Board of Aldermen 09-28-2021 Page 6
housing that's affordable to a certain size household at a certain income level that doesn't make them spend more than
30% of their gross income on housing and select utilities.
The next slide just shows you what those incomes translate into and on top of it is the maximum affordable rent with those
specific utilities included. So just for the sake of this conversation, a one bedroom unit at 100% or at the area median
income, which for a four person household is $109,600 just so you understand how high it is right now, translates into rent
of $2,072 a month. So just to give you an understanding of what that means. Similarly, you can also calculate through
using those market assumptions we talked about to calculate what the maximum purchase price for a home would be
based on what AMI and the size of your household. So all this translates. What you will see at the end column, I'll just
point out, is what the market rate thresholds are compared to what those affordability is. Just to call out from the
ownership side, you know, the average market rate one bedroom unit for sale we learn is about $300,000, which is
somewhere in the 130% of AMI range. So if you earn the area median income, you can't afford based on HUD’s cost
burdening to buy a new construction market rate in it and that is consistent across - now all unit sizes. You can see here,
this one in particular, for a three plus bedrooms, units, how expensive it is and then how that relates to even earning the
area median income. So | just wanted to make sure that everybody understood when | use these terms, you have a
sense of relativity.
So what are some of the findings that we ran into? | mentioned this one already and I'll just say it briefly again is the
missing middle housing. New construction that has gone on particularly on the rental side has been concentrated in
market rate only developments which has been targeting at and above 100% of Al, or fully subsidized projects through
State and federal subsidy programs, which are targeting folks at the 50 and 60% of AMI are below. Those incomes kind
of in between those ranges aren't really being served because from the market rate side, they're not price competitive. So
developers can't make as much money building those types of units and there is no public dollars available to cover the
gap between what the market rate value is and what the value is priced at 60, 70, 80, or 90% of AMI. So that's an
important finding because our recommendation, and we'll talk about this in a moment, is to target your inclusionary zoning
policy towards that 80% of AMI threshold, which puts you square in the middle of that unmet marketplace.
The next one is location impact feasibility. Not all housing markets within Nashua are uniform in terms of price points, in
terms of cost of construction. The easiest one to point out is doing larger scale developments downtown requires podium
parking or structured parking, which is substantially more expensive to build than a surface parking space. That has
effect on affordability and that has effect on the ability to create new below market housing because that cost doesn't
change but the revenue goes down. So whatever inclusionary zoning policy you choose to use, it needs to be tailored to
the different idiosyncrasies within your marketplace, whether it be housing typology, location, scale.
Probably one of the most important ones that we came across that is almost tangential to this study is the challenge of
policy enforcement. Right now the city is allowing maximum development densities and providing financial incentives for
strictly market rate projects. We don't take a position on whether that's a good idea or a bad idea but it does have an
impact on the ability to then try and implement a compulsory inclusionary zoning policy that requires below market rate
rents because a lot of the ways communities augment or supplement | should say, the financial impact of having lower
revenues on those inclusionary units is through allowing bonus densities and providing financial incentives. So if you're
already giving those to developments without having to require inclusionary zoning, you've taken away some of the tools
you have, frankly, to make that policy not be financially negative on development. And frankly, it also has created those
unrealistic return expectations that | talked about and | say unrealistic purely from a regional context of what return
expectations were reported to RKG within Nashua as opposed to other areas throughout New England, including the
Boston marketplace. So that is a key finding because one of the things we believe the city is going to need to do to make
an effective inclusionary zoning policy that doesn't stifle development is to kind of bring those regulatory norms back into
play and saying we are willing to give you a maximum density but it's going to be part of this other program. It's not just
going to be given to you so that you can make the maximum return on the deal.
And then finally just wrapping it all up into a nice big blue bow here, the dynamic IZ policy is possible and we learned
through our study that it doesn't and frankly shouldn't be a one size fits all strategy. We're going to talk about that in just a
moment. So some of the strategies that we talked about, | mentioned already the targeting the missing middle and
current development trends. We talked about where market rate is landing. We talked about the federal and State
subsidized programs for development and we think that if you target an 80% of AMI income threshold and you see the
range of what that means is we can help you create an IZ policy that meets that “missing middle” but also then creates
very minimal financial impact to the developments because while 80% is below market rate, it is not so below market rate
that it cannot be accommodated for through things like bonus density through things like financial inducement from the
city and then we'll talk about a couple of ways that that can happen.
We also recommend the city consider varying inclusionary percentage based on the size of development. The reality is
the more units that are being included in development, the less of a financial hardship one new inclusionary zoning
