Financia! Feasibility Analysis
UPDATE INCLUSIONARY ZONING REGULATIONS
Issues /Opportunities Addressed: @
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, 1Z 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 hetter schools, healthcare
options, transportation choices, and open spaces. Diversifying the
locations of affordable housing may offer new opportunities to
households who previously had limited cheice.
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 palicy. 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 o 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 ar more units).
This would help ensure new residential development in other
purts of the City are also contributing to easing the
affordable housing shortages over time.
ASSOCIAIES INC
A key first step to updating the City's IZ policy is to conduct a
financlal feasibility analysis of the current policy and scenario fest
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 ond should
include the following considerations:
* What size development should (Z 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-liev option to caflect money for
the Affordable Housing Trust?
* What income levels should the units target?
« $hould 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?
* Whot 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.
