Lawsuits, Appeals and the Future of Raleigh’s Missing Middle Housing Reform
Raleigh City Council’s enactment of TC-5-20, TC-20-21 and TC-3-22 (collectively, “Missing Middle Reforms”) amend the City’s Unified Development Ordinance (“UDO”) to allow the construction of duplexes, triplexes, townhomes and small apartments in low-density residential zoning districts across the City. The Missing Middle Reforms attempt to reduce the negative impacts of Raleigh’s “exclusionary” zoning ordinance. Exclusionary zoning is rooted in racial segregation because it was implemented in ways that made it difficult for Black families to buy homes in historically white neighborhoods. Today, many cities across America are reforming exclusionary zoning ordinances in an effort to address the housing affordability crisis. Arlington, Virginia enacted missing middle reform just last month. Unsurprisingly, owners of single-family homes “protected” by exclusionary zoning ordinances often challenge missing middle reforms. Most claim, without evidence, that allowing a broader range of housing options within residential zoning districts will damage property values, create traffic safety issues and overburden infrastructure like stormwater and public water/sewer systems. Raleigh’s ongoing efforts to implement Missing Middle Reforms have not escaped similar challenges.
Shortly after an owner/developer began the permitting process for a 17-unit townhome community on a 2.3 acre lot in the Hayes Barton neighborhood, a group of nearby homeowners organized to stop the project. They filed an appeal with the Raleigh Board of Adjustment on January 27, 2023, seeking to void the compact subdivision (SUB-0045-2022) approved by City staff on December 30, 2022. On March 2, 2023, another group of neighbors filed a lawsuit seeking to invalidate the Missing Middle Reforms approved by City Council between 2020 and 2022.
This 17-unit townhome proposal spawned a coordinated, multipronged strategy designed to defeat Raleigh’s Missing Middle Reforms and/or force the developer to abandon its project by imposing delays and added costs through litigation and an administrative appeal. This type of coordinated attack is an effective strategy commonly used by sophisticated land use attorneys representing affluent clients. In this case, the homes of the residents behind these challenges have Wake County assessed values ranging from $1.0 million to $2.0 million (though they likely would sell for prices exceeding assessed values). Interestingly, a representative for the development team stated in a Triangle Business Journal article published in August 2022 that prices for the proposed townhomes would be in the $2 million range. Here is RaleighForward’s analysis of this strategy and the likelihood of success.
Tactic # 1: Pressure City Council to Repeal Missing Middle Reforms
As part of their efforts to stop the townhouse project, some Hayes Barton residents through a group called Save Our Neighborhoods started a PR campaign designed to pressure City Council into repealing the Missing Middle Reforms. The PR campaign succeeded in using the townhome proposal to foment public opposition to the Missing Middle Reforms. As a result, City Council directed staff to develop and implement an information campaign explaining the Missing Middle Reforms and to gather resident feedback. Those sessions were conducted across the City in January and February. A detailed report with information from those sessions was delivered to City Council during a work session on March 21.
There was speculation that Council might repeal the Missing Middle Reforms because 4 new Councilors were elected after the reforms were enacted. After staff reviewed the report during the work session, no City Councilor expressed interest in repealing the Missing Middle Reforms. However, several Councilors did express interest in potential refinements. In the meantime, Council directed staff to report back this month with details about the level of development activity spurred by the Missing Middle Reforms. Unless staff reports back with particularly egregious outcomes or unintended consequences, it seems unlikely that Council will repeal the Missing Middle Reforms. With repeal unlikely, the most immediate threat to the Missing Middle Reforms are the pending challenges by the Hayes Barton homeowners. As a result, here’s a deeper dive into those challenges and how they may play out.
Tactic #2: Litigation
The lawsuit filed in NC Superior Court seeks to void the Missing Middle Reforms entirely, while the Board of Adjustment Appeal seeks to void the preliminary compact subdivision approval for the proposed 17-unit townhome community. In the lawsuit, the neighbors raise 2 fundamental issues: That different forms of residential structures (duplex, triplex, townhomes, etc.) are legally distinct land uses; And, if they are, then Raleigh’s Missing Middle Reforms collectively constitute a rezoning rather than a text change. The case raises important land use regulatory issues that could have far-reaching effects across the State.
If the Court rules that different types of residential structures are legally distinct uses, it may slow missing middle reforms across the State. Text changes require only published notice, while zoning amendments require mailed notice to all affected property owners. Depending on how future missing middle reforms are structured, it could be difficult determining who is legally entitled to receive mailed notice because that determination is based upon how close a property owner is to the property being rezoned. State law does offer the option of publishing a ½ page ad in the newspaper when a rezoning impacts more than 50 property owners. It is worth noting that Chapel Hill is in the process of approving similar missing middle reforms and is also using the text change process.
