Worcester Regional Chamber of Commerce supports inclusive zoning
The Worcester Regional Chamber of Commerce supports inclusive zoning, a requirement for new multi-family developments to build a number of affordable units. The chamber supports the city government’s proposed ordinance, and we believe it will provide affordable housing residents and developers with the incentives and options to make it work for their project budgets.
Some of the ongoing public discussion about inclusive zoning has circulated around requiring multifamily developers to only build units that are affordable to households earning 60% of the area’s median income or less, instead of including both 60% AMI and 80% AMI together. Based on our research and our conversations with stakeholders, we cannot support the exclusion of households earning the 80% threshold of the MAI from being able to benefit from this zoning.
The sliding scale method used by the Draft Ordinance – 10% of units at 60% AMI or 15% of units at 80% AMI or a combination thereof – provides enough options for sponsors to take decisions based on the overall size of individual developments and the composition of units with varying numbers of bedrooms.
The fact that the city uses either HUD’s fair market rents or the monthly cost that does not exceed 30% of household income – whichever is lower – as the rent limit for 60% and 80% of the AMI is an important factor in ensuring both are viable options to build. This effectively approximates the developer’s revenue impact of building 60% AMI and 80% AMI. With this strategy, many different combinations of unit sizes and income levels are possible, and this brings 60% of AMIs to serious consideration for developers.
Since the city will set a limit on the lower rent between the two rates, developers can choose to build a mix of 60% and 80% AMI for their affordable housing needs at the exact same cost it would take to build the 80% AMI units. And for developers who receive enough grants from local, state, and federal sources, building all AMIs at 60% is also possible.
As a result, we are likely to see many developers choose to mix both 60% and 80% AMIs, and we are confident that the city administration will encourage developers, as will the chamber, to build at the lower levels of AMIs. when it makes no difference to the project budget. This is the best path to take to ensure meaningful housing additions at the 60% AMI level, as just 60% alone will require a much larger amount of subsidy across the city and ultimately deter development. .
Exclusion from the AMI level of 80% or less prevents more than 10,000 low-income Worcester households from qualifying. Professions crucial to our economy and our community, such as health care assistants, mechanics, transport workers, social workers, health care social workers, career counselors and others, are all winning in this level of AMI.
It is also important to note that each new development will require some type of grant to account for the impact of the affordable housing required on their project budget. Lenders and equity investors won’t fund projects that aren’t financially feasible, so even if developers wanted to be in Worcester, they couldn’t build here without significant taxpayer-funded grants. Incentives and zoning relief can offset some, but not all, of the costs. Zoning relief measures, such as relaxing dimensional and parking requirements, can go no further.
Inclusive zoning has the illusion of being free for the taxpayer. But state-funded subsidies are needed for below-market affordable housing, especially with construction costs and interest rates seeing the biggest increases in decades.
Even some changes in market rates in Worcester require subsidies to make them possible. As an example, the two largest multi-family developments underway in Worcester, those built by Madison Properties and Wood Partners, both have tax exemption agreements with the city and have access to tax credits. at the state level. This program is called the Housing Development Incentive Program, a state grant for market-rate development in hub cities like Worcester, where rents are well below Boston-area rents.
However, tax increase waiver agreements do not apply to all projects. Housing Development Incentive Program tax credit allocations for this program are completely behind schedule due to a lack of funding, with $57 million in credits waiting years to be allocated to developers. The Chamber has advocated and worked with lawmakers to try to fully fund the housing development incentive program, but the program’s inability to provide a grant is something to consider for inclusive zoning.
To effectively tackle the housing crisis in Worcester, the main objective should be to build more housing in general. Worcester has only built 10,000 homes for 25,000 new residents over the past decade.
And currently, of the 75 most populous metropolitan areas in the United States, the Worcester area has the eighth lowest rental housing vacancy rate. This is the root of our affordability issues.
The production of new housing will ease upward pressures on prices, improve housing quality and, when combined with investments in rental assistance and home ownership, can help low-income households income faced with unthinkable circumstances such as displacement.
While inclusionary zoning can be a great complementary tool, it must be used in the right way to truly provide affordable housing opportunities in a meaningful way. The City Ordinance Project, created with input from other municipalities with inclusive zoning, subject matter experts, researchers and community members, is how we are successfully implementing implement inclusive zoning.
David Sullivan is Director of Economic Development and Business Recruitment at the Worcester Regional Chamber of Commerce.