Inclusionary Housing Policies
The Mount Laurel Doctrine (Mount Laurel, N.J.)
Beginning in the late 1960s, the town of Mount Laurel was growing increasingly expensive as it transformed into an affluent suburb, displacing lower-income residents from what was a historically African American community. New Planned Unit Developments were being constructed and homes were priced well above the modest means of many families in the area. Mount Laurel Township began condemning many of the substandard units that housed these families, providing no relocation assistance. Low-income residents, fearful of being forced out of their community, petitioned for 36 affordable garden apartments to be developed by a nonprofit organization. Mount Laurel Township opposed, stirring legal action.
The Mount Laurel Doctrine comes from the decisions of a series of New Jersey Supreme Court cases brought by the low-income residents and the opposing town officials. The Doctrine offers a controversial interpretation of the New Jersey State Constitution. Under this doctrine, municipalities are required to provide a “realistic opportunity” for low- and moderate-income housing, limiting the use of exclusionary zoning as a means of keeping lower-income individuals and families out of wealthier communities. New Jersey towns must provide their “fair share” of the region’s need for affordable housing, and mechanisms for enforcing compliance are enhanced by the doctrine.
The Mount Laurel decisions spurred the Fair Housing Act of 1985, which mandates the inclusion of affordable housing in New Jersey municipalities. The Council on Affordable Housing was created in response and is responsible for overseeing and monitoring the municipalities in the state to ensure that they are providing their fair share of low- and moderate-income housing.
Inclusionary Development Policy (Boston, Mass.)
In 2000, former Mayor Thomas Menino signed an executive order creating the city’s Inclusionary Development Policy (IDP). The policy applies to any residential development of 10 or more units seeking zoning relief and requires the equivalent of 13 percent of total housing units to be affordable. The policy also applies to any residential development built on public land or with public financial assistance.
To create new housing, most Boston developers need some form of zoning relief, usually in the form of additional height or density, because the zoning code in most areas of the city has not been updated for decades and allows only small-scale buildings by right. For nearly all developers, then, the IDP policy is technically voluntary but functionally mandatory.
Developers may be asked to provide greater than 13 percent affordability when requesting a Planned Development Area (PDA) zoning change. PDAs are overlay districts that offer considerable zoning flexibility for large-scale, mixed-use developments, similar to Planned Unit Development (PUD) zones in other parts of the country. The new Fenway neighborhood PDA, for example, requires 20 percent affordability.
Developers have the option of building the affordable units within the proposed development, constructing them off-site or paying a “buyout fee.” As of early 2015, the Boston IDP has produced 1,718 affordable units and generated an additional $32.3 million in buyout fees, according to Nick Martin of the Boston Redevelopment Authority. In December 2015, Boston updated its IDP to increase the “buyout fee” and tailor the fees to different zones in the city, with higher fees required in higher-cost parts of the city.
Buyout fee revenues are deposited in a city fund that supports affordable housing citywide. A minimum of half of these funds must be spent in neighborhoods where the percentage of affordable housing is less than the citywide average.
Half of affordable units for sale must be affordable for households earning less than 80 percent of AMI and half for households earning between 80 and 100 percent of AMI. Rental inclusionary units must be affordable for households earning less than 70 percent of AMI. Rental units must remain affordable for 50 years, and for-sale homes must have a 30- to 50-year affordability term.
For More Info:
Phil Cohen, Boston Redevelopment Authority
Email: phil.cohen@boston.gov
Moderately Priced Dwelling Unit Program (Montgomery County, Md.)
Montgomery County is home to the nation’s longest-running inclusionary housing program. The program requires that between 12.5 percent and 15 percent of the houses in new developments of 20 or more units be moderately priced dwelling units (MPDUs). The Montgomery County law requires that 40% of the MPDUs be offered to the Housing Opportunities Commission (HOC) and other nonprofit housing agencies for use by low- and moderate-income families.
The county recently added a compliance option under which developers of high-rise buildings can meet their affordability obligations by converting market-rate homes to deed-restricted affordable homes, subject to administrative approval. While no conversions had been completed as of mid-2015, a few recently approved developments were utilizing this option.
One example is Hampden Row in downtown Bethesda. Toll Brothers, the developer of a seven-story, 55-unit condominium development, is buying down the affordability of 12 market-rate rentals in a mixed-income property located within the same Bethesda planning policy area, but approximately three miles northwest of Hampden Row.
The on-site obligation for Hampden Row would have been nine affordable condominiums. Toll Brothers will make a payment of $1.434 million to make 12 off-site market-rate rentals affordable to low-income households.
