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LOCAL GOVERNMENT AUTHORITY TO ENACT INCLUSIONARY ZONING

IN NORTH CAROLINA

By the Staff Attorneys of Pisgah Legal Services

I. INTRODUCTION

In Lindsey v. Normet,1 The Supreme Court of the United States

held that access to decent housing is not a right protected by the

Constitution of the United States of America. States, cities and

counties have struggled with ways to make certain that affordable and

decent housing are available to its citizens while not running afoul

of constitutional and legislative mandates.

The term inclusionary zoning encompasses a variety of strategies

that refer to governmental compulsion or incentive that leads to the

production of affordable residential units in a given area. For the

purposes of this document, the term will generally refer to local

legislation that mandates developers to produce affordable units to

satisfy the requirements of their permit.

In such a system, ordinances mandate that a certain percentage of

units be made affordable for a certain amount of time and are

available to families that meet certain income requirements.

Different municipalities have experimented with a variety of formulas

to find one that fits their needs. While the formula chosen by a

local government might be legally significant in terms of avoiding

litigation and with regards to regulatory takings, the formula is

generally not legally significant in determining whether a local

government has authority to enact a comprehensive and mandatory

inclusionary zoning ordinance. The proper mixture of percentage

affordable units, years affordable, etc. is a question of governance

and this document will not make any recommendations related to it

other than to say that it is advisable for local governments to work

with developers to create a cocktail that will be palatable to

developers to avoid litigation where possible yet effective in

creating the housing that our people so desperately need.

This document will not answer all of the questions that surround

the legality of a mandatory inclusionary zoning scheme. That is

because there simply are not concrete answers to most of these

questions. This issue has not been litigated in North Carolina. When

the judiciary of other states has spoken on related issues, only

limited guidance is provided for lawmakers, lawyers, and judges in

1 405 U.S. 56 (1972)

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North Carolina because those decisions grew out of years of

jurisprudence that, while at times are similar to our own, have

evolved in their own unique ways. Some areas of law are very similar

from state to state. Some are highly state specific. The authority

of a municipality to act, especially given North Carolina’s unique

history in this area, is highly state specific.

While the hope is that this document will be something that non-

lawyers can understand, the document contains the result of legal

research. What everyone can understand is that there are many

pitfalls on the way to inclusionary zoning. This document tries to

point out those pitfalls and examine potential ways around them.2 The

overall recommendation is that the City Council should be very careful

if and or when it moves forward. Council should listen to its

attorneys, listen to the developers it works with frequently, and try

to learn lessons where possible from other jurisdictions. If the city

chooses to enact a mandatory inclusionary zoning ordinance, this

document might be used as a resource for Council and the City

Attorney’s office when making decisions or defending litigation should

that become necessary.

II. STATUTES

Chapter §160A of the North Carolina General Statutes controls the

extent of powers of city governments in North Carolina. Similarly,

Chapter §153A governs counties. While there are a number of

differences between the two chapters, there are also a number of

parallel provisions, often with the exact same language. Courts will

interpret parallel provisions in pari materia. This means that courts

will interpret statutes with similar purposes in light of each other.

Cases with holdings under §153A will typically be binding on cases

interpreting statutes under §160A provided that the statutes share

enough similarities or language. This report focuses primarily on

§160A, but reference will be made to cases interpreting cases under

§153A. Typically, in regards to police power and zoning, the two

chapters run parallel and cases decided under §153A will be binding on

cities and vice versa. What follows is a list of the operative

statutes with parallel provisions in footnote. Note that other

2 C. Tyler Mulligan and James L. Joyce’s book Inclusionary Zoning: A Guide to

Ordinances and the Law, School of Government, The University of North

Carolina at Chapel Hill (2010) is the most comprehensive resource on

inclusionary zoning in North Carolina. This document attempts to provide

Council something more than simply a book report of that excellent work. The

discussion in their book regarding takings could be considered a conclusive

statement on the issue and as such, takings will not be discussed in this

document.

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important statutes are not listed here as they will be considered more

fully in other sections of this report.3

NCGS § 160A- 174. General ordinance making power delegates the

General Assembly’s police power to the municipality to “define,

prohibit, regulate, or abate acts, omissions, or conditions,

detrimental to the health, safety, or welfare of its citizens and the

peace and dignity of the city.”4 The General Assembly gives guidance as

to what may be included in a zoning ordinance enacted pursuant to this

police power in NCGS § 160A-381(a) which states:

For the purpose of promoting health, safety, morals,

or the general welfare of the community, any city may adopt

zoning and development regulation ordinances. These

ordinances may be adopted as part of a unified development

ordinance or as a separate ordinance. A zoning ordinance

may regulate and restrict the height, number of stories and

size of buildings and other structures, the percentage of

lots that may be occupied, the size of yards, courts and

other open spaces, the density of population, the location

and use of buildings, structures and land. The ordinance

may provide density credits or severable development rights

for dedicated rights-of-way pursuant to G.S. 136-66.10 or

G.S. 136-66.11.5

NCGS§ §160A-383,6 titled Purposes in view, mandates that zoning

regulations must be enacted in accordance with the comprehensive

plan and sets out certain procedural requirements related to that

issue. The final paragraph expands on the enumerated list in

NCGS §160A-381 and states:

Zoning regulations shall be designed to promote the public

health, safety, and general welfare. To that end, the

regulations may address, among other things, the following

public purposes: to provide adequate light and air; to

prevent the overcrowding of land; to avoid undue

concentration of population; to lessen congestion in the

streets; to secure safety from fire, panic, and dangers;

and to facilitate the efficient and adequate provision of

transportation, water, sewerage, schools, parks, and other

3 For example NCGS §160A-4, its county parallel, NCGS §153A-4, and NCGS §42-

14.1, prohibition against rent control. 4 NCGS §160A-174(1971), parallel county provision NCGS §153A-121(a) 5 NCGS§ 160A-381(a)(1971) (Emphasis added), parallel county provision NCGS

§153A-340(a) 6 Parallel county provision NCGS§ 153A-341

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public requirements. The regulations shall be made with

reasonable consideration, among other things, as to the

character of the district and its peculiar suitability for

particular uses, and with a view to conserving the value of

buildings and encouraging the most appropriate use of land

throughout such city.

NCGS§ §160A-177, titled Enumeration not exclusive gives the

courts guidance on how they should interpret the General

Assembly’s intent when constructing this chapter.7 It states:

The enumeration in this Article or other portions of this

Chapter of specific powers to regulate, restrict or

prohibit acts, omissions, and conditions shall not be

deemed to be exclusive or a limiting factor upon the

general authority to adopt ordinances conferred on cities

by G.S. 160A-174.

NCGS § 6-21.7 Attorney’s fees: cities or counties acting outside

the scope of their authority, allows a prevailing challenger to

be awarded attorney’s fees by the court. The statute states:

In any action in which a city or county is a party, upon a

finding by the court that the city or county acted outside

the scope of its legal authority, the court may award

reasonable attorneys' fees and costs to the party who

successfully challenged the city's or county's action,

provided that if the court also finds that the city's or

county's action was an abuse of its discretion, the court

shall award attorneys' fees and costs.

III. INTRODUCTION TO HOME RULE IN NORTH CAROLINA

Although no municipality in the United States has any

Constitutional Authority to exist under the Federal Constitution and

all are considered creatures or agencies of the State,8 the majority of

states have chosen to acknowledge the municipality’s existence and

power to govern in their state’s respective constitutions.9 These

States are often called “home rule” states whereas North Carolina is

often referred to as a Dillon’s Rule state. These distinctions are

useful in understanding the overall concepts at play, but prove

legally specious in determining the actual extent of municipal power.

