Floor area bonuses

Floor Area Bonuses

Floor area bonuses are a tool within urban planning and real estate development that allow developers to construct more building square footage than typically permitted by standard zoning regulations. These bonuses, often granted as part of an incentive zoning program, are an economic incentive offered by municipalities in exchange for developers providing specific public benefits or desirable community amenities. Essentially, they modify the allowable Floor Area Ratio (FAR) for a given property.

History and Origin

The concept of floor area bonuses emerged from the broader practice of incentive zoning, which gained prominence in the mid-20th century. New York City is widely recognized for pioneering incentive zoning in its 1961 Zoning Resolution. The city aimed to encourage developers to incorporate public plazas and arcades into their projects by offering additional floor area beyond the standard limits. This innovative approach sought to improve the urban environment by leveraging private development for public good, shifting from a purely restrictive zoning model to one that offered tangible benefits for desired outcomes.⁸ Over time, the application of incentive zoning, and by extension, floor area bonuses, expanded to include a wider range of community benefits, such as affordable housing and environmental sustainability initiatives.

Key Takeaways

• Floor area bonuses permit developers to build additional square footage beyond standard zoning limits.
• They are typically granted in exchange for providing public benefits like affordable housing, open spaces, or transit improvements.
• Floor area bonuses serve as a powerful economic incentive to encourage development that aligns with municipal planning goals.
• The concept originated from incentive zoning practices, notably in New York City's 1961 Zoning Resolution.
• Their application can influence building density, urban character, and the provision of public goods within a community.

Formula and Calculation

While there isn't a universal "formula" for floor area bonuses themselves, they are applied as an increment to a property's base Floor Area Ratio (FAR). The FAR is a key metric in land use planning that dictates the total permissible floor area on a given lot.

The basic FAR is calculated as:

When a floor area bonus is granted, it effectively increases the "Total Floor Area of Building" that is permitted. The bonus itself is often expressed as a percentage increase to the base FAR or as an absolute additional square footage.

For example, if a municipality offers a 20% floor area bonus for providing affordable housing, and the base FAR for a lot is 3.0, the developer could achieve a new effective FAR of 3.6 (3.0 * 1.20). This allows for a greater volume of construction on the same parcel of land, thereby increasing potential rental income or saleable space and improving the financial feasibility of the project.

Interpreting the Floor Area Bonuses

Floor area bonuses are interpreted as a direct trade-off between private development potential and public benefit. For developers, a higher bonus indicates a greater opportunity to increase the overall scale and profitability of a project, potentially enhancing the property value. For municipalities and residents, these bonuses signify a commitment from developers to contribute to community well-being, such as creating more affordable housing units or improving public spaces.

The successful application of floor area bonuses relies on careful valuation of both the incentive offered and the public amenity provided. The bonus must be substantial enough to offset the additional costs a developer might incur by providing the amenity, making the project more attractive than a conventional development. Furthermore, the public benefit must genuinely address a community need identified in the area's comprehensive plan.

Hypothetical Example

Consider a hypothetical scenario in "Harmonyville" where the local zoning code permits a maximum Floor Area Ratio (FAR) of 2.0 for a particular commercial district. A developer, "Apex Properties," owns a 100,000 square foot lot in this district. Under the standard zoning, Apex could build a structure with a total floor area of 200,000 square feet (100,000 sq ft lot * FAR 2.0).

Harmonyville, however, has recently implemented a new incentive zoning program to encourage the creation of publicly accessible green space. The program offers a 0.5 FAR bonus if a development dedicates at least 15% of its ground-level lot area to a publicly accessible park.

Apex Properties decides to take advantage of this. They design a project that includes a 15,000 square foot public park on their lot. By doing so, they become eligible for the 0.5 FAR bonus. Their new allowable FAR becomes 2.5 (2.0 base FAR + 0.5 bonus). This means Apex Properties can now build a total floor area of 250,000 square feet (100,000 sq ft lot * FAR 2.5). This additional 50,000 square feet of developable space offers a significant increase in potential revenue, offsetting the cost of creating and maintaining the public park and encouraging a valuable community amenity.

