Financial Feasibility Analysis
BACKGROUND
PURPOSE OF THE ANALYSIS
¢ RKG performed housing market analysis for
Nashua, identifying housing needs/challenges
¢ City’s existing inclusionary zoning (IZ) policy
identified as not meeting market needs
¢ Recommendation to reconsider IZ policy to
align with market and financial realities
¢ RKG retained to perform a financial feasibility
and policy review analysis
MDING
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Palicy end Hos
inclusionary Zoning
Update Inclusionary Zoning Regulations
Case Study — Inclusionary Zoning, Newton, MA
In 2018, the City of Newton, Massachusetts began a
process to revise their Inclusionary Zoning policy. Housing
affordability was worsening. and the City was experiencing
an influx of large residential and mixed-use projects which
proved ample opportunities 16 increase the overall
number of affordable housing units.
The existing IZ policy was both confusing in its language
and intention and was not leveraging private development
effectively to produce affordable units. The City hired a
consultant 19 create a financial feasibility model which
could test different residential development scenarios
{both owner and renter) to better understand the potential
impacts of the changes the City and housing advocates:
were calling for,
The results of the financial feasibility model showed the
City could indeed update the IZ policy to create stronger
linkages between the size of the project and afferdable
housing requirements. For example, larger rental projects
were required ta set aside a higher percentage of
affordable units, The new policy also created Income tiers
based on HUD area median income (AMI) threstokis
which ranged fron 50% of AM/ to 1105 of AMI, The City
also included options for developers to provide fewer units
but make them more deeply affardable to households at
30% of AMI
Meshue Hous
The City’s new IZ policy has different calculations
and requirements for ownership projects and rental
projects requiring different levels of affordability,
Affordable ownership units are offered at BO% and
110% of AMI while rental units can go as kw as
30% of AMI.
There are also calculations for cash payments and
specific circumstances defining when the cash
payment option may be considered favorable.
Smaller projects between 7 and 9 units have the
option of cash payments, the City Council can grant
a Special Permit to. allow cash payment, and in
instances where the percentage sel aside
calculation results in a fraction of a unit less than
0.5, The cash payment fram the development is
deposited into the inclusionary Zoning Fund which
is then distributed equally to the Newton Housing
Authority and the City of Newton. These funds can
only be applied to affordable housing supporting
households at of below £0% of AMI.
RKG
ASSOCIATES INC
RENTS ARE RAPIDLY INCREASING
IN NASHUA.
Gross rent. which is rent plus utlities, has 2018:
increased 19% over the last five years 10 a high
of $1,287 per month,
Median Gross Rent
$1,287 per Month
Newton IZ Requirements for Rental Projects
$1,000- $1,499 §1,500- $1,999
RENTS IN THE $1,500 - $1,999 RANGE HAVE INCREASED BY 136%.
In Nashua, 63% of rental units fall within 2 gross rent range of $500 to $1,500 per
month, Gver the last five years, rents in the $1,500 to $1,989 range increased by
136% while rents in the $500 to $999 range fell by 78%. It appears from the data
that there has been a transition of rental units into this next price bracket. There
was also a 33% increase in sental units charging greater than $2,000 per month.
Rental Projects: Number of inclusionary Units Required
Rental Projacts: Number of inclusionary Units Required
Thar P20 UNITS: 246 UNITS:
O% 25%
15% 175%
EFFECTIVE January 1, 2021
720 2188 100+
vets | uns | UNITS
Ther Level
15% 175%
Newton (2 Requirements for Ownership Projects
‘Swnership Projects: Number of inclusionary Units Required
Ther Lave 76 17-20
unms | _UNITS
Ter 1.80% AMT 1% oF
Thar 2: 110% AMAL o% i
Fatal 1 75%
‘Ownership Projects: Number of inclusionary Units Required |
EFFECTIVE January 4, 2024
76 | 1-20 | 2+aa | 100+
Tier Lave unis | unis | vers | UNITS
Tar 4780 i
Mi
Thar 2: 110% AMAL
Total 175% | 20%
