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FEATURE | REAL
          TITLEESTATE LAW

                                           INTRODUCTION TO AFFORDABLE
                                               HOUSING IN COLORADO
      As the coordinating editor for real estate articles in Colorado Lawyer, I am pleased to announce this series on affordable
      housing issues in Colorado. While the focus of the series will be of particular interest to real estate lawyers, the issues cut
      across practice areas, affecting municipal attorneys, tax specialists, land use lawyers, and litigators, among others. The
      Real Estate Law Section committee that organized and oversaw this special series spent many hours identifying topics
      of interest, working with authors and contributors, and editing the articles, which we hope you will find edifying and
      educational. Please send your comments about the series to me at cbryan@garfieldhecht.com.
                                                                                                                 —Christopher Bryan

                                                               Series Overview
                                                                 by Douglas R. Tueller

      O
                ver the past decade                          craft enforcement mechanisms         incentivized ventures (e.g., purely
                of growth in Colorado,                       for both initial certification and   private undertakings and public/
                communities throughout                       ongoing compliance?                  private joint ventures); and statutorily
      the state have been focusing                        ■■ Once such decisions are made,        mandated housing bodies, such as
      increasingly on issues surrounding                     what staffing and other systems      the U.S. Department of Housing and
      the need to address shortages of                       are put into place to implement      Urban Development.
      quality affordable, accessible, and                    these decisions?                     That said, this series does not attempt
      safe housing. This is as true in the              We have tried to address these            to address every possible legal or
      urban/suburban Front Range as it                  issues while recognizing the context      other issue related to affordable
      is in mountain resort communities                 of each community’s specific local        housing challenges in Colorado
      like Telluride, Aspen, and Vail. It is            political climate. For example,           or elsewhere. Neither is there any
      as pertinent in rural/agricultural                Colorado Springs’ philosophical           effort to identify “magic solutions”
      communities as it is in college towns.            approach differs decidedly from that      to the multitude of issues that arise
      Thus, while each community has its                of the Boulder community, and the         in this complex area. Rather, this
      own unique local needs, the various               approaches, needs, and perspectives       series points out some of the most
      areas of the state also face many                 in Alamosa vary significantly from        current and pressing issues faced
      common challenges.                                those in Telluride. To clarify the        in recent years and illustrates how
      This Colorado Lawyer series highlights            discussion, we highlight examples of      these are being addressed legally and
      a number of pressing (and vexing)                 how issues are addressed in various       structurally by the various players.
      legal and political issues attending the          regions of the state and what legal       The series provides an overview of the
      challenges associated with Colorado’s             mechanisms and tools are being            approaches employed and the pros
      affordable housing needs. In                      employed both within Colorado and in      and cons of each.
      approaching this task, we have sought             other states.                             Ultimately, the series strives to
      to address issues such as:                        This series focuses on the roles played   supplement and further the evolving
        ■■ How are communities responding               by a wide array of authorities and        public discourse regarding this
           legally to common challenges and             “players” in the affordable housing       issue of paramount importance to
           unique local needs and demands?              arena, including housing authorities      the continued vitality, health, and
        ■■ How do various communities                   (e.g., municipal, county, regional);      “fairness” of our state. We hope our
           decide who qualifies for housing             housing trusts and other nonprofit        efforts move the discourse forward
           opportunities and financial                  entities; federal, state, and local       productively.
           assistance, and how do they                  governments; federal and state tax-

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INTRODUCTION TO AFFORDABLE HOUSING IN COLORADO - Colorado Bar ...
Affordable Housing Series

          “Hang ’em High”
                                Affordable Housing Covenants
                                     in Colorado (Part I)

                                                                   BY BE N D OY L E

                        Affordable housing covenants required as a condition of land use approval secure the public
                          interest and define expectations among developers, funders, regulators, and the broader
                      community. This article discusses affordable housing covenants with a focus on Meyerstein v. City
                               of Aspen, the first reported decision applying the amended rent control statute.

I
       magine you’re getting ready to meet with a                                                           whether an agreement entered into with the
       new client, an out-of-state developer who                                                            town as part of a land use approval process
       wants to build apartments in a historic                                                              was entered into voluntarily? Who may enforce
       Colorado mining town, now a beautiful but                                                            its terms?
expensive mountain resort area. She anticipates                                                                  More fundamentally, what is the legal nature
that local land use approval will be conditioned                                                            of an affordability covenant granted to a gov-
on a commitment to build a certain number                                                                   ernment as part of land use approval—does it
and type of affordable units. She is willing to set                                                         convey a property interest to the government, or
aside at least some of the units in her building      the town will require her to record against           does it create contractual rights only? Are these
for affordable housing, but she thought rent          the property? How long will the affordability         covenants instead one of many tools used by
control was illegal in Colorado. She also might       restrictions last, and will they run with the         localities in administering land use authority,
want financial assistance from the town. She          land? What if she or her successor wants to           different in kind than private deed restrictions
needs your advice on negotiating with the town.       terminate the restrictions early; can the covenant    like homeowner association (HOA) covenants?
    As you prepare, questions arise: What are the     be modified or released in the future without              Answers to these questions depend on
key terms in the affordable housing covenant          incurring penalties? How will successors know         the type of affordable covenant at issue, the

