INC WSIO NARY ZONING ANALYSIS 1 9
full value from the affordable unit, which has a similar cost to that of a market unit, results in a
financial loss.
The Inclusionary/Bonus Density Scenario reveals that a 1:1 bonus density would result in having an
IRR that met the proposed minimum return threshold. The table reveals that adding one market rate
unit would nearly achieve the expected financial return (IRR of 14.93% and NPV of -$11,689.
INC WSIO NARY ZONING ANALYSIS 1 8
10-UNIT SINGLE FAMILY OWNERSHIP DEVELOPMENT
inclusionary zoning project to not adversely impact the return of the developer or the inherent value
of the land. This effort was done to understand the feasibility of a non-financial incentive (additional
units) could be applied to minimize impact to the local real estate market and return expectations.
Interpreting Results
INC WSIO NARY ZONING ANALYSIS 1 6
Number _ of Inclusionary
Scenario Tenure Unit T Location Units e
1 Ownershi Single Fam Suburban 100% Surface 10 10%
2a Rental Multifam Amh 100% Surface 2 10%
2b Rental Multifam Downtown Podium 2 10%
Ownershi Townhome Suburban 100% Surface 1
Rental Multifam Amherst/Exit1 | 100% Surface 12 20%
b Rental Multifam Downtown Podium 12 20%
a Rental Multifam Amherst/Exit1 | 100% Surface 20%
b Rental Multifam Downtown Podium 20%
Source: of Nashua, and RKG Associates Inc.
INC WSIO NARY ZONING ANALYSIS 1 5
the inclusion of income-controlled housing units). This incentive works well in cases where a
community is focused on building lower cost housing without providing substantial cash incentives
to developers. In other words, the density bonus provides a developer with an incentive to create units
at deeper levels of affordability, in exchange for the ability to build more market rate units.
Smaller scale developers utilize traditional bank financing as the main source of funding. Local banks
typically act as partners with smaller scale developers and provide funding to projects which meet
their lending standards and risk profiles. Lending at the small scale is very much relationship based.
development, and the remainder is the land residual. The decision to pursue the project depends on
whether the developer can acquire the land at a favorable price.
Within the model RKG created a land value override where the model user can input their own land
value assumption. This allows the user to test financial feasibility based on the different land costs,
since they may vary significantly based on development size and underlying zoning.
Development Revenues
RKG collected rental rate data for relatively new luxury developments which included efficiency
(studio), one-bedroom, two-bedroom, and three-bedroom apartments. The market rental rates were
used as a baseline for the analysis and compared to information obtained from developers. Generally,
new units rent for between $2.24 and $3.38 per square foot depending on the unit type. Within the
model the rents can be modified by the user. For more information about rental rates, see Appendix
1.
O09) (tee tebatnal eta
INC WSIO NARY ZONING ANALYSIS
10
Affordable Rents (Utilities Included
Unit 40% 50% 60% 65% 70% 80% 100% 110% 120% 140% Market
Type AMI AMI AMI AMI AMI AMI AMI AMI AMI AMI Rate
