The Final Review

Removing Barriers to Affordable Housing: Housing Development Toolkit

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Last month, the White House released the Housing Development Toolkit (Toolkit), a guide to promoting affordable housing development. The Toolkit’s recommendations are based on different state and local jurisdiction initiatives to remove barriers to affordable housing. Although the regulation of housing development is normally left to states and municipalities, the White House is hoping the Toolkit will help local governments adopt strategies to encourage an increase in affordable housing.

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Barriers to Housing Development Reduce the Availability of Affordable Housing

Many areas of the country have an undersupply of affordable housing. This is particularly true in municipalities seeing a surge in population growth that is causing a shortage of housing. In addition to a housing shortfall, housing costs in many of the nation’s cities outpace wages. Yet, numerous states and local jurisdictions are relying on outdated housing regulations that create barriers to housing development, in particular, the construction of affordable housing.

Some states and cities are starting to revise their housing-related laws to remove barriers to affordable housing development. We recently wrote about New York City’s amendments to its zoning regulations, Zoning for Quality and Affordability. New York is experiencing an affordable housing crisis, and the new zoning amendments are designed to facilitate the development of affordable housing in the city.

The actions taken by New York City and other municipalities to update their zoning regulations and building codes to increase affordable housing availability can serve as examples for other jurisdictions struggling with similar issues.

Options for Encouraging Affordable Housing Development

The Toolkit provides a variety of actions states and local jurisdictions may take to foster affordable housing development.

Use By-Right Development Rather Than a Time Consuming Discretionary Review Process

Re-designing some local requirements to be more flexible, such those governing density and building heights, will allow developers to avoid applying for variances or seeking rezoning. Usually, the review process for variances and rezoning is lengthy and expensive, and developers are less liable to take on these additional costs and risks for affordable housing.

Using “by-right” development, allowed under zoning, provides the developer with more certainly and decreases the cost of development. For example, New York City’s Zoning for Quality and Affordability amendments eliminate onerous height restrictions in certain zoning districts.

Charge Fees for Vacant Property or Donate the Property to an Organization That Will Redevelop it

Vacant property is an unrealized opportunity for the development of affordable housing and also reduces the quality and property value of the surrounding area. In addition, vacant property is problematic because the cost of maintaining abandoned property is born by the local municipality.

To remedy these problems, the Handbook notes that some cities have adopted ordinances requiring owners to register their vacant property and pay a fee. Sometimes this fee increases with the amount of time the property remains unused to incentivize the property’s redevelopment. Another option is to donate tax-delinquent or abandoned property to a nonprofit for redevelopment as affordable housing.

Reduce Parking Requirements

Minimum parking requirements can be burdensome for developers and stands in the way of creating more affordable housing and transit-oriented development. The Handbook recommends lowering the parking requirements in areas that need more affordable housing or would benefit from transit-oriented development. Transit-oriented development is particularly important for low-income families who are less likely to afford the cost of a car.

Chicago’s transit-oriented development ordinance reduces parking requirements in transit-oriented development areas. Similarly, New York City’s Zoning for Quality and Affordability amendments lower or eliminate some parking requirements in designated Transit Zones.

Employ Zoning Changes that Allow High Density and Inclusionary Projects

Zoning changes that permit higher-density development, particularly in transit zones, can create more affordable options in heavily populated urban areas. Another option used by some municipalities is a zoning requirement that a certain percentage of the units in a new residential development qualify as affordable housing.

Use Density Bonuses and Tax Incentives

Zoning laws can be crafted to incentivize the inclusion of affordable housing. For example, a zoning ordinance can permit a developer to build more units than otherwise allowed if the developer includes affordable housing units, known as a density bonus.

Chicago has had a Downtown Affordable Housing Zoning Bonus since 2004. Developers who include affordable housing in a particular project in designated downtown zoning districts receive a bonus of additional square footage for market-rate space. To receive the bonus, Chicago also permits contributing to the Affordable Housing Opportunity Fund in lieu of building on-site affordable housing units.

Similarly, tax incentives can be used to encourage affordable housing development. For example, property owners and developers may be granted a property tax exemption or abatement for developing or renting units set aside as low-income housing.

Employ Improved Permitting Processes

Lengthy and complex permitting processes can increase costs and discourage affordable housing development. The Handbook cites as examples new laws mandating strict deadlines for permitting agency review of affordable housing related projects.

The Handbook notes that many municipalities don’t make the most of available newer technology that could help improve the permitting processes. As permit expediters, we frequently see the difference a streamlined process can make for our clients.

In addition to enacting ordinances that remove barriers to affordable housing, New York City has been making important changes to create a more efficient permit and inspection process. For example, New York City is currently moving to a completely digital system for processing permits and inspections, known as DOB Now.

We are anxious to see how many states and municipalities follow the recommendations contained in the Housing Development Toolkit. To encourage change, $300 million in U. S. Department of Housing and Urban Development grants will be available during fiscal year 2017 to municipalities revising their regulatory approach to housing.

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