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FEATURE | REAL
          TITLEESTATE LAW

                                                                             “
town’s and the owner’s long-term vision for                                                                of statewide concern; therefore, no county or
the property, the voluntary or involuntary                                                                 municipality may enact any ordinance or reso-
nature of title transfers, and other factors. This                                                         lution that would control rent on either private
two-part article aims to assist practitioners in               Statewide, 50%                              residential property or a private residential
negotiating voluntary affordability covenants,                                                             housing unit.”4 The statute was a response to
with a special focus on those imposed as a                     of all Colorado                             an effort by the City of Boulder to adopt a rent
condition of land use approval. Part 1 describes
how affordable covenants are most commonly                    renters are cost-                            control scheme. However, the rent control statute
                                                                                                           does not preclude the provision of affordable
created in Colorado, how each type of covenant
is affected, if at all, by the rent control statute,
                                                              burdened, paying                             housing through certain restrictive covenants
                                                                                                           entered into voluntarily.
and the exception in the rent control statute                  30% or more of
                                                                their monthly
that allows for “voluntary” agreements. Part                                                               Private Covenants
2 will offer a transcript from a hypothetical                                                              The rent control statute does not govern restric-
pre-application meeting between a developer
and a town, and each party’s counsel, to discuss
                                                                  household                                tive covenants voluntarily granted by one private
                                                                                                           party to another. For example, a church may sell
the terms of a voluntary affordability covenant.               income toward                               surplus land to a nonprofit organization on the

                                                                 rent. Nearly
                                                                                                           condition that the nonprofit use the land only to
Affordable Housing Covenants                                                                               house low-income individuals or households for
Colorado needs more affordable housing. State-
wide, 50% of all Colorado renters are cost-bur-
                                                                  one in four                              some period of time. Or a Habitat for Humanity
                                                                                                           affiliate might sell property to one of its home
dened, paying 30% or more of their monthly                      households is                              ownership program participants with certain

                                                               extremely cost-
household income toward rent.1 Nearly one in                                                               affordability restrictions added to the deed. Such
four households is extremely cost-burdened,                                                                agreements are voluntary agreements between
paying 50% or more of its monthly income
toward rent.2 However, the specific affordable
                                                              burdened, paying                             private parties, which do not implicate the rent
                                                                                                           control statute.
housing needs of each local community vary                      50% or more                                    Perhaps the most familiar private cove-
widely across the state. The benefit of using                                                              nants are those governing HOAs. As relevant
affordable housing covenants to address this                    of its monthly                             to affordable housing, in 2009 the legislature
need is that they can be tailored to reflect the
specific objectives of the property owner, the                 income toward                               amended the Colorado Common Interest
                                                                                                           Ownership Act (the CCIOA) to prevent common
project funders, and the local community.
     Affordable housing covenants take a variety
                                                                      rent.                                interest communities in “ski lift counties” with
                                                                                                           populations less than 100,000 from prohibiting

                                                                             ”
of forms. Three distinct categories of covenants—                                                          the right of a unit owner—public or private—to
private, public partner, and regulatory—are                                                                restrict or to specify by deed, covenant, or other
discussed below. The two most well understood                                                              document “[t]he permissible sale price, rental
covenants are those between private parties and                                                            rate, or lease rate of the unit; or . . . [o]ccupancy
those granted to a government by a property                                                                or other requirements designed to promote
owner in exchange for public funding or public                                                             affordable or workforce housing as such terms
land. Regulatory covenants voluntarily granted                                                             may be defined by the local housing authority.”5
to a local government to secure land use approval       quality standards; allowable uses; occupancy
are less well understood and more often the             standards; and violation and enforcement           Public Partner Covenants
subject of disputes.                                    procedures.3                                       With rare exceptions, affordable housing is
     Regardless of the type of affordable housing                                                          not financially possible to build or operate in
covenant, certain terms are typically included          The Statutory Prohibition                          Colorado without public support, particularly in
in virtually all such instruments. Depending on         on Rent Control                                    high-cost jurisdictions. As a result, local or state
the parties’ desired level of detail, these include     Since its adoption in 1980, Colorado’s rent        governmental entities may decide to support
eligibility qualifications to lease or purchase         control statute has always included a version      a project by providing public land or financial
a unit, such as maximum allowable income                of this prohibition: “The general assembly finds   assistance, such as grants, below-market loans,
and assets; the methodology for determining             and declares that the imposition of rent control   income tax credits, or property tax exemptions6
maximum rents or sale prices; minimum size and          on private residential housing units is a matter   in exchange for the recipient’s execution of a

