Density Bonusing

Density Bonusing

Density bonusing has been long identified with inclusionary zoning, but it is time for this association to be severed.  Simply put, density bonusing represents an ineffective and generally inappropriate approach to inclusionary zoning, and so should be no longer used in this context.

Density bonusing refers to the practice of giving developers the right to build additional density in exchange for providing affordable housing.  The increased density is given to offset the cost burden of providing the units.

Density bonuses are one of various possible regulatory concessions that are often offered in inclusionary zoning.   Others include fee waivers, fast-tracked approvals, and reduced standards for parking, setbacks and other zoning requirements.  But density bonuses are probably the single most rewarding of these concessions.

It is a fundamental characteristic of all inclusionary zoning programs that the key rules are fixed.   These rules are set ahead of time and kept non-negotiable, so that all developers are treated fairly and equitably. This applies particularly to the affordable housing obligation of the developer, and also to any regulatory concessions offered by the municipality.  As a consequence, when density bonuses are offered, they are given automatically (or as-of-right) according to some pre-set formula.

(There is another practice – typically called “incentive zoning” or “bonus zoning” that offers density bonuses negotiated ad hoc on a project-by-project basis.  This approach has generally been unproductive, and in any case, should not be confused with inclusionary zoning.)

The problem is that density bonuses provided in this way can lead to bad planning, particularly when provided over and above the appropriate permitted density.  The approved density should be based solely on what is physically suitable for a particular site in terms of the capacity of the supportive infrastructure, impact on neighbouring development, consistency with strategic planning decisions and similar other objective criteria.   As important as affordable housing is, developments with affordable housing should not be automatically granted additional density rights exceeding  what is appropriate as compensation for the housing.  (Nor should the permitted density be kept deliberately low so that it can be raised to a reasonable level to pay for the affordable housing.)

It is relevant to note that the City of Toronto intentionally – and quite rightly – does not use the term ‘density bonus’ when administering s37.  The reason is that the city determines the permitted density based on what is appropriate for any site according to planning grounds.  It does not base the permitted density on what is necessary to achieve community benefits like affordable housing.

The persistence of density bonusing as a relevant concept can be ascribed to its association specifically with voluntary inclusionary zoning programs.  In voluntary programs, density bonuses are essential because the developers will be seeking incentives to cover the cost burden of providing the affordable housing.  In the absence of sufficient incentives, of which increased density is probably the key one,  they are unlikely to agree to provide the affordable housing.

The empirical record, however, clearly shows that voluntary programs have been ineffective in providing affordable housing (see Mandatory vs Voluntary).  While there were once many voluntary programs, their relative number has steadily declined over the years.  So, while density bonuses could be essential in voluntary programs, these programs themselves have been dismissed as a viable option.

On the other hand, density bonuses are not needed in mandatory programs.  There is no imperative in these programs to make the developers whole through any regulatory concessions .  In these programs, the cost burden can and should be passed back to the land – that is, it should go toward reducing the price being paid for the land (see Who Pays?).

Passing the cost back to the land is entirely reasonable.  The landowners have benefitted greatly from rising land values while doing nothing to create them.  Inclusionary zoning is a way of capturing some part of that enhanced land value for the public benefit, particularly when the municipalities have had a significant role in creating those values through public investments and planning decisions.

In summary, density bonusing represents the wrong way to think about inclusionary zoning.  The provision of affordable housing should be seen as a reasonable obligation by all residential developments, and not just an exceptional contribution for which some reward (like a density bonus) is due.

25 April 2016

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