Why I don’t like inclusionary zoning

Inclusionary zoning is a hot item among urban planners today, and is often seen as a solution to residential segregation and high housing costs. Exact implementations vary, but the general idea is that developers of multiunit housing projects are encouraged to set aside a certain percentage of their units, generally raging from 10-30%, but sometimes even more, as “affordable housing” units. In other words, some proportion of the units are under rent controls to the point where they must be rented (or sold) at a loss by the developer. Sometimes the schemes are voluntary and give developers density bonuses, sometimes developers can pay a fee instead of setting aside units. The exact proportion of units that must be set aside and loss developers take on each unit also varies. As you can imagine, I’m not in favor of this system, but it’s a complicated issue, so this is going to be a long article.

Inclusionary zoning is a relatively new concept, first implemented in the 1970s, to combat the growing problem of residential segregation of classes and races, whose origins are interesting and, I think, germane to the conversation. I generally see two explanations given by proponents of IZ for why segregation and unaffordability arose in the first place: market forces and zoning (or, as they call it, exclusionary zoning). Quoteth a law review article:

Affordable housing has always been a problem in the United States. Cities and towns originally engaged in forms of discrimination through exclusionary zoning to exclude low-income residents.

Of course, this is only true if your history begins in 1930. But from the mid-18th century to the turn of the century, America underwent a tremendous urban population boom fueled by railed transit and a massive immigration wave from Europe, and the housing stock adjusted just fine – there was no affordable housing problem. On the zoning front, as well, the author is wrong: aside from the regulation of mass transit, there were very few zoning limits before New York City’s 1916 code.

While proponents are right that traditional zoning is indeed “exclusionary,” the name “inclusionary” always struck me as a little funny – you’d think the opposite of zoning out poor people through density requirements would be not zoning out poor people through density requirements, but instead IZ is essentially a form of rent control. Rent control proper acquired a nasty reputation, and deservedly so – economists, regardless of their political persuasion, are united in their opposition in a way that you rarely see. But unlike traditional rent controls, inclusionary zoning is only applied to a portion of the units, and therefore isn’t as much of a burden on landlords. Furthermore, because the landlord still has some tenants paying market rents, they may have less of an incentive to let their buildings degrade to the point of literal collapse.

Proponents claim that inclusionary zoning an effective way to create affordable housing and income/racial diversity in otherwise segregated neighborhoods, but I see many negative unintended consequences. The fundamental problem that I see is that while it definitely benefits those who are lucky enough to get affordable units (i.e., those with the most experience with the welfare state, who know how to work the system), it has negative net consequences for every single other person in the housing market.

The negative effects on fellow building dwellers are obvious: they will have to be charged higher rents in order to compensate for the loss that developers will almost surely be taking a loss on the affordable units. While they theoretically could just forgo profits and break even, mandates are only implemented in high-cost markets in the first place, where 30% of the median income (or lower) is almost never enough to cover the expenses of even a unit with cheaper appliances and internal finishes. But new construction is almost always built for the rich, so people have a hard time sympathizing – although this is a mistake, considering the ripple effect on prices throughout the metro area.

I think this concept of new construction vs. existing stock is worth dwelling on for a moment. One of the tenets of inclusionary zoning is that affordable housing should be “built.” But this is actually a pretty big departure from how housing for the poor has traditionally been done in America; as commenter jrab once put it, “Apparently rich people’s old housing is no longer good enough for poor people.” Which brings me to perhaps the most important point when it comes to rich people’s housing: it has enormous knock-on effects for the poor. Someone who can’t afford real estate in Manhattan is going to go to Brooklyn in search of new neighborhoods to gentrify, which will ultimately raise prices for the middle and lower classes. Expanding housing options for the wealthy brings benefits to middle class and poor renters and buyers in the form of less competition for market rate housing, which is where the vast majority of them will be living.

