Board of Aldermen 09-28-2021 Page 4
its basic form, inclusionary zoning requires certain new developments that meet defined criteria as defined by the city -
and we'll talk a little bit about some of the recommendations we have for that in a moment to include a certain percentage
of housing to be priced below market rate. So many communities they do it by the size of development and they say okay
if you're going to build a new residential development of let's say just for the sake of this conversation, 100 units, then a
certain percentage of those have to be priced at a below market level commensurate with an income grouping that we are
trying to better serve. The benefits that they provide creates affordability without substantial public investment because
it's done through regulatory means. It integrates affordable housing units into market rate projects so you are able to
generate price and typology diversity and encourages below market development in areas where development most
wants to go, which often times are areas that are best served with things like transportation options, healthcare options,
retail services, access to jobs, access to public amenities like parks and recreation assets.
And so that being said, the city has an existing inclusionary zoning policy but it hasn't been very effective in being used.
So our recommendation was go back and look at that policy and do a financial feasibility analysis to try and understand
how we can create a program that meets the desired outcome, which is creating a greater continuum of housing pricing
within Nashua throughout the city, but does so in a manner that mitigates the potential financial impact that could stop
development. That's really the crux of what we tried to accomplish through the study is to try and understand how can we
help the city craft an inclusionary zoning policy that meets the desire to create better diversity and housing but does so in
a manner that minimizes the impact on the investment that has been going on within the city so that it doesn't become a
financial barrier.
The process that we used, obviously, we needed to collect locally specific data. We need to understand rent rates. We
need to understand construction costs, need to understand return expectations of your investment community that is
making investments in Nashua. We had to understand the financial markets so that we could model accurately how
projects were done. We built a pro forma to try and understand how a project moves through the city, what its potential
return is as a market rate development, and then we tested a series of different inclusionary zoning ideas to see how they
would impact that development. We provide some recommendations which we'll go through in just a moment, and then
obviously, we'll create a document for the city to review and to distribute as our recommended strategy for the city to
move forward.
It's important to understand the approach that we took here. Regulatory policies control the development process devoid
of market and financial feasibility. We can make any rule that we want irrespective of how it affects the market and a lot of
times communities do that. Unfortunately, one of the potential side effects is if the requirement is so onerous that it stalls
or stops development altogether because you create an environment where development can't occur because that policy
is so financially onerous. So some policies go too far like we just mentioned and they make it very, very hard to for the
private sector to do business. Some don't go far enough, meaning they don't really meet the expectations of the
community in terms of what they're trying to accomplish. While it doesn't really affect development in terms of activity, it
doesn't also deliver what we're trying to accomplish through the policy.
What we're trying to do, you Know, using the Goldilocks and the Three Bears analogy is we're trying to find that just right
balance intended to create the benefits for the city through understanding the market and financial costs. You know that
analysis is both quantitative and qualitative. Obviously, we need to do the numerical analysis which we did to give
recommendations but there is also an understanding of the dynamic of things like where that development is located, the
type of development that we're talking about - is it rental, or is it owner? Is it small scale or is it large scale? And so we
wanted to take a look at a number of those different options so that we can try and help create a dynamic policy that
doesn't just say, here's how you should do it but it says in this type of market, for these types of units, at this type of scale,
the policy can look like this and it and it can change and be crafted in a manner that mitigates potential impacts across a
wide variety of locations and a wide variety of development programs.
The term that we like to use here at RKG is “the creation of a revenue neutral policy’. Really what that means is we try to
help communities craft policies that either don't create any financial hardship for developments or can mitigate it through
other types of benefits that are created such as bonus density, or payment in lieu, or off-site development so that we can
look at different options that can minimize that impact so that it doesn't disrupt the marketplace.
This slide is just showing you the different types of scenarios that we modeled for this process. Like | mentioned, we
wanted to look at a number of different factors so we looked at both ownership and rental. We looked at single family
development, townhome development on the ownership side. We looked at multiple locations. The Amherst Exit 1 area,
we looked at downtown individually and we looked at what we're calling suburban areas which is more of the northern
portion of the city. We took into account how development is occurring in those areas. So we looked at whether it needs
to be surface parking or podium parking because that has an effect on the financial feasibility of a project. Then we
looked at a various number of scales of projects ranging from as small as 10 all the way up to 200 to try and understand
how these recommendations could have a potential impact on all of these scenarios.
