The City of Newark recently introduced an ordinance that would amend its Inclusionary Zoning Ordinance (“IZO”) to expand the scope of the IZO, while offering certain density and other bonuses to developers. The City Council voted to introduce the ordinance on first reading and refer the ordinance to the Central Planning Board for review. After the Central Planning Board reviews the legislation, the ordinance will go back to the City Council for a second and final reading, and potential adoption.

The existing IZO requires most – but not all – residential and/or mixed-use developments with new construction of 30 or more units or with substantial rehabilitation of 40 or more units to set aside 20% of the units for affordable housing. Developments that do not require any variances, were not City-owned properties sold in a redevelopment agreement, and were not in the MX-3 Zoning District are not covered by the existing IZO.

The proposed IZO would cover all residential and mixed-use developments, whether new construction or substantial rehabilitation, that has 15 or more units, regardless of required variance relief and location of the project. The proposed IZO would still require covered projects to set aside 20% of the units for affordable housing, with 5% of the total units dedicated to income-restricted units not exceeding 40% of the annual median income (“AMI”), 5% not exceeding 60% AMI, and 10% not exceeding 80% AMI.

The proposed IZO also increases the income restrictions on the affordable housing units from 30 to 50 years. In addition, the amount of a payment-in-lieu of providing the affordable housing units, which is in the City’s discretion to accept, would be changed from a per-unit cost ranging from $15,000 to $50,000, depending on the income restriction level, to a flat $180,000 requirement, no matter how many affordable housing units the project would be short. The proposed IZO also requires a $2,000 fee for any project covered by the IZO for the City to cover administrative costs.

The proposed IZO exempts projects that have submitted a complete development application in accordance with the Municipal Land Use Law prior to the effective date of the ordinance, which is proposed to be October 1, 2022, unless the developer seeks a “substantial change, modification or amendment.” Projects undertaken by the Newark City Housing Authority or a non-profit entity in which at least 50% of the total units are for low or moderate income housing are also exempt.

While the ordinance greatly expands the IZO, it also offers certain benefits to developers, including a 15% density bonus unless the project is granted a density variance; consideration of the need to accommodate the increased number of units and reasonably provide an opportunity for affordable housing by the reviewing land use board, including but not limited to variances and waivers relating to reduced setbacks, reduced coverage, increased floor area, increased building heights and/or additional stories; and additional incentives to subsidize the creation of affordable housing to be negotiated with the City in a developer’s or redeveloper’s agreement.

The Mayor’s Office fully supports the amendment to the IZO and believes the amendment will help with the City’s housing goals. On the other hand, the proposed IZO may disproportionately impact smaller and emerging developers who do not have the same access to capital that larger and more established developers have. Other unintended consequences could be a reduction in smaller residential developments in the 15-29 unit range.

To view the ordinance in its entirety, please click here.