Incentive zoning is a system of bonuses offered to developers in exchange for the provision of a public amenity or affordable housing. The bonuses usually come in the form of additional floor area, which can be used to increase the density or height of a building. Incentive zoning has been used by cities to provide public amenities such as public plazas, visual or performing arts spaces, subway improvements, theater preservation, FRESH food stores, and affordable housing.
Incentive zoning uses market forces rather than command and control regulation to achieve public goals. This means that developers are incentivized to provide public amenities or affordable housing, rather than being forced to do so by government regulation. Incentive zoning has provided amenities such as public spaces, pedestrian-friendly streetscapes, affordable housing, and green buildings. (Jiwon Park, 2023)
Incentive zoning has been used to achieve the objectives of smart growth. A PAS report looks at successful projects that have used incentive zoning to meet urban design and affordable housing objectives. The report highlights the importance of careful planning and community engagement in the success of incentive zoning programs. (APA Planning Advisory Service, 2000)
Density bonuses are a type of incentive zoning that allows developers to increase the number of units in a multifamily investment beyond what is allowed by zoning ordinances. A density bonus can help developers increase their return on investment. Different jurisdictions have unique application processes and requirements for density incentives. (Deena ElGenaidi, 2021)
The Opportunity Zone (OZ) incentive, created by the Tax Cuts and Jobs of Act of 2017, aimed to establish an economic development tool that would foster equitable development outcomes in undercapitalized communities, many of which are majority Black. Two years after OZs were designated, the incentive is not yet living up to its goals.