The county agreed to an Alternative Location Agreement with Toll Brothers after finding that the monthly condominium fees of the property would have made the total ownership costs of the below-market-rate homes unaffordable to the program’s targeted households, who earn up to 70 percent of area median income (AMI). It was also significant for the county that the developer agreed to provide a greater number of affordable units off-site.
For More Info:
Lisa Schwartz, Montgomery County Department of Housing and Community Affairs
Email: lisa.schwartz@montgomerycountymd.gov
Tysons Plan (Fairfax County, Va.)
In 2010, Fairfax County adopted the 20-year comprehensive Tysons Plan to guide major changes to the county’s sprawling commercial center known as Tysons Corner. The plan envisions significantly greater development intensity within walking distance of four new Metrorail stations, which opened in 2014, along with mixed-use development, a walkable street grid and other physical changes that support transit use.
To access the lucrative redevelopment options outlined in the plan, developers are expected to make 20 percent of residential development units affordable to low- and moderate-income households or contribute $3 per square foot to the county’s affordable housing trust fund if building commercial or hotel space. By adhering to these guidelines, developers can build to an unlimited floor area ratio (FAR) within a quarter-mile of each Metro station, or up to a FAR of 2.4 or 3.0 elsewhere in each transit district.
County staff estimates that if existing development proposals are fully built out they will include a total of nearly 2,300 affordable units for households earning between 81 and 120 percent of AMI and another 1,500 affordable units for households at less than 70 percent of AMI. These housing units will be required to stay affordable for 50 years if rented and 30 years if owner-occupied.
The 17 million square feet of commercial and hotel space under construction or in the pipeline in Tysons Corner is expected to also generate tens of millions of dollars in contributions to the county’s affordable housing trust fund, all of which must be spent in the Tysons Plan area.
For More Info:
Charlene Fuhrman-Schulz, Fairfax County Department of Housing and Community Development
Email: charlene.fuhrman-schulz@fairfaxcounty.gov
Affordable Requirements Ordinance (Chicago, Ill.)
Chicago’s Affordable Requirements Ordinance (ARO) was initially passed in 2003, but the policy was expanded in 2007 and again in 2015 to broaden its reach.
Now Chicago has a hybrid inclusionary zoning policy that is triggered only in specific circumstances. Any rental or for-sale development with 10 or more units is subject to the terms of the ARO, if the project also involves:
- Any purchase of land from the city (the previous ARO only included developments where city land was purchased at a below-market rate);
- A zoning change resulting in increased project density, a change in land use that allows residential uses not previously permitted, or if the development is a “planned development” within the downtown area; or
- Receipt of financial assistance from the city (including tax increment financing).
Developers receiving financial assistance from the city must set aside 20 percent of units as affordable; all other conditions require a 10 percent set-aside. However, the new ordinance allows developers to reduce the required affordable housing set-aside if they target for-sale units to households that earn at or below 80 percent AMI.
The amended ordinance establishes that for-sale units must be affordable to, and reserved for, households earning up to 120 percent of AMI and rental units affordable and set-aside for households earning up to 60 percent of AMI. However, when the development is funded by TIF, 20 percent of for-sale units must be reserved for households earning 100 percent of AMI or less, with at least half of the 20 percent earning 80 percent or less of AMI. For rental units, 20 percent of the units must be available and affordable to households earning 60 percent or less of AMI, with at least half of the units filled by households earning 50 percent or less of AMI.
The 2003 ARE allowed developers to elect to make in-lieu payments of $100,000 per affordable unit not produced and the 2007 amendment links this in-lieu fee to inflation by adjusting the amount annually based on the Consumer Price Index. The 2015 ARO changes this further by installing a location-based system to determine the in-lieu fees. Currently, a developer could pay anywhere from $50,000 to $225,000 for each unit not built on or off-site, depending on the location of the property. Payments are directed to the city’s Affordable Housing Opportunity Fund.
Any incentives and cost offsets can be negotiated on a case-by-case basis among developers, aldermen and the city’s Department of Housing and Department of Planning and Development.
Visit the city’s ARO website to learn more.
Indexed Inclusionary Housing Policy (Burlington, Vt.)
In Burlington, the share of units that must be set aside as affordable in for-sale developments is dictated by the average price of the market-rate units. As the average cost of new homes increases, so does the required set-aside.
For example, if the average sales price of new homes in a development is affordable to households at 100 to 139 percent of the AMI, then 15 percent of units must be reserved for households earning 75 percent of AMI. For more expensive developments where the average sales price is affordable only to households earning 180 percent of AMI and above, 25 percent of units must be set aside for moderate-income households.
Click here for more information on inclusionary zoning in Burlington.
Inclusionary Zoning Ordinance (Davis, Calif.)
