INC WSIO NARY ZONING ANALYSIS 2 2
25-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT
The impact of requiring podium parking on small rental housing developments is substantial. The
Current Market/Baseline Scenario yields 11.70% IRR assuming a $50,000 land value per unit. The net
present value difference to the surface parking assumption is nearly $340,000 due to the much higher
costs of podium parking instead of surface spaces. As a result, the land value per unit would need to
be $19,587 per unit to meet the proposed return threshold.
Because the inclusionary policy is the same for this and the previous program, the relative financial
impact of the inclusionary zoning policy for the podium programs is like the surface parking program.
The Inclusionary Policy Scenario yields a 14.28% IRR and a -$117,178 NPV.
However, the bonus density needed to return the inclusionary zoning scenario to the proposed market
return threshold differs to the surface parking scenario. The higher costs of parking additional units
reduce the financial benefit of each new market rate unit. As a result, a podium parked scenario would
require a 2:1 bonus density to make the IZ scenario return to the proposed market return threshold.
Under this scenario, adding four market rate units would be required to achieve the expected financial
return of 15%.
50-UNIT TOWNHOUSE OWNERSHIP DEVELOPMENT
City staff wanted a larger single family attached program modeled in addition to a smaller detached
program. For this program, RKG Associates modeled a 50-unit townhouse-style development. Based
on the market assumption of a $38,338 per unit land cost, a 50-unit townhouse development yields a
52.17% IRR, with a NPV of almost $1.4 million. Based on current market performance metrics, this
development program could support land prices approximately $30,000 higher than current averages
($68,596) and still yield a 20% IRR (Table 11).
Because this program has 50 units, it triggers the second level of inclusionary requirement (15%). As
a result, the development program would need 7.5 income-controlled units priced to be affordable to
a household earning 80% of AMI. As noted earlier, the RKG Associates model apportions any
fractional units to a payment into the City’s housing trust equaling the market value differential
between a market rate unit and the income-controlled unit. Thus, the Inclusionary Policy Scenario
includes seven income-controlled units and a cash payment of $48,880 (50% of the value differential
of $97,760). The impact of the inclusionary zoning policy is substantial, with an expected IRR of 6.13%
and a NPV of -$1,218.294. The value differential between market rate ownership and income-
controlled ownership is greater than rental housing.
As aresult, the Inclusionary/Bonus Density Scenario indicates a bonus density program would require
a 2.5:1 ratio to income-controlled units to make the inclusionary scenario meet the modeled return
expectation threshold. The project would require an additional 19 market rate units to account for the
seven units priced to households earning 80% of AMI.