Whether an elected Wake County judge will agree with the Hayes Barton neighbors is anyone’s guess. Under North Carolina law, however, cities are granted wide latitude when making legislative decisions. Therefore, courts are reluctant to second-guess purely legislative actions. In this case, the Hayes Barton neighbors are asking the court to override Raleigh’s legislative determination that residential land uses are not defined by building structure, but by land use. At its core, zoning regulates land uses, not buildings containing land uses. While the Hayes Barton neighbors make a number of technical arguments, that’s the fundamental issue raised by the lawsuit.
If the Court accepts the argument that the Missing Middle Reforms constitute a rezoning instead of a text change, that raises an interesting technical statute of limitation argument. Statutes of limitations are legal deadlines when lawsuits must be filed. Once a statute of limitation filing deadline has passed, the opportunity to file a lawsuit dies. Under North Carolina law, text changes can be challenged for three years after enactment, but a lawsuit challenging a rezoning must be filed within 60 days of enactment.
Since the Hayes Barton lawsuit argues that the Missing Middle Reforms are a zoning map amendment, not a text change, the City will argue that the lawsuit should have been filed 60 days after TC-5-20 was enacted (July 6, 2021) and 60 days after TC-20-21 was enacted (May 10, 2022). At a minimum, the City will argue that the Hayes Barton neighbors failed to file their lawsuit within a reasonable time after becoming aware of the Missing Middle Reforms. The City will certainly point out that one of the lawyers representing the Hayes Barton neighbors was quoted in news reports about the Missing Middle Reforms this past August, but waited an additional 5 months before filing the lawsuit. The court may also note that the neighbors filed the Board of Adjustment appeal of the compact preliminary subdivision on January 27, 2023, yet waited until March 3, 2023, to file the lawsuit.
Tactic #3: Administrative Appeal of Preliminary Compact Subdivision
In Raleigh, preliminary compact subdivision applications are considered administrative decisions. Under North Carolina law, administrative decisions do not permit any discretion and are made by professional staff. In other words, as long as the proposed development meets the objective standards of Raleigh’s Unified Development Ordinance, staff is required to approve the application. In this case, several Hayes Barton neighbors filed an appeal challenging staff’s approval of the owner/developer’s Preliminary Compact Subdivision application. This appeal is scheduled to be heard by the Raleigh Board of Adjustment on May 8, 2022.
In order to prevail, the neighbors must first demonstrate that they have “standing” to bring the appeal. This requires that they show that they will suffer what is called “special damages” which are unique and distinct from all other Raleigh residents. To do this, the neighbors generally have to produce expert testimony supporting their claims that the approval will damage their property values, create traffic safety issues or cause stormwater damage. While they may be able to find expert witnesses to support their claim of “special damages,” the owner/developer will have an easier time finding experts to testify that the proposed townhomes will not damage the neighbors’ property or create traffic safety issues. If both sides produce expert testimony supporting their respective positions, the Board of Adjustment is free to choose among the experts to support their decision.
If the Board of Adjustment determines that the neighbors have standing, only then will they move on to consider the technical arguments. In this kind of appeal, it’s important to remember that the Board of Adjustment is not allowed to consider whether or not the Missing Middle Reforms are legal. Only North Carolina courts are allowed to rule on the legality of the underlying ordinances. That is why the neighbors also filed the lawsuit. So, for the purposes of this administrative appeal, the Board of Adjustment will only consider whether or not staff interpreted and applied the relevant ordinances to the townhome proposal properly.
These kinds of appeals are difficult to win because boards of adjustment generally do not second-guess professional staff decisions unless they clearly made errors in the interpretation and application of the relevant ordinances. And even if the neighbors succeed, all the owner/developer has to do is resubmit an application correcting whatever errors the Raleigh Board of Adjustment decides staff made. Once the application is corrected, staff will again be obligated to approve the corrected application. Because of this, administrative appeals generally do not “kill” projects outright. What they can do, however, is create delays and add so much additional costs that the developer is forced to walk away from a project. This happens most often when developers have real estate purchase agreements that are contingent upon obtaining all necessary governmental approvals. In those circumstances, as delays and costs mount, developers often decide to cut their losses and move on.
In this case, however, that’s unlikely because the owner/developer bought the property in November 2022 for $3,750,000. As a result, the owner/developer is likely going to develop the property. So, even if the owner/developer is unable to build 17 townhomes on the property, it will build something to recoup its investment and the added costs of the litigation and Board of Adjustment appeal. This is why the neighbors’ strategy could backfire. Since the property is almost 2.4 acres, the owner/developer can build between 8 and 14 homes on the property depending on whether some or all of the Missing Middle Reforms are upheld. Even if all of the Missing Middle Reforms are invalidated, a minimum of 9 homes can be built on the property, along with up to 9 ADU’s (18 total units). In that case, there will be 9 driveways onto public streets instead of 2, more cars due to the potential ADU’s, no open space (instead of the 1 acre proposed), more impervious surface and arguably more traffic safety issues because of the 9 driveways.
In the end, even if the neighbors win the court and the Board of Adjustment battle, they may feel like they lost the war when the property is finally developed.
Read more about Raleigh’s Missing Middle reforms at our hub here.