Ways to Incentivise Density Builds
My cities leadership has prioritized zoning changes and affordability policies that will incentivize the production of housing and employment.

I am to think of zoning changes and incentive programs that could entice the private market to build housing, such as Tax Abatements and SDC Financing Programs. 

Currently, basic, code:  65ft max, zero lot line, 1 parking spot per dwelling unit.  Bottom floor commercial, above commercial or residential. 

  
Ideas on paper so far:

1)  Density bonuses - Unsure of a good structure.

2)  Parking minimums elimination, with parking maximums

3)  System Development charges (city fees) to the city not in full upfront (fixed) before breaking ground, but allowed to be paid at the end of construction and/or 10 +year loan.  
 4)  Special Taxing district overlay.  

5)  20ft bonus if 10% housing affordable housing and/or 100% parking on location.

**Any and all ideas would be appreciated.  There are no dumb ideas!**
[{"id": "eguh25l", "text": "My 2 cents as someone in commercial real estate- don't get too prescriptive- just reduce constraints on supply (more FAR).\n\nAffordable housing comes from increased supply relative to demand- anything else is just rearranging the deck chairs.\n\nIncrease FAR.  Period.  Avoid the \"good idea fairy\" and let the developers maximize supply.  The city is not an experienced lender and will either stifle/waste time or get taken advantage of because terms are bad/not market.  Make your fees clear upfront and let the developer borrow from a real lender.  Bonuses and abatements are just complications without any real lasting impact that will reduce the interest of developers and make deals less competitive and worse for your city.", "replies": [{"id": "egvhwkt", "text": "How can a bonus or abatement be a complication?  Is it complicated to tell a tenant that if they refer someone they get a $100 bonus and that if they rent their first month gets abated?  \n\nAnd also it\u2019s a terrible idea to let \u201cdevelopers\u201d maximize supply, because most are going to maximize luxury units since that\u2019s going to provide the highest return from a pro for a perspective.  \n\nNo developer wants to make affordable housing units because it means accepting a lower return.  Incentivizing them with tax abatement, lower debt service payments, or bonuses are a step in the right direction, not letting people who\u2019s only purpose it to make money figure it out by letting them build as much as they want.", "replies": [{"id": "egw3jmq", "text": "Bonuses and abatement are in reference to square footage allowed to build (FAR) it has nothing to do with tenants.  \n\nWho do you think moves into those luxury units?  Where did they the move from?  Those units then become available to lower incomes.  More supply makes everything cheaper.  \n\nAffordable units don\u2019t need to be new.  Luxury units pull up the high income people from existing inventory.  It really is good for everyone. ", "replies": [{"id": "egw7d9r", "text": "My comment regarding tenants is to state that saying adding abatement and bonuses are too complicated is a weak argument since even tenants understand them, and to think that they would be too complicated for developers is ridiculous.  \n\nAffordable units need to be new, because developers would never build them.  Exactly how is more luxury units as opposed to affordable units good for everyone?", "replies": [{"id": "egwbzjr", "text": "His point, I think, is that it purely supplies and demand.  If you build luxury for the return, those new owners and/or renters then will leave their existing housing and therefore free up supply on their, assumed, cheaper housing for new renters and the cycle continues downward.  Which is true.  It's basic economics.\n\n&amp;#x200B;\n\nThat said, I tend to take the middle ground position to you both.  I don't think tax abatements are at ALL cumbersome to a developer.  Anyone who says as much likely doesn't have much experience.  That said, it depends on the type of abatement.\n\n&amp;#x200B;\n\nWith incentives and bonuses, it really depends.  Some can be too complicated or cumbersome, some can be beneficial for a time, but then time themselves out.  Sometimes there can be so many \"good ideas\", that they become top heavy, confusing and cumbersome.  It's a tipping point and I'd imagine different for every city.", "replies": [{"id": "egwcz8w", "text": "Yes, this.  Also it\u2019s not that abatements are literally complicated as much as they are an unnecessary distortion.  I\u2019ve been on the buying end of 421a certs in NYC and the whole system is really just bs shuffling.  The city limits supply, fixes affordable inventory causing market inventory to rise in price and then wonders where the middle class went.  \n", "replies": [], "depth": 6}, {"id": "egwd3pu", "text": "Honestly I'm in the middle as well, but when every person is saying the best way to move forward is to let people who are driven by returns get their way with max density, then I think there needs to be some checks and balances.  \n\nI've seen abatements that get complicated, but I've also seen simple ones that are straightforward and don't drop the returns so much that the project is no longer feasible.  The fact is that in many densely populated cities, if you build luxury units, the older supply then gets bought by value-add funds who add some things and still raise the rent anyway.  \n\nSupply and demand is basic economics, but a city cannot sit on the sidelines and hope that affordability will magically show up, or that they can wait for all of these units to come online when you have actual families who cannot afford to live there.\n\nYou can also look at a place like Irvine, Ca, where since the Irvine Company owns pretty much all the apartments in the area, they continue to build units, then they don't reduce rent, and just provide abatements which still results in sky high rents.  People who can afford to pay do, and everyone else has to move and have a longer commute, thus increasing demand on the highways, a lower quality of life, and a greater strain on anyone who doesn't have the money to live there.\n\nDevelopers have to be incentivized, otherwise they will never build anything that is affordable.  Hell, look at drugmakers and how they've priced life saving drugs to get an idea on what developers, in this case drug developers, would do if you just got out of their way.", "replies": [], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eguiv86", "text": "If you want to encourage developers, get out the way.   \n  \nAllow as of right development up to reasonable density.   Bonus, to reengineer your zoning code to focus on separating use types and ignore density all together (ie, ensure no industrial next to residential/retail, but once something declared residential/retail, then limitless development).   Don't charge any affordable housing ordinances (taxes).  Fast track permit applications, have defined escalation points for projects being held up by city.  \n  \nBuild something nearby that could encourage people to want to live there.   A sports stadium is great for revitalization, so is transit.   \n   \n", "replies": [{"id": "egvujo1", "text": "Yes, let's let the developers build whatever they want.  I'm sure they want what's best for the city and its residents, not what provides the highest returns right.\n\nI agree to build things that encourage development, but to say get out of the way is ripe for plans that look amazing at city planning, then get value engineered like crazy to juice the return. ", "replies": [{"id": "egvvb0y", "text": "Tokyo is an amazing city that has very affordable housing because Japan follows this method.    Developers make what people want to buy.  People want to buy high density and the amenities that come with that.   It's why Manhattan is more expensive than rural Montana.", "replies": [{"id": "egvw6ar", "text": "Tokyo is affordable?  Seriously?  The place where you need a character reference is your example.  Right.\n\nAnd Manhattan is more expensive due to demand.  That demand means if you build, you're get a better return.  So since demand exists from developers, the city can place regulations and developers will work around them.  Cities have to put restrictions, otherwise it will be nothing but luxury high-rise apartments that locals can't afford.  ", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "egup6sz", "text": "Honestly it really depends on the city. if people are clamoring to build there, and the process is cumbersome (Boston), then getting out of the way  and reducing development friction is step 1, 2 and 3. If it is say, Gary Indiana, then the incentives might be needed to spur development that would otherwise not take place. \n\nMilwaukee pursued a brilliant strategy of pre developing certain sites (phase I and remediation etc) and teeing it up for developers to knock it out of the park. \n\nAs someone else said, making the process predictable is key, as uncertainty is time and time is money. FAR bonuses in corridors of transit and growth are obvious win-wins. \n\nWould be happy to help with more specific recommendations as needed. ", "replies": [{"id": "egv3uil", "text": "Do you have any articles talking about this process Milwaukee took? I love reading up on stuff like that", "replies": [{"id": "egwcj0o", "text": "I'd like to read about it too!", "replies": [], "depth": 3}], "depth": 2}, {"id": "egwci97", "text": "You're totally right.  