Aligning Policy and Housing Outcomes
Inclusionary Zoning
Update Inclusionary Zoning Regulations
Issues/Opportunities Addressed: C)
Timeframe for Action: Short Term
Inclusionary Zoning (IZ) is a policy used to create
affordable housing by requiring developers to include a
specific percentage set aside of below-market units as
part of a market-rate rental or ownership development.
The IZ policy effectively leverages private market
investment to create new affordable units with very little
(if any) public subsidy. IZ is also an effective way of
integrating affordable units across a community to provide
opportunities for housing choices in neighborhoods where
lower-income households may not have otherwise been
able to afford. Resource-rich areas/neighborhoods may
have access to better schools, healthcare options,
transportation choices, and open spaces. Diversifying the
locations of affordable housing may offer new
opportunities to households who previously had limited
choice.
Inclusionary zoning policies are typically classified as one
of two types: mandatory or voluntary. In mandatory
policies, affordable units must be included in all proposed
developments that fit within the parameters of the policy.
Voluntary policies rely on negotiations and offsets which
function as incentives to encourage developers to provide
affordable units.
Nashua Housing Study - 66
The City of Nashua has an IZ policy already in place
within the City’s Zoning Ordinance, Section 190-48.
The current IZ policy is only applicable to residential
development in the Downtown Zoning District or a
parcel that abuts the Downtown District and is in a
residential zoning district. Table 48-1 outlines the
affordable housing set-aside required by
development type and location. Those percentage
set asides range from 3% to 20%. The City has also
included incentives such as a density bonus offset,
expedited permitting, and allowing certain
development types to be as of right. It is worth
noting that the City’s IZ policy has never been used.
Given that the current IZ policy is only applicable to
development in the Downtown zoning district, it
limits the geographic distribution of new affordable
units and does little to spread housing choice to
other areas of Nashua. A recommendation the City
should consider is revising the current IZ policy to
apply to city-wide to any residential or mixed-use
development that exceeds a certain number of units
(e.g. any development containing 10 or more units).
This would help ensure new residential development
in other parts of the City are also contributing to
easing the affordable housing shortages over time.
ASSOCIATES INC
A key first step to updating the City’s IZ policy is to
conduct a financial feasibility analysis of the current policy
and scenario test any changes the City wishes to make.
Conducting a feasibility analysis will allow the City to
understand what changes could be supported by market-
rate residential development and which changes may slow
the pace of development. The financial modeling exercise
can help in the crafting of new IZ language and should
include the following considerations:
¢ What size development should IZ be applied to?
¢ Where should IZ be applied in the City?
¢ What percentage of units should be set aside?
¢ Should the policy cover both ownership and rental
projects?
¢ Should the City have a payment in-lieu option to collect
money for the Affordable Housing Trust?
¢ What income levels should the units target?
¢ Should there be a tiered system for affordable units
where fewer but more deeply affordable units are
required versus more units at a higher income level?
¢ What incentives or offsets should the City offer?
Concurrently, the City could work with the entity conducting
the feasibility analysis to craft an updated IZ policy that
responds to the feasibility findings. This can help ensure
changes to the IZ policy will not discourage private
investment thereby reducing affordable housing
production.