There is one possible exception to all this, and that’s when inclusionary zoning is voluntary and accompanied by density bonuses. In this case, the alternative is that the extra density simply doesn’t happen. But even here, there are caveats. For one, the long-term alternative is rarely no development at all. The affordability issue eventually became so much of a problem in Pennsylvania that the courts eventually forced municipalities to upzone for density – something I will contrast to New Jersey later on, when I discuss empirical evidence. Furthermore, while IZ may originally be intended as only a “bonus,” it quickly becomes the norm, and no upzoning is allowed without it. The DC area Coalition for Smarter Growth, for example, has called for IZ in a GGW article in an area where the alternative was upzoning without the IZ requirements – clearly there are many who are interested in IZ as an end in and of itself and not just a politically palatable way to increase density. And in fact inclusionary zoning is itself sometimes a barrier to community support for dense development, as wealthy white neighborhoods rebel against the idea of poor people in their midst – a problem that AvalonBay, which specializes in dense development in hard-to-enter housing markets, faced on Long Island. If IZ were only used to push through density that wouldn’t otherwise happen, I might not be so hostile to it, but that rarely seems to be the case.

In the end, though, a priori and theoretical arguments can only get you so far, and you have to look at the empirical data. Unfortunately, statistical analysis is very difficult given the confounding factors. For one, places that implement IZ policies are disproportionately wealthy and desirable and already have very stringent land use restrictions – affordable housing mandates don’t happen in isolation. Furthermore, they vary widely in scope. Plagued with statistical insignificance, these econometric analyses are not definitive either way, but here’s a sample of a few published recently:

  • Bento, et al.’s 2009 analysis found that California cities with IZ shifted the proportion of units in favor of multifamily units, but it appears that California jurisdictions place a bigger IZ burden on developers of single family units, which is the opposite of what I usually see throughout the US. They found little evidence that housing starts were affected, but they did find that developers were passing costs onto consumers in the form of higher housing costs. The authors note, though, that the study was conducted during the housing boom, which could explain why housing starts were not affected.
  • Schuetz, et al.’s 2010 analysis found that suburban Boston experienced higher housing prices and fewer starts as a result of IZ during times of appreciation, whereas the San Francisco metro area experienced higher prices but not fewer starts during appreciation and lower prices during “cooler regional markets.” Magnifying booms and busts doesn’t sound good to me. The authors also note the prevalence of “de facto” programs – which I assume are similar to how NYC and Vancouver squeeze developers in an ad hoc way for concessions and amenities – which can complicate analyses.
  • Another paper by Shuetz, et al., published 2009, discusses the variation in IZ policies, and points out that Washington, DC exempts small projects and those in low-density areas. This means that buildings of expensive homes in ritzy, suburban-like neighborhoods in NW are not subject to the same kinds of costs that dense multifamily structures are.
  • Mukhija, et al. (2010) find that IZ works to a modest extent in providing affordable housing, without negative effects on the supply of market-rate housing. They come out strongly in favor of mandatory programs with density bonuses, but recognize that the bonuses are often unpopular with current residents. Like all other authors, they lament the poor quality of data available for analysis.

Ultimately, though, all of these studies suffer from the issue of finding good controls. I have, however, found one “natural experiment” that I believe overcomes this issue quite well: the case of the Pennsylvania and New Jersey suburbs of Philadelphia. The Philly metro area spans both states, and indeed in 1970 both had housing stocks that were very similar in terms of the mix of single-family and multifamily units. But the two states’ supreme courts took very different approaches to the issue of the dearth of affordable housing. New Jersey adopted a mandatory inclusionary zoning program through the Mount Laurel doctrine, whereas Pennsylvania gave developers what’s known as the “builder’s remedy” – essentially allowing them to override anti-density zoning regulations, but without the affordable housing mandates and subsidies of IZ (which reminds me – inclusionary zoning, on top of all its market impacts, often costs the government money). The two systems were compared in a 2004 paper by James Mitchell which is summarized in Jonathan Levine’s excellent Zoned Out, but here’s the abstract of the original article:

The municipal zoning process in the United States has come under increasing attack as a tool to create and maintain suburban socioeconomic homogeneity by mandating sprawl-producing single-family detached houses at the expense of less costly townhouses, apartments, and mobile homes. Beginning in the 1970s, the Supreme Courts of the neighboring states of Pennsylvania and New Jersey addressed municipal exclusionary zoning in different ways: Pennsylvania empowered residential developers to compel municipalities practicing exclusionary zoning to authorize market-rate development of all types of housing, while developer empowerment in New Jersey was conditioned upon inclusion of low- and moderate-income units. Using aerial survey and housing census data over a 20-year period, this article finds that outcomes by housing type over a 20-year period in Pennsylvania municipalities around Philadelphia were more diverse than those in adjacent New Jersey municipalities.

