How to make inclusionary zoning actually inclusive

Opinion: Columns

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By Daniel Lauber

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Next Monday the Oak Park village board will discuss a draft inclusionary zoning ordinance from staff not supportive of inclusionary zoning. It's important that the trustees and the public understand the key elements needed for an effective inclusionary zoning ordinance.

Inclusionary zoning gets housing built without any taxpayer subsidy that households of modest incomes (teachers, retired seniors, nurses, small business owners, first responders, librarians, village staff, recent college graduates, physical therapists, etc.) can afford, namely housing that costs them less than 30 percent of their monthly income.

Nearly every multifamily development proposal in Oak Park has sought to include more units than the underlying zoning allows. So developers enter ill-defined negotiations with the village to exceed this number. Lacking an inclusionary zoning ordinance, Oak Park has painfully failed to get much affordable housing included in these new developments in which most Oak Parkers couldn't afford even a studio apartment.

An effective and legal inclusionary zoning ordinance, establishes a formula that permits a developer to exceed the number of units the zoning permits so that:

20 percent of all the units in the development are affordable to nurses, retired seniors, teachers, and others of modest income at no cost to taxpayers, and

The developer gets to build more market rate units than the underlying zoning allows.

The result is that affordable units are built without any taxpayer subsidy, the developer makes a larger profit, and greater property tax revenues are generated. Instead of having to enter arbitrary negotiations with the village, an effective inclusionary zoning ordinance gives prospective developers certainty as to how many affordable units they must produce to receive zoning approval.

 

Essential elements

To be effective, Oak Park's inclusionary zoning needs to:

Apply to all new construction that exceeds the number of dwelling units the zoning ordinance permits as of right. Legally, inclusionary zoning can be required only when a development exceeds the density the zoning ordinance allows as of right.

Include a formula that enables the developer to build more market rate units than the underlying zoning allows while requiring that no less than 20 percent of all units be inclusionary, affordable dwellings.

Maintain affordability for at least 99 years, with village options to renew. The affordable housing crisis won't end in our children's lifetimes.

Establish "in lieu payments" that are at least as great as the cost of building a new unit, currently $365,000, and with increases over time. A core goal of inclusionary zoning is economic and racial integration which is not achieved when a developer makes "in lieu" payments rather than include affordable units. Too many inclusionary zoning codes like Evanston's, require a "in lieu" payment much lower than the cost of building a new unit, removing any incentive to build an economically and racially integrated development.

Require annual reporting of racial composition like the village did for decades along with inclusionary, affirmative marketing.

Be mandatory. Voluntary inclusionary zoning consistently fails to produce affordable units.

Apply to the entire village; greater profits under inclusionary zoning should attract new construction to difficult to develop areas.

Place limits on resale prices of inclusionary condo units to keep them affordable to the same targeted income group.

There are a slew of other policy choices that make for effective inclusionary zoning. These policy decisions should have been made before staff was instructed to draft the ordinance.

A responsible village board will take the time to fully air and discuss these policy decisions with the public rather than rush to a vote.

Daniel Lauber, AICP, is a former Oak Park senior planner.

Reader Comments

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Tom MacMillan from Oak Park  

Posted: February 10th, 2019 10:57 AM

Great points by Neal. The idea that the taxpayers subsidize the affordable housing with a lower tax rate means tax rates for everyone else in town go up to make up the difference. More inclusion equals higher taxes. So the Trustees specifically make life less affordable for existing citizens while saying they are working on affordability. The terminology used is specifically designed to hide what is really going on. If it is such a good idea they should be truthful and call it what it is - a tax increase program. Then let people decide how they feel about the tax increase program. meanwhile, there is all sorts of affordable housing in every community surrounding Oak Park, without us having to subsidize it.

Neal Buer from Oak Park  

Posted: February 7th, 2019 11:57 PM

Inclusionary zoning can only give you one of two outcomes - 1. The builder includes affordable units in the proposed development. In order for the development to make financial sense, the developer need substantial zoning relief. The developer will request height and unit variances, in return for the affordable units. So, the village ends up with a grossly overbuilt site; 2. The developer pays a "donation" to an affordable housing fund. In return, the developer is granted height and unit variances. Again, the development is grossly overbuilt for the site. The developer can pay the "donation" because of the additional profit from the increased units. The development also avoids having any affordable units in their building. The "donation" is then used to build grossly overbuilt housing developments in South Oak Park. Then the taxpayers subsidize the affordable housing development because it will not be taxed at the same rate as a market based development. Look at the proposed $15 million development at 801 S. Oak Park Avenue. The proposed annual taxes are $48,000. If this was a market rate development, the taxes would be close to 4% of value, or $600,000. So, the other taxpayers have to make up the difference of almost $550,000 annually. Pick your poison. Don't listen to the pied pipers of affordable housing. The money has to come from somewhere, and it is the taxpayer.

Dan Lauber  

Posted: February 7th, 2019 11:27 PM

Mr. Clark, What you're missing is the basic point about inclusionary zoning: it applies only when the developer wants to build more units than the zoning permits as of right. So if the zoning allows 10 units and the developer wants to build, say, 16 units, then 4 of the 16 units need to be affordable. The developer gets to build 12 market rates units (profit on 2 more units than otherwise allowed) and the village gets 4 affordable units (rented for a lower profit than market rate). Property taxes are based on 12 market rate units + 4 affordable units - generating more property tax than if just the 10 units were built. The market rate units don't need higher rents because the affordable units simply generate less profit than market rate units - and the developer gets 2 more market rate units than otherwise allowed. I hate using the phrase, but inclusionary zoning done properly is a win-win proposition for everybody. Sadly, the village staff's recommendations that became available today call for a very ineffective inclusionary zoning ordinance that will generate little affordable housing and is a giveaway to developers.

Paul Clark  

Posted: February 7th, 2019 9:35 AM

One thing I don't understand is the "no cost to taxpayers" part. Illinois property tax law is pretty arcane, but a $1 million building with 10 units, 2 of which are set aside as "affordable" will still be assessed as a $1 million building, with a property tax bill to match. So if two units have rents below market rate, wouldn't the other 8 units have slightly higher rents to absorb the shift of property tax cost? I'm not opposed to affordable housing but I just don't see how one justification is that there is no taxpayer subsidy. Obviously, in OP, property taxes are a big reason OP is seen as unaffordable by many, which is why people either never move here, or sell as soon as their kids are out of the school system.

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