The District of Columbia Adopts Mandatory Inclusionary Zoning Program

Following other jurisdictions across the country, the District of Columbia has adopted “inclusionary zoning” regulations and has recently issued administrative rules that require developments that include residential units to provide a percentage of units for low- and moderate-income households.

There is a three-part test for determining whether a project is subject to the inclusionary zoning requirements. First, the project must be located within an identified residential, commercial, special purpose or waterfront zone. Second, the project must have 10 or more dwelling units. Third, the project must either include (a) new multiple-dwellings, (b) new one-family dwellings, row dwellings, or flats constructed concurrently or in phases on contiguous lots under common ownership at the time of construction, or (c) an existing multiple-dwelling building or residential development for which an addition to the building or development will increase the gross floor area of the entire development by 50 percent or more. The inclusionary zoning requirements would also become applicable to an existing building or residential development with less than 10 dwellings upon the filing of a building permit application that increases the number of dwelling units to 10 or more.

The inclusionary zoning regulations do not apply to certain transient housing uses, such as hotels, dormitories, housing owned or leased by foreign missions for diplomatic staff, rooming houses or similar uses. They also do not apply to properties located in specific overlay districts, specific transferable development rights receiving zones and certain zones within some historic districts.

Bonus Density and Mandatory Set-Aside Requirements

The inclusionary zoning regulations provide for bonus density and mandatory set-asides for affordable housing. As an incentive for providing the inclusionary units, developments are permitted to construct up to 20 percent more gross floor area, or “bonus density,” than otherwise permitted under the zoning regulations. In addition, the regulations include modifications to the height, lot occupancy, lot area and lot width requirements in certain zones in order to accommodate the bonus density.

The set-aside requirements establish the minimum amount of affordable housing that must be included in a project and are based on the project’s density, the method of construction and the zone district. For instance, a development located in a higher density residential or commercial district that utilizes steel and concrete frame construction must devote 8 percent of its matter-of-right density or 50 percent of its achievable bonus density to inclusionary units, whichever is greater. However, a development located in lower density residential or commercial district for which the primary method of construction does not utilize steel and concrete must devote the greater of 10 percent of its matter-of-right density or 75 percent of its achievable bonus density to inclusionary units. This distinction is based on the fact that steel and concrete frame construction is more expensive, and thus the inclusionary zoning regulations align with the economics of the type of construction expenses incurred.

The inclusionary zoning regulations also govern the percentage of units per development required to be available for low-income households and moderate-income households. For example, developments in R-3 zone districts must set aside 50 percent of the inclusionary units for low-income households and 50 percent of the inclusionary units for moderate-income households, whereas 100 percent of the inclusionary units in other zone districts must be set aside for moderate-income households.

Development Standards for Inclusionary Developments

The inclusionary zoning regulations include standards that govern the location, finish and mix of inclusionary units within a project. The purpose of these standards is to ensure that inclusionary units in market-rate developments are physically integrated and blended within the development. For example, inclusionary units cannot be overly concentrated on any floor of a project. Similarly, the proportion of studio, efficiency and one-bedroom inclusionary units to all inclusionary units cannot exceed the proportion of market-rate studio, efficiency and one-bedroom units to all market-rate units. All inclusionary units must be comparable in exterior design, materials and finishes to the market-rate units. The interior amenities of inclusionary units (such as finishes and appliances) must also be comparable to the market-rate units, although they may be comprised of less expensive materials and equipment. In addition, all inclusionary units in a development must be constructed prior to or concurrently with the construction of the market-rate units, and in a phased development the inclusionary units must be constructed at a pace proportional to the construction of the market-rate units.

