Development Incentives

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Development Incentives

At a Glance

Type: Development incentives
Where tool is used: Downtowns/transit corridors
Timeline: Medium-term
Who implements: Jurisdictions
Relative density impact: In case of density bonuses — medium (depends on market-rate production)

Development2

Jurisdictions can provide a variety of incentives to developers to encourage them to build affordable housing and other projects that meet community needs. Common incentives include density bonuses, expedited permitting, and fee waivers or reductions. These incentives are often used to encourage the creation of affordable housing in particular locations, such as downtowns and transit corridors.

Density bonuses are zoning incentives that allow developers to build additional units if a residential project includes a certain amount of affordable units. By increasing the allowable density in a given location, density bonuses allow developers to increase profits and can improve the feasibility of underutilized sites. They result in affordable housing without requiring public subsidies. They are commonly targeted to specific districts where a jurisdiction wants to encourage higher-density development, such as redevelopment or transit station areas. Density bonuses are a key feature of inclusionary zoning policies. Inclusionary zoning ordinances typically offer density bonuses as the primary incentive to encourage developers to include affordable housing in their residential projects.

Delays during any stage of the development process increase the costs of new housing. Expedited permitting for projects with an affordable housing component can reduce land holding times before development begins and provide greater certainty to the development process. Expedited permitting can include prioritized permit review and approval, or creating a one-stop center for multi-agency reviews and permitting. Like with density bonuses, offering expedited permitting can reduce development costs for affordable housing without requiring public subsidies.

Fee waivers or reductions for impact or building permit fees reduce development costs (and barriers) associated with affordable housing projects.

The following jurisdictions offer density bonuses, expedited permitting, and/or fee reductions/waivers:

  • Atherton
  • Brisbane
  • Burlingame
  • Daly City
  • East Palo Alto
  • Foster City
  • Hillsborough
  • Menlo Park
  • Pacifica
  • Portola Valley
  • Redwood City
  • San Carlos
  • San Mateo
  • Woodside
  • San Mateo County

icon_benefits-orange Key Benefits

  • Density bonuses permit developers to build more units than site zoning would otherwise allow in exchange for providing a certain amount of affordable housing.
  • Expedited or streamlined permitting reduce development costs at no cost to the jurisdiction.
  • Fee waivers and reductions lower the cost of affordable housing for developers.

icon_community-orange Community Considerations

  • Similar to inclusionary zoning, density bonuses are most effective in communities with strong markets and high land values, home prices, and rents, where developing additional housing at lower densities would be difficult.
  • The terms of density bonuses, streamlined permitting, and fee waivers/reductions must be calibrated carefully to ensure they provide meaningful incentives for developers, and can be applied reliably and consistently.

icon_engage-orangeCommunity Engagement Strategies

  • Develop informational resources: Provide graphics showing how density bonuses work.
  • Educate your community: Provide interactive map showing jurisdictions with development incentives and details on the density bonus, expedited permitting, or fee waiver/reduction policies.

icon_resources-orangeResources

1 Featured Tool: Density Bonuses, Puget Sound Regional Council