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restrictive covenant running in favor of the         as the lead agency for the Boulder-Broomfield        Another example is Boulder’s use of general
government. In this context, the government is       Regional Consortium. When the City awards            fund dollars, property taxes and development
not mandating restrictions on private property;      federal HOME funds to an affordable developer        excise taxes, and cash-in-lieu payments obtained
rather, the owner is voluntarily agreeing to the     on behalf of the Consortium, HUD requires            through the City’s inclusionary housing program
restriction in exchange for a readily identifiable   a recorded covenant to ensure compliance             to create and preserve affordable housing in
benefit. The rent control statute does not govern    with federal regulations governing the HOME          the City. In both cases, the localities require
such “public partner” covenants.                     program.9 Requiring recordation of a restrictive     recorded covenants to secure performance.12
    Direct public subsidies of affordable housing    covenant is typical when HUD funds are used              In addition to funding from the traditional
are justified by the pressing need to maintain       to build or operate affordable housing.10 The        federal, state, and local government sources,
a diverse housing stock that offers a range          same is true for projects that benefit from          the Colorado legislature has authorized special
of housing choices and provides affordable           an allocation of federal or state low-income         districts to partner with the private sector to
housing for all the state’s residents, especially    housing tax credits from the Colorado Housing        facilitate affordable housing development
those with low to moderate incomes.7 As the          and Finance Authority (the CHFA).11                  and operation. For example, state law allows
legislature declared when authorizing Affordable         Increasingly, Colorado communities have          a city or town to form an urban renewal au-
Housing Dwelling Unit Advisory Boards, “the          opted to create purely local sources of funding      thority (URA). URAs can condemn property
inability of [low- and moderate-income persons]      for affordable housing, which usually means          to facilitate land assembly and title clearing,
to reside near where they work negatively            more flexibility, less administrative burden         as well as offer the redeveloper favorable tax
affects the balance between jobs and housing         during the compliance period, and more local         increment financing to make redevelopment
in many regions of the state and has serious         control over how and where the funds are spent.      economically feasible. URAs are typically only
detrimental transportation and environmental         One example is Boulder County’s “Worthy              willing to directly subsidize redevelopment if
consequences.”8                                      Cause” sales and use tax. Each year, based on        the project promises sufficient public benefit,
    In many public partner covenants tied to         a competitive application process, the board of      whether that means additional affordable
funding, the locality acts as a pass-through of      county commissioners allocates Worthy Cause          housing or other community amenities. These
funds from the U.S. Department of Housing            tax revenues to nonprofits and housing author-       promises are typically secured by covenants that
and Urban Development (HUD) or the state.            ities to fund the acquisition, rehabilitation, or    run with the land, such that when the private
For example, the City of Boulder (the City) acts     new construction of eligible capital facilities.     redeveloper itself sells, leases, or otherwise

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FEATURE | REAL
          TITLEESTATE LAW

transfers interests in real property acquired as        condition written on the face of the land use       run with the land, with the local government
part of an urban renewal project, successors            approval document, such as a city council           as the named beneficiary.19
are bound to the agreement.13                           resolution, an administrative approval by the            The distinctions between these two methods
    Similarly, metropolitan districts may waive         planning director, or the building permit itself.   of carrying out a land use regulatory regime are
all or part of a tap or connection fee or extend        That is, the use restriction was expressed in       important. For example, a condition shown only
the time period for paying such fees “to facilitate     writing and made part of the public record, but     on the face of a land use approval that expires
the construction, ownership, and operation of           not necessarily on a document recorded in the       for lack of activity under an issued permit no
affordable housing on such property, as such            county real estate records. Anyone who wanted       longer has any legal effect. By contrast, a properly
affordable housing is defined by resolution                                                                 drafted restrictive covenant recorded against

                                                                              “
adopted by the board” in exchange for “the                                                                  title will run with the land and bind successors
recordation against the property of a deed                                                                  if the original parties intended it to, such that a
restriction, lien, or other lawful instrument                                                               successor must either comply with the terms
requiring the payment of such fees in the event                                                             of the covenant or negotiate with the locality
that the property’s use as affordable housing is                 Today, many                                to modify or release the covenant.

                                                              localities require
discontinued or no longer meets the definition of
affordable housing as established by the board.”14                                                          Other Factors Affecting
    While governmental agencies often have a
standard form of covenant that has been used
                                                                 that the land                              Regulatory Covenants
                                                                                                            Colorado’s Regulatory Impairment of Property
successfully in many transactions, there is no                  use applicant                               Rights Act (RIPRA) also affects the feasibility of
Colorado statute that clarifies the nature of                                                               local governments using regulatory covenants
an affordability covenant, what kind of terms                    execute and                                to secure affordable housing.
can or must be included, or how the covenant
should be interpreted by the courts, in con-
                                                              record a separate                             Ad hoc Regulatory Covenants and RIPRA
trast to statutes governing HOA covenants,15
conservation easements,16 and environmental
                                                                  instrument                                Suppose a property owner approaches a town
                                                                                                            with a proposal to add an accessory dwelling
covenants required for clean-up of certain                          granting                                unit (ADU) on a large lot currently used for a

                                                                   covenants
contaminated sites.17                                                                                       single-family home. Faced with a sustained
                                                                                                            campaign by locals over the past few years for
Regulatory Covenants
The third major category of affordability cov-
                                                               intended to run                              more senior housing, the town decides on the
                                                                                                            spur of the moment to condition approval on
enants encompasses use restrictions affecting                   with the land,                              a requirement that the owner deed restrict the

                                                                with the local
title to real property imposed on a developer                                                               property such that the ADU can only be rented
as a condition of land use approval, where the                                                              to low-income seniors. Such a requirement is
locality has an expressly stated right to enforce
the grantor’s promises against the current
                                                                 government                                 almost certainly prohibited by the rent control
                                                                                                            statute.
property owner (referred to in this article as                  as the named                                    But assume a slightly modified fact pattern

