Inclusionary zoning and housing trust fund on the books in St. Charles - Metropolitan Planning Council

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Inclusionary zoning and housing trust fund on the books in St. Charles

Far west suburban city becomes the next in a string of Chicagoland communities to incorporate inclusionary zoning as a strategy to tap residential market activity, leverage public-private partnerships, and promote the local development of mixed-income housing.

Joining Highland Park, Lake Forest and Chicago, Feb. 4, 2008, St. Charles, Ill., adopted its inclusionary zoning ordinance and housing trust fund enabling legislation. "Its monumental," says MPC Vice President of Community Development Robin Snyderman. "There are a number of job-rich and affluent communities in our region working to ensure a diverse mix of housing options. They understand the jobs-housing mismatch is both a local and regional issue that negatively impacts our economic competitiveness."  

Inclusionary zoning is a tool that requires residential developers to set aside a certain percentage of the homes in the development to be priced as affordable. A housing trust fund is a flexible, locally run pool to support a community’s affordable housing activities, including helping to finance a new affordable development, assisting homebuyers, and upgrading existing properties.

While not alone, the City of St. Charles did take a unique approach to the development of its inclusionary zoning ordinance. It was very careful to ensure the ordinance made sense with the local housing market. First, the ordinance is “tiered,” requiring developments of different sizes to set aside different percentages of affordable homes. Most communities require a flat percentage for all qualified developments in their inclusionary zoning policies. (Highland Park’s ordinance, for example, applies to developments of five or more homes and requires 20 percent of the homes in each qualified development to be affordable.)

After drafting its ordinance, St. Charles worked with S.B. Friedman & Company, a real estate advisory consultant, to analyze how the proposed ordinance would affect the bottom-line costs and profits for developers. The study concluded that most would choose to build the homes on site, and the cost offsets built into the ordinance (density bonus, fee waivers, etc.) would make the construction of affordable homes financially viable for most developers. The St. Charles Housing Commission then met with a variety of stakeholders, including the school and park districts, local developers, and other real estate professionals to discuss the merits of the policies and solicit feedback.

These two pieces of legislation are the result of several years of hard work by St. Charles to address the decreasing supply of housing for moderate- income workers, a negative consequence of the city's strong local housing market and desirable location. In 2003, responding in part to the workforce housing challenges surfaced through the region’s first employer-assisted housing program with local manufacturer System Sensor, MPC began working with St. Charles to develop a housing action plan . This plan was designed to promote more housing options consistent with the Housing Endorsement Criteria created by the Metropolitan Mayors Caucus and adopted by the St. Charles City Council. The plan provides a series of recommended steps to create new mixed-income developments, preserve and upgrade the existing affordable housing stock, and leverage county, state, federal, and other resources to support local workforce housing developments and programs. St. Charles Mayor Donald DeWitte, Ald. Betsy Penny, and the St. Charles Housing Commission, chaired by St. Charles resident and affordable housing developer Cindy Holler, have led the charge to make these recommendations a reality.

The St. Charles Inclusionary Zoning ordinance applies to both rental and for-sale developments, as follows:

Development Size (# of homes)

% required  affordable

In-lieu fee provision*

Optional for all
Optional for 50%
Only optional for 50% if demonstrates "hardship"

*The current calculated in-lieu fee is $140,000 per unit required by the Inclusionary Zoning Ordinance, but not built on site. For the portion of the requirement that allowed to be satisfied by the payment of a fee in-lieu, any fraction will be used in calculating the total fee in lieu to be paid by the Developer. For example, for a development of five units, the affordable requirement is five percent (see above). Five percent of five units is ¼ or .25. So, the amount the developer would pay in-lieu of building the affordable home on site would be $35,000 or ($140,000 x .25).

For rental developments, the inclusionary homes must be affordable to households earning between 50 and 60 percent of the Chicago Area Median Income. In 2007, the income for a family four that would qualify for these apartments would be between $37,700 to 45,240 annually. The rental prices will be based on each qualified family’s ability to pay up to 30 percent of its income on housing costs.

Affordable rental apartments created under the St. Charles Inclusionary Zoning policy will be affordable in perpetuity.

In for-sale developments, the inclusionary homes must be affordable to households earning 80 percent of the Chicago Area Median Income. In 2007, the income for a family of four that would qualify to purchase an affordable home would be at or below $59,600 annually. The for-sale price would also be based on a family’s ability to pay up to 30 percent of its income on housing costs. These new homes will provide opportunities for working families to live and work in St. Charles .

For-sale opportunities created under the Ordinance will be price restricted for the first seven years. After seven years, then the owner shares a percentage of the equity earned on the property with the City of St. Charles upon the sale at the regular market price. Both the percentage of equity paid by a seller and the in-lieu fee initially paid by the developer will go into the city’s newly established Housing Trust Fund.

While monumental, these policies are still just part of the equation in St. Charles. Moving forward, the St. Charles’ Housing Commission will look to reach out to employers to solicit their investment in affordable housing for the local workforce, work with Kane County to look at developing additional resources, explore local tools such as tax increment financing (TIF) and local bond authority to generate new revenue sources for affordable housing, and review exiting building codes to ensure that they aren’t cost prohibitive to affordable housing construction.

MPC is pleased to congratulate St. Charles on its perseverance and leadership!

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