What is an Affordable Housing Overlay (AHO)?
The creation of an affordable housing overlay (AHO) district is a way for municipalities to proactively identify where they want affordable housing in their community and steer affordable housing development to these areas. Communities looking to create mixed-income neighborhoods can use an AHO to promote this type of development. AHOs are tools to encourage the development of affordable housing units with reduced costs to the government or to developers.
Well-designed AHOs should provide incentives for developers to build affordable housing such as density bonuses, flexibility in height and bulk, changes to setback requirements, impact fee waivers, reduced parking requirements, and an expedited approval process and exemptions to any discretionary review. The AHO ordinance includes these incentives which give developers and communities predictability of development standards and also codifies a community’s commitment to the production of affordable housing.
As a zoning overlay, an AHO creates a district that preserves the existing underlying zoning. This arrangement allows for substantial flexibility when delineating the boundaries of the overlay district.
Overlay Districts as described by the American Planning Association:
An overlay zone is a zoning district that is applied over one or more previously established zoning districts, establishing additional standards and criteria in addition to those of the underlying zoning district. Communities often use overlay zones to protect special features such as historic buildings, wetlands, steep slopes, and waterfronts. Overlay zones can also be used to promote specific development projects, such as mixed-use developments, waterfront developments, housing along transit corridors, or affordable housing.
Minimum Criteria for an Affordable Housing Overlay (AHO):
- A minimum of 20% of new units for rent and for sale are affordable (30% or less of the average median household income (AMI)).
- Of the affordable units available for rent, they shall be affordable to households between 50% and 80% AMI.
- Of the affordable units available for sale, they shall be affordable to owner-occupied households at or below 100% AMI. This means the monthly housing payment (which shall include debt service at prevailing mortgage loan interest rates, utilities, condominium or related fees, insurance, real estate taxes, and parking fees, if any) shall not exceed thirty percent (30%) of the AMI monthly income.
- Development in this overlay that conforms to zoning standards and affordability requirements is expedited to ensure the project takes no more than one year for full approval.
- Density bonus is offered for the inclusion of affordable units beyond the mandatory 20%.
- The geography of the overlay district encourages mixed income neighborhoods. This is accomplished by including census tracts with higher median household income in the AHO.
- The AHO, when applicable,is located in a transit-oriented with access to basic services (e.g., grocery stores, health care facilities).
Best practices for AHOs
- Provide technical support to developers on how the AHO works.
- Clearly convey the housing incentives in the AHO so that developers can leverage cost savings to increase the number of affordable homes they can build.
- Identify sites for development and include these parcels in the AHO.
- Monitor new developments and track affordable units.
Cambridge, MA – The City of Cambridge, Massachusetts recently adopted a 100% affordable housing overlay in October 2020. The Overlay incentivizes the development of affordable housing by providing density bonuses, height bonuses, and other relaxed zoning standards for residential developments where every unit is made permanently affordable. Complimentary design guidelines for the overlay district were created to ensure that affordable housing developments have desirable design features and are compatible with existing neighborhoods.
Oakley, CA – The city adopted an AHO as part of its comprehensive rezone in 2010. An area of 16 acres was changed from light industrial and commercial to “by-right” multifamily development. Since the creation of the AHO, there have been seven affordable housing developments in the overlay with a total of 509 units for low-income households and seniors.
Salt Lake City, UT– Salt Lake City is considering adopting an affordable housing overlay. This process started in 2019 with extensive public surveying about design preferences and housing needs. The proposed affordable housing overlay would modify density limits, reduce setback requirements, allow for the development of tiny homes, and allow accessory dwelling units by right.