Inclusionary zoning in 3... 2... 1...

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Inclusionary zoning in 3... 2... 1...

by David Alpert • August 14, 2009 11:14 am

The Fenty Administration has completed the last step to implement DC's inclusionary zoning law. Today's DC Register contains the "maximum rent and price schedule" (scroll to page 53), which computes the actual rents and purchase prices for units of various sizes that comply with the income thresholds in the law.

Inclusionary zoning's effect in a C-2-B district (added height).

Under the program, new residential developments of 10 units or more must to set aside 8-10 percent of the new housing for families making between 50 and 80 percent of area median income (AMI). For a family of four, that's a household income of $51,000 to $82,000.

To compensate developers, they are allowed to build about 20% more housing. In some zones, like neighborhood commercial corridors, that means higher lot occupancy, letting the building cover a bit more of the total lot. In row house neighborhoods, IZ allows projects to build more, slightly narrower townhouses than regular zoning requires (though the same size as many existing townhouses). And in districts with taller buildings, it lets developers add a bit of additional height. IZ won't apply in the low-density residential zones, or in two historic districts (Georgetown Waterfront and Historic Anacostia) where the IZ changes would have forced buildings that didn't fit with the existing historic neighborhood character.

A presentation from DHCD has more details. A 2006 presentation from OP is better at illustrating the program, though there have been some changes. For example, the original plan excluded R-2 zones (denser single-family detached and semi-detached houses), but IZ now applies there as well.

The Inclusionary Zoning law was first passed in 2006, but the Fenty Administration delayed implementation for about two years. That sacrificed many affordable units and in some cases forced developers to plan smaller buildings than they otherwise would have. Still, this program is better late than never, and joins similar programs in Montgomery, Fairfax, and Arlington Counties. This program will ensure that, as the economy recovers and residential construction picks back up, moderate-income families aren't completely left behind.

13 comments

Tags: affordable housing, DC, inclusionary zoning

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Inclusionary zoning v. historic preservation? (Apr 15, 2008)
Keep inclusionary zoning housing affordable (Sep 22, 2010)
Still not inclusionary: Council blasts Fenty's inaction (May 1, 2009)
One small step for inclusionary zoning (May 15, 2009)

David Alpert is the Founder and Editor-in-Chief of Greater Greater Washington and Greater Greater Education. He worked as a Product Manager for Google for six years and has lived in the Boston, San Francisco, and New York metro areas in addition to Washington, DC. He loves the area which is, in many ways, greater than those others, and wants to see it become even greater.

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as the economy recovers and residential construction picks back up

That's not going to happen for a long, long time.

by Juanita de Talmas on Aug 14, 2009 11:44 am • link • report

You know how many projects will be subject to the inclusionary zoning rules in the next year or so?

Maybe 3 or 4.

It's not going to have much effect given the current market (somehow the market doesn't seem to agree with David about their being a huge, pent-up demand for inner-city condos). And you can bet developers will figure out how to exploit loopholes.

You might also want to check into the revisions made to the final regulations.

by Fritz on Aug 14, 2009 12:06 pm • link • report

This program will ensure that... moderate-income families aren't completely left behind.

Don't worry, the miserable performance of the public school system will leave them behind.

by Monumentality on Aug 14, 2009 12:29 pm • link • report

Fritz, I hear you repeatedly say the same thing about there not being any demand for the urban buildings because a lot of the new ones aren't selling out quickly, and I think the reasoning is missing something.

In an economically frictionless system where landowners accept their losses passively and quickly, those buildings wouldn't be empty at all. Those units are still priced based on demand of two years ago. Sure, demand at the same price point is lower today, but that's true across the board no matter what kind of property it is. But from what trends I've seen, the occupancy rates are still higher (and are resolved faster) on these urban buildings than those in distant, drive-only locales.

The reason those buildings aren't selling out rapidly is twofold: the developers are being somewhat irrational in not lowering prices more (or quickly enough) to match the macro market conditions now (because they don't want to take the loss now that they most likely will end up having to take at some point), and because current homeowners who might want to move into them are being irrational in setting the sales prices of their existing suburban homes.

Just look at Zillow maps . . . the trends are that Arlington and DC homes, especially those within a mile of Metro or on a good bus line, are holding their value far better than those that are in most suburban and exurban neighborhoods. Clearly the demand for those unwalkable lifestyles is dropping faster and with more magnitude than for the walkable neighborhoods David talks of.

by Joey on Aug 14, 2009 12:29 pm • link • report

The program seems to have been implemented with a lot of sensitivity toward historic districts and other existing neighborhood concerns. The only thing I'm not too sure about is the bureaucracy that'll be needed to oversee it ... what with the requirements that incomes be measured and people be qualified. Whenver you get government involved at that level of detail, you often end up with situations that tend to benefit the bureacracy more than the people the program was intended to benefit. And people who weren't intended to benefit, learn to 'work the system'. Just look at the story of rent control in NYC and you'll see what I mean. The well to do ended up with cheap rent controlled apartments while those actually needing the help end up for many decades with no new construction to help them as the developers shied away from all the controls imposed by a well intended 'do good' bureaucracy.