7 Parallel county provision NCGS §153A-124 8 Hunter v. City of Pittsburgh, 207 U.S. 161, 178-179 (1907) 9 David W. Owens, Article: Local Government Authority to Implement Smart

Growth Programs: Dillon's Rule, Legislative Reform, and the Current State of

Affairs in North Carolina, 35 Wake Forest L. Rev. 671(2000)

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Home rule is better described as a spectrum with states having broad

constitutional protections for a municipality’s ability to govern

itself on one end and states like North Carolina where municipalities

govern, or even exist10 at the whim of the state’s legislative body on

the other.11

The higher courts of North Carolina have never ruled on the

validity of a mandatory inclusionary zoning scheme and the cases that

would most likely be cited were the case to be argued are inconsistent

at best. The only certainty is that local governments’ powers are

derivative of the State’s.

It is possible that the General Assembly could convene and

specifically overturn any ordinance enacted by a municipality. The

current General Assembly has given reason to believe that this is a

strong possibility, especially with regard to measures considered too

progressive or otherwise controversial. However, it could also be

argued that the General Assembly has acquiesced to the existence of

other inclusionary zoning programs across the state and may continue

to do so. In any case, if the General Assembly decisively acts to end

inclusionary zoning in North Carolina, they have the Constitutional

authority to do so. Absent an unprecedented, arguably activist and

very unlikely ruling by our courts, similar to the ruling by the New

Jersey Supreme Court in South Burlington County NAACP v. Mt Laurel12

10 See Lilly v. Taylor, 88 N.C. 489 (1883), where the General Assembly put the

future existence of the town of Fayetteville to voters and the town was

ultimately disbanded after vote of the electorate; Ward v. Elizabeth City,121

N.C. 1(1897), Where the Court found that the Plaintiff/City Attorney could

not recover wages for the entirety of his one year term because the City had

been abolished during the middle of that term by action of the General

Assembly. 11SEE N.C. Const. art. VII, § 1 (1971):” The General Assembly shall provide

for the organization and government and the fixing of boundaries of counties,

cities and towns, and other governmental subdivisions, and, except as

otherwise prohibited by this Constitution, may give such powers and duties to

counties, cities and towns, and other governmental subdivisions as it may

deem advisable;” N.C. Const. art. VIII, § 1,”No corporation shall be created,

nor shall its charter be extended, altered, or amended by special act, except

corporations for charitable, educational, penal, or reformatory purposes that

are to be and remain under the patronage and control of the State; but the

General Assembly shall provide by general laws for the chartering,

organization, and powers of all corporations, and for the amending,

extending, and forfeiture of all charters, except those above permitted by

special act. All such general acts may be altered from time to time or

repealed. The General Assembly may at any time by special act repeal the

charter of any corporation;” 12 67 N.J. 151, 336 A.2d 713 (1974). In Mount Laurel, The New Jersey Supreme

Court resting on growing precedent in New Jersey, not only ruled that any

zoning schemes with an exclusionary purpose were invalid, but placed an

affirmative duty on a municipality to use its zoning power to create

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curtailing this Constitutional authority, the concern expressed by

affordable housing advocates that enacting an inclusionary zoning

ordinance in this climate will “ruin it for everybody else” could be

realized.13

IV. SUBSTANTIVE DUE PROCESS ISSUES

In determining whether municipalities have acted in accordance

with the state statutes that enable municipalities to act in one way

or another, written opinions provided by North Carolina’s appellate

courts have struggled to produce a consistent body of law. This is

not unexpected given that the courts are called upon to rule on a wide

array of issues, regulated by hundreds of statutes. Often any case

pursuant to Chapter §160A will be a case of first impression.

Furthermore, many of the existing cases are highly fact specific and

therefore distinguishable from other cases that may arise. In light

of this, often no clear direction has been given as to the outer

limits of the police power. Given this, the courts have wide latitude

to rule either in favor of or against the existence of authority to

enact an inclusionary zoning ordinance without running grossly afoul

of precedent.

affordable housing. The Mount Laurel Court, wisely relying on the New Jersey

Constitution’s equal protection clause rather than the Federal equal

protection clause, recognized that in exercising the state’s police power

through zoning, the equal protection rights of citizens outside of the

municipality’s reach are infringed upon by exclusionary practices of a

municipality.

For discussion on the Mount Laurel opinion and the direction of rulings by

Federal Courts facing similar challenges, see 13 Wake Forest Law Review 107,

Mark Stanton Thomas, Comment: Exclusionary Zoning and a Reluctant Supreme

Court (1977).

Also see Donald R. Daines, “How to Determine the Maximum Potential Builder’s

Remedy the Court has Constitutional Power and Obligation to Award” for a

discussion of the evolution of Mount Laurel opinion and the remedies

available to citizens. 13 For an excellent summary of various powers granted to municipalities, see

David W. Owens, 35 Wake Forest L. Rev. at 676-677 (2000) “A variety of

additional general enabling authority has been granted in ensuing years. This

includes authority to establish minimum housing codes, adopt airport zoning,

regulate development in floodplains, regulate subdivision of land, carry out

building inspections, regulate historic districts and landmarks, create

community appearance programs, undertake community development, urban

homesteading, and downtown development programs, adopt a variety of resource

protections measures, and adopt official maps to protect transportation

corridors.” (internal citations omitted)

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Generally, when a challenge is made to a piece of legislation

based on its alleged incompatibility with constitutional guarantees or

mandates, this is called a substantive due process challenge. While a

challenge to a municipal ordinance would generally be testing its

compatibility with the enabling statute rather than Constitutional

mandates, North Carolina Courts have, at times, cited Federal

Substantive Due Process cases in rendering their opinions. These

cases generally give deference to the legislative body’s judgment on a

particular issue.

In 1926, the Supreme Court of the United States handed down its

ruling in Euclid v. Ambler Realty.14 Euclid stands for the proposition

that where a state has delegated its general police power to the

municipality, there is no Federal Constitutional impairment to that

authority. The Court held that zoning laws are presumed valid if

their validity were even “fairly debatable”.15 The municipality has the

authority to protect the public welfare even if private landowners

were subjected to restrictions on the use of their own land without

compensation.16

This authority is not without limits. The municipality must use

the zoning power in a way that is not “unreasonable, arbitrary, or

capricious and bears a rational relationship” to safeguard the health,

safety, morals, and general welfare of the public.17

In Raleigh v. Morand, The North Carolina Supreme Court held that a

presumption exists that zoning ordinances are valid exercises of the

police power18. The party asserting the invalidity of the ordinance

has the burden of establishing its invalidity.19 Echoing Euclid, the

Court in Helms v. Charlotte, stated:

When the most that can be said against such ordinances is

that whether it was an unreasonable, arbitrary or unequal

exercise of power is fairly debatable, the courts will not

14 272 U.S. 365 (1926) 15 Id. at 386 16 Id. at 386 17 Id. at 395 18 247 N.C. 363, 367(1957) 19 Helms v. Charlotte, 255 N.C. 647(1961). Also see Schloss v. Jamison, 262

N.C. 108, 115 (1964), where the North Carolina Supreme Court, citing this

passage of Helms, held that the Plaintiff/sign owners failed to meet the

burden of proving that the Charlotte zoning ordinance was not a proper

exercise of the city's police power, and the Court refused to interfere

because there was not even a debatable showing of arbitrary, unreasonable, or

unequal exercise of power.

