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Exploring Inclusionary Zoning | Part 01

Updated: Jul 29, 2022

The Intricacies of Zoning

We continued our journey to find affordable housing solutions for students experiencing homelessness this week by exploring zoning.

Reflecting on our previous discussions at “The Developers Story”, we identified the numerous challenges developers face when building affordable housing. The funding tools often available to come with stipulations that limit who they can serve. This would often lead to students being excluded from the demographics, requiring developers to use tricky work arounds or alternative funding with higher cost. College Homelessness is not widely known, and even among universities awareness can be sparse. This elevates the importance of building and sharing a strong narrative on this challenge. Zoning can obscure development. Whether through parking minimums, material requirements, restricting density, or outright banning certain projects, these stipulations can increase the cost of a project and reduce the capacity to build affordable units. We explored the potential of using a housing prototype to incrementally address each of the specific challenges and share the key insights on an open platform so others could build from our success. 

Building on this conversation, we welcomed Heather Way from The University of Texas in Austin to lead our journey for this evening’s conversation on zoning. Together, we explored how zoning has been used to both hinder and incentivize affordable housing development. 

Exploring the Topic

Zoning has a devious past. In multiple instances, zoning has been used to intentionally exclude communities of color. Hyde Park, a suburb north of Downtown Austin, was originally established as a community specifically for whites. The strategy to isolate minorities was further enforced by The City of Austin’s master plan developed by Koch and Fowler in 1928 that designated Central East Austin as a “Negro District”. The district was the only part of the city African Americans could access schools, public services, and residence. Accompanying this was a lose set of zoning restrictions that allowed the development of objectionable industrial uses in this district. This strategy was also used in Modesto California in 1885 to outlaw the use of warehouse buildings that where commonly occupied by Chinese immigrants [1]. The same happened in New York in 1916 to restrict manufacturing to keep Jewish communities away from 5th Avenue [2]. 

A more severe form of exclusionary policies came with Redlining which denied mortgages to any African American neighborhood. This policy in addition to urban public housing project, pushed many communities of color to concentrated centers of poverty, far separated from white families. Though outlawed in 1968 with the Fair Housing Act, the opportunity to build wealth was lost, as most of the houses that where available at an affordable rate had been purchased by white families. “Reverse-Redlining” in where banks issued predatory lending to the same neighborhoods once effected by redlining, further crippled communities of color from being able to build financial stability. The lingering effects contribute to an ever-increasing struggle to escape poverty and reinforce efforts to segregate based on income. 

In Fort Worth, we explore how specific neighborhood ordinances can restrict development. In West Over Hills, an independent residential town in Fort Worth, the zoning only allows 3,000 square foot or larger single-family homes with specific construction standards. The product is large luxurious homes for the area’s most elite families. The neighborhood also enjoys a plethora of amenities including a private club house, lower tax rates, and their own private police department. All adjacent properties carry restricted zoning (A-5 & A-10) which only permits larger single-family homes as well. Tanglewood, Colonial, and University West also carry similar zoning patterns and fall under a TCU Overlay which further restricts the number of un-related individuals that can occupy a dwelling, which effects student populations. Though not based on direct racial parameters, these zoning policies do restrict access to wealthier families and ultimately limit the amount of land available for affordable and dense developments. 

Financial subsidies often are the primary incentives use by cities to spur affordable housing developments. This as we discussed in detail at our last forum on development can come with its own set of challenges, including land use policies that do not support affordable housing projects. Inclusionary Zoning is a tool that cities can use to allow, incentivize, or require developers to reserve a percentage of units in market rate development for low to moderate income families. This can also extend to allow different types of housing such as accessory dwelling units or premanufactured homes. There are currently 886 jurisdictions in 25 states that have implemented some form of inclusionary housing program. 

Mandatory is accepted to be the most effective form of inclusionary zoning. It provides a guarantee for a certain percentage of units. For a mandatory policy, there are specifics that must be considered though, including the percentage of average median income that will be served and the percentage of units to be designated. Montgomery County, which was one of the first jurisdictions in the country to adopt inclusionary zoning is a case example of the success an inclusionary policy can have. Through innovative partnerships with their local Housing Authority they were able to provide affordability options for both rental and home ownership. Since 1976, Montgomery County has been able to produce over affordable 13,000 units. This success, as highlighted in a recent HUD Report, has require proactive and dynamic policies that can shift to accommodate a fair balance of developer and consumer goals. Montgomery County’s Inclusive zoning policies are complex and require participation from multiple government and non-governmental organizations to ensure compliancy.

Affordability can be a pre-determined period, as found in federal HUD requirements, or in perpetuity like what is commonly found in community land trust or a shared equity program. For the later, it does require localize efforts usually in the form of a non-profit or non-governmental organization to aggregate, purchase, and manage the property to be part of the affordable district. Supporting funding for subsidies also become necessary, and resale restrictions restrict the sales price of a home to ensure affordability. 

