In many communities without formal inclusionary housing policies, developers are often asked to provide affordable housing in larger, high-profile development projects, often as part of a package of negotiated community benefits.
Advantages
- Larger projects can often afford to provide more affordable units than would typically be required by a broadly applicable ordinance.
- Direct negotiation offers developers an opportunity to propose alternatives that may work better for their projects.
- Negotiated agreements have frequently been used as a temporary step prior to the implementation of an inclusionary ordinance.
Disadvantages
- Project-by-project negotiations are time consuming and therefore generally only used for large projects.
- Without a formal policy, many smaller projects will provide no affordable units.
- This can be seen as unfair to developers of larger developments and it often results in fewer affordable units being built.
Santa Cruz, California
Santa Cruz went through a multi-year planning process to figure out how development could better meet the city’s needs. The work resulted in new requirements for developers that want to build taller buildings. In certain parts of the city, developers can build up to 32-36 feet without significant discretionary approval procedures. If they want to build higher, up to 60 feet in some cases, developers must sign a development agreement and provide additional benefits, usually more affordable housing. Santa Cruz uses an on-call consultant economist to determine how much value is created by the extra density so the city can adjust the requirements accordingly.
Common Questions
There are a number of options for states that do not allow cities to use rental inclusionary zoning. This situation usually arises because the legislature or a court has decided that inclusionary zoning is a form of rent control.
In some states—including Arizona, Colorado, Idaho, Indiana, Kansas, Texas, Tennessee, and Wisconsin—local governments are prohibited from adopting at least some form of mandatory inclusionary housing (for ownership housing, rental housing, or both). In some cases, the court has determined that the state statute limiting local rent control preempts mandatory local inclusionary housing requirements for rental housing. Many states—including Alabama, Arkansas, Georgia, Illinois, Iowa, Kentucky, Michigan, Mississippi, Missouri, and New Mexico, North Carolina, South Carolina, North Dakota, South Dakota, Oklahoma, Texas, Utah, and Washington—also have state statutes prohibiting local rent control but there has not been litigation regarding whether that statute preempts inclusionary housing requirements for rental housing. The specifics are different in all states so it is important to check with local attorneys, but there are a number of strategies that other jurisdictions have used so new rental housing development will contribute to affordable housing.
Charging Impact Fees
Many cities have adopted an affordable housing impact fee. Impact fees require that rental developers contribute money to an affordable housing trust fund. The size of the impact fee can vary dramatically, from under $1 a square foot to over $20 a square foot depending on local conditions. (Some jurisdictions charge a set price per unit, rather than per square foot.)
Before this can be done, a nexus study must be conducted.
Impact fees work well in areas with high home prices because the nexus study shows a strong connection. Cities with lower housing costs will only be able to legally justify a more modest impact fee level.
Some cities have set the impact fee as the default requirement and allowed developers to choose to provide rental units as an alternative. Because the default option is paying the fee and developers are choosing to provide the units, it may be more likely to withstand a legal challenge. When implementing the impact fee, it is a good practice to offer developers flexibility as well as incentives to participate. This will both make development more likely to happen and also reduce the likelihood of a successful court challenge.
Development Agreements
In some states, it is possible to require affordable units when developers voluntarily enter into Development Agreements – generally as a result of receiving some specific public benefits.
Partnering with Housing Authorities or Nonprofits
States generally allow housing authorities, local governments, or nonprofits to operate affordable rental developments, even where rent control is forbidden. It may be possible to partner with these groups to ensure that all development contributes to affordable housing.
Boulder, Colorado requires that new rental developments provide affordable rental units on site or offsite, but the homes are owned by the local housing authority or similar agency so they are exempt from the state prohibition. The City of Boulder purchases the unit from the developer at an affordable price, and then sells or gives it to the Housing Authority or similar agency. Rental developments also have the option of providing a cash payment or dedicating land to the city.
No: Several communities have adopted inclusionary policies through methods other than zoning code amendments. This may be by resolution of municipal council or executive order of the mayor, for example. The decision to adopt inclusionary housing as an ordinance or through resolution should be based on the following:
- If the inclusionary program is to be of limited duration and impact (e.g. applied only to select developments or areas), then a resolution may be appropriate.
- If the inclusionary program is of extended duration and universal impact, then it should be adopted through ordinance.
While adopting a policy as an ordinance can be a cumbersome process, it is less subject to changes due to near-term political shifts and changing priorities of municipal officials. It also provides certainty to developers because the regulations are codified as law with defined requirements and application.
Boston, Massachusetts is one example of an inclusionary development policy that has been adopted by executive order. The policy was first adopted through an executive order of the mayor in the year 2000, requiring a 10 percent affordability component in any residential project of 10 or more units that is financed by or developed on property owned by the city or the Boston Redevelopment Authority (BRA), or where zoning relief is requested. The city is currently in the process of amending their zoning code to incorporate inclusionary zoning to (1) increase developer certainty in its implementation and application and (2) make it a permanent ordinance rather than an executive order that is easily changed by political shifts.