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interfere. In such circumstances the settled rule seems to

be that the court will not substitute its judgment for that

of the legislative body charged with the primary duty and

responsibility of determining whether its action is in the

interest of the public health, safety, morals, or general

welfare.20

There is no reason to conclude that cases like Helms are in some

way inapplicable to the matter at hand and the language above is

encouraging. However, it is difficult to say with certainty that

a court will choose to apply this level of deference as other

options exist given the language of other cases. It should be of

note that cases like Helms have not been cited for the above

stated proposition in any of the more recent and very relevant

cases discussed below in Section V of this report. Smith v. New

Bern and Helms created two lines of cases, running side by side,

interpreting the same issues in completely different ways.

V. DILLON’S RULE

As mentioned above, North Carolina is often referred to as a

“Dillon’s rule state.” This is not a technically accurate statement,

but is not wholly inaccurate in regards to practical application. The

rule has held a powerful place in our jurisprudence and in the minds

of many attorneys and judges. For many, it is likely believed to be

the law of the land even in spite of very direct language in cases to

the contrary.

Judge John F. Dillon, in his Treatise on the Law of Municipal

Corporations wrote the following:

It is the general and undisputed proposition of law that a

municipal corporation possesses, and can exercise the

following powers, and no others: First, those granted in

express words; second, those necessarily or fairly implied

in, or incident to the powers expressly granted; third,

those essential to the declared objects and purposes of the

corporation- not simply convenient, but indispensable. Any

fair, reasonable doubt concerning the existence of power is

resolved by the courts against the corporation, and the

power is denied. 21

20 Id. at 651. 21 John F. Dillon, Commentaries on the Law of Municipal Corporations (1872)

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The above text is considered Dillon’s Rule and is quoted

repeatedly in North Carolina cases22. It should be understood that

Dillon’s rule is not a substantive law at all, but a rule for

interpreting laws.

It might have appeared that Dillon’s rule was overturned in 1971

when the North Carolina General Assembly passed NCGS §160A-4 which

states:

It is the policy of the General Assembly that the cities of

this state should have adequate authority to execute the

powers, duties, privileges, and immunities conferred upon

them by law. To this end, the provisions of this Chapter

and of city charters shall be broadly construed and grants

of power shall be construed to include any additional and

supplementary powers that are reasonably necessary or

expedient to carry them into execution and effect:

Provided, that the exercise of such additional or

supplementary powers shall not be contrary to State or

federal law or to the public policy of this state. 23

Like Dillon’s rule, this statute is a rule of construction. In this

instance, the General Assembly has provided guidance to the courts of

North Carolina on how to interpret the enabling statutes found in

chapter §160A and §153A. Although from the language of the statute,

it might appear that there would no longer be a place for Dillon’s

rule, but the cases have shown otherwise.

VI. THE MAJOR CASES

Homebuilders, Porsch, Greene, and Bowers

In the landmark case of Homebuilders Association of Charlotte,

INC. v. The City of Charlotte,24 the Supreme Court of North Carolina

faced the question whether a resolution passed by the City Council of

Charlotte establishing a schedule of user fees for a variety of city

services was valid. The Court ruled that Charlotte ultimately had the

authority to impose regulatory fees provided that they are reasonable.

In this instance the fees were reasonable in that they were sufficient

only to cover the cost of the authorized regulation itself.25 The Court

found that all of the user fees charged were related to some express

22 See: Smith v. New Bern, 70 N.C. 14 (1874). This is likely the first such

Dillon ruling in North Carolina, handed down by the North Carolina Supreme

Court Just two years after the publication of Dillon’s Commentaries. 23 NCGS §160A-4 (1999) 24 336 N.C. 37 (1994) 25 Id. at 45

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authority to regulate a particular field which it had the authority to

regulate.26 The Court accepted the rule that if a municipal power

exists to regulate, then that grant of authority implies the grant to

charge fees to cover the cost of that regulation.27

In reaching its ruling the Court attempted to clarify the

relative positions of Dillon’s rule and §160A-4 in North Carolina

jurisprudence. The Court states that it must “treat the language as a

‘legislative mandate that we are to construe in a broad fashion the

provisions and grants of power contained in Chapter 160A.”28 The

Builders Association argued that the Court has used the narrow

construction found in Dillon’s rule in at least two cases since §160A-

4 passed and that a narrow construction of municipal power was

justified. The Homebuilders Court analyzed the two cases argued by the

Builders association in turn and while the Court did not overrule

these cases, it held that the proper rule of construction was §160A-

4.29

The first of these cases analyzed was Porsh Builders v. Winston

Salem30. In that case, the Court addressed the issue whether pursuant

to §160A-514(d),did the municipality have the authority to consider

compatibility with its comprehensive plan when selling real estate or

did the phrase “highest responsible bidder” limit the municipality to

only consider the amount of the bid and whether the bidder had the

means to actually pay.31

Although Porsh was decided ten years after the passage of NCGS

§160A-4, neither the majority nor the dissent mention the statute.

The majority chose to follow a very narrow, Dillon-style construction

stating:

[I]t is generally held that statutory delegations of power

to municipalities should be strictly construed, resolving

any ambiguity against the corporation’s authority to

exercise the power. This Court has long held that “[a]ny

26 Id. 27 Id. It could be argued that this rule could be accepted even applying

Dillon’s rule. The Court cited a number of sources as authority for this

rule including a number of cases from other jurisdictions and two Legal

treatises, but did not cite any North Carolina case or statute. 28 Id. at 44 29 Id. 30 302 N.C. 550 (1981) 31 Id. at 555

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fair, reasonable doubt concerning the existence of the

power is resolved against the corporation.”32

While trying to determine legislative intent, the Court cited

definitions for “responsible” and “bidder” from Black’s Law Dictionary

and found that these terms were not ambiguous and the municipality

must sell the real estate to the bidder offering the most money. The

municipality was not allowed to consider factors such as future

economic impact and cohesion in the surrounding environment in making

its determination; the term “responsible” did not include these sorts

of considerations.

It is odd that the Majority went out of its way to express that

“responsible” was an unambiguous term given that it had already cited

a rule that ambiguities are interpreted against the grant of

authority. By this Court’s logic, the power could have been struck

down because the General Assembly spoke clearly on the issue OR

because the General Assembly had not spoken clearly.

Justice Carlton dissented in this case and argues that the term

“responsible” is not, as the majority believed, a clear and

unambiguous directive from the General Assembly33. Quoting Stevenson v

Durham,34 he states that “in ascertaining legislative intent, courts

should consider the language of the statute, the spirit of the

statute, and what it seeks to accomplish.”35 He argues that the

Majority of the Court is not only ignoring the intention of the

General Assembly, but is limiting a municipality’s ability to use its

discretionary functions to effectively govern. Under the Majority’s

holding, making determinations of who the highest responsible bidder

is would become a “mechanical” act that could be performed by any

employee.

The other case given an in depth analysis by the Homebuilders

Court was Greene v. The City of Winston-Salem.36 The question in

Greene was whether builders were bound by a city ordinance that

purported to regulate sprinklers in certain buildings in a way that

varied from the requirements found in the State Building Code. In

overturning the ordinance, the Court cited Dillon’s rule, but

ultimately its decision was based on principles of preemption rather

than powers granted or not granted by an enabling statute. The Court

32 Id. at 554; citing Shaw v. City of Asheville, 269 N.C. 90,97 (1967) 33 Here we have Supreme Court Justices arguing about the ambiguity of a term;

it seems that the very existence of the argument suggests an ambiguity

exists. 34 281 N.C. 300,303 (1972) 35 302 N.C at 557 36 287 N.C. 66 (1975)

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ruled that the state had created a “complete and integrated regulatory

scheme to the exclusion of local regulation” when it created the State

Building Code.37

It should be noted that the Homebuilders Court had the

opportunity to end the confusion by overruling those cases, but chose

to distinguish them from the case it had before it instead.