by Lance on Aug 14, 2009 12:35 pm • link • report

"The reason those buildings aren't selling out rapidly is twofold: the developers are being somewhat irrational in not lowering prices more (or quickly enough) to match the macro market conditions now (because they don't want to take the loss now that they most likely will end up having to take at some point),"

I dunno ... I've heard prices are continuing to rise here in the District ... even on condos. It's probably more just a matter of a glut of new buildings. Given their investment alternatives (i.e., low rates of return in the stock and bond markets), those developers/sellers who don't need to sell now are making the intelligent, rational choice to hold on to their properties until people's fears of a depression subside and properties start selling at a more regular pace. The far out burbs might have significant developers/individuals in a position of not being able to wait it out, but I think that is far less so the case here in the District and inner burbs.

by Lance on Aug 14, 2009 12:40 pm • link • report

@Joey: Actually, you're read me talk about demand for condos about two times. It's my tweaking of David's paradigm shifting theory of huge demand for downtown, walkable condo living.

And I'd agree with Lance that the bureaucratic management of this program is likely to be not very fun, especially for the first few years as everyone tries to understand how the program works.

by Fritz on Aug 14, 2009 1:11 pm • link • report

The new construction condo building I live in downtown has gone to settlement on around 65 units since the first of the year. Thats a pretty respectable volume of transactions IMO even if it doesn't match the frenzy from the middle of the decade. So I would refute Fritz's point about their not being demand for downtown condos. Are their many exurb townhome subdivisions still selling 10 homes/month?

by Paul S on Aug 14, 2009 1:15 pm • link • report

Perhaps I'm missing something, but one thing that doesn't make much sense is that additional lot occupancy doesn't really do you much good if the FAR and height are still capped at the old limit. For instance, today, by right, on a 20,000 sf parcel, in C-2-A, the 60% lot occupancy times five stories high = 60,000 sf. That exceeds the allowable residential FAR of 2.5. So, the max. gross square feet by right is currently 45,000 sf. Twenty percent bonus would be 9000 square feet, allowing 54,000 total. That's still not maxing out the 60% lot occupancy, 5 stories high.

Increasing the lot occupancy to 75% only guarantees a lot of low-slung, but arguably cheaper buildings. You can go up four stories in wooden construction, for instance. There's not all that more rentable space, since under the old regs, the primary density limitation was FAR, not lot occupancy.

by Paul on Aug 14, 2009 1:19 pm • link • report

According to the old presentation (page 24), FAR increases in all the zones. Some zones allow the added FAR through greater lot occupancy but not greater height; others permit greater height but not greater lot occupancy; and only the highest density districts allow both.

by David Alpert on Aug 14, 2009 1:23 pm • link • report

OK, thanks David. I see where I went wrong. The current FAR of 2.5 in C-2-A is the basis for determining the baseline, to which the 20% bonus is added. So in my hypothetical, current by-right on a 20,000 sf parcel would 50k sf (not 45--what was I thinking?) + the 20% bonus, yielding 60k sf. The same as if the FAR had been raised to 3.0. I actually do have a dog in this fight, and currently working on a feasibility study for a job that may be one of the first to come on-line under this provision.

by Paul on Aug 14, 2009 4:51 pm • link • report

The problem with IZ is that in many cases you cannot actually utilize the bonus density that is supposed to offset the cost of the inclusionary units. The supposed height and lot occupancy relief is rarely significant enough to matter, even assuming there are no other restrictions on the site - and things like historic structures, yard considerations, and so on virtually ensure that the total bonus density is useless.

The fallacy that IZ offsets its cost through bonus density is even more glaring in certain overlay zones like the ARTS Overlay (where, frankly, much of the likely multi-family activity is going to happen). The IZ bonus density overshadows and supplants the other bonuses offered within that zone for arts and retail uses in any mixed-use scenario, effectively killing the point of the ARTS Overlay.

It's undeniably important to make sure that every neighborhood takes on its fair share of affordable housing. The District's IZ program is theoretically a reasonable approach that balances this requirement with offsets that make it economically feasible. In practice, however, the system just does not pencil out for any real development project.

by Dave on Aug 15, 2009 8:29 am • link • report

The Utopia project at 14th & U is a good example of how IZ should work - but because of the delay, will not have any IZ units. The mixed use project of 200+ units in the Greater 14 Historic District originally built in the IZ units but later was forced to take them out b/c of the delay. This project illustrates that developers can do it and even find it advantageous. Too bad we missed it for this one.

Kudos to DC Council Chairman Gray, Councilmember Jim Graham and the rest of the Council for consistently pushing the Mayor to finally enact the implementing regulations. It was a long fight, but we are glad IZ is finally here. A few projects are moving forward, and will now incorporate affordable units into their overall project.

by Cheryl Cort on Aug 15, 2009 4:22 pm • link • report