Topic:
MUNICIPALITIES; ZONING; HOUSING FINANCE; TAX CREDITS; LAND USE;
Location:
HOUSING - FINANCE;

OLR Research Report


October 18, 2005

 

2005-R-0764

AFFORDABLE HOUSING REQUIREMENTS

By: Joseph Holstead, Research Analyst

You asked for information about state law related to affordable housing, including what the state requires of municipalities and if they are required to have at least 10% of their housing stock classified as “affordable” (i.e., meeting a statutory definition of affordability).

SUMMARY

The law requires municipalities to consider affordable housing when preparing their plans of development and regulating zoning. It does not require municipalities to have 10% of their housing stock meeting a statutory definition of “affordable.” However, municipalities that meet this threshold are exempt from the Affordable Housing Land Use Appeal Procedure, which shifts the burden of proof to the municipality in certain zoning matters.

By law, a housing unit is affordable to low- and moderate-income households if it costs them no more than 30% of their income. A person is considered low- or moderate-income if he earns less than or up to the Area Median Income (AMI), as determined by the federal Department of Housing and Urban Development (HUD). Other provisions of the law have varying definitions of affordability, as discussed below.

During the 2005 Session, the legislature created a Housing Trust Fund. Its primary goal is to encourage the creation of housing for homeownership at a cost that makes it affordable for low- and moderate-income people.

AFFORDABLE HOUSING AND MUNICIPALITIES

Requirements

A municipality must consider its affordable housing needs when preparing its plan of development, which may include strategies for addressing those needs (CGS 8-23). Additionally, the law authorizes a municipality to regulate zoning within its boundaries and those regulations must encourage the development of housing opportunities, promoting housing choice and economic diversity, including housing for people with low- and moderate-incomes (CGS 8-2). (These provisions do not define affordability.)

Affordable Housing Land Use Appeals Procedure

The law does not require a municipality to have at least 10% of its housing stock meet a statutory definition of affordable. Rather, municipalities that have at least 10% of their housing stock meeting the definition of affordability under CGS 8-30g are exempt from the Affordable Housing Land Use Appeals Procedure under the same statute.

The procedure is actually a set of rules developers and courts must follow when a developer sues a municipality for rejecting a proposed housing project that would include a certain amount of affordable units. Under the procedure, municipalities must convince the court that they had to reject a developer's project for three particular reasons. Normally, developers in land use appeals bear this burden.

Housing units that may be counted toward the 10% level for exemption are (1) those built, acquired, or rented with government funds specifically for low- and moderate-income people and (2) those where deeds require the owners to sell or rent the units at prices these people can afford.

Tax Credits. A municipality may provide property tax credits for housing with deed restrictions that allow people with incomes at up to the AMI to spend no more than 30% of their income on housing.

OTHER AFFORDABLE HOUSING PROVISIONS

By law, housing units are considered affordable if a person earning no more than the AMI pays no more than 30% of his annual income for it (CGS 8-39a). HUD annually issues a listing of states' AMIs by Metropolitan Statistical Area and by county. The 2005 AMI for a single person living in New London County is $49,834, according to HUD. Thus, a housing unit in New London county would be considered affordable under the above statutory definition if a person earning the AMI spent no more than $14,950 per year on it.

Other statutes use the 30% of annual income standard discussed under 8-39a, but apply it to a lower income group. This is sometimes referred to as income-grouped housing. For example, the law requires the Department of Economic and Community Development (DECD) and Connecticut Housing Finance Authority (CHFA) to serve people with incomes that are 25% or less of the AMI and between 25% and 50% of the AMI (CGS 8-37aa and -37dd).

(DECD has programs to finance the development of affordable homes, apartments, limited equity cooperatives, and mutual housing associations. CHFA homebuyer mortgages are available to first-time homebuyers with low- or moderate-income who are buying moderately priced homes within its sale price limits; it also provides construction loans to multifamily developers.)

THE HOUSING TRUST FUND

PA 05-5, June Special Session, creates a Housing Trust Fund and authorizes the State Bond Commission to capitalize it by issuing up to $100 million in General Obligation bonds, with $20 million effective each July 1, from 2005 to 2009. It establishes a Housing Trust Fund Program to expand affordable housing opportunities for low- and moderate-income people, sets program goals, and defines the types of housing to be developed and who is eligible for it. It requires DECD to develop and administer the program, including adopting regulations and forming an advisory committee.

Housing Trust Fund Program Goals

The Housing Trust Fund Program must:

1. encourage the creation of housing for homeownership at a cost that makes it affordable for low- and moderate-income people, meaning they pay no more than 30% of their gross household income for it;

2. promote the rehabilitation, preservation, and production of quality, well-designed rental and ownership housing affordable for these people;

3. maximize the leveraging of state and federal funds by encouraging private-sector investment in housing developments that receive assistance;

4. encourage housing that maximizes residents' housing choices;

5. enhance economic opportunity for low- and moderate-income people and their families;

6. promote (a) application of efficient land use that uses existing infrastructure and (b) conservation of open spaces; and

7. encourage the development of housing that aids community revitalization.

The act defines “low- and moderate-income families and persons” as people whose income falls within income levels the commissioner sets, except he may establish income levels up to 120% of AMI.

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