The Case for Letting Developers Pay Not to Build

Inclusionary zoning requires new developments to include affordable units, but many cities allow developers to bypass this by paying an off-site fee. Is the fee-out option getting unfairly demonized?

2 minute read

June 19, 2020, 6:00 AM PDT

By Shelterforce


Housing protest

Sheila Fitzgerald / Shutterstock

The question of integrating affordable housing units required by inclusionary zoning on-site versus allowing developers to pay a fee to locate them off-site has long been a contentious one. In this Q&A, Sam Moss, executive director of the Mission Housing Development Corporation in San Francisco, explains why he thinks that the fee-out option is unfairly demonized.

Miriam Axel-Lute: Last year on social media you posted saying something to the effect of, “Hey, look: everybody talks about on-site units as the holy grail of inclusionary zoning, but I think off-site fees are actually better.” Why do you think people go for the on-site units, and why do you think that off-site is better?

Sam Moss: If a developer chooses to fee out, [and if that fee is] properly disseminated to nonprofit affordable housing developers through something like a housing trust fund or an affordable housing fund, that is the most efficient, most valuable use of the fee. Building on-site is supported by a lot of people, mainly because of how long it takes to build the 100 percent–affordable projects. It can take years longer than the market-rate project that produced the fee. There is something to be said for getting below-market-rate units built at the exact same time as the market-rate development.

But at the end of the day, using the fees on affordable housing nonprofits leverages each dollar into $3 or so, because of tax credits and bonds and things like that. I believe that’s the most valuable use.

[Why do I think that off-site is] better? I don’t know that it’s necessarily better. [But] I am disappointed and frustrated over the demonizing of the fee-out option. I can see why people would just default to demanding on-site, but I do still believe that the most valuable, efficient use of the funds is to allow a nonprofit developer to utilize the fee.

Miriam Axel-Lute: So you’re saying more units would be built using the fee-out option?

Yes, because the nonprofit can leverage the fee dollars with other sources of funding, you essentially get more units. So, for every dollar that the market-rate developer would have spent building units on-site, that same amount of money can be utilized to, in some cases, triple the amount of overall funding that’s available for the affordable units, and thus build more units.

Miriam Axel-Lute: One of the reasons people like on-site is it can be a way to force affordable units into areas that would put up a NIMBY fight against a totally affordable development. How would you respond to this?

... 

Wednesday, June 10, 2020 in Shelterforce Magazine

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Get top-rated, practical training

Wastewater pouring out from a pipe.

Alabama: Trump Terminates Settlements for Black Communities Harmed By Raw Sewage

Trump deemed the landmark civil rights agreement “illegal DEI and environmental justice policy.”

April 13, 2025 - Inside Climate News

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

April 16, 2025 - Diana Ionescu

Black and white photos of camp made up of small 'earthquake shacks' in Dolores Park in 1906 after the San Francisco earthquake.

The 120 Year Old Tiny Home Villages That Sheltered San Francisco’s Earthquake Refugees

More than a century ago, San Francisco mobilized to house thousands of residents displaced by the 1906 earthquake. Could their strategy offer a model for the present?

April 15, 2025 - Charles F. Bloszies

Ken Jennings stands in front of Snohomish County Community Transit bus.

Ken Jennings Launches Transit Web Series

The Jeopardy champ wants you to ride public transit.

6 hours ago - Streetsblog USA

Close-up on BLM sign on Continental Divide Trail in Rawlins, Wyoming.

BLM To Rescind Public Lands Rule

The change will downgrade conservation, once again putting federal land at risk for mining and other extractive uses.

April 20 - Public Domain

Calvary Street bridge over freeway in Indianapolis, Indiana.

Indy Neighborhood Group Builds Temporary Multi-Use Path

Community members, aided in part by funding from the city, repurposed a vehicle lane to create a protected bike and pedestrian path for the summer season.

April 20 - Smart Cities Dive