                                                                  beneficiary.
regulatory covenants). There is no standard label                                                           where the same property owner wishes to
for these covenants: the instrument may be titled                                                           redevelop her lot from a single-family detached
a development agreement, zoning agreement,                                                                  home into a duplex, and the town conditions

                                                                              ”
restrictive covenant, deed restriction, regulatory                                                          approval on a requirement that one of the new
agreement, or something else.                                                                               units be deed restricted as for-sale affordable
     In contrast to the private party and public                                                            housing. This condition would not be prohibited
partner covenants discussed above, regulatory                                                               by the rent control statute, which doesn’t govern
covenants are directly affected by the Colorado         to know whether a property was burdened by          restrictions on sale. It could, however, face other
rent control statute, which provides “no county         such a restriction was obliged to affirmatively     hurdles, such as a challenge based on RIPRA,
or municipality may enact any ordinance or              seek out the records by contacting the city or      which dictates that “[n]o local government shall
resolution that would control rent on either            county.                                             impose any discretionary condition upon a
private residential property or a private residen-          Today, many localities require that the land    land-use approval unless the condition is based
tial housing unit.”18 Years ago, these regulatory       use applicant execute and record a separate         upon duly adopted standards that are sufficiently
restrictions appeared in the form of a short            instrument granting covenants intended to           specific to ensure that the condition is imposed

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in a rational and consistent manner.”20 Without      appears to be a municipal resolution mandat-          the Colorado Court of Appeals reversed in
language in the town code authorizing such           ing rent control, the rent control statute was        part, holding that the need for further factual
a condition, adopted after sufficient public         amended in 2010 to clarify that it does not           development precluded summary judgment.
input, due process, and compliance with the          prohibit “voluntary agreements” to limit rent         Specifically, the Court declared that it was
law governing adoption of local regulations,         on a property.24                                      unclear whether CRS § 38-12-301(2), which
it may be difficult for the town to prove that           If a developer is willing to enter into such      provides an exception from the rent control
requiring this covenant meets this test.             a voluntary agreement, the statute states that        ban for voluntary agreements between counties
    RIPRA also provides:                             the agreement may specify how long private            or municipalities and permit applicants or
    In imposing conditions upon the granting         residential property is subject to its terms,         property owners, applied without evidence that
    of land-use approvals, no local government       whether a subsequent owner is subject to the          Meyerstein’s predecessor “voluntarily” entered
    shall require an owner of private property       agreement, and remedies for early termination.25      into an agreement with the city.29
    to dedicate real property to the public, or          In contrast, where a developer declines to             In addition to his claims of rent control
    pay money or provide services to a public        enter into an affordable housing agreement,           statutory violations, Meyerstein asserted that
    entity in an amount that is determined           the locality cannot deny an application on that       he was denied due process because “(1) the
    on an individual and discretionary basis,        basis alone.26 Localities do, however, retain         board as a whole was biased, given that its
    unless there is an essential nexus between       their ability to deny or condition discretionary      mission is to promote low income housing, and
    the dedication or payment and a legitimate       development permits where other unrelated             (2) an individual board member was biased, as
    local government interest, and the dedi-         code criteria are not met.                            evidenced by certain public statements that he
    cation or payment is roughly proportional                                                              had made.”30 On its way to rejecting Meyerstein’s
    both in nature and extent to the impact of       When is a Regulatory                                  claims, the Court of Appeals quoted the board
    the proposed use or development of such          Covenant Voluntary?                                   member: “I am a firm believer in people living
    property.21                                      The rent control statute does not prescribe a         up to their contractual obligations and if they
    If a court treats the covenant as a real prop-   method for determining voluntariness. The             don’t, since we live in the West, hang ’em high
erty interest, here again it may be difficult for    statute makes clear that it “is not intended to       . . .Whoever developed this property received
the town to prove that this condition complies       impair the right of any state agency, county,         benefits and they should uphold the deed
with RIPRA.                                          or municipality to manage and control any             restrictions on it.”31
                                                     property in which it has an interest through a             The lack of clarity in the Meyerstein ad-
Regulatory Covenants Negotiated                      housing authority or similar agency.”27 Housing       ministrative record on voluntariness was the
in a PUD Agreement                                   authorities, which are entities with a statutory      primary reason the Court of Appeals remanded,
Assume a town has adopted regulations allowing       charter to create housing options for low-income      although it did not specify how the district court
planned unit developments (PUD), and the             residents, are a good example of developers           was to make this determination. On remand,
regulations encourage the creation of more           willing to voluntarily deed restrict property. But    the Pitkin County District Court construed
workforce housing by allowing developers             how does a private developer, who doesn’t have a      the term “voluntary agreement” to mean a
who choose to build affordable housing more          statutory mission to own and operate affordable       voluntary contract and reasoned that “a contract
density than is typically permitted in the zone.     housing, know whether its agreement with a            is not voluntary if it is the result of duress.”32
Town regulations contemplate execution of a          local jurisdiction to deed restrict property for      Because the administrative record contained
development agreement tailored to the specifics      affordable rental housing is truly “voluntary”?       no evidence that Meyerstein’s predecessor
of the project.22 A developer approaches the                                                               assented to the city’s deed restrictions because
town with a request for increased density in         Meyerstein v. City of Aspen                           he was threatened and had no reasonable alter-
exchange for providing a significant number          A recent dispute illustrates the intricacies          native, the court concluded that the agreement
of affordable rental units on site, as the code      of determining whether affordable housing             was in fact voluntary. When Meyerstein again
allows. The town likes the project and adopts        covenants were voluntarily entered into. Arnold       appealed, the Court affirmed the district court
a resolution approving a PUD development             Meyerstein, successor owner of an apartment           in an unpublished decision Meyerstein v. City
agreement that includes detailed rental housing      building, sued the City of Aspen, the Aspen/          of Aspen (Meyerstein II).33
restrictions, which per standard town practice       Pitkin County Housing Authority, and Music                 Beyond Meyerstein II, Colorado case law on
will be recorded and run with the land. Is this      Associates of Aspen, claiming that an affordable      voluntariness is sparse.34 Some states statutorily
a defensible approach?                               housing deed restriction recorded against his         authorize voluntary agreements with localities
    In this instance, RIPRA is less likely to pose   property constituted illegal rent control under       as part of the land use review process.35 Cases
a problem, as it does not apply to legislatively     CRS § 38-12-301.28 The district court issued          interpreting those statutes, and other relevant
adopted regulations.23 While at first blush this     summary judgment for the City of Aspen, and           case law, reveal facts and circumstances where

