Density Bonus
Density bonus ordinances permit developers to increase the number of units allowed on a piece of property, thus decreasing their land cost per unit, if they agree to restrict the rents or sales prices on some of the units. Developers can use the additional cash flow from these bonus units to offset the reduced revenue from the affordable units.
Because density bonus programs are part of a community’s zoning ordinance, many states require state legislative approval before a local government can enact any type of inclusionary zoning or density bonus program.
Possible Program Parameters
Amount of Density Bonus - Density bonuses commonly range from 15 percent to 25 percent.
Set Density or Flexible Density - Some ordinances set the number of affordable units as a percentage of the total number of units in the development. Some ordinances set a maximum bonus density, but allow the jurisdiction’s staff to negotiate a minimum density bonus.
Amount of Affordability – Some ordinances require that all of the bonus units be affordable while others allow city staff flexibility.
Type of Housing – The ordinance can include either multi-family or single family or both – and either for sale or rental - depending on the community needs.
Geographic Targeting - Your community could designate certain areas such as transit corridors or redevelopment areas for density bonuses.
Income Limits – Your community needs to assess the ability of the developer to produce a viable project if the income limits are very low and there is no public financing to assist.
Monitoring/Enforcement - Your community may not want to have a compliance period for owner-occupied units, or may want to have strong compliance and enforcement regulations to maintain permanent affordability. In addition, enforcement/monitoring requires staff resources and this needs to be considered for the long term monitoring.
Compliance Period – Obviously, the longer the compliance period, the longer the units will remain affordable. However, it also means that your community is responsible for monitoring, in some fashion, ongoing compliance with the rules of the program. For single-family housing, your community could utilize deed restrictions, equity limitations or the community land trust model to protect future affordability. For multifamily properties, your community could require the property owners to submit annual reports detailing incomes of residents in the development.
Non-Compliance Penalty – A restriction should be recorded on the property outlining the ramifications for non-compliance. Without a penalty, there is little incentive to continue to comply with the rules of the program.
U.S. Department of Housing and Urban Development
http://www.huduser.org/rbc/newsletter/vol2iss4more.html
U.S. Department of Housing and Urban Development
http://www.huduser.org/rbc/newsletter/vol2iss2more.htm |
