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Council weighs temporary cut to 20% inclusionary requirement amid stalled housing projects
Summary
Councilors and staff debated options to spur housing production after the new multifamily zoning: temporary reduction of the inclusionary set-aside from 20% to 10%, tax incentives requiring home-rule petitions, capital funding models, fee waivers, or targeted exemptions for projects already in process. Staff said a full nexus study will not be ready until FY26 but proposed interim measures for council consideration.
The council held an extensive discussion of a city manager memo about barriers to housing production and options to accelerate projects that are struggling to finance under current market conditions.
Councilors and staff reviewed five broad policy levers: temporarily lowering the inclusionary-zoning set-aside (proposed examples: 20% to 10% for a time-limited period), exploring tax-incentive packages that could require home-rule authorization, creating city capital funding or a revolving loan fund, waiving or deferring building permit fees, and targeted permit or special-permit relief for projects judged critical to meeting housing goals.
Staff said the legal "nexus" study that would provide a new formal justification for changes to the inclusionary formula is not complete; a new RFP and consultant engagement are planned for early fiscal 2026 with final results in spring 2026. Department leaders said independent economic feasibility work done recently shows the market is challenged and that a range of proposed rates (8% to 13%) might pencil for some project types, but results vary by project and market assumptions.
Some councilors pressed for swift short-term action to rescue stalled projects in the pipeline, including temporary reductions limited to projects that start within a set window. Councilor Toner and others argued a temporary 10% set-aside would create a pragmatic path to get units built; Councilor Zuzi and others asked that any changes be geographically sensitive so that corridor-scale projects get relief while smaller neighborhood sites are treated differently. Vice Mayor McGovern and others urged conservative, multi-pronged solutions including capital funding through the Affordable Housing Trust to subsidize inclusionary units so that obligations can be met without undermining project finance.
City staff committed to returning with more detailed options in the fall, including timelines, legal constraints (home-rule needs), and financial scenarios for each idea.
What happens next: Staff will develop specific policy language and financial scenarios, coordinate with the Affordable Housing Trust, and return to council with options and suggested next steps in the fall. Any ordinance changes would require a public process and, where required, state-level approval.
