Planning memo details performance, possible changes for density bonus programs

A new analysis of the city’s density bonus programs finds mixed results in their ability to deliver community benefits such as affordable housing in new real estate projects.

A memo released last week by Planning Department Director Lauren Middleton-Pratt details the findings and recommendations of the analysis commissioned by the city and prepared by Clarion Associates and Economic & Planning Systems. The look at the city’s 15 active programs – including the Downtown Density Bonus and Affordability Unlocked – found that as a whole the density bonus approach has delivered over 46,000 total housing units, including 13,000 affordable units, and generated $41 million in fee-in-lieu payments since its inception.

In general, the density bonus programs allow developers to build taller or denser projects in exchange for providing community benefits like affordable housing. High-utilization areas such as downtown, the Rainey Street District and the University Neighborhood Overlay are seen as having the most potential use and impact, but disparities in program adoption and effectiveness reveal challenges.

The report said some programs permit developers to pay in-lieu fees, while others require on-site affordable units, leading to confusion and inconsistent outcomes. Also, programs like Micro-Unit Density Bonus have seen significantly lower participation due to insufficient incentives in areas with lower market demand.

Developers and community members who offered their thoughts on the programs called for greater consistency in affordability standards and regular recalibration of program requirements and incentives to align with market dynamics and construction costs. The economic feasibility of the density bonus approach varies widely, with high-demand areas seeing substantial developer participation while lower-demand areas often lack sufficient incentives to offset costs, resulting in lower adoption rates.

As an example, the downtown and North Burnet programs require 10 percent of bonus square footage to be designated as affordable, while East Riverside requires 25 percent. Disparities like that are seen as contributing factors to the varying levels of developer engagement.

The report outlines 11 key recommendations to address these challenges, with the most significant including:

• Consolidate geographically and thematically similar programs to reduce complexity and enhance clarity for developers. This approach aims to simplify participation and improve consistency across the city.
• Regularly recalibrate affordability requirements on a regular schedule to reflect dynamic market conditions and evolving construction costs to ensure programs remain attractive to developers while achieving their affordability goals.
• Offer developers more options to meet affordability standards, including the ability to combine on-site affordable units with fee-in-lieu payments. That flexibility could increase participation in areas where on-site units are less feasible.
• Develop tiered programs tailored to height and density goals, particularly for transit-oriented development zones, to align incentives with the demands and opportunities of different areas.
• Prioritize affordable housing as the primary community benefit and limiting the inclusion of other community benefits within density bonus programs.
• Create consistency in rent pricing standards across programs to eliminate confusion and make the program more predictable for developers and administrators.

City Council will review the findings and recommendations in the coming months, with public hearings planned to gather input from residents and stakeholders. Changes to specific programs could be incorporated into amendments to the Land Development Code that are expected to roll out over the next 18 to 24 months.

Some programs identified for review include the University Neighborhood Overlay, the Lamar/Justin Transit Oriented Development, the East Riverside Corridor, Downtown Density Bonus, North Burnet Gateway, DBETOD Phase 2 and S.M.A.R.T. Housing.

The memo also notes that city staff recommends aligning Vertical Mixed Use (VMU) affordability requirements with other density bonus programs. As an alternative, City Council could consider replacing VMU with a citywide tiered program allowing heights up to 60 feet.

A tiered density bonus program for varying heights near transit corridors is also proposed as part of ETOD Overlay Phase 2, alongside a new program granting height entitlements between 60 and 90 feet. Concurrently, staff will evaluate the need for additional tools and may recommend Land Development Code amendments to establish further height-based tiers beyond transit corridors. Recalibration of previously adopted programs is also advised to integrate them into the tiered framework.

Photo made available through a Creative Commons license.

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