Presumably, Porsch and Greene are still valid precedent in North

Carolina. The language in these cases could be especially damaging if

followed by future courts. The Court in Greene stated:

In construing the extent of the powers of municipalities,

the fundamental and universal rule is, that while the

construction is to be just, seeking first of all for the

legislative intent in order to give it fair effect, yet any

fair, reasonable or substantial doubt as to the extent of

the power is to be determined in favor of the public and

against the municipality.38

This language is contradictory to the language from Euclid that has

been cited repeatedly by our Courts giving deference to the

municipality.39 None of these cases have been overturned and all are

valid precedent in North Carolina even though the direction they give

regarding interpretation of municipal powers goes in opposite

directions.

Shortly after deciding, Homebuilders, the Court issued its ruling

in Bowers v City of High Point.40 Bowers is a case where the City of

High Point was actually arguing that the actions of its city manager

were ultra vires in that he exceeded his authority while entering into

certain contracts with retiring police officers. The City argued that

since the manager’s actions exceeded statutory authority, the City

could not be bound by the contract. The Court cited §160A-4 and

Dillon’s rule in concluding that the plain meaning of “base pay”

should control rather than giving the municipal action broad

deference. The putative Contract was ultra vires and unenforceable.41

Smith Chapel

Five years later in Smith Chapel Baptist Church v. City of

Durham42, the Supreme Court again chose to ignore the broad deference

37 Id. at 75 38 Id. at 72 39 see Discussion of Substantive Due Process supra 40 339 N.C. 413 (1994) 41

Id. 42 350 N.C. 822 (1999)

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provided to a municipality by NCGS §160A-4. It held that Durham had

exceeded its authority under NCGS §160A-311 and §160A-314 by charging

users stormwater fees that exceeded the actual cost of use. These

fees were also held to be invalid in that they exceeded actual cost of

“furnishing” a stormwater system, which this Court believed was a

clear legislative directive that fees may only be charged for the

actual cost of direct maintenance to the infrastructure. In order to

comply with federal stormwater regulation, the city was attempting to

charge these fees to fund educational programs, enforcement efforts

against illegal dumping, used oil recycling, that it believed would

over time support the physical infrastructure, but were not directly

related to the costs of physical repairs. Without any mention of

§160A-4, the Court determined that the City exceeded its authority

under the statutes and should have found ways to comply with the new

Federal law out of its general fund.43

Laurinburg and a summary of the preceding cases

In 2005,the North Carolina Court of Appeals issued its opinion in

Bellsouth Telecomms Inc. v. City of Laurinburg.44 This opinion

attempts to reconcile the varied holdings of Homebuilders, Porsh,

Greene, Bowers, and Smith Chapel. The Court, citing Homebuilders

states that since Porsh and Greene do not cite §160A-4, they are not

the proper authority for determining the rule of construction of

grants of power to municipalities in light of §160A-4. This bit of

dicta borders on the absurd since both opinions were issued after

§160A-4 and are squarely on the issue of municipal grants of power.

Given this, it is difficult to determine what these cases actually

stand for. The Laurinburg Court distinguishes Porsh and Greene from

Homebuilders, Bowers, and Smith Chapel (which like Porsh and Greene do

not mention §160A-4). The Court states that the latter three opinions

are consistent and stand for the following rules of statutory

interpretation: §160A-4 has replaced Dillon’s rule when there is

ambiguity in the statutory language authorizing municipal power OR

when the powers clearly authorized reasonably necessitate “additional

and supplementary powers to carry them into execution and effect.”45

“However, where the plain meaning of the statute is without ambiguity,

it must be enforced as written.”46

43 Justice Frye wrote a dissent focusing on the broad grant of powers in

§160A-4. Justice Frye argues that the term “system” encompassed ancillary

strategies and activities that are supportive of the physical infrastructure

and therefore within the scope of the municipality’s authority to act govern. 44

168 N.C. App. 75 (2005) 45 NCGS§160A-4; Homebuilders, 336 NC at 45 46 Lauringburg, 168 N.C. App. At 82 (emphasis added)

14

The rule most succinctly stated in the Laurinburg case is likely

the current state of the law, but it has become obvious that ambiguity

is in the eye of the beholder. As we have seen in the cases, Supreme

Court Justices disagree about the meaning of terms: responsible,

furnishing, and base pay. This alone seems to raise the specter of

ambiguity in these terms.

The Courts rarely give guidance on how to determine ambiguity in

language. Courts have often used Webster’s Dictionary or Black’s Law

Dictionary in making this determination. Courts use prior canons of

interpretation or the title of laws for extra guidance.47 The truth is

that this rule provides a vast playground for jurists and attorneys to

use their most expansive and creative sophistry in arguing or ruling

either for or against deference to municipal discretion.

In Laurinburg, Bell South sued the City of Laurinburg and a

private internet service provider alleging that the city was operating

as a public enterprise in a way that was outside of the limits

provided in NCGS §160A-311 due to the fact that it was serving non-

city users. The case turned on highly technical issues surrounding

bundling of fiber optic cables and much discussion was made about

various types of hardware.

It is perhaps fortunate that Laurinburg involved the construction

of laws pertaining to highly technical systems that frequently are

updated by technological advancement. The Court found that the

statutory language of §160A-319 does not foreclose the statutory

authority of the city to bundle fiber optic cable and that since the

city has the authority to act as a Cable Television Service, the

ability to take advantage of this technology was a power that was

“reasonably necessary and expedient” to that power. The Court states

that the types of advancements to these technologies were not

something that the General Assembly could have contemplated in 1971

when §160A-4 was passed.48 The Court concludes with a powerful

statement of the General Assembly’s intent:

[T]he legislature’s intent in 1971 was to enable the

municipality’s public enterprise to grow in reasonable

stride with technological advancements as it is this

advancement which marks the ever-approaching horizon of

necessity.49

47 See Smith Chapel, discussed supra 48 Laurinburg 168 N.C. App. At 85 49 Id. at 85

15

This ruling stands for the proposition that a municipality’s

ability to govern must be allowed to advance with the times. In

this case, to require the city to use 1971 technologies would be

to “elevate form over function” and would prevent the

municipality from “effectively operat[ing] in today’s market.”50

As we will see from later cases discussed below, ambiguity

might not be a saving grace for an inclusionary zoning ordinance

if the local government is relying on its power to zone its

territory alone.

IMPACT FEE CASES

Smith Chapel and Homebuilders represent the two major paths that

a court will follow in interpreting local ordinances. Both cases

involve the local government’s ability to charge fees in certain arena

of regulation, but apply the rule, most succinctly stated in

Laurinburg in opposite directions. The government will argue that

Homebuilders should apply and the challenger will argue that Smith

Chapel should be followed instead. The government wants the court to

apply the broad deference found in NCGS §160A-4 rather than reading

the statute narrowly. The current North Carolina Supreme Court has

shown a trend of finding statutes unambiguous, interpreting them

narrowly and striking down local ordinances. The following is a

discussion of recent cases that deal with government mandated impact

fees for certain types of government activity.

Historically, our courts will review taxes and fees with greater

scrutiny than general grants of authority. 51 This scrutiny is

exhibited in Smith Chapel and progeny. The majority of the impact fee

cases involve a local government attempting to fund one of its

endeavors by placing the burden improperly on the public. This often

takes the form of a county funding schools by requiring developers who

increase the population of an area through new residential

construction, to pay for the increased burden on the affected school.

