INC WSIO NARY ZONING ANALYSIS 2 5
125-UNIT MULTIFAMILY (STICK) RENTAL DEVELOPMENT
The next four scenarios focus on larger multifamily rental developments. The first program includes
125 units of multifamily rental housing developed in the Amherst/Exit 1 area. For this program, RKG
Associates assumed that all parking will be surface space. The Current Market/Baseline Scenario
resulted in in IRR of 16.85% based on the current market average of $21,299 per unit land costs. This
performance level is above the modeled minimum threshold of 15%, but well below the current
market expectations of 20%+ returns. This is consistent with current practices, which developers seek
incentives from the City (i.e., additional density and/or financial inducements0 to increase return
levels. Based on the modeled 15% IRR return threshold, land costs could be as high as $36,944 per
unit (Table 12).
The Inclusionary Policy Scenario would require the program to commit 20% of all units to be priced
affordably to households earning 80% of AMI. As a result, IRR is reduced by over 100 basis points
(13.91%) and create a negative impact on the value of the program exceeding $870,000. The
Inclusionary/Bonus Density Scenario reveals that this program would require a 1.5:1 bonus density
ratio (35 additional market rate units to accommodate the 25 income-controlled units) to return the
program to the tested minimum return threshold.
125-UNIT MULTIFAMILY (PODIUM) RENTAL DEVELOPMENT
This program assumes the 125-unit rental development is in the Downtown area and requires podium
parking instead of surface parking. The higher cost of the parking has a negative impact on all
scenarios. The Current Market/Baseline Scenario yields an IRR of 14.71%, more than 210 basis points
below the surface parked scenario. As a result, the current market pricing of $21,299 per unit for land
does not meet the modeled minimum return threshold. In this scenario, land values would need to
be $18,625 to meet the minimum return threshold of 15% (Table 13).
The impact of the model inclusionary zoning policy has a similar impact for this scenario as the
previous scenario, reducing IRR by approximately 100 basis points. However, the Inclusionary/Bonus
Density Scenario reveals that the higher cost of parking in Downtown would require a much higher
bonus density ratio to offset the income-controlled unit requirement. With podium parking the bonus
density would need to have a 2.5:1 ratio to return the Inclusionary Policy Scenario to the minimum
return threshold of 15% IRR.
