The New York City Inclusionary Housing Program (IHP) aims to promote affordable housing in neighborhoods with zone regulations to encourage new development. To that purpose, IHP incentivizes developers with bonuses, such as a higher allowable floor area. In return, they must designate some affordable units in their market-rate buildings.
The IHP promotes mixed-income housing. It encompasses two subprograms: voluntary inclusionary housing and mandatory inclusionary housing. The voluntary inclusionary housing (VIH) dates back to 1987 and covers R-10 districts (residential), designated areas, and special districts. Developers receive a density bonus for constructing, rehabilitating, or preserving permanently affordable housing.
The developers use their density bonus to increase the residential floor area for the building where the affordable units generated are and/or another building. If they opt for the latter case, the building must meet specific location criteria, such as being in the same community district as the zoning lot where the affordable units are or in a neighboring one but not farther than half a mile from the lot.
The amount of the generated bonus varies depending on the area. For example, in R-10 districts, it varies by type of construction (new, rehabilitation, or preservation) and funding (public or private). On the other hand, in designated areas and special districts, the generated bonus remains the same regardless of the construction and financing.
The second program, mandatory inclusionary housing (MIH), was introduced in 2016. It requires a portion of new housing in medium- and high-density populated areas rezoned to promote new housing production to be permanently affordable. The requirement applies for all new residential constructions, enlargements, and non-residential to residential conversions over 10 units (12,500 zoning square feet) located in MIH areas. Alternatively, developments between 10 and 25 units (12,500 and 25,000 square feet) can opt for payment into an affordable housing fund.
New housing projects that do not exceed the mentioned units are exempt from the MIH. It is important to note, however, that apart from bonuses, developers might also receive penalties. A look at the different types of IHP zoning gives a better insight. There are three types of inclusionary zoning, namely mandatory, designated, and R10.
As the names indicate, only properties within the first zone mandate the inclusion of affordable units. For the latter two, this is optional. Before making the final decision on whether to include affordable units or not, however, there are several things developers should consider. For example, in the inclusionary housing designated areas, they could choose to join the IHP or opt it out. If they decide to join, they will receive the relevant zoning bonus. If, however, they wouldn’t like to participate, they might be penalized accordingly.
If the property is in an R-10 zone and doesn’t fall within a mandatory or designated inclusionary area, developers can still join the IHP and get relevant bonuses. But there won’t be any penalty if they decide otherwise. To avoid any undesired penalties, before starting construction activities, check what inclusionary zoning area your property is located in and get familiar with the possible options.
Castellan Real Estate Partners 