The first of these cases, Durham Land Owners Ass’n v. Durnam,52

decided by the Court of Appeals one year after issuing an opinion very

deferential to municipal discretion in Laurinburg, stated that the

County exceeded its statutory authority by charging developers certain

fees for routine/ document-oriented tasks, which it had the sole duty

to provide. The county argued that it had authority to require these

fees pursuant to the general police power and zoning power. The

50 Id. at 85 51 The Lanvale Court quoting David Owens on general statutory construction 52 177 N.C. App. 629 (2006).

16

county further argued that the under Homebuilders, the Court should

rule that charging these fees “as an additional and supplementary

power that is reasonably necessary or expedient to carry a regulatory

program into execution and effect.”53 The Court in Durham states that

it did not believe that the Supreme Court in Homebuilders did not

intended for the County to be able to displace the cost its own

services. 54

The Court in Durham Land Owners stated that it found no authority

to suggest that Durham County had the ability under the general police

power or power to zone to charge these fees. This Court did not

however expand on this analysis and did not make any holdings that

might alter future understanding as to the extent of police or zoning

powers beyond the context of the facts in the case before it.

The Court of Appeals, cited Durham Land Owners in the 2009 case

of Union Land Owners Association v. County of Union55 and the 2010 case

of Amward Homes, Inc v. Town of Cary.56 In both of these cases, the

respective counties were charging developers fees to pay for the

impact that proposed residential developments would have on schools as

a condition of receiving their permits. Like the Durham Land Owners

case, the counties argued that it had authority under the police power

and the power to zone to require these fees. The Court rejected those

arguments citing Durham Land Owners.

Also like Durham Land Owners, the Court in these cases did not

provide extensive analysis regarding the extent of the police power or

the power to zone. However, the growing precedent shows the direction

that the courts are heading. The Union Landowners Court, without

reference to NCGS §153A-4 or §153A-124 or further analysis, stated the

following:

Although defendant is entitled to use its zoning authority

to facilitate the efficient and adequate provision of

schools, it must achieve that this goal using the tools

authorized by the zoning statute. While defendant clearly

seeks to pursue the legislative objective of facilitating

the efficient and adequate provision of schools the

[ordinance] does not utilize any of the zoning powers

enumerated in section 153A-340. 57

53 Id. At 635, quoting Homebuilders at 45 54

Id at 635. 55

201 N.C. App. 374 (2009) 56 206 N.C. App. 38 (2010) 57 Union Land Owners, 201 N.C. App. At 379

17

This holding seems at odds with §153A-124 or its parallel city statute

§160A-177, which state that enumerated powers in these respective

chapters are not exclusive. Those statute suggest that there is no

requirement that a local government any of those items enumerated.

Here we see the Court beginning to reign in expansive interpretations

of these powers.58

These impact fee cases all lead to the Supreme Court’s 2011

opinion in Lanvale Properties, LLC v. County of Cabarrus.59 The facts

of this case are very similar to those of the other school impact fee

cases discussed above. The County was attempting to mitigate

overcrowding in its public school systems by conditioning approval of

residential construction projects on developers paying a fee to

subsidize new school construction. The County argued that it had the

authority under the police power and zoning to power to charge these

fees. The Court disagreed and struck down the ordinance.

This opinion creates a variety of hurdles to any local government

attempting to use expansive interpretations of its zoning power and

the greatest hurdle to an inclusionary zoning ordinance. In Lanvale,

the Court states that the statutes enabling local governments to zone

are “clear and unambiguous articulations of county zoning powers” and

provide “clear guidance to counties regarding the extent of their

zoning powers.”60 The Court here has chosen to follow the line of

Smith Chapel cases and reasons that since the statutes are clear and

unambiguous, §153A-4, the parallel of §160A-4, is “inapposite in the

instant case”.61

58 The courts’ trend of striking down impact fees continued in its most recent

related case handed down in August of 2016 in Quality Built Homes

Incorporated and Stafford Land Company v. Town of Carthage,

____N.C.______(2016). In this case, the Supreme Court took the somewhat

unusual step of allowing discretionary review of a unanimous, unpublished

opinion of the Court of Appeals to decide whether the Town of Carthage

exceeded its authority to enact certain water and sewer impact fees. In this

case, the town was charging landowners seeking permits to subdivide their

property fees for connecting to water and sewer services, but also for the

impact on future services. The Court of Appeals employed the broad deference

of §160A-4 and ruled that the town could charge these fees. Overruling them,

the Supreme Court found that although the town could collect fees for

contemporaneous services, it could not collect fees for future discretionary

spending. The Court, citing Smith Chapel held that the statutes clearly and

unambiguously fail to give Carthage to power to assess prospective fees. 59 366 N.C. 142 (2011), It should be noted that much like the Town of Carthage

case discussed in footnote above, the Supreme Court once again took

discretionary review of a unanimous, unpublished opinion of the Court of

Appeals in Lanvale. 60 Id. At 156 and 154, respectively. 61 Id at 154

18

The Court devotes most of its opinion arguing against the views

expressed by the dissenting Justice Hudson. The Majority holds that

local governments cannot use §153A-4 (broad deference) and §153A-124

(enumeration not exclusive) to classify any ordinance it chooses as a

zoning ordinance and expand municipal powers beyond what the General

Assembly intended. The Majority, in a somewhat tautological statement

agreed with the plaintiff/developers that the instant ordinance cannot

be classified as a zoning ordinance because “it simply does not

zone.”62 The Court states that doing so would “give counties virtual

carte blanche to enact an unlimited range of ordinances affecting the

use of real property no matter how tenuous the connection between the

ordinance and our zoning statutes.”63

Located in various places throughout the opinion, the Court lists

certain characteristics that are the essence of a zoning ordinance.

Zoning ordinances “divide the city or county’s land into districts

with a separate set of development regulations for each zone or

district.”64 They typically “divide the land within a county’s

territorial jurisdiction into broad use categories including for

example, agricultural, commercial, office-industrial, and

residential.”65 They “remain important before, during and after

development.”66 They “regulate land use activities over multiple

properties located within a distinct area of the county’s territorial

jurisdiction.”67 They divide geographically the territory “into

districts of any number, shape and area that [the county] may consider

best suited to carry out the purpose” of the enabling statute.68

Because the ordinance in Lanvale did “nothing to organize the County’s

territorial jurisdiction into districts or zones and it does not

govern specific categories of land use activities” it is not a zoning

ordinance.69 Rather the Court states that the County chose to create a

“carefully crafted revenue generating mechanism that effectively

establishes a ‘pay-to-build’ system for developers.”70

Although there are ways to distinguish the facts of this

case from the hallmarks of inclusionary zoning ordinances, the

Lanvale opinion is damaging and might prove fatal. In Lanvale the

local government is pushing onto developers the burden of

62 Id at 158 63 Id at 156 64 Id 65 Id 66 Id 67 Id at 158 68 Id at 159 69 Id. 70 Lanvale at 160

19

financing an activity that the government itself has the burden

of and duty to provide. Similarly in Smith Chapel, the

government itself had the duty to find ways to comply with

federal storm water regulation. In both of these situations, the

local government had a variety of other means of fulfilling its

duty through taxes generally, but chose to create a “carefully

crafted revenue generating mechanism that effectively establishes

a ‘pay-to-build’ system for developers.” 71 It cannot be denied

that inclusionary zoning creates affordable housing at the

developers’ expense, but it is also true that it is not a revenue

creating mechanism for the local government to fund its other

obligations. Furthermore, developers often receive something in

return for compliance with inclusionary zoning ordinances and

through those incentives make inclusionary zoning ordinances look

much more like other zoning ordinances than the one at bar in

Lanvale which was merely tied to the land in that it involved the

approval of residential developments. That being said, it is

difficult to point to the enumerated list found in the zoning

enabling statute and say where exactly inclusionary zoning

ordinances fit in.

