Mandatory Policies - Principles and Examples

Leading practice examples – Mandatory inclusionary affordable housing policies

Threshold approach

Negotiated agreements

Principles of leading practice

Leading practice examples - Mandatory inclusionary affordable housing policies

Threshold approach

City West, NSW: inclusionary zoning

The City West region in inner Sydney includes many former industrial and port areas now undergoing a process of intense urban renewal. In mid-1992 a City West Affordable Housing Committee was established to investigate how affordable housing could be secured in the precincts of Pyrmont/Ultimo. Together with the Commonwealth’s Building Better Cities (BBC) Program in 1991, which promoted more affordable housing, it resulted in the City West Affordable Housing Program.

Development contributions for affordable housing are mandated under the main planning instrument for the area (Sydney Regional Environmental Plan 26 (SREP 26)), which requires a contribution of 0.8 per cent of residential development in the area and 1.1 per cent of commercial development. Contributions can be provided either on-site as part of a larger development or, as has occurred to date, as cash-in-lieu, then pooled with other contributions to provide for purpose-built affordable housing elsewhere in the precinct. The housing is developed and managed by the dedicated not-for-profit housing company City West Housing Pty Ltd (CWH). See: www.citywesthousing.com.au/

Green Square, Sydney: inclusionary zoning

Inclusionary zoning provisions were introduced by the former South Sydney Council for its ‘Green Square’ urban renewal project in inner Sydney. The provisions were initially signaled through a development control plan (which had the status of guiding policy) and later approved by the then Minister for Planning and included within the main statutory instrument for the area (the South Sydney Local Environmental Plan 1998). To enable compulsory affordable housing contributions, the Environmental Planning and Assessment Act 1979 was twice amended to make clear that affordable housing was a legitimate objective under the Act, and that contributions for affordable housing could be made under certain prescribed circumstances. SEPP 70: Affordable Housing (Revised Schemes) was then introduced to set out the parameters within which contributions for affordable housing may be compulsory in New South Wales. This SEPP validated existing affordable housing provisions contained in the City West, Green Square and Willoughby planning instruments.

In the case of Green Square, current provisions now require that three per cent of floor area intended exclusively for residential purposes, and one per cent of floor area intended for other than residential purposes (or a cash equivalent), be dedicated for affordable housing within the Green Square area. Affordable housing development in Green Square is mainly dependent on funding received through the inclusionary planning instrument, but a grant of one million dollars from the State Government enabled City West Housing Company to acquire sites before land values increased prohibitively.

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Negotiated agreements

Willoughby Council, NSW: mandatory negotiated agreements

Willoughby Council in Sydney’s inner north has a mandatory scheme to collect developer contributions for affordable housing when a residential rezoning is approved. The scheme is enforced through the main planning instrument (Willoughby Local Environmental Plan 1995), which requires that four per cent of total floor space of a development on identified sites which are rezoned for residential purposes be dedicated to affordable housing.

Contributions can be provided on site or as a cash equivalent. The policy provides that affordable housing units constructed must be of a similar standard to other dwellings in the local government area, and the title of these units is retained by Council and the dwellings are managed by a community housing organisation. The scheme is supported by the Willoughby Local Housing Program (in the Willoughby Development Control Plan).

United Kingdom: mandatory contributions

In the UK, planning authorities can require a developer to contribute to affordable housing as a consideration and condition of planning approval. The actual level of contribution is negotiated on a site by site basis, but this negotiation occurs within a strong policy framework extending from national policy requirements for affordable housing in plan making and development assessment, through to the identification of regional housing and affordability targets, and local housing strategies with indicative site based targets for affordable housing contributions. The approach combines a mandatory requirement with a negotiated final outcome. For more information see:
www.parliament.uk/commons/lib/research/rp2006/rp06-041.pdf

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United States: inclusionary zoning

In the US, mandatory inclusionary policies are achieved through two basic approaches:

• ‘inclusionary zoning’ approaches, where a proportion of all development above a specified threshold and within a specified zone must contribute to affordable housing
• ‘impact fee’ requirements, which require an affordable housing contribution to offset the impact of the development on housing needs within the local area. A connection or ‘nexus’ between the development and the affordable housing impact must be demonstrated to use this approach.

