Tool 6: Calculating the Contribution of Density Bonusing and Inclusionary Zoning

6A: Potential Contribution of Density Bonusing

This tool allows you to calculate the impact of density bonusing on a project’s total number of affordable units. A density bonus is an authorization given by a municipal government to a developer to build at a higher density than specified in official density plans. In exchange for a density bonus, some municipalities require developers to include affordable housing units in their housing developments. Thus, density bonusing is a strategy to increase the affordable housing stock.

Please note that the blue cells below are calculation cells and thus, do not require entered information.

Steps:

1. In column A, enter the name for the proposed residential project.
2. In column B, enter the number of housing units the proposed residential project will include.
3. In column C, consider if there is demand for additional density. (High housing prices, for example, could be an indication of such demand.)
4. In column D, determine the density contribution that will be given to the developer (that is, the number of additional units that the developer will be permitted to build on the lot). This figure will be based primarily on the density rate that the municipality deems desirable (e.g. if the project calls for 25 units but the municipality believes that 40 units would be desirable, the latter may allow an additional 15 units).
5. In column E, enter the original amount of profit expected (pre-density bonusing) per housing unit (based on the original pro forma).
6. For column F, click the "calculate" button to determine the original amount of profit expected (pre-density bonusing) for the total housing development.
7. For column G, click the "calculate" button to determine the increase in profit that will be achieved through density bonusing.
8. In column H, enter the cost per affordable housing unit.
9. For column I, click the "calculate" button to determine the number of affordable units that density bonusing will contribute to the housing development.

6B: Potential Contribution of Inclusionary Zoning

This tool allows you to calculate the impact of inclusionary zoning on the total number of affordable units in a project. Inclusionary zoning is a policy to increase the number of affordable housing units by requiring builders (in certain zones) to incorporate affordable housing units in their project (in return for the entitlement to build in those zones). The idea is for the affordable units to be funded through a portion of the overall project profit. To ensure this, planners target projects where there is potential for large profit to be made.

Please note that the blue cells below are calculation cells and thus, do not require entered information.

Steps:

1. In column A, enter the name for the proposed housing project.
2. In column B, enter the number of housing units the proposed residential project will include.
3. In column C, enter the average cost of housing units in the proposed residential project.
4. In column D, enter the expected rate of profit on the housing units (as a decimal, e.g., 10% = 0.1).
5. For column E, click "calculate" to determine the net profit for the proposed residential project.
6. In column F, enter the “normal” rate of profit.
7. For column G, click "calculate" to determine the “windfall” profit.
8. For column H, click "calculate" to determine the number of units that could be created.
9. For column I, click the "calculate" button to determine the number of units that could have been created (H) as a percentage of the total number of proposed units (B).

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