The following is a guest blog post by Stephanie Reyes, State and Local Policy Manager, Grounded Solutions Network
Communities across the country are exploring inclusionary housing policies, which either require or encourage private real estate developers to include a share of units affordable to lower-income residents in new market-rate buildings.
Inclusionary housing policies are only effective when they are developed with careful attention to the impact that they are likely to have on project economics. If the affordability requirements are set too high, the increased costs to a developer can make development financially infeasible. On the other hand, if jurisdictions are so concerned about potentially making development financially infeasible that they set affordability requirements too low, they miss out on an opportunity to create more desperately-needed affordable homes for lower-income households.
Unfortunately, most of the people—from local government staff to community stakeholders—who design and implement inclusionary housing programs have limited experience with the complexities of real estate development. As a result, they may either impose unrealistic requirements or defer entirely to real estate professionals who sometimes have a financial incentive to overstate the potential negative effects.
On February 14, 2018, Grounded Solutions Network released its new Inclusionary Housing Calculator, a web-based tool that helps policymakers and other local policy stakeholders better understand the real estate economics that drive local housing policy choices. The updated tool builds on the success of the first Inclusionary Calculator which, since its launch in 2015, has helped advocates, developers, and policymakers comprehend the economics of inclusionary housing policies.
The Calculator measures the anticipated costs and revenues for a hypothetical development project and returns an estimate of profitability. Users can select from a set of pre-populated “templates” for market-rate residential developments at various density and market types. Additionally, users can adjust key variables like construction costs, rent/sales price, and how much affordable housing the project will provide to determine the potential financial viability of a given development type. The updated Calculator offers new features including an option to save and print work and an improved user interface which will enable an even larger number of new users to learn the fundamentals of inclusionary housing on an advanced platform.
“The power of a tool like this is that it levels the playing field so that a broader set of local stakeholders can engage constructively in discussions about what’s feasible,” said Rick Jacobus, a policy and housing consultant and a lead developer of the tool. “Better, more accessible and transparent local decision making is key as inclusionary housing programs continue to grow in number around the country.”
Several local and regional governments have used the Inclusionary Housing Calculator to learn the complexities of real estate development and the economic tradeoffs that are key to any inclusionary program. As state and local policies become increasingly important for affordable housing development, the updated Calculator will empower even more advocates, developers, and policymakers to launch and steward effective inclusionary housing policies nationwide.
