More Carrot, Less Stick Needed for Affordable Housing

Mixed-income housing - infusing affordable housing with market-rate units - is relying more on incentives and subsidies, than mandates, to stimulate development.

2 minute read

June 21, 2012, 2:00 PM PDT

By Andrew Gorden


Thankfully, dwindling are the days of segregating low-income residents into affordable housing-only enclaves. Today, the need for affordable housing remains, yet an emerging trend is to utilize public incentives to co-mingle income groups in mixed-housing developments.

"The concept is finding favor among for-profit and nonprofit developers alike, particularly in today's tight lending market," states Patricia Kirk of Urban Land Magazine, "because local governments offer a number of incentives, including low-interest financing tools, cash subsidies and grants, free or low-cost land, density bonuses, tax abatement programs, rehabilitation assistance, fast-tracking of plan reviews and permits, and reduced or waived fees." It is these incentives that are driving private developers to include affordable housing in their developments, sometimes mixing affordable units with multi-million dollar ones.

While city planners and some developers state that it's simply "the right thing to do," many cities have been banned from mandating the inclusion of affordable housing into development plans by state statutes. In turn, cities are now looking at the use of incentives to coax developers into voluntarily setting aside up to 20 percent of their units as affordable housing.

For example, "Austin's S.M.A.R.T. (Safe, Mixed-income, Accessible, Reasonably priced, Transit-oriented) Housing Program offers developers a schedule of incentives based on the level of affordable housing provided. The city provides additional density and height variance, or floor/area ratio, to encourage provision of affordable housing and other community benefits, such as parking, open space, and streetscapes." Other cities like Los Angeles, New York and Portland have used similar incentive strategies to construct new transit-oriented developments, senior housing, art colonies and help revitalize economically and environmentally distressed neighborhoods.

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