The City of Madison adopted an Inclusionary Zoning program a little less than two years ago. The theory behind the program is that the city would provide incentives to the developer and in exchange, developers would build 15% of their housing affordable to people at moderate incomes. For homeowners they would be at 80% Area Median Income (AMI) or less. For renters they would be at 60% Area Median Income or less. (For income levels see here.)
The number of incentives a developer can get are determined by how affordable the units are. A typical ownership project would get 1 point for doing 10% of the units at 80% AMI and 1 point for doing 5% at 70% AMI. To earn more points, they could make more units available or provide units at a lower level. For rental, they earn 1 point for doing 10% of the units at 60% AMI and 1 point for doing 5% at 50% AMI. (For more details see charts on page 5 of the ordinance.)
Ever since the ordinance passed, developers have contended that the incentives are not working. The current ordinance provides the following incentives at 1 point each:
1. Density Bonus – a ten percent (10%) bonus, unless a development has four (4) or more stories and at least seventy-five percent (75%) of parking is provided underground or has forty-nine (49) or fewer detached dwelling units in which case, each point provides a twenty percent (20%) bonus. No more than three (3) points may be used for a density bonus. An additional density bonus may be available based on applicable approval standards in the Zoning Code.
2. A reduction in Park Development fees for on-site inclusionary dwelling unit, pursuant to the requirements in Sec. 20.16. No more than one (1) point may be used to reduce Park Development fees. A park developed to City of Madison standards prior to the time it would be developed under City of Madison plans shall be maintained for up to five (5) years by the applicant.
3. A reduction in Park dedication requirements, pursuant to the requirements in Sec. 16.23(8)(f). No more than one (1) point may be used to reduce Park dedication requirements.
4. Twenty-five percent (25%) reduction in Parking Requirements, if approved, pursuant to Sec. 28.11(8)(2)(c). No more than one (1) point may be used to reduce Parking Requirements.
5. Non-City provision of street tree landscaping.
6. A cash subsidy from the Inclusionary Zoning Special Revenue Fund disbursed pursuant to the rules of that fund of up to five thousand dollars ($5,000) per inclusionary dwelling unit that are provided for families with an AMI denoted by an asterisk in 3. above or from Tax Incremental District funds, disbursed pursuant to adopted policies, for units provided to families with an AMI denoted by an asterisk in 3. above. No more than two (2) points may be used for any cash subsidy. The subsidy shall be adjusted annually based on the Consumer Price Index and shall be subject to availability of monies in any of the above funds.
7. A cash subsidy from the Inclusionary Zoning Special Revenue Fund, disbursed pursuant to the rules of that fund of two thousand five hundred ($2,500) per inclusionary dwelling unit or from Tax Incremental District funds, disbursed pursuant to adopted policies. In either case, the subsidy shall be only for on-site inclusionary dwelling units for developments with forty-nine (49) or fewer detached dwelling units or developments with four (4) or more stories and at least seventy-five percent (75%) of parking is provided underground. No more than two (2) points may be used for any cash subsidy. The subsidy shall be adjusted annually based to the Consumer Price Index and shall be subject to availability of monies in any of the above funds.
8. One additional story for development in Downtown Design Zones, not to exceed the requirements of Sec. 28.04(14) or the height limits of the Downtown Design Zones in Sec. 28.07(6)(e).
9. Eligibility for a number of residential parking permits equal to the number of inclusionary dwelling units in Planned Development Districts, if the provisions of Sec. 12.138 are met.
10. Assistance from the Department of Planning and Development in obtaining other funding and information regarding other sources of funding related to the provision of housing.
11. For development that is located in the Central Urban Service Area and is contiguous to existing development, but for which no Neighborhood Plan exists, the preparation of a Neighborhood Plan may be funded by non-City sources upon approval of the Common Council.
So if the developer earns two points, they can choose two incentives. These incentives were all put in the ordinance at the request of the developers who worked with us on the ordinance, including Smart Growth Madison, Inc. (A group of developers who have hired a lobbyist to represent them, but they refuse to tell us who their members are.) These developers now oppose the ordinance, in part because they say the incentives which they helped create aren’t working.
Admittedly, every incentive is not working out perfectly. First of all, there was no money in the Inclusionary Zoning Special Revenue Fund. I offered to sponsor a budget amendment to add money last year during the budget process for the 2005 budget, if Smart Growth Madison would support it, but they declined. They didn’t want to be seen publicly asking for money. So we had to wait for a developer to qualify for a waiver and make a payment into the fund in lieu of creating the required Inclusionary Zoning to put money into the fund.
Additionally, the park fee reductions have been difficult to get. They also claim they are not getting their density bonuses, however, I believe the density bonuses are working.
In the amendments to the ordinance that the Mayor, myself and several other alders are recommending upon the advice of the staff that works with the developers on a daily basis, we are adding the following incentives:
1. Non-IZ areas of a Development – Reservation of up to ten percent (10%) of total floor area or ten percent (10%) of the developable residential area within a development for non-inclusionary dwelling unit designation. Any floor area reserved shall be for contiguous dwelling units and may include dwelling units on more than one floor if the floor area of one floor is less than ten percent (10%) of the total floor area. No more than two (2) points may be used for such reservation.
Note: The current ordinance requires equal dispersion of the inclusionary zoning (IZ) units throughout the development. This allows the developer to not put IZ units on the top levels of their building or in nicer areas of their plat. This allows them to make more profit on more expensive homes.
2. Duplexes – Up to ten percent (10%) of the inclusionary zoning units may be duplexes if both dwelling units in the duplex are inclusionary zoning units, the exterior appearance of the duplex inclusionary dwelling units is similar to dwelling units on adjacent lots, and duplexes are allowed in the zoning district. No more than two (2) points may be used for a total of not more than twenty percent (20%) of the inclusionary dwelling units.
Note: The current ordinance requires people who build single family homes, to build single family inclusionary zoning units. This change allows them to build duplexes instead of single family homes for up to 20% of their units in duplexes. This allows them to build more units on the same amount of land. i.e. a density bonus. These units are sometimes referred to as “Rusk-style” units after David Rusk who spoke several times in Madison while we were forming the ordinance and showed us homes like these from Montgomery County, Maryland.
3. Consideration of modifications to City plans, to allow residential development in areas currently identified for other uses.
Note: This allows them to build more residential units in areas than previously planned. i.e. another density bonus.
In addition to these incentives, I continue to ask, ad nausium, what other incentives they think would work. I welcome any and all suggestions for additional incentives, but I rarely hear any. What more could the city provide?
