Photo by Mr. T in DC on Flickr.

DC’s Inclusionary Zoning (IZ) policy requires developers to set aside units in new construction for low- and moderate-income households. But zoning commissioners say the units may be priced too high for those families who truly need affordable housing.

During a discussion Wednesday night on the zoning code rewrite, DC Zoning Commissioners said that they are ready to revisit the income requirements for IZ units, which are priced for households making 50% or 80% of the Area Median Income (AMI). For a family of 3, that equals about $50,000 and $78,000, respectively.

If $78,000 for a family of 3 sounds high to you, that’s because it is. The DC Fiscal Policy Institute has often pointed out that the biggest need for affordable housing is at the 50% AMI level and below. And commissioners agree that an 80% AMI target is too high to address the needs of most families who find themselves priced out of DC’s rising market.

IZ units begin to enter the market

After adopting the policy in 2006, the Fenty administration delayed its implementation until 2009, following the housing market crash. By then, many already-approved projects had stalled. As the housing market recovered, these grandfathered projects, which didn’t have inclusionary zoning units, moved through the construction pipeline.

One of those projects is The Louis at 14th and U streets NW, where a new Trader Joe’s is slated to open soon. The original design for the project included IZ units, but they were eliminated due to the delay in implementation. Meanwhile, across the street is another sizable residential project that will also be completed soon, but since it was approved later, it has IZ units.

Only now are significant numbers of IZ units entering the market. According to the DC Office of Planning, as of July there were 265 IZ units on the market or about to be. That’s about 11% of a total 2,404 units subject to the IZ law. Over the next several years, the pipeline is likely to contain about 1,000 IZ units. 

Of the 265 IZ units the DC Office of Planning (OP) is tracking, 85% will be affordable for households making 80% of the Area Median Income (AMI), while the remaining 15% will be affordable for households making 50% AMI.

Housing market has changed since IZ began

At Wednesday’s hearing, Zoning Commissioner Michael Turnbull asked OP if it would be feasible to require a larger set aside than the current 8-10%. Planning Director Harriet Tregoning indicated that they could look at it, and that the policy might be able to offer additional bonus density. And Office of Planning Deputy Director Jennifer Steingasser said that her agency is planning to introduce a separate discussion on revisions to IZ regulations in January to address concerns about income targeting and other issues.

DC’s real estate values are higher than they were before the housing bust, when the Zoning Commission adopted the IZ policy. This means there’s more value in the bonus density that IZ gives a development as compensation for the cost of units rented or sold below market rate.

Not only does the current policy require builders to set aside IZ units based on income level, but it also distinguishes between high-rise and low-rise development. For high-rise buildings, which are more costly to construct and are generally 6 stories or higher, developers only have to set aside 8% of their units, and price them for households at the 80% AMI level.

But for low-rise construction with typically 5 or fewer stories, the set aside requirement is 10%, and the income targets are split between 50% and 80% AMI. Commissioner Peter May asked OP if this distinction gives developers an incentive to seek high-rise designation for projects that could also qualify as low-rise construction, and Steingasser said it does.

Housing prices in DC continue to rise. Despite a number of administrative problems that the city is still working to manage, IZ can offer an important source of new affordable homes and help preserve mixed-income neighborhoods.