Innovative Zoning Strategies: Addressing Affordable Housing Shortages

The American Southwest is experiencing a notable shift in its approach to addressing affordable housing shortages. California, Nevada, and Arizona are exploring and debating various zoning relief measures to incentivize private developers to increase the supply of affordable housing. These initiatives primarily focus on increasing housing density and lowering development costs, with the intent of making housing more accessible to low and moderate-income families.

California, known for its suburban sprawl and single-family neighborhoods, has a major affordable housing shortage. To begin to address decades of undersupply, California must plan for more than 2.5 million homes over the next eight-year planning cycle, and no fewer than one million of those homes must meet the needs of lower-income households. An important tool in addressing this shortage has been the State’s Density Bonus Law (DBL; Gov. Code §§65915 - 65918). Originally enacted in 1979, DBL allows a developer to increase density on a property above the maximum density set under a jurisdiction’s General Plan in exchange for including rent-restricted affordable and senior housing. The State is now considering taking its density bonus further with new legislation aimed at housing in coastal neighborhoods, some of the state’s most expensive areas. Assembly Bill 2560, introduced by Assembly Member David Alvarez, seeks to extend the DBL to coastal zones, which were previously exempt due to the California Coastal Act of 1976. This follows last year’s AB 1287, which allows for stackable density bonuses, designed to incentivize the creation of both middle-income and very low-income housing.

According to statistics from the National Low Income Housing Coalition (NLIHC), Nevada tops the list for affordable housing shortage in the nation. As a result, various local jurisdictions, particularly in Southern Nevada, have introduced a range of similar incentives for developers. The City of Las Vegas, for instance, approved an ordinance in January 2023 that provides density and height bonuses, along with financial incentives, for residential or mixed-use projects that include affordable units. Similarly, Clark County (the nation’s 11^th-largest county) recently updated its Development Code, Title 30, which now offers density bonuses, including parking requirement reductions, for affordable housing developments that cater to households earning 80% or less of the AMI.

In Arizona, according to an Arizona State University research report, the state is short 270,000 housing units, and there are only 26 rentals available for every 100 extremely low-income households (which are defined as having incomes at or below either the federal poverty guideline or 30% of the area median income, whichever is greater). Arizona has been exploring legislative avenues to promote affordable housing, including proposals focusing on accessory dwelling units, missing middle housing options, and streamlining local approval processes. One such proposal, House Bill 2570, though vetoed by Governor Katie Hobbs in March 2024, was aimed at increasing homeownership by loosening development standards for single-family homes to foster the production of smaller, more affordable starter homes. The bill would have additionally altered minimum lot sizes and setback requirements, limited cities’ authority to enforce specific design or aesthetic standards, and impacted cities ability to regulate aspects of homeowners associations.

While there are other potential tools to address the affordable housing shortage, the approaches these three states are taking highlight a growing trend of the use of the zoning code to address the affordable housing shortage. The efforts by these states also illustrate that more than one approach may be necessary to assist private developers in meeting today’s high-cost challenges that are present in developing more affordable housing.

Attorneys in Ballard Spahr’s Affordable Housing and Community Development group are continuously monitoring new developments and are available for counsel.

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