Report Excerpt:This Article would deter a property owner with an existing mixed-use building from converting unused commercial or office space to residential space, or creating more residential uses, with the unintended consequence of saddling the Town and property owners with vacant commercial or office space that could be converted to housing. Instead, this article mandates the creation of only affordable housing for such conversion or expansion. As such, this Article would not achieve Arlington’s affordable housing or commercial development goals. Without offering any incentives, this Warrant Article would appear to deter rather than encourage the creation of affordable housing. This chilling effect is caused by limiting the flexibility property owners now have in reinvesting in properties in Arlington. If the only option available for residential space is to create affordable housing, a property owner may not be able to balance a pro forma to see a return on their investment in their property. Small-scale development of any type is challenging and costly, particularly creating a development with only affordable housing units. Further, the added requirement to seek a Special Permit creates another barrier to property owners reinvesting in buildings in Arlington, increasing time and costs. Lastly, the seemingly mandatory nature of requiring that one to five units of housing must be affordable in most mixed-use development is in direct conflict with the existing Zoning Bylaw’s Inclusionary requirements found in Section 8.2.
The cost of developing affordable housing often exceeds available local and state funding sources, even for projects that only have 10-20% of total housing units designated as affordable. Private developers recoup the cost of developing affordable housing in several ways: using inclusionary housing bonuses (e.g., height bonuses, unit bonuses) to offset the costs of providing affordable housing, charging more in rent or purchase costs for housing not designated as affordable housing, and applying for public subsidies (e.g., CDBG funding, CPA funding, housing trust funds, federal tax credits). These development scenarios include primarily market rate housing in order for a private developer to break even on a project, especially given limited public funding resources and subsidies.