Other avenues to ensure affordability work to protect the rights of tenants and reinforcing existing programs such as housing vouchers and fees in lieu that allow developers to opt out for a base fee per unit. Any fees collected are allocated fund future affordable projects. However, the projects funded can take years to manifest and there are limited guarantees that the funds will be used exactly as anticipated. The only successes discussed are in urban residential projects, where the exceptional high land value for rise rises can capitalize on the fees in lieu to build housing outside of central downtown areas. Fees also need to property calibrated to achieve the desired results. 

There are some contested contradictions on whether government should protect affordability or prospect of wealth for housing, but it is usually agreeable a city should have a diversified portfolio of housing options. One must also observe the seemingly dying ‘American Dream’. Economic trends have shown a decreased from 90% to 50% of being earning more than your parents. Access to high paying work is predicated on having a degree, which has increased the demand for college. The development of financial aid gave future learned unprecedented resources to pursue an education. However, the ongoing support to cover intended and unintended results has not been made available. As funding for higher education has diminished, tuition cost have increased to cover salaries, facilities, and support services. In addition, the cost of living, which includes housing, has also increased substantially. For homeless students trying to get a degree that is seemingly decreasing in value, the cost could hinder their ability to complete their education and achieve financial self-sufficiency.

In Texas: 

Mandatory Inclusionary Zoning, contrary to common belief, is not completely illegal in Texas. Only home ownership units are banned from mandatory ordinances, and municipalities have the authority to implement requirements to support the development of affordable rental units. Though this presents an opportunity to implement new mandatory rental policies, the current make-up of the legislature would likely find any such ordinances hostile. 

Most of what we see in Texas falls under Incentivized Inclusionary Housing which provides tradeoffs for achieving set percentages of affordable units. Selected incentives usually include density bonuses or tax abatements which can increase the economic performance of a project.  Other incentives allow more floor to area ratios and a reduction in required greenspace, which increases the economic capacity of a project. Fees can also be waived, processes can be expedited or skipped, and requirements can be reduced or removed if the project meets certain affordability parameters. Cities can also utilize flexible zoning practices to allow changes to adapt to creative ideas that developers may create that support the desired outcomes. 

These bonuses must be utilized strategically to achieve the intended results. Many cities under sell or give away density bonuses or additional abatements without leveraging the economic gain from the additional capacity to find a balance between public and private goals. Cities must decide what target groups need to be served. This could require supporting economic studies to identify specific area median incomes and the gaps and services available to certain percentages. This would allow cities to identify where services are most needed, what types of projects would best serve the target audiences, what areas zoning policies apply to, affordability periods, and what fees need to be charged to effectively incentivize the desired outcomes. 

In Fort Worth these approaches are utilized to some extent in the Neighborhood Empowerment Zones (NEZ) and mixed-use zoning. For the neighborhood empowerment zones, a 10% affordability requirement is mandated for tenants making both 80% and 60% of average median income. The agreement is a 5-year tax abatement that follows HUD guidelines. It is unclear if the 20-year affordability period is required. However, the tax abatements and fee waivers are available whether the affordability goals are met or not. If granted permission, a developer can opt to pay a $200 fine per unit to the Fort Worth Housing Finance Corporation per year required to help pay for new affordable developments. For a 200-unit project this would only be a total of $8,000 per year and if we assume a 20-year affordability period per current HUD requirements, it totals to $160,000. Without factoring inflation, this provides enough funding to pay for roughly ¾ - 1 affordable unit depending on location.  

Restrictive zoning laws in addition to growing rates of gentrification contribute to class biased development and make it difficult for families operating within the median income to find stable housing in Fort Worth. Near Southside Fort Worth has seen explosive growth in industrialized, artistic, and mixed-use facilities in what used to be an impoverished neighborhood. Form Based Codes encourage niche businesses, mixed-use facilities, and bring a charming neighborhood feel. The high price of land, however, has encouraged the development of large, luxury apartment complexes, seen with projects like The Monarch and Mag & May.  Near Southside is partially covered by NEZ 6, yet as discussed, the incentives offered are not ideal for building an abundant portfolio of affordable housing. These conditions have aided in driving up rent prices in these historically impoverished areas, which currently sits above Tarrant County’s median rent of $1,200 for a two-bedroom apartment.

The current legislature supports property owner rights, and as a result, tenants using housing vouchers in Texas have limited protections. SB 267 in addition, restricts local municipalities from passing local ordinances that penalized a landlord for refusing to lease to someone with a housing-choice voucher. However, cities can use clever work arounds through incentivize inclusionary housing requirements to offer perks in exchange for accepting housing vouchers. 

Based on interviews with students experiencing homelessness in Fort Worth, the waiting time to get a voucher could be up to seven years with no guarantee of acceptance.  This creates a dire need to develop abundant and avaialble solutions to aid our current and future learners.

In part 02 we will take a deeper dive into a few successful projects developed in Austin and share the insights and ideas that we discoverd through our discussions. 

Written by:

Jesse Herrera | Executive Director | CoAct

Tanner Williams | Project Coordinator | CoAct




[1] Scott, Mel. America City Planning Since 1890. University of California Press, 1971

[2] Stein, Samuel. Capital City Gentrification and the Real Estate State. Verso, 2019

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