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.
Two comments: 1) with smaller units, you can blow more air instead of using ductwork, basically eliminating most of the 18″ ceiling drop. In 70 feet you could fit 7 floors with a clear height of less than 9′ but more than 8.5′, which is fine. 2) the bigger issue with IZ is that it is very difficult to get any bonus density in the historic districts. If you build in Dupont or Logan, you have the 8% required affordable housing, but historic preservation may not allow the height increases or total build-out of the FAR.
Thanks Michael for the insightful answer! I knew I was missing something.
Does does IZ outside of historic districts give developers more density? In the chart posted above it looks like it just gives them more flexibility in building form, but doesn’t increase overall FAR.
Interesting post Bruce. I look forward to hearing the input of planners as I’m sure this issue was heavily debated amongst D.C. zoning officials and they came to the conclusion they did for a reason (in theory).
While I’m all for mandatory inclusionary zoning and fully understand the extreme lack of affordable housing in our major cities, the net economic benefit to the developer should be at least neutral given the additional ceiling height or lot coverage. It’s challenging enough for developers in this economic climate to even conceive a project that will achieve the returns required by investors.
This can be related back to the overall building height limit debate that’s been ongoing in D.C. I’m a big proponent of greater density, just take a look what’s occurred near your office in Arlington along the orange line. Ultimately I think you’ll see dense development along metro lines. The ability to build to a greater density will allow developers to provide affordable housing while making the numbers pencil out.
Thanks Joe, I hope some planners and architects weigh in!
Joe, good insight. To the point that you made in paragraph two, I wanted to add that while MIZ appears to be a gesture of good will, but seems to be very little beyond that. If DC Gov’t were actually interested in mandating that developers provide usable space that could be developed into livable units, they would provide more than 5 feet (between slabs, HVAC, electrical work and other infrastructure this leaves room enough for a doggie door entrance and little more – are they implying a future trend of dog highrises? I hope not).
Moreover, as you noted, that this mandated change results in a net economic loss, how does this incentivize developers to build in an already restrictive district.
You bring up a great point Bucky, but that leaves the question why would the Gov’t be so hesitant to allocate additional height to allow developers to build more livable units?
Does this go back to the DC building height limit debate? Do you think the height limit is required to preserve the unique nature of the city?
Always debatable as neither Inclusionary Zoning and/or Fee-in-Lieu efficient builds enough affordable housing to slap everyone on the back and say, “job well done…”
As with parking and traffic, I recommend avoid using zoning regulations for management issues. Zoning isn’t nimble enough to respond quickly to an issue completely dependent upon market forces, such as manipulating construction costs to build under market housing. Make zoning rukes to regipulate complete and appropriate places, then manage the social and market details of these places through GO’s, NGO’s and partnership. Zoning is a crude platemaking instrument, IMHO.