The latest report on the city’s inclusionary zoning program, which compels developers to include affordable units in large residential buildings, shows that as of the end of last year, none of these units had been bought or rented.

The Department of Housing and Community Development quietly released its Inclusionary Zoning Annual Report in April, but it’s received no media attention, and I wasn’t aware of its release until I was recently alerted to it by a reader. The report shows that 18 inclusionary zoning units had been built by December 31, 2012. Seventeen of them are “moderate-income” units, while only one is set aside for “low-income” residents. (Moderate income is not all that moderate for many D.C. families: It’s defined as up to 80 percent of the area median income, which was $107,500 last year for a family of four.) Fifteen are rental units; three are for sale. None of the 18 units has been rented or sold.

But it seems things have picked up in 2013. According to DHCD spokesman Marcus Williams, 14 units have been rented so far in 2013, and while none have been sold, one has a ratified contract on it and is moving toward settlement.

The inclusionary zoning program was initiated by a vote of the D.C. Council in 2007 and took effect in 2009. It requires developers of large new residential buildings to set aside 8 to 10 percent of the dwelling units for low- to moderate-income households at below-market rates. The program got off to a slow start due to the recession, and took another hit in December when the developer of the first two for-sale IZ units, which it was unable to sell, sued the city for depriving it of the value of its property.

But the program could soon take off. According to the report, there are 104 IZ-applicable projects that are under construction, planned, or in the conceptual stage, which should bring a total of 1,079 IZ units to the market. There are also 89 projects with a total of 26,692 units that are exempt from IZ, many because they got approval before IZ took effect.

So will developers have an easier time filling these units than they’ve had thus far? According to Williams, the answer is yes. The central difficulty in selling the units has been that lenders were unwilling to provide loans for IZ units because those units would remain affordable in the event of foreclosure, limiting the bank’s ability to recoup its money. But recently, the rules changed to allow the units to return to market prices.

“The Zoning Commission voted in early 2013 to adjust the IZ program to allow inclusionary units to be released at foreclosure,” Williams says. “That should allow lenders to make loans on IZ units. We continue to amend the covenants that are not consistent with this change.” Williams says DHCD is actively reaching out to lenders to provide information on the program.

As for the rental units, Williams says that IZ has lacked “a clear marketing strategy,” but DHCD is working to implement one.

So what will next year’s IZ report look like? It’s too early to say, but one thing’s clear: Unlike this year, the bottom-line figure will be bigger than zero.

Photo from 2910georgiaave.com

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