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                                                                               “
courts are more likely to find that an agreement                                                              developers of projects such as malls and hotels
with a locality was entered into voluntarily.                                                                 to generate affordable housing for 40% of the
     Obviously, it helps if such agreements are                                                               new employees created by development. Given
expressly authorized by state law and reflect-
ed in local code.36 In the absence of express
                                                                    However,                                  multiple legislative declarations over the past
                                                                                                              few decades, it’s widely accepted that creation
authorization, agreements are more likely                        both the 2010                                and preservation of affordable housing furthers

                                                                    legislative
to be seen as voluntary where the developer                                                                   a public purpose.46 But no statute expressly
sought approval for a project the locality had                                                                authorizes local adoption of “inclusionary”
the discretion to deny.37
     Courts also examine the administrative
                                                                 clarification of                             housing or zoning ordinances such as the one
                                                                                                              at issue in Telluride. Rather, local governments
record for evidence of the developer’s willingness              the rent control                              rely on their authority to impose reasonable

                                                                   statute and
to consent to the agreement requested by the                                                                  conditions on zoning and building permits
government. Telling the developer to “take it                                                                 in the exercise of the police power47 and, in
or leave it” will not further the government’s
cause.38
                                                                 the Meyerstein                               municipalities like Telluride, home rule powers.
                                                                                                                   In Telluride, the respondent-developer
     Courts tend to uphold covenants as vol-                         decisions                                challenged the ordinance as violating CRS §

                                                                  indicate that
untary where the evidence indicates that                                                                      38-12-301. The Court of Appeals reversed the
they have a reasonable relationship to public                                                                 grant of summary judgment in favor of the town
health, safety, and welfare and are intended
to mitigate the development’s impact.39 Con-
                                                                   regulatory                                 and invalidated the ordinance, and the Colorado
                                                                                                              Supreme Court affirmed. The Court found that
versely, courts are more likely to invalidate                     affordability                               rent control implicates mixed state and local
agreements that appear intended to improperly                                                                 concerns, the ordinance conflicted with the
influence the local body to act on behalf of the                 covenants that                               statute, and the state statute superseded the
developer rather than in the best interest of
the community.40                                               are supported by                               authority of a home rule municipality. The Court
                                                                                                              held that though the town’s ordinance included
     Courts are also more likely to find that an
agreement was voluntary where there is evidence
                                                               sufficient record                              several options for satisfying an affordable
                                                                                                              housing requirement, its options for constructing
of the negotiated exchange of benefits and                         evidence of                                new housing or imposing deed restrictions on

                                                               voluntariness are
obligations incurred by all parties.41 As the U.S.                                                            existing housing constituted rent control.48
Court of Appeals for the Ninth Circuit put it, “a                                                                  The practical result of the Telluride decision
contractual promise which operates to restrict
a property owner’s use of land cannot result in
                                                                  enforceable.                                has been twofold. First, while a number of
                                                                                                              jurisdictions retain some form of inclusionary
a ‘taking’ because the promise is entered into                                                                housing, these regulations are drafted or im-

