Flagstaff official describes incentives, bond spending and monitoring practices to spur workforce housing

Jennifer, a Flagstaff housing official, summarized the city’s approach to encouraging workforce housing at a Prescott City Workforce Housing Committee meeting. She told committee members Flagstaff uses zoning incentives, municipal funding and city-owned land to attract developers and increase the chances of obtaining low-income housing tax credits.

Jennifer said a combination of regulatory incentives in the zoning code and “financial incentive[s]” is the most effective way to attract builders. “If you can swing that in financially, we have an incentive policy that is funded by our general fund,” she said, adding the city also benefited from a voter-approved general obligation bond.

The $20,000,000 bond, she said, was divided into four primary spending categories: about $7,000,000 for down-payment assistance; $5,000,000 for developer incentives for multifamily rental projects; $3,000,000 to support adaptive reuse (for example, converting motels to housing); and $5,000,000 to update and expand affordable rental units on city-owned public-housing sites. “That was a really big help,” she said of having local bond funding to bring to project negotiations.

On city-owned land, Jennifer said incentives in Flagstaff apply to municipal parcels but cautioned that Arizona’s gift-clause rules limit how deeply the city can discount land sales. She described pre-application coordination between planning and housing staff as a standard practice: developers are invited to pre-application meetings where staff describe incentive options, and housing staff will follow up to discuss feasibility and income targets.

Jennifer described Flagstaff’s incentive structure as tiered: lower-area-median-income (AMI) targets receive larger incentives. She said the minimum threshold to qualify for incentives in Flagstaff is 10% of units set as affordable, and that multifamily affordable units in projects are generally required to remain affordable for 30 years, “consistent with low income housing tax credit projects.”

Monitoring and enforcement rely on development agreements and reporting requirements, she said. Developers sign legally binding development agreements that include commitments to provide affordable units. “That document stipulates that they will submit biannual reports to our housing department that verify … the income levels of the tenants in those units and the rent being charged,” Jennifer said. She added that the city relies on property managers for much of the tenant-level verification and conducts periodic checks.

On permanently affordable ownership programs, Flagstaff operates an in-house community land trust and partners with Housing Solutions of Northern Arizona to handle eligibility determinations and administer down-payment assistance loans. For ownership units, Jennifer said the city uses long ground leases (99 years) or deed restrictions to secure resale-price restrictions so homes remain affordable to subsequent buyers.

Jennifer noted operational lessons: zoning-code incentives can be complex and hard to change once codified, so Flagstaff maintains policy documents alongside zoning text and periodically reviews income tiers. She recommended separating ownership and rental rules and keeping some policy levers outside the zoning code so they can be updated more easily.

Committee members asked for sample code language, development agreements and deed-restriction templates; Jennifer said she would provide examples and policy documents to the committee.

Ending: The presentation closed after committee questions and a pledge to share Flagstaff’s code sections, development-agreement templates and deed-restriction/ground-lease examples for the Prescott committee’s use.