Incentives for Housing

Two Types of Incentives All Incentives Should Strive to Be: Regulatory incentives can be relatively inexpensive and straightforward to implement but can be less effective than direct funding in increasing new housing by large amounts. Some incentives include:

– Density Bonuses

– Flexible Design Standards

– Reduced Parking Requirements

– Accelerated Approvals

– By-Right Development

Funding incentives provide money directly or indirectly from public reserves. They can be significant, and even necessary, for project feasibility. Some incentives include:

– Reduced Fees

– Public Land

– Tax Incentives

– Public Funding

Here, we shall briefly discuss about the density bonuses. The rest will be found in the attached document.

Density bonuses

In markets that can support more units, additional density will increase overall supply and help to bring rents in line with local needs.

Incentive Format

Density bonuses allow more units of housing to be built on a site than would be allowed for under existing zoning regulations in exchange for a developer’s provision of affordably priced units or other public goals.

The “bonus” can be achieved through an increase in floor area ratio (FAR), a greater building height, decreased minimum unit size, or loosened setback requirements. Density bonuses typically allow for an increase of between 10% and 20% over a zoning code’s baseline permitted density. In effect, for every affordable unit in a development, the developer can add a determined number of market-rate units to the development.

Density bonuses work as an incentive by increasing a project’s overall revenue and decreasing per-unit development costs. Developers can build, and eventually operate or sell, more units than otherwise possible. Often, these additional units are market-rate units that serve to offset the lower levels of rental revenue derived from affordably priced units.

Density bonuses are one of the most common incentives offered to developers. The incentive is relatively inexpensive, is straightforward to implement, and effectively advances public and private goals.

Market Impact & Considerations

IMPACT

CONSIDERATIONS

In appropriate markets, density bonuses can effectively improve affordability through both direct and supply approaches. Density bonuses can directly incentivize the building of more affordably priced units, if the rent generated by the additional units allowed is sufficient to offset the affordability requirements. Moreover, by adding more units than otherwise would be the case, the project also contributes more to the overall supply of rental units, which can improve affordability. Is the market strong enough to support the additional units? A density bonus is not helpful if the additional units are left unabsorbed by the market. Will the additional density alter the type of construction required for the building and, therefore, add exceptional costs? On a project-by-project basis, an increase in the number of units may trigger a need to use different construction materials. The potential increase in costs may nullify the increased revenue.