                                                                               ”
voluntarily, in good faith and is supported                                                                   plemented to avoid the mandatory imposition
by consideration.”42 Courts do recognize that                                                                 of rent control on rental housing units on the
“in some cases, the process by which proffers                                                                 permit applicant’s site. Instead, the regulations
become incorporated into the zoning system                                                                    typically give the applicant a variety of ways to
may involve a degree of negotiation,” but this                                                                satisfy the requirement for contributing to the
practical reality “does not convert an exercise of                                                            generation of more affordable units, for example,
the police power into an exercise in contract.”43       Covenants Required by                                 through creation of off-site units, cash-in-lieu
Courts will look behind the labels, whether             Inclusionary Housing                                  payments, or off-site land dedication. To the
titles of documents or statements made on               Before the 2010 rent control statute amendments       extent affordable rental units are generated
the record.44                                           and the Meyerstein opinions, the key decision         by the inclusionary ordinance, localities may
     The Meyerstein dispute reinforces that those       interpreting the effect of the rent control statute   require that the applicant affirm that a housing
drafting affordability covenants must consider          on deed restrictions imposed at the local level       authority is a part owner of the project, thereby
how the instrument will operate many years after        was Town of Telluride v. Lot Thirty-Four Venture,     avoiding the need to prove the agreement was
its execution, when the parties to the agreement,       L.L.C.45 In that case, Telluride, a home rule         sufficiently “voluntary” under the rent control
the economic and political environment, and             municipality, was faced with a shortage of            statute.49
the community’s vision for the highest and best         available housing for its working citizens. It             Second, some property owners mistook the
use of its finite land supply have all changed.         passed a comprehensive ordinance requiring            decision overturning Telluride’s inclusionary

50   |   C OL OR A D O L AW Y E R   |   J U LY 2 01 9
Affordable Housing Series

program as a declaration of open season on reg-       the property in question, without a clear record        law requires developers who benefit from
ulatory affordability covenants, with Meyerstein      it can be difficult for a Colorado locality to prove    discretionary approval of developments to
as one prominent example. However, both the           that a requirement for on-site affordable rental        respect the conditions on that public support.
2010 legislative clarification of the rent control    housing was truly “voluntary” as opposed to             While covenants are flexible tools that can be
statute and the Meyerstein decisions indicate         impermissible rent control. The best guidance           calibrated to deal with individual circumstances
that regulatory affordability covenants that          available for the time being is Meyerstein II,          unique to a property, a development proposal,
are supported by sufficient record evidence           affirming the district court’s decision that, for       and a specific community, they must be drafted
of voluntariness are enforceable. Based on            purposes of complying with the rent control             with care and a long-term view, as they typically
the Telluride Court’s interpretation of the rent      statute, inclusionary housing deed restrictions         restrict what can be done with property for
control statue, it’s clear that a local government    are entered into voluntarily absent evidence            decades.
cannot, strictly speaking, require that a developer   of duress.
create affordable rental housing on its property
as a condition of land use approval. The CRS §        Conclusion
38-12-301 language underpinning this holding          Colorado’s rent control statute affects affordable
                                                                                                                             Ben Doyle is an associate at Bryan
remained unchanged in the 2010 amendments.            housing covenants imposed by virtue of a local                         Cave Leighton Paisner LLP in Boulder.
What is less clear from the statute, as amended       government’s land use authority or police                              The focus of his practice is affordable
in 2010, is what makes an agreement between           power. We don’t actually “hang people high” for                        housing development in Colora-
                                                                                                                             do—@ben.doyle@bclplaw.com.
a private developer and a locality “voluntary,”       covenant violations in Colorado, as the Aspen
as seen in the Meyerstein dispute. Unless a           housing authority board member memorably                Coordinating Editor: Christopher D. Bryan,
housing authority has an ownership interest in        demanded in the Meyerstein hearing. But state           cbryan@garfieldhecht.com

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                                                                                                             J U LY 2 01 9     |   C OL OR A D O L AW Y E R   |   51
Affordable Housing Series

