No ​“Inclusionary” Apartments Built So Far

Two and a half years after the city adopted a law designed to require affordable housing to be built as part of New Haven’s market-rate construction boom, the city’s ​“Inclusionary Zoning” law hasn’t yet created a single new reduced-rent place to live.

Most of the 50 ​“IZ” affordable apartments approved so far appear to be indefinitely held up by the high cost of borrowing money — even as other, non-“IZ” affordable developments move ahead.

That’s the latest with New Haven’s IZ law, an affordable housing-minded zoning update that city officials first began seriously considering after the Affordable Housing Task Force recommended an IZ study as part of its January 2019 report.

After years of public debate and review and tinkering, the Board of Alders adopted an amended IZ law in January 2022.

The ordinance requires developers of certain market-rate apartment buildings to set aside a percentage of units at deed-restricted affordable rents. 

In particular, it requires new buildings with at least 10 apartments that are constructed downtown to set aside 5 percent of units for renters with Section 8 subsidies and another 10 percent of units for renters making no more than 50 percent of the Area Median Income (AMI), which currently translates to $46,450 for a family of two. It also requires new buildings with at least 10 apartments that are constructed adjacent to downtown or in Westville, and new buildings with at least 75 apartments that are constructed elsewhere in the city, to set aside 5 percent of units for renters making no more than 50 percent AMI.

The law includes a host of incentives — such as density bonuses and waived parking minimums and tax assessment deferrals — intended to make it more appealing for developers to comply. (Click here and here, and see below, for a more detailed accounting of New Haven’s IZ rules.)

While the balance of reduced-rent to market-rate apartments in any given project varies depending on the building’s size and location, the goal was clear: To piggy back off of New Haven’s recent frenzy of residential construction by requiring new private developments to make room for lower and middle-income renters. 

“Inclusionary zoning can create affordable housing that the market would not build on its own,” then-Legislation Committee Chair and East Rock Alder Charles Decker said upon passage of the IZ law in January 2022. 

“It can increase the affordable housing supply, foster mixed-income development, and prevent future luxury developments in areas like Downtown and East Rock from becoming de facto gated communities.”

So. These two and a half years later, how’s New Haven’s IZ law working out?

Mayor: 50 Approved. None Built Yet

According to Mayor Justin Elicker, whose administration drafted and proposed New Haven’s IZ law in June 2021, no new affordable apartments have yet been created thanks to this zoning provision. 

However, he pointed out, the City Plan Commission has approved development projects containing a total of 50 IZ affordable apartments over the past two and a half years.

Those include:

• 10 affordable apartments as part of a 194-unit development planned for 354 Davenport; 

• 13 affordable apartments as part of a 245-unit development planned for 781 Whalley / 50 Fitch;

• 7 affordable apartments as part of a 140-unit development planned for 1101 Whalley;

• 11 affordable apartments as part of a 112-unit development planned for 873 – 887 Grand;

• And 9 affordable apartments as part of various smaller projects that do not legally have to comply with IZ, but choose to because of the associated density bonuses and other building perks.

“I think it’s working well, given the market conditions,” Elicker said about the IZ law. ​“I don’t think anyone expected a spike in interest rates like we’ve seen.” Same goes for a pandemic-era surge in construction material costs. 

Elicker stressed that, while these four big IZ-required apartment projects ​“haven’t been going as fast as some other projects for a variety of reasons that aren’t necessarily related to the Inclusionary Zoning code,” other ​“predominantly deeply affordable projects” in the city are moving ahead.

As examples, he cited Beacon’s planned 76-unit development at 300 State St., St. Luke’s planned 55-unit development at Whalley, Dickerman, and Sperry, and LMXD’s planned 150-unit development at 10 Liberty St.

“There’s been a lot more developers that have pivoted towards building affordable projects in general,” Elicker posited, in part because ​“interest rates are so high that building affordable projects is more desirable because CHFA [Connecticut Housing Finance Authority] interest rates are lower” than what developers would be able to get for market-rate apartment projects.

“It’s difficult at this early stage to have a full understanding of how IZ is working, given that some projects have gone well beyond what is required and the few others that are doing only what is required are slower going,” the mayor concluded. ​“To have the takeaway message be that IZ isn’t working because the four projects that are doing only what’s required haven’t gotten off the ground wouldn’t give the full picture.”

