Inclusionary Housing Designated Areas – Production, 2005-2013

The analysis presented here describes how the Inclusionary Housing program has performed with respect to its objective of creating and preserving affordable housing in conjunction with new development in recently rezoned areas.

Background

In 2005, the Department of City Planning (DCP) and Department of Housing Preservation and Development (HPD) began a substantial expansion of the Inclusionary Housing Program, which allows developments to construct more floor area if they provide a specified amount of affordable housing. This expansion was a part of a broader effort to create and preserve affordable housing citywide through the Mayor’s New Housing Marketplace Program. The purpose of the expanded Inclusionary Housing program has been to promote economically integrated neighborhoods in communities where zoning changes would encourage substantial new housing development. The expanded program was first applied in the Greenpoint-Williamsburg, Hudson Yards, and West Chelsea rezonings, and has since been applied in over 30 City-initiated rezonings. In 2009, the program was modified to improve its function and to include an affordable homeownership option.

Inclusionary Housing Designated Areas

Inclusionary Housing designated areas, within which the program is applicable, have been established in the Bronx, Brooklyn, Manhattan and Queens. Boundaries can be found in  Appendix F of the Zoning Resolution, or viewed in the ZoLa application. (Another, earlier version of the program applies in R10 districts located outside Inclusionary Housing designated areas.) Developments taking advantage of the full 33 percent bonus must devote at least 20 percent of their residential floor area to housing that will remain permanently affordable to lower-income households.  Qualifying affordable units must be affordable to households at or below 80 percent of Area Median Income. The zoning floor area bonus may be combined with a variety of City, State, and Federal housing subsidy programs, which frequently make it possible to reach lower income levels. Affordable units may be provided on-site or off-site, within the same Community District or a half-mile of the bonused site, and may be provided through new construction or preservation.

For more information about the Inclusionary Housing program, please visit the Inclusionary Housing reference page.

Construction of New Units and Affordable Housing in Designated Areas

Using data from HPD and the Department of Buildings (DOB), DCP analyzed the level of affordable housing production that has occurred through the Inclusionary Housing program, and compared it to the overall level of housing development that has occurred in Inclusionary Housing designated areas.  This analysis required extensive culling of DOB construction permits to identify only those permits for residential buildings that had been issued within designated area boundaries, along with the corresponding number of residential units in the approved building. Individual records were geocoded to determine whether they fell within an Inclusionary Housing designated area, and ambiguous records were researched individually.¹

This analysis takes into account all permits issued and affordable housing plans approved through July 2013. Note that while some areas were rezoned as early as 2005, other areas were rezoned only recently. These figures should therefore be seen as a snapshot in time, with additional housing construction likely to occur in the future.

Citywide analysis shows that:

• Through July 2013, permits had been issued for a total of 15,310 residential units in new buildings located within Inclusionary Housing designated areas since these designated areas went into effect.
• A total of 2,888 affordable housing units had entered the Inclusionary Housing program, making them eligible to generate floor area bonuses for buildings in designated areas.
• These approved affordable units represent 19 percent of all units that received new building permits in designated areas. This figure is very close to the 20 percent rate that is targeted by the program, and indicates that at a citywide level, the program has been successful in promoting affordable housing in conjunction with new development.

Further analysis breaks out utilization of the program by Community District:

• Nearly 13,000 of the more than 15,300 units produced in new buildings within Inclusionary Housing designated areas (84%) were constructed in Brooklyn Community District 1 or Manhattan Community District 4. This reflects the extent of housing construction in the Greenpoint-Williamsburg, Hudson Yards, and West Chelsea rezoning areas, the size of the Inclusionary Housing designated areas established here, and the fact that these areas were established the earliest, prior to the housing slowdown and financial crisis.  
• In some areas, such as Manhattan Community District 4, the number of affordable units produced through the program exceeds 20% of total housing in new buildings to date. This appears to result from some affordable developments proceeding prior to market-rate developments, and “banking” the credit to generate future bonus floor area.
• In Greenpoint-Williamsburg, all waterfront developments have participated in the Inclusionary Housing program. In upland areas of the 2005 rezoning area, Inclusionary Housing activity was slow in the early years of the program, but has picked up in recent years. This suggests that the 2008 extension of the 421-a general exclusion area (GEA), which conditions tax exemptions on the provision of affordable housing, to these areas may be a factor in recent increased utilization of the program.
• In areas where the program has produced limited numbers of units or none, there are several possible contributing factors, including limited local capacity in affordable housing nonprofits and affordable housing development, and a predominance of small sites, where transaction costs make participation in the program less economical. Further case studies of developers’ decisions would be required to identify more definitively the factors at play and options for improving utilization of the program.

Inclusionary Housing Designated Areas
Total Housing Units Created in New Buildings and IH Affordable Units Produced Through July 2013

The Inclusionary Housing Program in Context

The Inclusionary Housing Program has been a key feature of recent neighborhood rezoning plans, but it is only part of a much broader City effort to promote housing affordability. While the 2,888 units produced in Inclusionary Housing designated areas indicate success for the program’s established objectives, and represent a meaningful contribution to the communities in which these units were constructed, they constitute only a small share (roughly two percent) of the over 155,000 units created and preserved to date through the New Housing Marketplace Program.

¹ Units created through conversion or enlargement of existing buildings (filed as alteration permits, rather than new buildings) were not captured in this analysis. However, these buildings would not be expected to substantially affect the results, because a building is only eligible for the Inclusionary Housing bonus if it is a new development or an enlargement of more than 50 percent of the existing floor area.