‘Inclusionary zoning’ approaches are used widely in the US to achieve social mix in the context of new housing development or redevelopment. Requirements are specified in the plan as a fixed percentage of housing units or development value, with ten per cent and higher the norm. Requirements typically apply to new developments, however might be extended to conversions and rehabilitations in areas where there is limited opportunity for new development. Requirements are often restricted to a certain threshold size (like ten units), but increasingly in inner city areas this threshold is reduced or removed as the smaller size of infill sites limit the scale of new developments. Requirements may apply to all developments within a designated zone, or be limited to residential development only. An arbitrary numerical threshold can be problematic as it might encourage developers to undertake odd below threshold development forms to avoid the contribution requirement. This pitfall is avoided if the contribution can be offset by incentives that apply only to developments making the mandatory contribution.

To achieve the social mix objective, preference is for the contribution to be provided on site with a dedication of housing units that are consistent in appearance with the overall development. This approach both increases the supply of affordable housing units and integrates them with other development. However, off-site contributions or payments in lieu may be acceptable for:

• small developments where the contribution would not amount to a complete unit
• developments where running overheads and maintenance costs are likely to be high
• development within environmentally sensitive areas where additional housing stock is not consistent with environmental protection goals.

In most schemes, incentives are available to offset the financial burden of the contribution. Combinations of incentives are offered to maximise value. They may include density bonuses, variations on subdivision, building design, parking, or landscaping requirements, permit and service fee waivers, and expedited approvals.

Ireland: mandatory contribution

In Ireland, local authorities require 20 per cent of residential land to be used for social and affordable housing. Developers must transfer the specified proportion of dwellings, land or sites to local authorities in return for compensation at the level of the existing use value (in the case of land), development costs (in case of sites) and reasonable profit (in case of houses. Alternatively, they may make a cash contribution, or provide dwellings, land or housing sites in alternative locations. The focus of the mechanism is on the delivery of mixed tenure residential developments, as a way of reducing socio-spatial segregation, and of securing sites for new social and affordable housing providers who may be otherwise unable to compete for land in the open market. For more information see:
www.cih.org/northernireland/policy/planning-and-housing.pdf

Banff, Canada: mandatory contribution

A mandatory inclusionary housing scheme was established in the alpine community of Banff National Park, Canada, in 1990. Although development within the national park is strictly rationed for environmental reasons, the local planning authority wanted to ensure opportunities for affordable employee housing remain. Under the Banff local plan, commercial or tourism developers must provide accommodation including one bedroom for every development creating two additional jobs, or contribute $15,000 as a fee in lieu.

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Principles of leading practice

Mandatory inclusionary requirements

Leading practice in implementing mandatory inclusionary requirements for affordable housing observes the following principles:

• Mandatory inclusionary requirements should be supported by a clear legislative framework, including state planning legislation and policy validation, local planning scheme objectives and provisions.
• Mandatory inclusionary housing requirements must be clear, with the ability to estimate likely contribution for different development scenarios at point of land acquisition.
• Mandatory inclusionary housing requirements should be applied as consistently as possible across local or regional areas.
• Mandatory contributions should be offset by planning incentives, guaranteed sales to social housing providers, or other forms of assistance. When available offsets are significant, levels of contribution should also increase.

Pitfalls to avoid

• Requirements should not be set at a contribution level that will jeopardise development viability or discourage activity in the medium to long term.
• Avoid the sudden introduction of a mandatory requirement. Rather, a long lead time to the introduction of mandatory requirements is preferable, with voluntary negotiated frameworks used in the interim to assist land market adjustment.

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