NOTES
1. CHFA, The Housing Affordability                   any interest therein acquired by it as a part         Enter., LLC, 184 P.3d 106 (Colo.App. 2007).
Gap at 4 (Oct. 2018), www.chfainfo.                  of an urban renewal project for residential,          In this case, two special districts in Gunnison
com/news/ResourceLibrary/wp/WP_                      recreational, commercial, industrial, or other        County sought to foreclose statutory liens as a
HousingAffordabilityGap.pdf.                         uses or for public use in accordance with the         result of the developer’s failure to pay certain
2. Id.                                               urban renewal plan, subject to such covenants,        fees. The developers asserted counterclaims
                                                     conditions, and restrictions, including               based on alleged overpayments of the fees.
3. See Centennial-Aspen II Ltd. P’ship v. City of
                                                     covenants running with the land . . . as it deems     The Court of Appeals affirmed the lower court’s
Aspen, 852 F.Supp. 1486, 1490 (D.Colo. 1994).
                                                     to be in the public interest or necessary to          finding that the developer’s payments were
4. CRS § 38-12-301(1).                               carry out [its] purposes”).                           voluntary, given the absence of a showing
5. CRS § 38-33.3-106.5(1)(h)(I).                     14. CRS § 32-1-1001(1)(j)(II).                        that they were made under written protest or
6. For more examples, see Colorado                                                                         duress, or that there was a mistake as to all
                                                     15. CRS §§ 38-33.3-101 to -222 (common
Department of Local Affairs (DOLA),                                                                        relevant facts.
                                                     interest communities).
Affordable Housing Guide for Local                                                                         35. See, e.g., Va. Code Ann. § 15.2-2303
                                                     16. CRS §§ 38-30.5-101 to -111 (conservation
Officials, https://drive.google.com/file/d/0B-                                                             (conditional zoning in certain localities; proffers
                                                     easements).
vz6H4k4SESOFN0LUNhVFd1c2s/view.                                                                            of conditions offered in writing).
                                                     17. CRS §§ 25-15-317 to -327 (environmental
7. See CRS § 29-26-101 (affordable housing                                                                 36. See, e.g., Bd. of Cty. Supervisors v. United
                                                     covenants and restrictive notices).
dwelling unit advisory boards); CRS §                                                                      States, 48 F.3d 520, 524 (Fed.Cir. 1995) (“the
29-4-202(1)(a) (city housing authorities             18. CRS § 38-12-301(1). Unlike private party          Virginia legislature expressly authorized
needed to remedy unsanitary or unsafe                and public partner affordability covenants,           counties such as Prince William to engage
dwelling accommodations in various cities            where disputes that lead to reported cases are        in the process of conditional zoning; that is
due to “overcrowding and concentration of            rare, two significant cases have arisen from          what the County did here in the exercise of
population, the obsolete and poor condition          regulatory covenants, Town of Telluride v. Lot        its delegated police power to control land
of buildings, improper planning, excessive land      Thirty-Four Venture, L.L.C., 3 P.3d 30 (Colo.         use through zoning. There is no need, or
coverage, lack of proper light, air, and space,      2000); and Meyerstein v. City of Aspen, 282           justification, to overlay this exercise with a
unsanitary design and arrangement, lack of           P.3d 456 (Colo.App. 2011), cert. denied, 2012         contract veneer. The County was not engaged
proper sanitary facilities, and the existence of     Colo. LEXIS 335 (Colo. May 14, 2010).                 in the business of contracting when it dealt
conditions which endanger life or property by        19. Unlike other states, Colorado appellate           with this developer, and the United States did
fire and other causes”); CRS § 29-4-501(1)(a)        courts have not had occasion to analyze when          not take from it any rights based on contract.”);
(county housing authorities needed to address        it is appropriate for a locality to extract a land    Dawson v. Loudoun Cty. Bd. of Supervisors, 59
“housing shortage for agricultural workers,          use condition and a separate accompanying             Va. Cir. 517, 524–525 (Va.Cir.Ct. 2001) (exactions
their families, and other families of low income     restrictive covenant. See, e.g., City of New York     claim failed given proof of voluntary proffer).
in the state . . . with the result that many         v. Delafield 246 Corp., 236 A.D.2d 11 (N.Y.App.       See also Nunziato v. Planning Bd., 541 A.2d 1105,
agricultural and other low income workers and        Div. 1997) (“process of ‘conditional zoning’          1110 (App.Div. 1988) (“if the agreement to pay
their families are unable to find decent, safe,      may be accomplished by a municipality’s               $203,000 to the borough for its affordable
and sanitary housing”); CRS § 29-4-702 (citing       conditioning the zoning amendment on                  housing fund was entered into by the applicant
shortage of decent, safe, sanitary, and energy       execution of a declaration restricting the use        to induce the Planning Board to grant approval
efficient housing that is within the financial       of the property by private parties interested in      and was a consideration in the mind of the
capabilities of low- and moderate-income             rezoning the property . . . once the conditions       Board members when they voted approval
families, and the need for tools to alleviate        are incorporated into the amending ordinance,         [and where that condition was not set forth
the high cost of construction loans and home         the conditions effectively become part of the         with particularity in a zoning ordinance], such
mortgage interest costs).                            zoning law”).                                         action could not be other than arbitrary and
8. CRS § 29-26-101(1)(b).                            20. CRS § 29-20-203(2). See Quaker Court              capricious.”).
9. 24 CFR § 92.504(c)(1)(x). The means of            LLC v. Bd. of Cty. Comm’rs, 109 P.3d 1027, 1032       37. “[T]he word ‘voluntary’ means precisely
enforcement of the HOME program may                  (Colo.App. 2004) (citing Bd. of Cty. Comm’rs v.       that the developer has the choice of either
include liens on real property, deed restrictions,   Conder, 927 P.2d 1339, 1348 (Colo. 1996), and         (1) paying for those reasonably necessary
or covenants running with land.                      Beaver Meadows v. Bd. of Cty. Comm’rs, 709            costs which are directly attributable to the
                                                     P.2d 928 (Colo. 1985)).                               developer’s project or (2) losing preliminary
10. See, e.g., HUD regulations at 24 CFR §§
                                                     21. CRS § 29-20-203(1).                               plat approval. The fact that the developer’s
1.5(a)(2), 8.50(c)(3), 100.306(a)(4), 578.81(a),
                                                                                                           choices may not be between perfect options
891.863, and 906.39(n).                              22. CRS § 24-67-106 (enforcement of
                                                                                                           does not render the agreement ‘involuntary’
11. 26 USC § 42(h)(6)(A) to (B) (buildings are       PUD Plan); CRS § 24-68-104 (authorizing
                                                                                                           under the statute.” Cobb v. Snohomish Cty.,
eligible for the federal low-income housing          development agreements).
                                                                                                           829 P.2d 169, 173 (Wash.Ct.App. 1991) (noting
tax credit only if the minimum long-term             23. CRS § 29-20-203(1).                               that in this instance, developer had no absolute
commitment to low-income housing is in effect        24. CRS § 38-12-301(2).                               right to receive plat approval: “The county is
through an agreement between the taxpayer                                                                  authorized to withhold approval if appropriate
                                                     25. CRS § 38-12-301(3).
and the housing credit agency that is binding                                                              provisions have not been made for the public
on all successors of the taxpayer, and the           26. CRS § 38-12-301(4).
                                                                                                           health, safety, and general welfare.”).
agreement is recorded pursuant to state law as       27. CRS § 38-12-301(5).
                                                                                                           38. Henderson Homes, Inc. v. City of Bothell,
a restrictive covenant); CRS § 39-22-2102(4)         28. Meyerstein, 282 P.3d 456.                         877 P.2d 176, 179 (Wash. 1994) (superseded by
(no state low-income housing tax credit may
                                                     29. Id. at 466.                                       statute on other grounds) (finding agreements
be allocated unless the property is the subject
                                                     30. Id. at 467.                                       not voluntary, given lack of record evidence
of a recorded restrictive covenant requiring the
                                                     31. Id. At 468.                                       to that effect during proceeding from staff,
development to be maintained and operated as
                                                                                                           applicant, or Council, as well as evidence
a qualified development).                            32. Meyerstein v. City of Aspen, Colo. Court of       that “When the applicant asked what would
12. Both jurisdictions have included covenants       Appeals No. 13CA0330, 5–6 (Jan. 30, 2014)             be the consequences if they did not sign the
within a recorded performance deed of trust.         (unpublished).                                        agreement, he was told ‘it would probably
13. CRS § 31-25-106(1) (URAs “may sell,              33. Id.                                               be the eventual disapproval of my project.’”);
lease, or otherwise transfer real property or        34. See, e.g., Skyland Metro. Dist. v. Mt. West       Humbert Birch Creek Constr. v. Walla Walla Cty.,

