1919 14th Street, a project with IZ units. Image from Level2 Development

Nearly 3 years after regulations were finalized, DC’s inclusionary zoning (IZ) program is beginning to have a positive effect on affordable housing stock in the city. 

While the program has suffered a slow start up because of grandfathering and the recession’s effect on residential development, the program’s 3rd annual report suggests that IZ in DC will follow the success of neighboring Montgomery County.

Inclusionary zoning is an affordable housing policy which mandates that new rental or condo buildings over 10 units include 8-10% of the total number of units as affordable to households earning 50-80 percent of area median income (AMI), in exchange for being allowed to build more units than would otherwise be allowed (a “density bonus”).

IZ policies have been widely practiced around the country for decades, and very successfully in Montgomery County. Beginning in the early 2000s, the District of Columbia government recognized that it needed more tools to address the growing shortfall of affordable housing for DC residents in a revived housing market. The IZ policy is one of the new tools the city adopted to address its growing affordability problem.

IZ became DC law in 2006, but implementation was delayed until summer 2009, well after the housing market crashed. Thus, the effect of IZ has been minimal because the market has taken time to re-energize, and clear out restarted projects approved before IZ rules were finalized. The city’s robust recovery has generated a full pipeline of residential developments, many of which will produce IZ units as part of the larger project.

IZ and affordable housing by the numbers

According to the IZ annual report, as of December 2011, there are 82 projects in the IZ pipeline: 3 under construction, 29 in planning phases, and 50 in conceptual phases, slated to produce a total of 930 IZ units when complete.  In addition, there are 120 IZ-exempt residential projects in the pipeline, slated to produce an additional 5,645 affordable units.

Status IZ applicable projects IZ exempt projects
Projects IZ units Total units % Projects Affordable units Total units %
Under const. 3 23 235 10% 36 1,948 8,044 24%
Planned 29 382 3,232 12% 54 2,039 16,594 12%
Conceptual 50 525 5,117 10% 30 1,658 7,897 21%
Total 82 930 8,584 11% 120 5,645 32,535 17%

Source: DC Office of Planning. This shows projects under construction as of December 31, 2011.

Notes: The majority of numbers are estimates and subject to change. Of the 3 IZ projects under construction, only 2 have filed a CIZC. CIZCs are not required until above-grade construction.

There are several reasons residential projects currently in the pipeline might be exempt from IZ requirements. The biggest category of exempt projects are grandfathered — projects that would have been subject to IZ, but were approved prior to IZ regulations going into effect in late 2009. There’s a big list of grandfathered projects because the Fenty administration delayed final regulations during the height of the housing market boom.  Those projects are now getting going again.

Approximately 53 projects and 16,000 units in the city’s development pipeline were approved before IZ regulations went into effect. This means that upwards of another 1,000 IZ units would also have been produced but for the Fenty Administration delay in issuing regulations by more than two years after the DC Council and Zoning Commission put the IZ policy in place.

While these projects are “exempt” from IZ regulations, many of them will nonetheless provide affordable units through a mechanism other than IZ.  In some cases, this means an all-affordable or largely affordable project that exceeds IZ standards.  Other projects are exempt because they are providing affordable units similar to IZ through an alternative zoning review process called a “Planned Unit Development” or PUD.

A PUD is a special review process where the Zoning Commission gives a development greater flexibility including more density in exchange for additional public benefits and features. Approximately 5,645 affordable units are in the exempt projects pipeline, yielding 17 percent out of a total 32,535 units. See Table 1 for the tally of IZ and other affordable units in the pipeline, as of 2011.

On a policy level, IZ is working as designed

As of 2011, the DC housing market’s strong recovery is in full swing. The third annual report on IZ notes that DC’s overall development pipeline is going gangbusters with permits to build 4,726 units issued in 2011, which far exceeds 2010’s total of 1454 units, and is nearly double the number of residential building permits issued during the last peak year of 2005. Many of these projects are Planned Unit Developments (PUDs) and will meet IZ requirements, though technically outside the program.

In the future, as IZ takes full affect, the program will cover most residential development outside PUDs and geographically-exempted areas, providing 8 to 10 percent moderate and low cost housing for DC residents in these developments. The city’s remarkable acceleration of residential development projects seems to indicate that IZ won’t be holding it back as some critics had suggested.

The city’s IZ report also tells us that only one project in the pipeline is receiving full relief from IZ regulations under unique circumstances. This is another important early sign that IZ is already generally accepted by the development industry.

In contrast to projects being exempt because they are grandfathered, in an exempt geographic district (e.g. downtown, two historic districts), too small, or are providing the same or greater amounts of affordable units through an alternate process (PUD or affordable housing development), zoning relief means the project is let out of providing any affordability due to extraordinary circumstances.

The one project that has requested and received relief is the West End Library PUD project which is providing a new library and fire station. These new public facilities were recognized as a significant public benefit for the Planned Unit Development that qualified the project for IZ relief.  Additionally, the city has also committed to funding a 52-unit building all at 60 percent of area median income (AMI) above the fire station.

One piece of information missing from the brief report is the expected income split between 50 and 80 percent AMI.  For 2011, 50 percent AMI was $53,050, and 80 percent AMI was $84,900 for a family of four. DHCD has struggled to provide accurate information on affordable housing unit production, and getting the details on income targeting appears to be even more elusive.

As IZ units come online, we can expect to get specific information about the income split with the IZ law’s reporting requirement. The report does tell us that of the 2 for-sale IZ units on the market, one is at 50 percent and one at 80 percent AMI. We expect to see that most future IZ-covered projects will be providing affordable units at the 80 percent AMI level, given most new development is high rise multifamily.