The small suburban city of Davis has had an inclusionary zoning ordinance since 1987. The Affordable Housing Ordinance requires 25 to 35 percent affordability for rental housing and 10 to 25 percent affordability for homeownership developments. To date, the program has produced approximately 2,000 affordable homes for low-income renters and moderate-income homeowners. These homes must remain permanently affordable.
For most of the policy’s history, the ordinance offered developers two alternatives to developing affordable units on-site: land dedication or paying an in-lieu fee. Land dedication, in particular, has allowed for a variety of affordable housing types, including a domestic violence shelter, senior housing, family housing, housing for formerly homelessness adults, transitional housing and housing for those with developmental disabilities.
In January 2015, the city added a third alternative: acquiring and placing permanent affordability restrictions on existing housing units. Use of this option is subject to discretionary approval by the city council based on consideration of such factors as the condition of the units and potential displacement of existing residents.
For More Information:
Danielle Foster, City of Davis, City Manager’s Office
Email: dfoster@cityofdavis.org
Affordable Housing Production Program (Santa Monica, Calif.)
Santa Monica’s Affordable Housing Production Program (AHPP) is a mandatory inclusionary housing program adopted in 1998. The program employs a variable affordability requirement for rental properties depending on the income bracket served. If the affordable units are priced for low-income households (earning 80 percent of AMI), then 20 percent must be affordable. The affordability percentage drops to 10 percent if units are priced for very-low-income households (earning 50 percent of AMI) and to five percent if units are affordable for extremely low-income households (earning 30 percent of AMI). To date, the program has generated approximately 1,000 affordable apartments. Developers frequently choose the option of providing fewer units at a deeper level of affordability.
For More Info:
Jim Kemper, City of Santa Monica Housing and Economic Development
Email: James.Kemper@smgov.net
Below Market Rate Program (San Mateo, Calif.)
The city of San Mateo adopted its mandatory Below Market Rate Program in 1998. The ordinance requires that 10 to 15 percent of rental and for-sale homes be priced affordably for households earning 50 to 120 percent of AMI, depending on tenure and incomes targeted. As of 2014, the city has 325 total inclusionary homes—196 rental units and 129 for sale.
Affordable rental units must remain affordable for the life of the building. The for-sale affordability term is 45 years, with the term restarting for the next homebuyer if the home is resold within the 45-year control period. City staff believes this will have the practical effect of perpetual affordability because most homes tend to be sold within 30 years.
San Mateo uses many innovative practices to hold onto its inclusionary homes over time. The city adds a promissory note and deed of trust to inclusionary for-sale homes at the point of initial sale to establish a “security interest” in the property that helps the city stay better notified of attempts to improperly refinance or sell homes. The city also exercises a preemptive right of purchase (right of first refusal) at the point of resale to gain control and oversight over the resale process. Rather than actually taking ownership of the home, however, the city assigns its preemptive option to purchase to an income-qualified homebuyer, who then purchases the home from the previous homeowner at the designated affordable price.
San Mateo’s Below Market Rate Program also establishes underwriting standards for loans assumed by homeowners. It also has found it helpful to require its homeowners to complete annual certification forms affirming they are in compliance with permissible types of home loans and the underwriting standards required for refinancing.
To ensure inclusionary rental units are leased in keeping with the program’s selection and income qualification rules, the city manages a master waitlist for all inclusionary rental units in the city.
For More Information:
Sandy Council, Department of Community Development, City of San Mateo
Email: scouncil@cityofsanmateo.org
Disposition of District Land for Affordable Housing Amendment Act (Washington, D.C.)
Washington’s Disposition of District Land for Affordable Housing Amendment Act of 2014 (PDF) requires that all new multifamily residential developments on city-owned surplus land include at least 20 to 30 percent affordable housing. The exact level of affordability depends on the site’s location; the percentage rises to 30 percent for sites within a half-mile of a Metrorail station, within one-quarter mile of a streetcar line or within one-quarter mile of a Priority Corridor Network Metrobus Route.
The law allows for property to be transferred at less than the appraised value, and the city may provide additional subsidies to ensure that affordability requirements are met.
The mayor may waive or reduce the affordability requirements as necessary, but only under certain circumstances, such as the appraised value of the site being insufficient to support affordable housing in light of all other available sources of public funding for supporting the affordable housing component, or the disposition of the property enabling the financing of a “significant public facility.”
Half of for-sale affordable homes must be affordable to households earning less than 50 percent of area median income (AMI) and half to households earning up to 80 percent of AMI. One-quarter of the rental affordable homes must be affordable for households at 30 percent of AMI and three-quarters for households at 50 percent of AMI.
For More Information:
Andrew Trueblood, Office of the Deputy Mayor for Planning and Economic Development
Email: andrew.trueblood@dc.gov
Inclusionary Housing (Boulder, Colo.)