It really depends on the city, business cycles, etc....The city I'm referring to is 90k, strict Urban Growth Boundaries, high home values, \"high: rental prices, lots of pent up demand.  One of the growing pains is that the city is in a transition between being a big town and a small city.  The politicians haven't caught up to the UGB mandates and tend to be reactive rather than proactive.\n\n&amp;#x200B;\n\nSomething that really jumped out with your post is the predictability aspect.  Giving firm clarity so developers can truly wrap their hands around the code and incentives to plan is essential.  Something my city has been very bad about and I've been pushing hard to change this.", "replies": [], "depth": 2}], "depth": 1}, {"id": "eguug5a", "text": "Have to agree with everyone else : Get out of the way. Get rid of current obstacles rather than creating incentive to overcome them. ", "replies": [{"id": "egv2dnl", "text": "I have to agree.  Lot of wisdom here.\n\n&amp;#x200B;\n\nI'm actually a developer who is meeting with council and consultants to shape the scope. ", "replies": [{"id": "egvwaqs", "text": "Have to disagree, removing obstacles is not wisdom, it's folly.  Getting rid of obstacles is a great way to ensure affordability is never considered.", "replies": [{"id": "egwck3s", "text": "There's a middle ground.  You make a very valid point.", "replies": [], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "eguv6rs", "text": "Bend Oregon? \n\nWho is moving there? Commute to where? Retirees? \n\nIs  the focus jobs or housing? Do you think zoning laws would have a big impact on economic development? \n\nThe private market responds to incentives, so can they build profitably in your area or not? \n\nIs it too popular and you need these programs to increase density to alleviate rising rents (an increase in supply to meet demand). \n\nOr do you have a loser city and think that increased incentives would get people to build housing and retail there (increase in demand). \n\nIf it is the second one, that is a problem in economic development, known as pushing on a string. \n\nAre you beating a flacid penis or is it rock hard?", "replies": [], "depth": 1}, {"id": "egvvmdm", "text": "My 2 unpopular cents as a developer, you will HAVE to provide requirements if you want affordability.  Most Developers are incentivized by return, that's it.  They want a high return, so that they sign on as GP and collect a humongous waterfall on the back end from LPs, enabling them to do it again in the future.\n\nI like your ideas, and I'm a big fan of code based structure, where you place in requirements that need to be met if they want to develop.  Providing incentives are the way to go for high demand areas, and regardless of what people say, if they can make a return, they will build there.\n\nI'm glad you didn't mentioned fee-in-lieu, because in almost every development it makes more sense to charge market rates and pay the per unit fee, then actually have an affordability component.\n\nI think you're going to find most developers are going to say get out of their way and remove friction, but that's just them looking out for their self interest.  If the city does not require it and it does not provide the highest return, it will not be developed, ie affordable units.  \n\nLastly, the idea that more supply will create affordable units would be great, except for those owners seeing an existing building at below market rents, and selling the property as a value-add where a new buyer comes in and adds amenities / appliances / washer/dryer etc., thus increasing rents on what should have been affordable units, with the end result of just more expensive units that only new transplants are going to be able to afford.  And long term if there is a supply issue, is those expensive units will provide a lot of abatement so that they can maintain those high rents in preparation for an exit.\n\nIf you have a high demand area, increase regulations.  Don't make it too easy, because developers have no incentive to make things affordable.  The idea that you should get out of their way is basically when's the cat's away the mice will play, and what they build will not be what is best for the residents unless they are rich.  Hell, even if they are rich, it will be value-engineered so it won't have been built with the best materials available.  ", "replies": [{"id": "egw30nq", "text": "I\u2019m a value add guy- it\u2019s not self interest- more supply means net cheaper no matter how you spin it.  If you regulate it you\u2019re just shifting expense to middle class because low income becomes fixed and the market becomes more expensive and prices out the middle guys.   \n\nAffordable does not and should not need new build- to force otherwise is just distortion.  