The fact that the result confirms my viewpoint may have biased me into thinking that the experiment is better than it is, so I encourage any pro-IZ people who think they’ve found better evidence to prove me wrong.

Finally, I’d like to point out that discussion of “inclusionary zoning” and “affordable housing” suffers from serious framing problems. Like “compassionate conservatism” and “enhanced interrogation techniques,” it’s hard to argue against something with such a nice-sounding name. Sometimes the language and idea of affordability and inclusion is even co-opted by developers using politics to argue for their harebrained eminent domain and massive public subsidy schemes – Atlantic Yards developer Bruce Ratner won ACORN’s support for the project by giving them millions and the right to manage the affordable housing units that were to be constructed.

Anyway, I apologize for the length of this post and the lack of editing and clear organization – inclusionary zoning is a beast of an issue, and I figured it was more important to put my thoughts in writing rather than to wait until I found a manageable way to deal with the topic without just writing whatever came to mind. But, there you have it – this is why I don’t like inclusionary zoning.

Mohamed Atta as urban planner, and more from the Middle East

The NYT has an interesting article on urban planning developments in Aleppo, Syria (the largest city in the Levant – bigger than Beirut, Tel Aviv, Damascus, and Amman!), which includes this section about the history of planning in the Middle East, with a development-as-preservation lesson at the end:

The role of postwar urban planning in the rise of fundamentalism is well documented. In the 1950s and ’60s nationalist governments in countries like Egypt, Syria and Iraq typically viewed the congested alleys and cramped interiors of historic centers not as exotic destinations for tourists but as evidence of a backward culture to be erased. Planners carved broad avenues through dense cities, much as Haussmann had before them in Paris. Families that had lived a compartmentalized existence — with men often segregated from women in two- or three-story courtyard houses — were forced into high-rises with little privacy, while the wealthy fled for villas in newly created suburbs.

But while preservationists may have scorned Modernist housing blocks, they were often just as insensitive to the plight of local residents who got in their way. Even as they worked to restore architectural monuments in the Muslim world, they could be disdainful of the dense urban fabric that surrounded these sites. Neighborhoods were sometimes bulldozed to clear space around landmarks so they would be more accessible to tourists.

Agencies like Unesco often steered governments toward a Western-style approach to preservation. Traditionally a family might have built onto a house to accommodate a newly married son, for instance, adding a floor or a shop out front. But those kinds of changes were often prohibited under preservation rules.

I’m also pleased to see that Aleppo won’t be razing its slums:

And the city’s mayor, Maan Chibli, said that he recently asked GTZ to help plan for the redevelopment of the informal ramshackle settlements that have sprouted on Aleppo’s outskirts.

“These settlements date from the 1970s,” Mr. Chibli said. “They are part of a social pattern that leads back to the old villages. Someone arrives, then his brother follows. So the idea, as before, is not to destroy these areas. It is to begin by providing them with infrastructure and services, then work programs.”

But how to make the final link between historic preservation and the creation of a contemporary city remains blurry. Many preservationists working here, including some at GTZ, see the last 70 years as unworthy of their interest. And most contemporary architects, whose clients are almost uniformly drawn from the global elite, are out of touch with the complex political realities of the poor in the region.

And finally, Mohamed Atta on urban planning:

What many militant extremists are fixated on is a utopia of the past: a vision of Islam in the era of the Prophet. Not only Western influence, but also three centuries of Ottoman rule — the period when the fabric of most Arab cities was created — is seen as a form of corruption.

“What is interesting about this whole argument between the modernizers on the one hand and fundamentalists on the other is that it all happens on the level of ideology,” Malise Ruthven, a historian who has written books on Islamic fundamentalism, said in a recent interview. Mohamed Atta, the central planner of the 9/11 attacks, once wrote an urban planning thesis on the Old City of Aleppo in which he said he wanted to tear out centuries’ worth of buildings, Mr. Ruthven said. He dreamed of “an Islamic city that was pure and unchanged — frozen in aspic.”

Systemic Failure on HSR

One of many reasons why high-speed rail in America is doomed, from Systemic Failure:

When DB or Renfe or even SNCF needs to buy a high-speed train, they simply call up Siemens (or Alstom or Talgo) and order some trains. Simple as that. Customization consists of painting a logo on the outside, and maybe choosing colors for the interior. It is no different than how United or Continental orders airplanes, or how Hertz orders automobiles.

