Mayor Walsh Signs Executive Order to Create Additional Affordable Housing in Boston
December 10, 2015
Mayor Martin J. Walsh announced today that he has signed an Executive Order prompting changes in the City of Boston's Inclusionary Development Policy (IDP), leveraging the private development market to ensure the continued development of affordable housing in Boston.
"For our city to continue to grow and thrive, we have to do everything in our power to make sure that people who want to work to make Boston better can afford to live here," said Mayor Walsh. "The Inclusionary Development Policy is a critical tool for creating and maintaining affordable living in our City. I am pleased that the team working on this issue has created a balanced policy that helps ensure that our city's most vulnerable benefit from the strong real estate market, while preserving developers' ability to create the housing we need across all income levels."
IDP applies to residential developments with ten or more units that will either be developed on property owned by the City of Boston, or that will require relief from the Boston Zoning Code. Under IDP, developers of these projects are required to either build affordable units on-site; build or acquire affordable units in an off-site location, or, with BRA approval, provide a contribution to the Inclusionary Development Fund. The Executive Order signed by Mayor Walsh improves this policy to require additional units or funds, and affords a higher level of predictability and transparency in the development process.
Under the new policy, Boston will now be divided into three development zones, in recognition of the distinct markets within the city. While major developments downtown can support greater Inclusionary obligations, the real estate markets in Boston's outer neighborhoods have market rents and sales prices that, while being more accessible to moderate and middle-income families, may not be able to support significant additional Inclusionary requirements.
The zones will be designated as A, B, and C. Zone A will include the downtown neighborhoods and waterfront areas; Zone B will include Allston, Brighton, Charlestown, Jamaica Plain, Mission Hill, and part of South Boston. Zone C will include Dorchester, East Boston, Hyde Park, Mattapan, Roslindale, Roxbury, and West Roxbury.
To ensure that affordability is maintained in Boston's neighborhoods, the City's preference is for units created through IDP to remain on-site. Under certain circumstances, however, developers will be permitted to fulfill their IDP obligations by either making a cash-in-lieu payment into the Inclusionary Development Fund, or by creating affordable units near the planned market-rate development. These allowances would generally be given if the cash-in-lieu payment or off-site option would yield a significantly higher number of affordable units.
Based on the location of new developments within the three new zones, IDP has been modified to increase the contribution amounts for developers wishing to make a cash-in-lieu payment instead of building affordable units on-site. With the exception of Zone C, the new contribution limits will be higher than in the previous policy, rising from $200,000 per unit to $300,000 in Zone B, and from $200,000 to $380,000 in Zone A.
In addition, in Zones A and B, developers seeking to build their units off-site will be required to increase the number of affordable units from 15 percent of the total to 18 percent of the total units in their development. These two modifications will further increase the number of affordable units in the city and the value of contributions to the Inclusionary Development Fund.
Lastly, the Executive Order calls for more specific program details to be outlined in the new policy. Historically, many of the details of how IDP was implemented were spelled out in separate Affordable Housing Agreements created for each project. New, more specific details to be outlined in the policy will significantly improve standardization, transparency, and predictability for both communities and developers.
Affordable units created through IDP are subject to income requirements. All affordable rental units created through IDP are required to be affordable to households with incomes less than or equal to 70 percent or less of the Area Median Income (AMI), which is approximately equal to a combined household income of $62,000 for a household of three.
For ownership units, such as condominiums, half the IDP-created units are to be dedicated to families with incomes less than or equal to 80 percent of AMI, with the other half to be dedicated to households with incomes between 80 and 100 percent of AMI. For a three-person household, 80 percent of AMI is approximately equal to $71,000, while 100 percent of AMI is equal to $88,000 for a household of three.
Developers have three options for complying with IDP:
- On-Site Units: Building affordable units on-site is the City's preferred option. Currently, the policy requires that the number of income restricted units equals 15 percent of the market rate units, which is approximately 13 percent of all units. This policy remains unchanged.
- Off-Site Units: Under certain conditions, developers will be permitted to meet their Inclusionary obligations by building or acquiring units in an off-site location. Under the new policy, the number of income-restricted units in this option must be no less than 18 percent of the total units in Zones A and B. The requirement will remain at 15 percent of the total units in Zone C. In addition, units must now be located within one half-mile of the original development.
- Cash-in-Lieu Contribution: Currently, with BRA approval, the developer may provide a contribution to the Inclusionary Development Fund at a rate of 15 percent of their market rate units. The contribution for each rental unit is $200,000. For ownership units, the payment is half the difference between the market value of the unit and the value of an income-restricted unit, with a minimum contribution of $200,000.
Under the new policy, if a developer is permitted to make a cash-in-lieu payment, two changes will apply. First, payments will now be based on the new, higher off-site unit requirements of 18 percent affordability in Zones A & B. In addition, the cash-in-lieu minimum rise to $300,000 per unit in Zone B and to $380,000 in Zone A.
The Fund has been managed by the Department of Neighborhood Development since 2013. Guidelines have been established for the use of these funds, which are distributed through a transparent, competitive Request For Proposal process.
Since its inception in 2000, IDP has been responsible for the creation of 1,496 new affordable housing units under the on-site and off-site components, with another 551 affordable units currently under construction. In addition, more than $100 million has been raised for affordable housing; $70 million from the Fund has been disbursed to date. These funds have helped create 1,597 new units of affordable housing.
While there is no legal requirement for a public process for changes to IDP, the IDP team, co-led by the Boston Redevelopment Authority and the Department of Neighborhood Development, has been meeting for the past year with a broad range of stakeholders, including leaders from non-profits focused on affordable housing, the development community, the Office of Fair Housing and Equity, and the Mayor's Office.