He said his administration is watching this area closely and, ​“if we do believe that IZ is slowing things down, we’ll work with the alders and change course as part of the regularly scheduled IZ policy updates outlined in the Inclusionary Zoning Monitoring and Procedures Manual.”

The lack of housing built so far because of New Haven’s IZ law comes as the city is trying to figure out how to update another years-old zoning law, around accessory dwelling units (ADUs), to make that provision work as intended in leading to the creation of new affordable places to live.

Dixwell Alder Jeanette Morrison, who spoke in support of IZ’s passage back in January 2022, said the very existence of New Haven’s IZ law has changed the conversation, with developers and community members, around new housing construction in town.

“If you want to build in this city,” she said, you have to build at rents affordable to city residents. 

She pointed to Yves Joseph’s company’s construction of 168 apartments — including 58 at below-market rents — on formerly publicly owned land at Ashmun and Canal as evidence of the type of project that can and should be built in town, even if this particular one predates IZ.

She recognized that the cost of borrowing money makes building new housing particularly hard right now. ​“I don’t think IZ is the thing pushing people back” from building at this point in time, she said. 

Morrison said she’s not concerned about no new IZ apartments being built yet. They will be built, she predicted, in time. The change she’d like to see made to the law would be to increase the percentages of apartments that have to be set aside at below-market rents.

Developers: Interest Rates Are To Blame

Three developers behind three of the four projects with mandated IZ affordable apartments offered explanations similar to Elicker’s during interviews about why their approved apartment buildings have not yet been built.

“It’s basically the market factors,” said John Lockhart of Catalina Buffalo Holdings, whose company won permission in October 2022 to demolish several buildings and construct in their stead 194 apartments on Davenport and Congress avenues in the Hill. ​“Interest rates are so high. It really blew past my initial underwriting and my backup plans.”

New Haven’s IZ law wasn’t a problem for this project, he said, given that it required only 5 percent of the development’s apartments to be set aside for renters making no more than 50 percent of the AMI. Lockhart said that the city’s IZ law actually proved to be more helpful than not, because it allowed for greater density and fewer parking spaces.

That said, the project isn’t going anywhere anytime soon. And Lockhart’s company is actually looking to sell it. 

“Somebody is going to build it,” he said. ​“I don’t know who. … I’m really kind of disappointed that it’s not going to be us.”

Christine Rogers of West Rock Views LLC also said that inclusionary zoning hasn’t been the reason for the delays for her company’s planned 140-unit development at 1101 – 1155 Whalley — which she also now plans on selling instead of building herself. 

“There’s been nothing negative about it at all,” she said about New Haven’s IZ law. ​“The Inclusionary Zoning has not been a detriment to the project.”

What has been is the high cost of materials and mortgages. ​“It’s being marketed” for potential buyers or partners to come in and try to help make this long-sought development project a reality.

Hugh Scott, a Branford-based developer involved in the 781 Whalley / 50 Fitch project, also said that New Haven’s IZ law has been ​“really not relevant” in ongoing delays for those planned new apartments.

Scott, who said he’s ​“partially involved” in 50 Fitch’s development, said ​“the project is still on track, but we’ve been slowed down by capital markets.” Do he and his current business partners still plan on building out the approved 245 apartments there, or will they be selling it? ​“Not sure,” he replied.

The developers of the 873 Grand project, meanwhile, did not respond to a request for comment by the publication time of this article.

That development also appears to be moving nowhere fast. 

Two Lyon Street residents have sued the Grand Avenue project’s owner and the City Plan Commission, tying that project up in state court in a bid to stop it from moving forward. 

Zoning Attorney: IZ's Working, Especially At Smaller Scale

A leading local zoning attorney, who has more practical experience of working with New Haven’s IZ law than perhaps anyone else, praised the zoning rule as surprisingly helpful to certain developers.

“For me, it’s a useful tool in certain neighborhoods where the gap between market rent and affordable rent is not significant,” Ben Trachten said. 

Meaning: The financial benefits of the density bonuses outweigh the financial costs of deed-restricting a percentage of units at 50 percent AMI for the IZ term of 99 years.

Trachten singled out one particular density bonus — that allows for a density of 600 square feet for the average gross floor area per dwelling unit, where 1,000 is typical required — as being particularly helpful for the conversion of, say, a two-family house to a four-family house. In such a case, one of those new rental units would be market rate, the other would be IZ affordable, and the developer would not have to add any new parking. 