King

In 2014, the Supreme Court in King v. Chapel Hill72 found that the

Town of Chapel Hill had exceeded its authority by preventing towing

companies from charging credit card fees from individuals whose cars

had been towed and by capping the overall fee a towing company might

charge.73 The ordinance, in addition to the provisions above, required

tow truck drivers to respond to telephone calls by owners of vehicles

within a certain time frame and imposed signage requirements. The

Court upheld the signage and response requirements as valid exercises

of the Town’s police power and ordinance making authority under §160A-

174. 74

Although the Court strikes down the fees in this case as

inappropriately placing “the burden of increased costs incident to the

regulation solely on the towing companies,”75 the Court allows the Town

71 Lanvale at 160 72 367 N.C. 400 (2014) 73

The Town was also preempted by state law from regulating the use of mobile

phones on public highways. 74

The Town argued that it had authority to regulate the towing of vehicles

from private lots in addition to the police power and §160A-174 under NCGS

§20-219.2. Chapter §20 of the North Carolina General Statutes governs motor

vehicles. Oddly enough, this statute contains no enabling language. The

Court did not examine whether the Town had authority under Chapter §20. 75 Id at 408

20

to regulate an area without any topically specific enabling

legislation. In very surprising language in light of the Lanvale

decision, the Court states that §160A-174 and the police power are:

By [their] very nature ambiguous, and its reach cannot be

fully defined in clear and definite terms. Since the

police power of the State has not been, and by its very

nature cannot be, placed within fixed definitive limits, it

may be extended or restricted to meet changing conditions,

economic as well as social. An examination of police power

will reveal the police power not as a fixed quantity, but

as the expression of social, economic and political

conditions. As long as these conditions vary, the police

power must continue to be elastic…Therefore, we are bound

to construe NCGS §160A-174 to include any additional and

supplementary powers that are reasonably necessary or

expedient to carry [the grant of power] into execution and

effect. 76

VII. RENT CONTROL

Like many states, North Carolina prohibits local

governments from enacting ordinances and regulations that would

control rent on residential rental property. NCGS §42-14.1

states:

No county or city as defined by G.S. 160A-1 may enact,

maintain, or enforce any ordinance or resolution which

regulates the amount of rent to be charged for privately

owned, single-family or multiple unit residential or

commercial rental property. This section shall not be

construed as prohibiting any county or city, or any

authority created by a county or city for that purpose,

from:

(1) Regulating in any way property belonging to that city,

county, or authority;

(2) Entering into agreements with private persons which

regulate the amount of rent charged for subsidized rental

properties; or

(3) Enacting ordinances or resolutions restricting rent

for properties assisted with Community Development Block

Grant Funds.

76 Id at 406

21

There have been no cases in North Carolina interpreting any

part of this statute. This is common nationally. Twenty-five

states have laws very similar to §42-14.1 where local government

regulation is preempted from enacting any regulation controlling

rent. Often these state laws contain similar exceptions to those

found in our statute, allowing for control of rents when the

municipality has a property interest in the premises and/or a

contract has been formed between developer and government. There

are fourteen states that have no law either prohibiting or

authorizing rent control. There are eleven states that have

statutes authorizing some form of rent control. Of these eleven,

most have some limitation on when rent control is appropriate.

For example, Texas allows a governing body to enact an ordinance

controlling rent in the case of a housing emergency due to a

disaster.77

There is very little case law interpreting these statutes.

Of the twenty-five states with laws preempting rent control, only

Colorado, Mississippi,78 and Wisconsin have cases interpreting

these laws. These opinions are not binding on North Carolina

courts, but given the dearth of any legal authority, these cases

will likely be highly persuasive and unfortunately, damaging.

Colorado’s rent control statute79 is very similar to North

Carolina’s. Local governments in Colorado enjoy greater home

rule protections than do those in North Carolina, but the general

rules of preemption regarding matters of statewide concern appear

very similar.

Town of Telluride v. Lot Thirty-Four Ventrure, L.L.C

In Town of Telluride v. Lot Thirty-Four Ventrure, L.L.C.80,

the Colorado court held that an ordinance81 requiring that

property owners create affordable housing constituted rent

control in violation of the Colorado statute. The Court noted

that rent control generally means setting a ceiling for maximum

market rents and regulating the allowable increases of that rent.

In this case, the Telluride Ordinance fit that definition because

77

Tex.Local.Gov’t Code §214.902 78

Crook v. City of Madison, 168 So. 3d 1169, 1171 (Miss. Ct. App. 2014). This

case discusses a local ordinance that requires a landlord to post a bond in

order to receive a license to rent residential property. The landlord argued

that this requirement was a form of rent control in that it increased his

costs. The Court quickly dismissed this argument quickly and without

analysis, stating that the ordinance in no way attempted to control rent. 79

Colo.Rev.Stat §38-12-301(1999) 80

3 P.3d 30 (Colo. 2000) 81

Town of Telluride Ordinance 1011

22

it set a rental rate based on square footage and regulated any

increases in that rate.82

The Telluride ordinance directed that developers of

projects such as malls and hotels create generate affordable

housing for the new employees created by such development. The

Ordinance allowed developers to satisfy this requirement by

construction of new housing with fixed rental rates, by imposing

deed restrictions on free market units in order to fix rental

rates, by paying fees in lieu of housing, or by conveying land to

the town for affordable housing.

The Court found that the variety of ways in which a

developer may satisfy this requirement did not change the

character of the ordinance as one that “redistributes the value

of the rental property from landlord to tenant” and that this is

a “hallmark of rent control.”83

North Carolina local governments could find ways to

distinguish any ordinance it enacts from that of Ordinance 1011.

It should be noted that there was no mention in the Colorado case

that the developers received incentives for compliance, so

commonly associated with inclusionary zoning statutes. Also, the

Telluride ordinance places a burden on developers who never

intended to be in the residential rental business at all. This

seems more onerous than requiring a residential developer to set

aside certain units in an already planned residential development

as affordable in exchange for incentives.

The Colorado court, in a somewhat out of place piece of

dicta states that rent control laws “do not isolate particular

units for special treatment, but usually apply to a broad class

of rental properties.”84 No further analysis on this point is

provided by the Court, but there is an implication that had there

been units isolated for special treatment, the court could have

ruled differently. Whether a North Carolina court would find

that affordable units set aside for special treatment ameliorates

concerns of rent control is uncertain, but this factor certainly

makes an inclusionary zoning ordinance distinguishable at least

from the situation in Telluride.

Apartment Associant of South Central Wisconsin, Inc. v. City of

Madison

The only other relevant case in a state prohibiting rent

control, is Apartment Ass’n of South Cent. Wisconsin, Inc. v.

82Id. 83

Id. at 36 84 Id. at 35

23

City of Madison,85 decided by the Wisconsin Court of Appeals six

years after the Telluride case without citing it. The Wisconsin

court found that the state statute prohibiting local regulation

of rent control86 was violated by a Madison inclusionary zoning

ordinance.87

The Madison Ordinance looks similar to what we think of

when referring to inclusionary zoning ordinances. It required a

development with ten or more units to provide no less than

fifteen percent as inclusionary units when the development

requires a zoning map amendment. The units were to be made

available to a family with an annual median income at or below

sixty percent of the area median income and were to cost no more

than thirty percent of the family’s monthly income. The

ordinance allowed the developer to choose from a list of

incentives such as density bonuses and reduction in parking

requirements. The developer could be excused from the

inclusionary zoning requirement upon a showing that the

development would be unfeasible were the ordinance’s mandates to

be adhered to.

