USA Case Studies

Lessons on Inclusionary Housing and Land Value Capture – USA case studies

The Californian context

Hope for Slums offers a set of recommendations and lessons drawn from an extensive fieldwork conducted in the United States of America, and more specifically in California, aimed at shedding light on key-factors of Land Value Capture and Inclusionary Housing theories and instruments and achieving an in-depth understanding of possible constraints or opportunities in light of their applicability to sustainable slum regeneration. The focus on the United States and on California in particular has been motivated by the willingness to explore issues and advantages of Land Value Capture and Inclusionary Housing in a context which is mainly privately-driven. This is because the potential transferability of lessons could have been undermined by a more public-orientated policy and planning context.

The cities were found to have implemented a density bonus programme in compliance with “The Density Bonus Law” (found in California Government Code Sections 65915 – 65918). This law requires cities to offer developers with incentives including up to a 35% increase in project densities, depending on the amount of affordable housing provided and an 80% increase in density for projects which are completely affordable with the aim of encouraging the development of affordable and senior housing.

The affordable housing programmes in Santa Monica City and San Francisco City were selected on purpose as they met two main criteria:

  • the programmes being identified as best practice in literature and corroborated through informal interviews with academic experts in the field
  • the programmes having been in operation for at least five years. This was important in order to enable an evaluation of the impacts.

San Francisco City

The San Francisco City programme in the eastern neighbourhoods has been praised as an example of the transformations of plans and regulations to address community needs particularly affordable housing. San Francisco as a city is seen as a pioneer in Land Value Capture. It could be argued that Land Value Capture in the USA was invented in San Francisco in the early part of this century. Land Value Capture has also been implemented in the city for a sufficient duration, allowing for evaluation of the programme and assessment of impacts on affordable housing production and social inclusion.

Producing public benefit through LVC can be done through either:

  1. Individual project “deals’’, utilizing development agreements or similar instruments or
  2. Establishing at the onset the level of public benefit to be expected, proportional to the benefit received for different parcels, known as the “plan-based” approach

The city of San Francisco chose a plan-based approach to LVC which is based on two primary methods to address the increased need for affordable housing production in the Eastern Neighbourhoods. These methods are

  1. Increased IH requirements for new zoning districts in formerly industrial areas, requiring deeper affordability and enabling new options outside of current inclusionary options. The plans rezoned many areas that were primarily previously zoned for industry to urban-mixed-use (allowing for residential and commercial developments). The new plans called for increased IH requirements in the formerly industrial zoning districts of the eastern neighbourhoods.
  2. The second method is through requiring additional fees. The impact fees resulting from up-zoning may be directed towards construction of new housing and preservation of affordability of existing housing within the Plan Areas.

Santa Monica City

The City of Santa Monica has implemented a successful innovative inclusionary housing programme, the Affordable Housing Production Programme (AHPP). Based on the Land Use and Circulation Element (LUCE) of the General Plan, the AHPP seeks to capture some of the increases in land value resulting from planned increases in the intensity of development. The results from the AHPP under the LUCE 2010 show that the tiered bonus-based changes served to enhance the programme goals of increasing the stock of affordable housing and enabling social integration. LUCE 2010 provided a very comprehensive and a well-structured approach to using the market to provide equitable affordable housing using the principle that allowing incremental increases in the development intensity enhances the value of the property and hence developers have to include affordable housing in their projects.

It brought a balance of interests by requiring economic feasibility analyses of the projects so that, as the community obtains its benefits, the developers are also assured of their project’s feasibility. The programme was found to have enabled developers to achieve feasibility and provide housing at deeper levels of affordability than there was before. LUCE 2010 offers a comprehensive policy on mixed use development and demonstrates that land use policies and planning can help encourage greater supply and affordability, as well as influencing the type and location of housing enabling households to access neighbourhoods of opportunity.

The project team have published papers on these two cases in peer-reviewed journals.