Bodies and square feet determine pricing all you can do is shift burden to the middle guys.  ", "replies": [{"id": "egw7muj", "text": "What's your argument for why new build shouldn't be affordable?  You say it's to force it, yet if it wasn't it would never be built.  Basically, it's an incentive.  If you want to build, then you need to also build some affordable.  \n\nWhy should all new units be market rate?  So a developer can get a 30% IRR?  ", "replies": [{"id": "egw9iz2", "text": "So that the units can exist instead of NOT. Better to have 1,000 extra new units that are \u201cluxury\u201d instead of building 100 affordable units. Supply and demand, see the bigger picture. ", "replies": [{"id": "egwc91p", "text": "That assumes that no units get built.  I am seeing the bigger picture, as well as the fact that once that piece of infill location is built, there's no way to take it back without considerable cost.\n\nIf the return on a project goes from 30% to 25%, do you think the project isn't getting built?  Also, if those affordable units come with a tax abatement that bring the return to 27%, are you saying it won't get built?\n\nThe problem is you're thinking it's either all market rate units, or nothing.  I've seen firsthand, as you have if you're a real estate developer, new luxury projects go up with an affordability component and still pencil.  Hell, I've underwritten them, and while the return isn't as high as if it was all market, it still pencilled. \n\nWith cap rates on multifamily very low, to think that having a component of affordability, especially when it is subsidized by either a tax abatement or something similar is ridiculous and honestly, greedy. ", "replies": [{"id": "egwcv5h", "text": "If the affordable units come with a tax abatement, sounds like a great idea. Keep in mind those massive taxes would have likely helped the city in many other ways...again it all depends on the city, its dynamics, its transportation, its current and future residents as well as its current building stock. \n\nAs someone who has underwritten many types of multifamily developments in many different msas, the gap isn\u2019t 25 vs 30 pcent, typically its more like 10% vs 20%. And yes, there are many projects on the *margins* that will not be built if nothing changes but the expected return. ", "replies": [{"id": "egwdj0i", "text": "Depends on the amount of the tax abatement.  I've underwritten where it's been 5%-to-10%.  I guess it depends on the development.  You're also assuming none get built, when this recent [article](https://www.cityrealty.com/nyc/market-insight/features/future-nyc/12-new-affordable-housing-projects-coming-nyc-includes-world039s-tallest-passive-house/22001) shows that in NYC 12 mixed-income projects are getting built.  \n\nSo I guess these 12 developers maybe were able to underwrite a feasible project?  Maybe your cost of capital is too high, or your operating expenses too high, or maybe your developer fee is too high.", "replies": [{"id": "egwdyca", "text": "I already said that some will get built, just far less because its economically inefficient to build expensive new housing on expensive land for poor people. \n\n12 projects in NyC, nice case study but I would point out that they are a drop in the bucket compared to NYCs massive mkt rate development, and also unsurprising that people will build in america\u2019s most popular city..do we think OP is asking for NYC or one of the 100 other cities that is nothing like it? NYC is so popular that investors (esp foreigners) will take borderline 0% real returns just to park their cash there with its unlimited demand. ", "replies": [{"id": "egwezq6", "text": "So if some investors will be willing to take 0%, which in my experience those foreign investors want actual existing developments, not ground up but hey, then some will get built.\n\nThere are many other developments going up in NYC that are market, so doesn't that mean that the idea that it's all market or nothing is not true?", "replies": [{"id": "egwflyc", "text": "Let\u2019s not discuss the 1 outlier MSA any further, because it\u2019s a waste of time. Nobody is saying its all market rate or nothing in a place like NYC. People will literally build affordable housing just to land bank in NYC, so its clearly a bad example    For other cities without that demand. ", "replies": [{"id": "egwgo5j", "text": "Fair enough, but it's dense places like NYC, Seattle, SF and LA / OC where this is becoming a huge issue. \n\nI just don't think the answer is letting developers build whatever they want.", "replies": [], "depth": 11}], "depth": 10}], "depth": 9}], "depth": 8}], "depth": 7}], "depth": 6}], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}]