The City of Madison argued that their ordinance fit into

one of the exceptions found in section (2)(b) of the statute

because rent would be regulated only where an agreement had taken

place between developer and the City. The City argued that the

mandates of the ordinance only apply when a developer is seeking

the benefits of rezoning or land division and did not affect by-

right building. The City argued that the developer was not

obligated to take part at all, but if they did, the City and the

developer have entered into an agreement where the developer

agreed to produce affordable units. The Court held that the

mandates of the ordinance did not result in an agreement but a

compulsion by the City.88 Were the City’s argument true, every

permit issued by the City would be a contract because the

applicant had the choice not to engage in the activity for which

conditions are imposed.

85 722 N.W.2d 614 (Wis. Ct. App. 2006)

86 Wis. Stat. Ann. §66.1015 (2003-2004): (1) No city, village, town or

county may regulate the amount of rent or fees charged for the use of a

residential rental dwelling unit.(2) This section does not prohibit a city,

village, town, county, or housing authority or the Wisconsin Housing and

Economic Development Authority from doing any of the following:(a) Entering

into a rental agreement which regulates rent or fees charged for the use of a

residential rental dwelling unit it owns or operates.(b) Entering into an

agreement with a private person who regulates rent or fees charged for a

residential rental dwelling unit.

87 Madison, Wis. Ordinance § 28.04(25)(e)

88 City of Madison, 722 N.W.2d at 190

24

This case is damaging, but not conclusive. First, the City

of Madison did not raise an argument that the inclusionary zoning

program was not rent control at all; the point appears to be

conceded and the Court operates from the starting place that the

inclusionary zoning ordinance is rent control. Ultimate holdings

in a case might be persuasive to a North Carolina court, but

courts would also have to find the logic itself persuasive. There

is no analysis by the Wisconsin Court which an opponent of a

zoning ordinance could point to in arguing that inclusionary

zoning programs are in fact rent control. Similarly, the

Wisconsin Court notes that the developers conceded the point that

the City had authority to enact the zoning ordinance under

Wisconsin’s enabling statute. Local governments in North

Carolina could not use this concession to bolster the argument

that it has this power under North Carolina’s enabling statute.

It follows that the unanalyzed assumption that the zoning

ordinance was rent control in the Wisconsin case is of similar

precedential value.89

Furthermore, for good or bad, the language of NCGS §42-14.1

differs from that of section (2)(b) of the Wisconsin statute.

Our statute allows rent control by a local government by

agreement involving subsidized rental units. The Wisconsin

statute applies to agreements with any private citizen. During

oral argument in City of Madison, the Court asked the attorney

for the developer to give an example of what an allowable

agreement between developer and government controlling rent would

look like and he conceded that he could not. The Court did not

provide one in its opinion either. Given that, it could be

argued that it is uncertain what the (2)(b) provision of the

Wisconsin statute means at all. In any case, it is different

from our statute and inapplicable.

Although a North Carolina local government should argue

that inclusionary zoning is not rent control at all, that

locality should find ways to set up the alternative argument,

that even if inclusionary zoning is rent control under the

statute, it fits into the exception in §42-14.1(2). C. Tyler

Mulligan and James L. Joyce point out in their book90 that the

term “subsidized” is not defined in the North Carolina statute

and therefore density bonuses and other incentives might meet

that definition, allowing a North Carolina ordinance to fall

within the exception in §42-14.1(2). Mulligan and Joyce also

89 Of greater precedential value could be that Tennessee amended its statute

prohibiting rent control in early 2016. (Tenn.Code Ann.§66-35-102.) The

amendment added paragraphs that specifically prevent a local government from

enacting mandatory inclusionary zoning programs. The implication here is

that before the amendments, the term “rent control” did not include

inclusionary zoning. It could be argued that our General Assembly, aware of

this, has had the same opportunity, but has chosen not to do so. 90 Mulligan and Joyce, pages 151-153.

25

wisely recommend that North Carolina local governments should

enter into a separate and distinct agreement with developers

outside of the permitting process to further be distinguishable

from the Wisconsin case.91

SUMMARY

NCGS§160A-174(b) sets out ways that a municipal action can

be inconsistent with State or Federal Law.92 The local government

could face a challenge pursuant to subsection (b)(5) of that

statute which would claim that the ordinance is void because the

state has preempted the field by enacting §NCGS 42-14.1. Although

information is scant on the interplay between inclusionary zoning

ordinances and rent control, it is advisable for a North Carolina

local government to find ways to further distinguish any

ordinance from those in Colorado and Wisconsin and to find ways

that the ordinance would look different from rent control as it

exists in other parts of the United States.

The Colorado Court repeatedly pointed out that rent control

involves the redistribution of wealth from Landlord to Tenant.

Rent control is typically thought of as a means of overall market

suppression because of a housing shortage or because of the

inability of the market to deal with an overabundance of

substandard housing93.

In Washington D.C., the rent stabilization ordinance seeks

to assist certain landlords as much as tenants through market

suppression.94 An inclusionary zoning ordinance would seek to do

91

Id.

92 NCGS§160A-174(b)(1) The ordinance infringes a liberty guaranteed to the

people by the State or federal Constitution;(2) The ordinance makes unlawful

an act, omission or condition which is expressly made lawful by State or

federal law;(3) The ordinance makes lawful an act, omission, or condition

which is expressly made unlawful by State or federal law;(4) The ordinance

purports to regulate a subject that cities are expressly forbidden to

regulate by State or federal law;(5) The ordinance purports to regulate a

field for which a State or federal statute clearly shows a legislative intent

to provide a complete and integrated regulatory scheme to the exclusion of

local regulation;

93 See N.J. Stat. §§2A:42-74 through 84.6. The New Jersey statute allows for

rent abatements for substandard housing and creates a scheme for tenants to

pay fair rent as determined by an administrative office into the respective

clerk of court until the substandard conditions are ameliorated. 94 See D.C. Code § 42-3501.01 (7); “Many small housing providers are

experiencing financial difficulties and are in need of some special

mechanisms to assist them and their tenants.”

26

nothing to alter the market value of other units and the City

should demand strict proof from any challenger that it has.

Typical statutes allowing rent control often set rent

ceilings based on sale prices of the premises or other

considerations95, not based on the income of the putative tenant

in the way that an inclusionary zoning ordinance would.

Connecticut’s rent control statute96 creates a Fair Rent

Commission which a tenant may petition to have their rent abated

upon a showing after hearing that a rental amount or rental

increase is inequitable. The statute sets out penalties and

fines for landlords that violate that administrative body’s

determination as well as creating a variety of procedural

requirements for subsequent rent to be paid and accepted. An

inclusionary zoning ordinance would not seek to increase a

tenant’s rights under Chapter §42 of our statutes or increase the

procedural burden on the landlord in regards to the acceptance of

rent or eviction in the way that the New York,97 Connecticut and

other states’ statutes do98.

Statutes authorizing rent control come in a variety of

forms across the country. This variety allows for a North

Carolina court faced with the question for the first time to

define what rent control means in North Carolina based on any

definition it finds most persuasive. Although rent control takes

on different shapes and sizes, a local government should attempt

to distinguish its ordinance from the hallmarks of rent control

that are clearly matters of state concern: the control of market

prices generally, adding or taking away rights, privileges and

obligations related to eviction, adding administrative hurdles to

the raising of rent, and generally focusing on anything other

than the very narrow purposes that an inclusionary zoning

ordinance is created for.

