Is there a way for an apartment or condominium building developer to fully monetize an additional 5 feet in building height when a typical residential floor height is approximately double that? I’m looking for feedback from architects, engineers, marketers, developers, zoning and planning professionals, or anyone with insight into this issue.
Mandatory Inclusionary Zoning, or MIZ, is the District of Columbia’s long-gestating (~10 years) and finally now implemented law that requires residential developments of 10 units and greater to allocate roughly 10% of all dwelling units to government-enforced affordably priced rental and for-sale housing stock. In spirit, I am all for it, as are most. The economics, however, are tricky, because there is no such thing as an “affordable rate brick”.
Developers have zero control over global commodities prices, and zero control over the labor market, so it makes it tough to achieve their targeted return threshold when they have to buy goods and services at retail prices, suffer the loss factor of building out gross SF into rentable/saleable SF, and in addition have to rent or sell a portion of their units below market rates (in most cases, significantly below).
The intent of Mandatory Inclusionary Zoning is to equitably compensate developers economically through the ability to build additional dwelling units – “bonus density” – that will relieve them of any economic hardships imposed by the affordability requirement, and that makes sense. Since building density is not square footage but cubic square footage (three-dimensional, length x width x height), the elements involved in granting additional density are: a) the portion of the site that the building consumes on the ground floor (lot occupancy, or building footprint), and b) building height.
By some formula to which I am not currently privy, the DC government went through all of the zones in which MIZ would apply, and made its bonus density allocations by altering one or both of these limits on developments providing affordable units.
Either I have some serious spatial ineptitude, or am missing something big (it would not be the first time; is there some purposeful disincentive being put forth for residential development within these particular zones for some reason?), but how pray-tell is the developer in the C-2-B and SP-1 zones (see yellow highlights in table below) supposed to fully monetize the extra 5 feet of height they are granted? They are certainly paying full price to build it out.
Please educate me as to how this can come out as a net economic positive to the developer! I’ll be up on the 7th and 1/2 floor.