In a victory for the homebuilding industry, the state’s highest court has ruled a zoning law in Hadley that permanently restricts the rate of residential development is unconstitutional.

Homebuilders long have argued that measures that limit the rate of development make housing development economically unfeasible and only exacerbate the state’s housing shortage.

The case involved a Hadley bylaw that restricts the number of homes that can be built in a subdivision to no more than 10 percent per year. Hadley, a rural community north of Springfield, adopted the bylaw in 1988 as a way to stem rapid growth, preserve the town’s agricultural land and character, and plan for additional development.

A Hadley resident who wanted to build up to 40 single-family homes on a large parcel of land that she owned challenged the bylaw, and two years ago the Land Court ruled that the bylaw was unconstitutional.

The ruling was appealed to the Supreme Judicial Court, with the town claiming that the bylaw was not intended as a moratorium on building and did not limit the number of building permits that the town issues each year.

The plaintiff, however, argued that it was not economically feasible to extend the development of her property over a 10-year period, and that the bylaw constituted a land taking for which must be compensated.

‘Many Mechanisms’

The Home Builders Association of Massachusetts, which filed an amicus brief that was signed by the Massachusetts Association of Realtors, argued that the Hadley limit on subdivisions makes it extremely difficult for developers who rely on the cash flow from the sale of lots and homes during the development process to finance a project.

“We’re very excited with the decision,” said Gregory Spier, a Foxboro builder who serves as president of the homebuilders’ group.

Many Bay State communities have implemented either permanent or temporary development restrictions over the years, said Spier, but the court’s decision sends a clear message.

“It sends a loud and determined voice to these municipalities that are hiding behind permanent growth controls,” he said.

In its decision, the SJC ruled that communities can temporarily slow or stop growth in order to provide time for planning purposes, but can’t do so indefinitely.

“Restraining the rate of growth for a period of unlimited duration, and not for the purpose of conducting studies or planning for future growth, is inherently and unavoidably detrimental to the public welfare, and therefore not a legitimate zoning purpose,” the decision reads.

The decision continues, “In their intent and in their effect, rate of development bylaws reallocate population growth from one town to another, and impose on other communities the increased burdens that one community seeks to avoid. Through zoning bylaws, a town may allow itself breathing room to plan for the channeling of normal growth; it may not turn that breathing room into a chokehold against further growth. Despite the perceived benefits that enforced isolation may bring to a town facing a new wave of permanent home seekers, it does not serve the general welfare of the commonwealth to permit one particular town to deflect that wave onto its neighbors.”

Like the homebuilders, Realtors also were pleased with the ruling. “I think that the decision was an appropriate decision by the SJC where the line between land-use control and land-use takings was crossed by the town of Hadley,” said David Wluka, president of government affairs for MAR.

Wluka said towns can utilize different tools to plan for growth, instead of permanent growth restrictions, including “intelligent land-use mechanisms” like cluster zoning or transfer of development rights. Under transfer of development rights, towns can enable property owners to sell their development rights to builders who can use those rights to build developments in specially designated areas.

“There are a great many mechanisms available to guide, direct and control growth,” Wluka said.