VIII. SUMMARY OF THE RULES

To sum up the rules at play:

95See NY CLS Unconsol, Ch. 249. The New York statute allowing rent control

states as its purpose to allow regulation to prevent “abnormal conditions” in

their rental market. The statute further states that “the transition from

regulation to a normal market of free bargaining between landlord and tenant,

while still the objective of state policy, must be administered with due

regard.” Id. § 1 96 Conn.Gen.Stat. §§7-148b through 7-148f 97 See NY CLS Unconso, Ch. 249 98 See HRS §666-20 which prohibits the eviction of tenants in Hawaii that are

contrary to any local government rent control ordinance. This allows

Hawaiian municipalities the ability to abrogate the normal procedures found

at state law through local rent control ordinances.

27

Local governments are creatures of the State and derive their

power to regulate anything from the State. The General Assembly

has the authority to remove any power it has given to local

governments at any time. The Supreme Court of North Carolina

could hold that mandatory inclusionary zoning ordinances are

perfectly legal and the General Assembly could overturn that

ruling by statute immediately thereafter. If the City wants to

push forward, it should understand that all of its efforts might

be immediately for naught and subject to the whim of the General

Assembly.

§160A-174 grants the municipality the authority to

legislate pursuant to the State’s police power and the King case

tells us that the legislative judgment of the local government is

given broad deference in this regard. This echoes the due process

cases that tell us that when a municipality is acting in valid

exercise of its police power, that is, for the health and safety

of its citizens, deference is given and the courts will not

displace the legislative judgment with its own. Additionally,

since §160A-174 are inherently ambiguous, §160A-4’s directive to

allow broad deference applies.

When a statute is without ambiguity, the Court’s will

enforce the statute as written; there being no need to defer to

the local government’s belief about the meaning of the statute

because the General Assembly has spoken.

§NCGS 160A-381 creates an enumerated list of various

actions the municipality might use under its power to zone.

§NCGS 160A-177 stands for the proposition that when an enumerated

list, as found in §160A-381 is found in Chapter 160A, that list

is not exclusive and the powers listed are not the only powers

that the municipality might have.

§NCGS 160A-4 likely does not apply when interpreting §160A-

381 and §160A-383. This is a significant roadblock and may be a

decisive one. The Lanvale Court states that the parallel county

statutes unambiguously state that a local government has the

power to zone and define the extent of the zoning power. That

case stands for the proposition that local governments cannot

take any action they want and simply refer to it as a zoning

ordinance because it affects real property. §160A-4(broad

deference) and §160A-177(enumeration not exclusive) were not

intended to give local governments that type of latitude. For

lack of a better way to state it: a zoning ordinance must be a

zoning ordinance.

28

In Court, the City will have the burden of producing

competent evidence that its actions are not arbitrary and are in

fact to promote the values expressed in the delegation of police

power. This may include information found in the Bowen Report

and other studies that show the extreme circumstances found in

Asheville and the surrounding area regarding the inflated rent

prices and the extreme dearth of available housing for

individuals of low, modest or even higher incomes. There is no

guarantee that this will satisfy any court and will likely

require additional and expensive expert testimony at the trial

level. 99 Similarly, the City should be prepared to show the

research relied upon to prove that smart growth measures such as

inclusionary zoning it chooses to enact are effective in

alleviating the problems we are faced with. The City should

understand that the Consequences of losing could be very costly.

The City might be required to pay the challenger’s attorneys’

fees which could be significant. The City could also be required

to pay any actual damages incurred by aggrieved builders were

their challenge successful. The City Attorney’s office should be

consulted

IX. PROCEDURAL ISSUES

It is also crucial that a municipality makes sure that all

parts of the required legislative process are followed. Were there to

be a misstep, an inclusionary zoning ordinance could fail on a

challenge based on procedural due process. Detailing every step

involved in properly drafting and enacting an inclusionary zoning

ordinance is beyond the scope of this report. However, the City

Attorney’s office is expert in these areas and Council should

fastidiously follow their advice. What follows is a few points about

the importance of doing so.

Normally, when the legislature passes a law that affects a

general class of the public, those constituents have received the

process that is due to them. In relation to zoning in North Carolina,

the General Assembly has set out a laundry list of other procedural

requirements that must be satisfied before an otherwise statutorily

and constitutionally compliant ordinance will be held to be valid. “A

municipality’s authority to enact and amend zoning ordinances is

‘subject to the limitations imposed by the enabling statute and by the

Constitution. These limitations forbid arbitrary and unduly

discriminating interference with property rights in the exercise of

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such power…thus a zoning ordinance…which is not adopted in accordance

with the enabling statue is invalid and ineffective.”100

Appellate courts are generally inclined to dispose of a case,

where possible, on procedural grounds without ruling on the merits (in

this case, whether or not a municipality has authority under the

enabling statute to pass a mandatory inclusionary zoning program)101.

While an adverse ruling due to procedural missteps would not end a

city’s ability to enact an inclusionary zoning ordinance, the city

would have to start the process again expending time and resources.

X. CONCLUSION

The conclusion is not a satisfying one. It remains impossible to know

what a North Carolina court will do when it is faced with a challenge

to an inclusionary zoning scheme. More information is needed

regarding the way a court will define rent control even though it is

likely that a local government can distinguish its ordinance from what

is typically thought of as rent control. More information is needed

to predict whether a North Carolina court will determine that a local

government has the authority to enact a mandatory inclusionary zoning

ordinance under the enabling statute.

100 Heaton v. City of Charlotte, 277 N.C. 506, 513 (1970). See: Sellers v.

Asheville, 33 N.C. App. 544(1977); where the city of Asheville tried to zone

area outside of its city limits, but had failed to provide a timely notice of

public hearing and the notice did not state that any area outside of the city

limits was to be zoned. The Court also found that the ordinance itself did

not properly define the extraterritorial that would be affected. For Similar

rulings related to counties, See: Thrash L.P. v County of Buncombe,673 S.E.2d

698(2009). The North Carolina Court of Appeals found that Buncombe County

had not complied with N.C.G.S. §153A-323 because a public hearing on

consideration of the ordinance was not advertised in accordance with

statutory requirements. Due to this procedural failure, the Court held that

the ordinance was invalid. 101 see Keiger v. Winston-Salem Board of Adjustment, 281 N.C. 715,(1972). Where

the Plaintiff/Property owner was denied a special use permit to build a

mobile-home park on a parcel owned by them challenged the board of

adjustment’s ruling. The Court found that a rezoning ordinance passed within

3 days after the planning board filed its recommendation with the board of

aldermen did not comply with the notice provisions of N.C.G.S §160-175. The

Court stated: “In this case we do not reach the questions of what effects a

validly enacted rezoning ordinance would have had on petitioner’s right to

construct the mobile home park. For decision here it suffices to say that an

applicant’s right to a permit, denied under an existing valid ordinance which

entitled him to it, may not be defeated by a purported amendment which was

void ab initio because it was not adopted as required by the enabling

statute.”

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There may be best practices available for local governments when

enacting its inclusionary zoning ordinance, but there is certainly no

magic formula. The courts will have broad discretion to rule for or

against the local government on either of these issues. The only

certainty is that the General Assembly may enact a statement if it

chooses to do so either allowing the practice or prohibiting it.

Given the uncertainty, not only should local governments attempt

to pursue political solutions to this problem, but local governments

should enact these type of ordinances with great caution.