April 04, 2022

Washington, DC Expands Its Affordable Housing Programs

4 min

DC Mayor Muriel E. Bowser's administration continues to seek ways to achieve its goal of building 12,000 new dedicated affordable housing units by 2025.

In the year since the city's Zoning Commission approved "IZ Plus," an expansion of its Inclusionary Zoning program, the administration has taken several steps toward that goal by making large investments, increasing set-aside requirements, and creating incentive and support programs to encourage construction of affordable housing units.

The IZ Plus expansion increased the percentage of units qualifying residential developments must designate as affordable from 8-11% to 10-20%. A month later, in May 2021, DC received $2.3 billion in American Rescue Plan Act State and Local Fiscal Recovery Funds, $323 million of which was allocated to affordable housing production.

Specifically, the funds provided a "one-time infusion" to the Housing Production Trust Fund (HPTF) – a special tool the city uses to finance affordable housing – that increased the total amount invested in fiscal years 2021 and 2022 to $400 million.

The substantial investment allowed the Department of Housing and Community Development (DHCD) to release a request for proposals (RFP) for affordable housing projects in September – the first of its kind since 2019. Affordable housing funding opportunities under the RFP include HPTF financing for new construction or vacant building rehabilitation projects that produce and reserve at least five affordable housing units for households earning up to 30% or 50% of the Median Family Income (MFI). According to the U.S. Department of Housing and Urban Development (HUD), the MFI for a family of four as of April 1, 2021 was $129,000.

In December, the Zoning Commission expanded the scope of Inclusionary Zoning set-asides associated with penthouses and rooftop structures. Previously, penthouse construction on a residential building was not subject to Inclusionary Zoning set-asides. Now, developers must reserve additional affordable housing units for households earning up to 50% of MFI. Alternatively, developers must contribute to the HPTF an amount equal to half of the penthouse's market value. As a tradeoff, the commission relaxed setback and other requirements for the development of these highly desirable amenity spaces.

Later that month, DHCD released a request for applications (RFA) for the Supporting Faith-Based Institutions in Developing Affordable Housing pilot program. Through the pilot program, faith-based organizations can obtain technical assistance, loans, and grants to convert their real estate assets into affordable housing for households with incomes of up to 50% of MFI.

In February, DHCD released an RFA for property tax abatements created under the Tax Abatements for Affordable Housing in High-Needs Areas Amendment Act of 2020 (HANTA). The program is intended to encourage affordable housing development in four planning areas identified in the Housing Equity Report as having the lowest stock and highest production goals: Rock Creek West, Rock Creek East, Capitol Hill, and Upper Northeast.

Developers can obtain up to 40 years of tax abatements in exchange for reserving at least one-third of housing units for households with an average income of 80% of MFI. Units that are part of the Inclusionary Zoning program count toward the one-third requirement. The total amount available for abatements caps at $200,000 in FY 2024, $4 million in FY 2025, and $4.16 million in FY 2026, with a 4% increase each fiscal year thereafter.

Currently, a comprehensive public engagement process is under way for another expansion to the Inclusionary Zoning program. If approved, the expansion – known as IZ-XL – will subject commercial-to-residential building conversions resulting in ten or more dwelling units to Inclusionary Zoning requirements. The District Office of Planning commenced the IZ-XL public engagement process soon after the Zoning Commission approved IZ Plus. Once IZ-XL is approved, the Office of Planning will commence a third phase of Inclusionary Zoning expansions.

Public processes are also ongoing for four separate petitions submitted by the Office of the Attorney General to further expand Inclusionary Zoning. The four petitions propose text amendments to:

  • Deepen affordability levels by lowering income thresholds from 60% of MFI to 50% of MFI for rentals and 80% of MFI to 70% of MFI for homeownership
  • Require additional contributions – such as 20% more units, deeper affordability, or more family-sized units – when affordable housing units are provided off-site
  • Apply Inclusionary Zoning requirements to multiple downtown zones currently exempt from the program
  • Exempt affordable housing units from minimum parking requirements, thereby removing a barrier to development and incentivizing developers to reallocate costs

It has been a busy year for the Bowser administration's affordable housing efforts. All signs point to 2022 being another one.

For more information on the Inclusionary Zoning program and other affordable housing development matters in DC, please contact Ked Whitmore, Zach Williams, Alex Echevarría, or another member of Venable's Land Use and Zoning Practice Group.