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In The Zone

Monday, June 25, 2018  
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Orlando REALTOR® | JulyAugust 2018
 

How local municipalities can address affordable housing through the use of inclusionary zoning

By Jay Small
2018 Real Estate Legal Summit Class Instructor:
“Inclusionary Zoning and Affordable Housing”


Central Florida’s need for affordable housing is more acute than ever. While Central Florida enjoys a historically lower unemployment rate than the national average, its workforce includes many low- and lower-income service sector wage earners. Those wage earners need housing. After the Great Recession, apartment-developers built market-rate multifamily units, exacerbated the affordable housing crisis. Demand for affordable housing outstripped supply.

Although Florida raised the minimum wage this year, market realities put homeownership beyond the reach of the vast majority of restaurant workers, teachers, first responders, and service sector workers who now must look to apartments for housing. According to the March 2018 National Low Income Housing Coalition’s annual report, the Orlando-Kissimmee-Sanford area ties for second worst in the country for affordable housing availability, with only 17 available units per 100 renters. Only Las Vegas’ affordable housing deficit is larger.

Traditional affordable housing solutions include low-Income housing tax credits, which subsidize affordable housing developers, and housing choice vouchers (or Section 8 vouchers), which subsidize affordable housing rental payments. Richard Rothstein’s recent study of the modern American metropolis, The Color of Law, points to a consequence of these and other historical policies and practices like redlining and federal subsidies to builders conditioned on their not selling to African-Americans: neighborhood segregation along income and racial lines. Affordable housing projects are now geographically isolated from market rate developments, thereby contributing to a deeply ingrained image of public housing as islands of dreary high-density projects without well-kept landscaping or playgrounds and with drab, institutional-looking dwellings. Federal funding for these traditional tools also has failed to keep pace with need.

But there is a rarely tried tool besides low-income housing tax credits and Section 8 vouchers. Florida law authorizes local governments to adopt inclusionary zoning to solicit the involvement of private sector developers in building affordable housing.

Under inclusionary zoning ordinances, as a condition of multifamily development approval, developers must include in their market rate projects a percentage of units comparable to market rate units affordable for low-income renters. Developers then build these affordable housing units concurrently with the market rate units.
Including affordable housing units in market rate projects increases the affordable housing supply and avoids concentrating affordable housing in isolated geographic areas. Alternatively, developers may opt out of inclusionary zoning by paying a fee equal to the cost of building an affordable housing unit. Local governments then deposit these “in lieu of” fees in an affordable housing trust fund to alleviate the affordable housing shortfall even further.

Inclusionary zoning can have a tremendous impact on the Central Florida multifamily housing market. It may be an effective way to respond to the region’s affordable housing shortage and produce mixed income communities. Nevertheless, inclusionary zoning may be met with resistance by market rate apartment developers because they are unfamiliar with how it can contribute to a successful mixed use and multifamily development.

Real estate market realities require that inclusionary zoning ordinances be flexible and offer meaningful market-driven economic incentives to encourage developers to supply a relatively permanent stock of affordable housing at a profit. Incentives may include density bonuses, expedited site permitting, waivers from open space, set-back, or parking requirements, on- and off-site mitigation, land donation, “in lieu of” fees, or a combination of all of these.

Safe, adequate housing and inclusive communities are unimpeachable goals of the American experience. All Central Floridians bear a collective responsibility to contemplate in a deliberative way what needs to be done to achieve these goals.

Experience has shown that local solutions to local problems often work best. Inclusionary zoning shifts the problem-solving paradigm from the state and federal level to the local level. Since traditional top-down tools to supplying affordable housing have not substantially alleviated the shortage, inclusionary zoning is a worthy option to consider.


> Jay Small, Mateer Harbert P.A., will be presenting “Inclusionary Zoning and Affordable Housing” at the 2018 Real Estate Legal Summit. He can be reached at jsmall@mateerharbert.com.


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