Exploring the Use of Development Incentives and Cost-offsets in Inclusionary Housing Programs
Creators: name: Price, Emily
Publisher: name: The University of North Carolina at Chapel Hill University Libraries
Year: 2007
Subjects: Inclusionary housing programs

description: This study examines the role that cost-offsets and incentives for developers play in making inclusionary housing programs feasible in different community contexts. Municipalities that are developing ordinances may find this analysis of cost-offsets useful to decide on the menu of cost-offsets they will provide in an inclusionary ordinance. Inclusionary housing programs stimulate creation of affordable housing units through local zoning codes, without large subsidies from governments. Under inclusionary zoning, local governments request or mandate developers to build a portion of affordable housing in new residential developments. There are at least an estimated 200 inclusionary housing programs in localities nationwide, and several more municipalities are considering adopting inclusionary ordinances. In an era of decreasing federal subsidies for affordable housing and increasing financial burdens on governments at the local and state levels, implementation of an inclusionary housing policy seems promising. However, if the government does not directly subsidize the building of these affordable housing units, then who pays for it? What kinds of cost-offsets do local governments grant developers under inclusionary ordinances? When local governments grant developer cost offsets to stimulate the creation of affordable housing, what is the cost and benefit of these incentives? Inclusionary Zoning ordinances typically provide developers with a menu of cost-offsets to facilitate the development of affordable housing under the ordinance. The cost-offsets either directly or indirectly provide some kind of financial compensation to the developer in exchange for building affordable housing units. Direct cost-offsets include direct financial compensation from the local government to the developer, or waiver of fees for inclusionary developments. Indirect cost-offsets provide developers with additional flexibility that can help reduce the overall costs of development, such as allowing mixed-use zoning where it otherwise would not be allowed through local zoning code, or allowing developers to build inclusionary units off-site. Indirect cost-offsets may also reduce the standards for developers building under inclusionary ordinances. For example, developers may be exempted from parking standards or screening and lot size requirements. Other very common indirect cost-offsets include common tools such as the density bonus, fast-track permitting for inclusionary projects, and allowing developers to pay a fee-in-lieu of constructing inclusionary units. This study begins with a detailed literature review in Chapter Two that examines both the specific issue of cost-offsets, as well as the use and necessity for cost-offsets within the broader economic and legal arguments about inclusionary zoning. Chapter Three of this study explains the relevance of the research and the research methodology. A summary of the cost-offsets used in the sample of 20 ordinances is the topic of Chapter Four. I examine the types of incentives and the use of incentives or cost-offsets in 20 inclusionary programs across the country. Following in Chapter 5 is an analysis of the relationship between contextual factors such as population density and vacancy rates, and the use of cost-offsets. Key findings presented in Chapter Six answer the question, "under what circumstances are different incentives used?" An examination of the crosstabulation of data in Chapter Five is supplemented with interview data. This research draws conclusions regarding which types of communities use certain incentives.