) “Secondary suites are only permitted when the owner lives on the property, either in the main dwelling or the secondary suite.” Exceptions apply for temporary sabbaticals or admissions to hospital or assisted living facilities.
Arlington County, Virginia. Arlington Cnty., Va. Zoning Ordinance §§ 12.9.2(C)(3) If several families occupy the property, “the owner of the main dwelling must occupy either the main dwelling or the accessory dwelling as their main residence”. While the ordinance also permits the property to be occupied solely by non-owners, it requires that “the entire property . . . be occupied by at most one family. »

These owner-occupancy rules have several negative effects on equity, multifamily housing construction efforts, and overall housing supply. Because renters generally have lower incomes than owners and are more racially diverse, homeownership requirements affect the economic and demographic makeup of neighborhoods. Owner occupancy requirements also prevent landlords from developing repeated expertise in acquiring and renovating existing housing stock to add ADUs; therefore, lenders are less likely to finance ADUs. Finally, homeownership rules constrain supply because each existing house can only result in one rental unit, not two, and houses owned by non-residents cannot add ADUs. (Also, many codes explicitly state that if an investor buys an owner-occupied home, they must leave the ADU vacant.)

Local governments could avoid these impacts simply by regulating maintenance. Rather than assuming tenants will be bad neighbors, local authorities could enforce housing codes, burning ordinances, and noise ordinances. Instead, they rely on owner occupancy as a shortcut to regulating maintenance.

In upholding owner-occupancy requirements, the courts fail to explain how these requirements relate to the maintenance of the property. Instead, they rely on unspoken assumptions and biases about tenants. In the few cases where the courts have questioned the link between home ownership and housing maintenance, they have refused to enforce owner occupancy requirements. In deposits for a 2019 New Jersey casezoning officials argued that an owner-occupier requirement would ensure “adequate supervision” of a two-family house. In response, the landlord’s attorneys cheekily noted that it was “unclear…whether the public was concerned that tenants were properly monitoring the [owners] or if the concern was the [owners] had to adequately supervise the tenants. In any event, the court concluded that “The status of the occupant of a house as a landlord rather than a tenant does not guarantee that he will be a law-abiding and considerate neighbor. The court refused to allow local officials to “functionally delegate to a private landowner part of the municipality’s police powers and his own exclusive responsibility for enforcing local laws and keeping the peace”.

A decade earlier, the North Carolina High Court achieved the same conclusion, concluding that an owner-occupier requirement had “no reasonable basis” and had “no substantial connection” to public health or welfare. And recently, a federal appeals court also ruled that while a homeowner requirement for short-term rentals had advanced local policy goals related to preventing nuisance and preserving neighborhood character, those same policy goals could have been achieved by other means. Since the court found that the owner occupancy restrictions discriminate against interstate commerce, the availability of non-discriminatory alternatives rendered the owner occupancy requirements unconstitutional.

Policy makers should not rely on zoning to solve all problems

Owner occupancy requirements are an example of “zoning creep”, or when planners and politicians use zoning to solve problems far beyond the scope of land use regulations and zoning. These issues could – and should – be addressed directly in order to avoid the (sometimes intended) consequences of using zoning. Owner occupancy requirements, for example, tend to exclude tenants from a neighborhood. Likewise, the minimum lot sizes, which have devastating effects on housing affordability, segregation, and the environment—are justified as a way to manage stormwater and wastewater, even though public health codes already regulate stormwater and wastewater.

A few state and local legislatures have seen fit to address this issue through statutes or ordinances. But the courts also have a role to play here, a role that most do not fulfill. Outside of New Jersey and North Carolina, courts have has been friendly to the occupying property terms. In case law, most courts recognize that zoning governs use, not ownership. Nonetheless, the courts defer to claims by cities that homeowners are better stewards of property.

As long as the courts refuse to question the nexus between the claimed purpose of a zoning ordinance and its actual effect, there will be no legal remedy for zoning creep. Fortunately, the courts in New Jersey and North Carolina have shown a way forward, a way that courts in other states should emulate.