15. Meeting Expectations for Equity
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• Affordable Housing
• Diversity of Housing Types
• Job Training
• Small Independent Businesses
• Open Space
• Traffic
• Environmental Impact Mitigation
• more . . .
16. One Predictable Form of Equity
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INCLUSIONARY ZONING
1. Density at which
Inclusionary Zoning triggers (# of DU)
2. Percentage required (12.5%, 15%, etc)
3. Income categories provided for
(Extremely Low, Very Low, Low, Moderate)
4. Rate of unit generation for each income category
24. A Developer’s Perspective
Real Estate is a Business
Large investments in land, buildings, and regulatory entitlement
Must pay a return for investors, commensurate with risk
Must make more than you pay your workers, taxes, insurance, debts, etc.
Competition
Profit commensurate with creating a valuable good/service for a low cost
Limits to transparency—If I show the city my pro forma, my competitors see it too
Real Estate is Very Risky
Uncertainty about future markets, costs, & regulation
You may lose all your money
Must generate a “risk-adjusted” return (10-20%+/-)
25. Predictability and Flexibility
Predictability
Reducing risk is very important
Any thing that I can make more predictable helps reduce risk, improve profits—and
lower necessary risk adjusted returns
Permitting can be a major source of risk: 3 months or 3 years? Every month we may
be spending $10k-100k’s (holding costs, consultant services, permitting fees)
Discretionary review is amongst the highest risks in development
Flexibility
Flexibility is not the opposite of predictability
Flexibility is important because real estate markets are constantly changing
My originally intended use may no longer work, can I change? Bigger building?
Smaller building? Etc.
Take particular care of use regulations, you might be zoning out the things you want
26. The Pro Forma
Caveat: the development pro forma could easily be a whole session on it’s
own
Essentially:
The pro forma is a model of the expenses and revenues of a project, conducted
prior to starting a project, to understand if it is financially viable
We make many assumptions, grounded in experience, about expected costs,
revenues, and risks
If we are wrong about the assumptions—costs more than expected, or revenues
less—the overall profitability suffers, potentially causing the project to fail
Where community benefits fit in:
Money spent on “community benefits” comes from bottom line project viability
Depending on the overall profitability of the project, it may be able to bear some
amount of community benefits, particularly if it improves the value
Large projects are typically much more able than small infill projects.
27. Thoughts on Community Benefits
Some philosophical problems I have with the CB approach:
Implication that new development is per se bad
Must be ameliorated with community benefits
Relatedly, assumption that our existing city/town is what we want, and therefore
change is more likely to be bad than good
Private developers, typically operating before zoning, built that vast majority of the
places that we love
Places the costs of fixing problems on new arrivals
Often fixing existing problems
Where are my (higher) property taxes going?
Free-rider problem—existing property owners who are not reinvesting benefit
Reduces the attractiveness of reinvestment, and puts drag on increasing tax base
Having all effected properties contribute would be fairer
30. COMMUNITY
REQUESTS
Trip Reduction and Traffic
Management
– Bicycle facilities;
– Dedicated shuttles;
– Car-sharing;
– Transit passes;
– Shared parking; and
– Pricing parking separately from housing units (i.e.
unbundling parking)
Affordable and Workforce
Housing
– Housing affordable to households earning up to 80
percent of adjusted median income (AMI) and work force
housing; and
– Located near transit, services and existing job centers
Community Physical
Improvements
– Reconnecting the street grid;
– Quality pedestrian, biking, and Green connections;
– Community gathering and green open spaces;
– Recreational open space; and
– Neighborhood-serving retail and services
Social and Cultural Facilities
– Arts and cultural facilities and uses such as providing
public art and/or gallery space within building; and
– Child-care, senior, or youth facilities as part of the
project
Historic Preservation
– Preservation of historic structures or adaptive reuse to
conserve exterior features
31. WHAT IS WANTED
VS. NEEDED?
More units or increased FAR
Reduced requirements
Access/easement agreement
Streamlined process
“essential nexus”
raw nexus test requires (1) a legitimate state
interest or purpose; (2) a connection between that
interest and the land use exaction chosen to
address it; and (3) a minimal connection between
the impacts of the proposed development and the
land use exaction
32. STATUS QUO
Ad hoc & site specific
Negotiated agreements
Exactions/contributions/
“horse trading”!
33. SITE-SPECIFIC COMMUNITY
BENEFITS AGREEMENTS (CBAS)
Community benefits tools maximize returns on local government investment in
development.
Community benefits programs can transform regions through stronger, more
equitable economies.
Community benefits help generate public support for economic development
projects.
Delivering community benefits is smart business.
CBAs hold developers accountable for their promises to local governments and
residents.
Public input results in better projects that benefit the whole community and attract
local customers.
Community benefits are part of a smart growth agenda.
Time is money, and projects with CBAs often enjoy a faster, smoother entitlement
process.
35. BENEFIT DISTRICTS
CBDs differ from Business Improvement Districts (BID) in that they are easier to create
and dissolve, emphasize mixed-use districts, and require the participation of all property
owners including those which are public or tax-exempt. CBDs do not require renewal,
and involve the creation of a nonprofit board to guide and implement the Management
Plan, which is the locally defined revitalization strategy. This bill does not replace the
existing BID statute and represents another option for communities to pursue.
MA House Bill 144 & Senate Bill 1070
It even came with a map (click through this one fast)
Conserve our neighborhoods
Enhance our Squares
And Transform underutilized land
WANT is different than NEED
Needed by development project and needed by the community
“rough proportionality”
To minimize subjectivity, an incentive program incorporated in the zoning approval process should avoid the type of project-by-project negotiations that typically apply to development agreements.
http://www.forworkingfamilies.org/resources/policy-tools-community-benefits-agreements-and-policies
Fixed cost i.e. fee per unit type
Value capture is a type of public financing that recovers some or all of the value that public infrastructure generates for private landowners
Stops construction? Who actually builds the affordable units . . . Government as developer?
a defined area within which businesses are required to pay an additional tax (or levy) in order to fund projects within the district's boundaries