HIP Tool: Density Bonuses

Density bonuses are a zoning tool that that permits developers to build more housing units, taller buildings, or more floor space than normally allowed, in exchange for provision of a defined public benefit, such as a specified number or percentage of affordable units included in the development. An affordable housing density bonus program can be designed to allow developers to contribute to a housing fund in lieu of building the affordable units.


Background

What issues do density bonuses address?

Density bonuses provide incentives for specific development types that achieve an agreed upon community vision. This tool can help encourage lower cost market-rate housing in areas with high land costs. Density bonus programs encourage developers to create affordable dwelling units in areas where the local government has identified a shortage of housing affordable to low- and moderate-income households. Density bonuses can also be used to entice development to specific neighborhoods or zones, such as transit-oriented development in station areas or housing in urban centers, or provide amenities, including open space or transit and non-motorized transportation features.

The result is development that provides public benefits without direct public funding. The added density is intended to compensate the developer with additional revenue from constructing additional dwellings, recognizing the added costs of development or differences in profit margins between market rate and below market rate units.

Where are density bonuses most applicable?

Density bonuses are a way to harness strong housing markets to construct affordable housing and other necessary public benefits. Communities that have strong housing markets and wish to instigate affordable and diverse housing options not available through the private market should consider offering a density bonus system in single-family, multifamily or mixed-use zones. Different levels of bonus may be offered for different development intensities. This tool tends to work well if market rents or home prices are high, land values are high, and development capacity is artificially constrained (that is, developers want to build much more densely than zoning allows). If developers can easily develop market-rate housing at lower densities, the density bonus will not likely be used often.

Density bonus and height or floor area ratio incentive programs are also created for areas where a community wants to establish a particular building scale and character – for example, multistory mixed-use developments with underground parking in a downtown.

Tool Profile

Focus Areas

  • Urban Centers
  • Transit Oriented Development
  • Expensive Housing Markets
  • Innovative Single Family Techniques

Project Types

  • Single Family
  • Multifamily
  • Ownership
  • Rental
  • Market Rate

Affordability Level

  • 80 to 120% AMI
  • Less than 80% AMI

Housing Goal

  • Affordability
  • Diversity