Financial Feasibility Analysis
PREVIOUS FINDINGS
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.