Exemptions and Off-Site Compliance

Recognizing the need for some flexibility, the inclusionary zoning regulations include provisions that allow for reducing the set-aside requirements and for providing inclusionary units off-site. Specifically, the Board of Zoning Adjustment is authorized to reduce the set-aside requirements for each square foot of achievable bonus density that cannot be achieved due to site conditions or development restrictions imposed on a property. The Board of Zoning Adjustment is also authorized to permit some or all of the required inclusionary units to be constructed off-site upon proof, based upon a specific economic analysis, that compliance on-site would impose an economic hardship.

The off-site development is required to meet a number of conditions regarding its location, construction and other factors intended to ensure that the off-site units meet the same development standards required for on-site units. In addition, prior to proceeding with the development of off-site inclusionary units, a covenant between the owner of the off-site development and the District must be recorded in the land records of the District. The covenant binds the owner and all future owners of the off-site development to a number of obligations regarding the construction and sale of the inclusionary units, and includes restrictions regarding seeking other zoning relief and the receipt of subsidies from government programs established to provide affordable housing. The inclusionary zoning regulations prohibit the issuance of a certificate of occupancy for market-rate units in an inclusionary development unless construction of the off-site inclusionary units is progressing at a rate generally proportional to the construction of the on-site market-rate units.

Administrative Rules Implementing the Inclusionary Zoning Regulations

The final administrative rules that establish the procedures for implementing the Inclusionary Zoning Act and the inclusionary zoning regulations were issued on May 15, 2009. The final rules became effective on the same date, but do not become applicable until 90 days thereafter or the date on which the final Maximum Rent and Price Schedule is published, whichever is later, in order to allow a transition period between publication and implementation.

The administrative rules include provisions regarding the following:

• Prerequisites for obtaining building permits for a development, including the requirements and procedures for obtaining a Certificate of Inclusionary Zoning Compliance demonstrating that the development will meet the requirements of the inclusionary zoning program and the recordation of an Inclusionary Development Covenant.
• The process for obtaining a certificate of occupancy for either each inclusionary unit in a development or for the entire project that identifies each inclusionary unit in the development.
• Issuance of a Notice of Availability by the owner indicating that an inclusionary unit is available for purchase or lease, the information required to be included in such notices, and a requirement to register inclusionary units with a housing locator website to be established by the District.
• The maximum purchase price or rent for inclusionary units, and the formula for determining the maximum resale price for inclusionary units.
• The selection, screening, closing and post-closing procedures for inclusionary units, including provisions regarding (a) the selection process for the sale or initial lease of an inclusionary unit; (b) registering and participating in District-conducted lotteries for inclusionary units; (c) the District’s obligations to provide notification of the households selected pursuant to the lottery; (d) the owner’s obligation to market inclusionary units to households selected pursuant to the lottery; (e) certifications for household eligibility to rent or purchase an inclusionary unit; (f) closing procedures; (g) post-closing responsibilities of owners, tenants, and subsequent unit owners; and (h) the process for conversion of a rental development to a for-sale development.
• The District’s designation of housing providers to resell inclusionary units to households selected by the District.
• The responsibilities of heirs, legatees, or others taking title to an inclusionary unit if an owner dies, and mortgage holder obligations in the event of a foreclosure.
• The opportunity to cure violations of the regulations, and the District’s ability to waive any of the regulations if (a) the development is participating in a District or federal program to provide affordable housing; (b) the waived provision is not required by the inclusionary zoning regulations or law; and (c) application of the provision is burdensome when combined with other regulations or standards, the goal of the provision is adequately addressed by other regulations or standards, or waiver of the provision is in the best interests of the District.

Conclusion

The inclusionary zoning regulations and the administrative rules are untested in the District of Columbia. As projects make their way though the development process, it will be important for the District to be consistent in applying and interpreting the inclusionary zoning rules and regulations, with the overall goal of developing a fair and predictable program. It also will be important for the District to allocate appropriate resources, because implementing the inclusionary zoning regulations and rules will involve a rigorous administrative process. Finally, the District must be prepared to address promptly any unexpected negative consequences to housing in the District or excessive delays in the development process that may arise during implementation of the requirements.