Boulder’s mandatory Inclusionary Housing Policy requires new residential development to create 20 percent affordability in perpetuity. Since 2000, the policy has produced approximately 750 affordable housing units (625 for-sale and 125 rental). The policy applies to residential developments of all sizes, including single-unit properties, but exempts accessory dwelling units (ADUs).
For properties with fewer than five units, developers meet their obligation by paying a “cash-in-lieu” fee. The per-unit fee rate is considerably lower for properties with fewer than five units and lower still for developers of a single home.
Inclusionary Zoning Program (North Kingstown, R.I.)
The Town of North Kingstown adopted an inclusionary zoning ordinance in 2007 to help achieve local “fair share” affordable housing goals. The mandatory ordinance requires developers of residential projects to reserve as affordable at least 10 percent, and up to 25 percent, of new units. To help offset the costs associated with selling units at below-market prices, developers may receive a density bonus that allows them to build twice the number of affordable units included above the 10 percent requirement.
To learn more about the program, view a case study [PDF] excerpted from a guide to state and local housing affordability solutions prepared by Abt Associates for the National Association of Home Builders
Inclusionary Housing Policies Offsets and Incentives
Affordable Housing Set-Aside Program (Emeryville, Calif.)
Emeryville’s Affordable Housing Set-Aside Program requires 15 percent affordability for rental developments (nine percent for moderate-income households and six percent for very low-income households) and 20 percent moderate-income affordability for ownership developments. Homes must remain affordable for 55 and 45 years, respectively. The small city (population 10,777) has produced more than 400 below-market-rate units through this program since its adoption in 1990.
Emeryville’s program offers various zoning benefits and cost offsets to participating developers. In addition to density bonuses of up to 25 percent, the city is authorized to subsidize the cost of traffic impact fees, building fees and any other city fees subject to the affordable units. It also provides technical assistance to help developers access local, state or federal sources of subsidy funding to help them meet their affordability obligations.
For More Information:
Catherine Firpo, City of Emeryville
Email: cfirpo@ci.emeryville.ca.us
Cornfield Arroyo Seco Specific Plan (Los Angeles, Calif.)
In 2013, Los Angeles incorporated a voluntary approach to inclusionary housing in its new, transit-oriented land-use plan for an up-and-coming industrial area of the city where the Los Angeles River and Arroyo Seco converge. The Cornfield Arroyo Seco Specific Plan (CASP) offers significantly higher density for predominantly residential developments that include a percentage of affordable rentals or for-sale housing.
The CASP sets baseline floor area ratio (FAR) limits at 1.5 for predominantly residential developments with more than 15 units, but increases the maximum FAR in most areas to 3.0 or 3.15 (depending on the district), if the developer reserves five percent of the units for households earning less than 30 percent of AMI, 11 percent for households earning less than 50 percent of AMI or 20 percent for households up to 80 percent of AMI.
The decision to set baseline FAR limits at 1.5 was motivated by a third-party pro-forma analysis that found that density incentives applied to higher baseline FARs would be unappealing for developers.
As of January 2015, no new developments had been built under the CASP, a year and a half into its implementation, but senior city planner Claire Bowin reported that two mixed-income projects were moving forward with plans that included affordable housing.
For More Information:
Claire Bowin, Los Angeles Department of City Planning
Email: claire.bowin@lacity.org
Designated Areas Program and Housing New York (New York City, N.Y.)
New York City’s voluntary inclusionary housing program, known as the Designated Areas Program, offers 33 percent density bonus for properties that make 20 percent of the units affordable to low-income households. Developers may also access city and state loan programs, tax-exempt bonds, and low-income housing tax credits to finance the development of the inclusionary units. The Designated Areas Program offers no in-lieu fee alternative. From its inception in 2005 through May 31, 2016, the Voluntary Inclusionary Housing program has produced 9,438 units.
In 2014, New York City Mayor Bill de Blasio created a plan to build and preserve 200,000 affordable apartments in New York City. The $41 billion plan, called Housing New York, encompasses all 5 boroughs and is the most extensive affordable housing plan in the United States. It calls for 120,000 preserved affordable units and 80,000 newly affordable constructed units over ten years and aims to serve households from extremely low income to middle income. The plan proposed a mandatory inclusionary housing requirement, which was approved by the city council in March 2016, which requires a portion of housing units developed in medium and high density districts to be made permanently affordable when they benefit from rezoning that allows for more housing units. Under Housing New York, the Inclusionary Housing program has produced 4,205 units as of May 2016.
For More Information:
Howard Slatkin, New York City Department of City Planning
Email: HSlatki@planning.nyc.gov