                                                                                                          J U LY 2 01 9   |   C OL OR A D O L AW Y E R   |   53
FEATURE | REAL
          TITLEESTATE LAW

185 P.3d 660, 663–64 (Wash.Ct.App. 2008)                (9th Cir. 2008).                                    approaches to increase their affordable
(noting unequal balance of power where the              42. Leroy Land Dev., 939 F.2d at 698.               housing stock, such as those listed in DOLA’s
permit granting authority is the same entity                                                                Affordable Housing Guide for Local Officials,
                                                        43. Board of Cty. Supervisors, 48 F.3d at 524.
negotiating a “voluntary” agreement; hence the                                                              supra note 6. Some believe that repeal of the
legislature’s limitations on the locality’s power       44. Nunziato, 541 A.2d at 1110 (overturning         rent control statute would be an effective
to enter into such agreements).                         land use approval in light of “illegal extortion”   method of increasing affordable housing in
                                                        from applicant of money for the affordable          the state, but recent attempts to repeal the
39. Rando v. Town of N. Attleborough, 692
                                                        housing fund, notwithstanding applicant’s           rent control statute have failed. See, e.g., Perry,
N.E.2d 544 (Mass.App.Ct. 1998) (rezoning
                                                        insistence that the funds were a gift); Pollard     “What Would Rent Control Mean for Colorado?”
that had a reasonable relationship to public
                                                        v. Comm’r, T.C. Memo 2013-38, P18 (T.C. 2013)       5280 (Apr. 16, 2019), www.5280.com/2019/04/
welfare and safety was valid exercise of
                                                        (despite documents containing “gift” and            what-would-rent-control-mean-for-colorado
town’s zoning power; the voluntary offer of a
                                                        “voluntary offer” language, taxpayer’s grant        (referencing Colorado SB 19-225).
mitigation payment and a deed restriction was
                                                        of conservation easement to county did not
not an extraneous influence that caused the
                                                        qualify as a charitable contribution, since it
town to act improperly because the payment
                                                        was a quid pro quo exchange for county’s
and covenant were intended to mitigate the
                                                        approving land use application, a personal
development’s impact).
                                                        benefit to the taxpayer).
40. West Park Ave., Inc. v. Ocean Tp., 224
                                                        45. Town of Telluride, 3 P.3d 30.
A.2d 1, 4 (N.J. 1966) (“We have no doubt the
municipality was conscious of the illegality of         46. See supra note 8.
what it did and for that reason refrained from          47. See, e.g., Bethlehem Evangelical Lutheran
adopting an ordinance, seeking instead to               Church v. City of Lakewood, 626 P.2d 668 (Colo.
achieve its ends through the guise of ‘voluntary’       1981); King’s Mill Homeowners Ass’n v. City of
contributions with spurious ‘agreements’ to             Westminster, 557 P.2d 1186 (Colo. 1976).
make them stick.”).                                     48. Telluride, 3 P.3d at 32–33.
41. Leroy Land Dev. v. Tahoe Reg’l Planning             49. See CRS § 38-12-301(5). Other communities
Agency, 939 F.2d 696, 698 (9th Cir. 1991);              have elected to use alternative regulatory
McClung v. City of Sumner, 548 F.3d 1219, 1230

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