Practical Applications

Floor area bonuses are primarily applied in urban and suburban areas undergoing new capital investment and redevelopment. Their practical applications are diverse:

• Affordable Housing: Many cities use floor area bonuses to incentivize the creation of affordable housing units within market-rate developments. Developers receive increased density in exchange for including a specified percentage of housing units for low- or moderate-income households. This is a common strategy to expand the supply of affordable homes.⁷
• Public Open Space: As seen in New York City's early use of incentive zoning, bonuses can encourage developers to provide plazas, parks, or other publicly accessible open spaces.
• Transit-Oriented Development: Municipalities often offer floor area bonuses for projects located near public transit hubs to promote higher-density, mixed-use development that reduces reliance on private vehicles. For instance, the Urban Land Institute highlights how zoning incentives can encourage mixed-use and transit-oriented development, leading to more vibrant communities.⁶
• Historic Preservation: In some cases, bonuses are granted to developers who agree to preserve or restore historic structures as part of a new development.
• Environmental Sustainability: Incentives may be tied to the incorporation of green building practices, storm water management, or other environmentally beneficial features.
• Community Facilities: Bonuses can also encourage the inclusion of facilities like childcare centers, community rooms, or public art.

These applications facilitate smart growth and leverage private sector investment to achieve public policy objectives. The Urban Land Institute publishes extensive research on how such zoning incentives contribute to community objectives.⁵

Limitations and Criticisms

Despite their utility, floor area bonuses and incentive zoning programs face several limitations and criticisms:

• Market Dependency: The effectiveness of floor area bonuses is highly dependent on a strong real estate market. If market conditions are weak, developers may not find the bonus sufficiently attractive to offset the costs of providing amenities, leading to fewer public benefits being realized.⁴
• Unintended Consequences: Critics argue that unchecked floor area bonuses can lead to overdevelopment, straining existing infrastructure like transportation networks, schools, and utilities. Increased building bulk can also alter neighborhood character, leading to concerns from existing residents about shadows, loss of open space, and increased traffic.³
• Equity Concerns: There are debates about whether the benefits of floor area bonuses are skewed. Some argue that developers gain substantial financial rewards while the public benefits, particularly affordable housing, may not adequately address the scale of need. Concerns have been raised in California, for example, that the benefits of density bonuses are skewed toward developers with limited gains for low-income residents.²
• Complexity and Negotiation: Designing and implementing effective floor area bonus programs can be complex. They require clear guidelines, consistent administration, and often involve extensive negotiations between developers and municipalities, which can introduce delays and uncertainty into the building permits and approval process.
• "Deal with the Devil": Some local officials and community members criticize these policies as a "deal with the devil," suggesting that municipalities are giving away valuable development rights in exchange for amenities that should perhaps be mandatory or funded through other means.¹

Floor Area Bonuses vs. Density Bonus

While often used interchangeably, "floor area bonuses" and "density bonus" refer to closely related, but distinct, aspects of incentive zoning.

A floor area bonus specifically refers to an allowance for additional gross floor area within a building beyond what is typically permitted by the base zoning code. It directly increases the total square footage that can be built on a lot, typically tied to the Floor Area Ratio (FAR).

A density bonus, on the other hand, is a broader term that refers to an allowance for an increased number of dwelling units per unit of land area, or an increase in the intensity of development. While an increase in floor area (a floor area bonus) often results in increased density (more units or more intensive use), a density bonus might also be granted through other means, such as allowing smaller lot sizes or reduced setbacks, without necessarily increasing the total building floor area on every part of the lot. For example, a density bonus might permit 20 units on a parcel where only 15 were allowed, which may or may not translate to a direct increase in total floor area if the units themselves are smaller. In practice, both terms are mechanisms within incentive zoning to encourage certain types of development by offering more developable space or units.

FAQs

What is the primary purpose of floor area bonuses?

The primary purpose of floor area bonuses is to incentivize real estate development that includes specific public benefits, such as affordable housing, public open spaces, or improved infrastructure, by allowing developers to build larger structures than normally permitted.

How do floor area bonuses benefit the community?

Communities benefit from floor area bonuses by receiving amenities that might not otherwise be provided by the private market. These can include more affordable housing options, parks, community centers, or sustainable building features, enhancing overall quality of life.

Are floor area bonuses mandatory for developers?

No, floor area bonuses are typically voluntary incentives. Developers choose to pursue them if the additional allowable floor area provides sufficient economic incentive to offset the costs of providing the required public amenity.

Can floor area bonuses lead to taller buildings?

Yes, in many cases, floor area bonuses can lead to taller buildings or buildings with a larger footprint, as they increase the overall permissible Floor Area Ratio (FAR) for a given site, allowing for more developable space.

Who determines the specific public benefits required for a floor area bonus?

The specific public benefits required for a floor area bonus are determined by local municipal governments through their zoning ordinances and comprehensive plans, reflecting the needs and priorities of the community.