Inclusionary Zoning Calculator Tool
NAHB’s Inclusionary Zoning (IZ) Calculator Tool consists of Excel spreadsheets designed to show the effects of IZ on the pro forma for a development consisting of homes built for sale. Select the Excel spreadsheet that fits your requirements:
The tool allows users to investigate cost-offsetting incentives that would make the project economically feasible and allow it to be built in the presence of a particular IZ ordinance. The tool can be used by developers, local governments, and other stakeholders with an interest in increasing the supply of affordable housing.
Relative to other inclusionary zoning analysis tools that exist, NAHB’s tool provides enough detail to be realistic and applicable to an actual project, and enough transparency to be credible. It also accommodates an unusually wide range of possible incentives:
- General changes to the IZ ordinance
- Government assistance with land acquisition
- Reductions in impact or other fees
- Government provided infrastructure
- Reduced requirements for environmental or other studies
- Low-cost loans
- Relaxed standards for the affordable units
- Expedited permitting or anything else that shortens development and construction time
- Reduced property taxes or other holding costs until the homes are sold, and property tax abatement for the eventual home owners
- Conventional density bonuses
It is a powerful tool that can help developers communicate with local government about how to make IZ work for all parties.
How to Use the IZ Calculator Tool
The following will explain how to use the AD&C version, as it includes everything that is in the AD version.
Instructions can also be found embedded in each spreadsheet of the tool, along with tables of recommended sample data. There are two columns throughout the tool: “No incentives” and “With incentives.” The “With incentives” column requires total data, i.e. if you have a project of 50 lots with no incentives but are granted a density bonus of five lots, the With incentives input should be 55 lots.
At the bottom of the Excel document, you will see a row of tabs; each tab is for a different piece of the puzzle and requires either your own personal or sample data.
When you open the spreadsheet, you will be on the first tab, General Instructions. This tab provides more information on the types of tables and cells.
- Any table shaded GREEN is a summary/result box that does not require any input.
- Any table shaded PINK implies that your data (with NO incentives) will need to be placed into the red-outlined boxes.
- Any table that is BLUE is the incentives counterpart of the PINK tables, allowing you to input your data that takes into account governmental incentives for your project. Throughout the document, it is not required that you enter anything into the “With incentives” column. Only enter data here if an incentive is provided to the project. Further, if you do not want or do not have the level of detail, you can enter combined sum into “Other.”
- Any table shaded YELLOW is a suggestion box, providing some average characteristics data for certain input boxes in case you do not have that figure available.
The Dashboard is the main tab where you should start and end. Upon opening for the first time, the tool has sample data already filled in for an example project. If you wish to start anew, select “Clear all input cells” in the top-right corner.
NOTE: There are no cells on this page for you to input data; this is the summary page with the “results.”
- A&D Costs is where you will navigate next and is the first page that requires your input; this tab is where you should enter project information and costs for acquisition and development data. Enter project info for the number of lots, and the percentage required affordable under IZ.
- A&D Financing, start with Debt parameters. Put in either the loan dollar amount or loan-to-cost ratio/limit. In the orange box you will see suggested data to use from NAHB’s AD&C quarterly survey. Copy and paste this data for help. Next, schedule how many costs are incurred per year. It is helpful to consider what could be different with incentives? Examples here include lower interest rate or expedited permitting.
NOTE: At the bottom of tables there is either a YES or NO to show whether your inputs add up to 100% or are fully incurred.
- A&D OP Exp, enter any holding costs, for example property tax while holding the property. Incentives like property tax relief could apply here.
- A&D Returns is where anticipated return data is used to judge whether the project will be feasible or not. There are three rates of returns (see suggested data). In a typical case you may enter data that will make it look like the project is requiring the smallest rate of return.
- Lot Sales contains a box that will be automatically calculated based on the previous construction data inputs to ensure the profit margin is met. You will need to schedule when lots will be sold, how many will be sold in each year (as a percentage), for both market rate and affordable units. Again, the total must equal 100% of lots to get YES at the bottom.
NOTE: At this point the A&D Tool would require the lot price to be entered manually, but the AD&C Tool has four more tabs for construction.
- A&D Pro Forma, A&D Pro Forma Incentives and A&D Pro Forma No IZ gives you cost per square foot data from RS Means that you can copy and paste as construction inputs. The data includes labor, subcontractor overhead, materials etc. RS Means has location coefficients and can adjust for different quality homes, or specific project, and economies of scale. Contact NAHB staff for specific locational data. Enter home size; if you have cost per home rather than cost per square foot either column works. Enter the inputs from market rate and affordable units.
- Construction Costs requires inputs for the cost of construction. If there are other costs of sales, there are suggested cost data from NAHB‘s own cost survey. You will need to enter a profit margin — using the suggestions here may be helpful — and is calculating the price that a builder is going to be willing to pay for the lot(s).
- Construction Financing is similar to A&D Financing; suggestions are on this sheet that typically apply for debt parameters as well as suggestions for percent of construction costs incurred by month. This data comes from United State census data.
- Construction Operating Expenses includes the costs while you are holding the home while it is getting finished prior to selling. On this sheet you do not have to input something for property tax. Costs could include security costs, for example.
- Construction Sales has inputs for sales price. You do not need to input property tax reduction, but it can be used as an incentive. For example, if you get $1,000 waiver of property taxes, the buyer would be willing to pay may so this is automatically capitalized into the cost of the home.
- Lot Price Calculation contains output tables for the Loan Parameters and Per Lot Calculated Pricing Recommendation.
- Pro Forma Construction contains output tables cumulating with Net Flow of Funds into the Project with No Incentives.
- Pro Forma Construction Incentives contains output tables cumulating with Net Flow of Funds into the Project with Incentives.
Once you have input all your data into these sheets, you can return to the Dashboard to the results. Data include Unit Summary, Project Cost Summary and Rates of Return. You can also see the price that builders may be willing to pay for lot(s) given cost restrictions. In the Incentives Applied box, you can toggle available incentives. The Dashboard will show you what incentives you have applied. The most common, and powerful, incentive in terms of making a project feasible under IZ is density bonus. Expedited permitting also has a large effect.
TIP: The effect of various incentives can be used to showcase effective policy in combination with IZ to make projects feasible. For example, if your locality mandates 15% IZ units in your project, you can run your data through the tool and then adjust the level of incentives necessary to make your project feasible.