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Factsheet: Housing Overlay Zones

Housing Overlay Zones (HOZs) provide a package of incentives to developers who include in their projects homes that people can afford. Based on carrots rather than sticks, HOZs encourage production of affordable homes rather than requiring it. They are called “overlay” zones because
they layer on top of established base zoning regulations, leaving in place opportunities for property owners to develop within these existing rules. Rather than imposing restrictions, HOZs present developers with more choices by offering additional benefits to projects that increase the supply of
homes that people can afford. HOZ incentives may include increased density, relaxed height limits, reduced parking requirements, fast-tracked permitting, and exemptions from mixed-use requirements. HOZs may also permit residential construction in zones otherwise restricted to commercial uses. In order to qualify for these incentives, developments must include a certain percentage of homes for lower income households, generally between 25% and 100% of the units. Ultimately, the more valuable the developer incentives included in a Housing Overlay Zone, the more effective the HOZ will be in encouraging production of homes that people can afford. Desirable incentives both motivate developers to take advantage of the HOZ, and reduce development costs to allow construction of more affordable homes. Because zoning decisions have financial value to developers but do not require direct city expenditure, HOZs can create value, which can be used to build more affordable homes without relying on either public or privatedollars.

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