“The numbers work,” he said. At least, they do for now — when none of these new IZ units have actually come online yet. Who knows what will happen when people actually occupy these units, when the Livable City Initiative (LCI) has to enforce these affordability rules, and when the owner of an IZ building tries to refinance the property.

Trachten said that he’s worked on a number of smaller-scale residential projects that will comply with IZ, and will be coming online in the not too distant future. Those include house rehabs at 306 Greenwich, 362 Poplar, and 708 Orange.

While these projects have been on the smaller side, Trachten said, ​“I think you’re gonna see a lot more developments in the 20 to 60-unit range” far from the city center. ​“We’re gonna see new construction, people choosing to opt in to get the benefits of IZ,” he said.

He concluded by pointing out that, even though he thinks IZ is working out well now and will likely increase in popularity, it does nothing to help the poorest renters.

“The problem with housing is that there is nothing for the deeply poor,” he said. ​“For people living off of disability, there’s nothing. Nobody can building housing for them except the housing authority.” And that’s a totally different area of affordability than what IZ can hope to cover.

What Are The IZ Rules Again?

And, just as a reminder, what does New Haven’s Inclusionary Zoning law actually do?

Some of its key provisions include:

• New or significantly rehabbed buildings with 10 or more apartments in the downtown​“Core” area must set aside 10 percent of units at 50 percent AMI and another 5 percent for tenants with federal Section 8 rental subsidies. (Significantly rehabbed refers to renovations that increase a relevant apartment building’s assessed value by more than 50 percent.)

• In the downtown-adjacent and Westville​“Strong” areas, new or significantly rehabbed buildings with 10 or more apartments must set aside 5 percent of units at 50 percent AMI.

• In the rest of the city, new or significantly rehabbed buildings with 75 or more apartments must set aside 5 percent of units at 50 percent AMI.

• On publicly owned land that the city sells to a developer, new or significantly rehabbed buildings with 10 or more apartments must set aside 20 percent of units at 50 percent AMI.

• Developments exempted from this law include​“prior approved” and​“prior submitted” projects. Those refer to otherwise-eligible developments for which applications were submitted to the Board of Alders, City Plan Commission, Board of Zoning Appeals, or Office of Building Inspection and Enforcement prior to Feb. 18, 2022. Also exempted are student housing, dormitories, and rooming houses.

• The City Plan Commission must also​“promulgate regulations to implement the intent and purposes” of the IZ law. Those regulations shall be compiled in a so-called​“Inclusionary Zoning Monitoring and Procedures Manual,” and shall include guidelines around permitting and approvals, tenant selection and protections, and monitoring and enforcement.

• The city and the alders must re-evaluate the IZ law two years after adoption​“with a goal of increasing the affordable housing set aside required under this Ordinance” to 20 percent in the Core area, 10 percent in the Strong area, and 30 percent on publicly owned land. That re-evaluation must also include the goal of​“expanding” the boundaries of the newly adopted inclusionary zoning map. (That is, to make the Core and Strong areas cover larger swaths of the city.)

The incentives and perks available to developers who comply with the city’s new IZ law, meanwhile, include:

• A 10-year tax abatement that cuts local property taxes by 30 percent for applicable apartment complexes in the Core market, and by 5 percent for applicable apartment complexes in the Strong market.

• A floor-area ratio (FAR) bonus of up to 25 percent above the permitted FAR in the underlying zone. That FAR bonus ​“may be otherwise limited by height restrictions and other bulk area requirements of the underlying zone,” per the ordinance. FAR refers to a building’s total amount of usable floor area in relation to the size of the piece of land it stands on. 

• No parking minimums, meaning that compliant residential developments are not required to build any on-site parking spaces.

• A density bonus that allows for a density of 600 square feet for the average gross floor area per dwelling unit. Most residential zones in the city have a gross floor area minimum of 1,000 square feet per unit.

Finally, developers can still buy their way out of the affordable-set aside requirement entirely.

That so-called​“in lieu of” fee is $214,200 per unit in the Core market, and and $171,360 everywhere else in the city.

Elicker told the Independent that the city has not received any ​“in-lieu” payments yet through the IZ program.