Now consider the process for building trains in the USA. Under FTA rules, all train components must be 100% manufactured in the US. And to guarantee no foreign manufacturing takes place, regulators will devise enough oddball design specs that bidders have no choice but to custom design the rolling stock from scratch. Then, local municipalities compete to offer huge tax breaks to lure a manufacturer.

For transit agencies, this nonsense results in 100% higher costs for vehicle procurement. And even as a jobs program, the cost-effectiveness is abysmal.

I know I haven’t really addressed high-speed rail in a comprehensive way, but that’s mostly because the concept so enrages and saddens me that it’s hard for me to sum up all my negative feelings about it in one post. The arguments against it seem so obvious, and yet the idea has somehow become the primary plank of Obama’s transportation policy.

It gives railed transit a bad name, and the fact that its current incarnations are supported by Greater Greater Washington and Streetsblog – blogs whose regions aren’t even being considered for the money! – and pretty much every other urbanist blog out there really disappoints me. To everyone who’s sullying the name of transit and urbanism with this ridiculous white elephant: shame on you.

Calling your opponents “socialists” and “un-American” is as American as skyscrapers

It’s pretty amusing to me that liberals today are still whining about being called “socialists,” considering the charge is at least a century old. Here one example from Robert Fogelson’s excellent Downtown chapter on height restrictions around the turn of the century:

The Post voiced especially strong objections to the argument that a height limit was necessary to prevent new buildings from undermining the profitability of old ones and to deter the business district from moving from one location to another. That was “Municipal Socialism,” it declared. The city had no more business regulating development than running a department store. Municipal authority was already encroaching on private enterprise in too many ways. “And if it be permitted to limit the economic development of the city it might as well buy the city outright and conduct it as a Socialist Elysium.”

And here’s another example later in the chapter about comprehensive zoning, with an extra “un-American” mixed in there:

In some cities, the efforts to impose height limits through zoning ran into strong resistance. Sometimes the resistance was fueled by the opposition to zoning, which, it was charged, was “unfair, undemocratic, and un-American.” It was unfair because it discriminated among property owners. As Horace Groskin, director of the Philadelphia Real Estate Board, declared: “By what right has a zoning commission to set itself up as the judge and distributer of property values? To take the value away from one property owner and give it to another, or not to give it to anyone but to destroy it entirely for the imaginary benefit of the community, strikes me as coming mighty close to Socialism.”

And while I’m in the mood to fill posts with others’ work, here’s another good (unrelated) quote from market anarchist Kevin Carson, as a Christmas Eve bonus:

As Ivan Illich put it, bureaucracies solve problems by escalation. For example, government builds subsidized freeways and provides subsidized water and sewer infrastructure to outlying developments — and then deals with the increased sprawl by proposing new subsidized roads to “relieve congestion,” or a sales tax on the public at large to pay for expanding sewer capacity. Before long, the local Growth Machine wonders why the new roads are filling up with new congestion from the strip malls and subdivisions that sprang up at every single exit.

Vancouver shows how seeking community amenities from developers can go horribly wrong

A lot of time I hear liberal urbanists claiming that trading development rights for community amenities (I’d definitely include affordable housing mandates here) is a win-win situation, but there’s a real danger of killing the goose that laid the golden egg, as appears to be happening in Vancouver:

Development of the Cambie corridor is being “paralyzed” because the City of Vancouver is taking too much of the profits resulting from property rezonings, the Urban Development Institute says.

Paul Sullivan, chair of the UDI taxation committee, said at least three potential developments along the new Canada Line have fallen apart because the city is being too aggressive in seeking community amenity contributions when rezonings take place.

The city uses the money — an average of 75 per cent of the profits resulting from rezonings — for community amenities like parks and seniors’ centres.

It’s interesting that the city openly admits to taking the vast majority of the upshot from the rezonings. One could interpret this as a marginal tax rate on dense development of 75% – I’m not sure that you could find a single politician or economist who would support a such a tax bracket on income, but I guess developers are viewed as less productive and more easy to leech off of than even the ultra-rich.

Another odd aspect of the story is that the rules are in fact not even formalized:

Sullivan, a real estate appraiser by trade, said the city could solve the problem by establishing a set amount for CACs that developers can factor into their purchase prices. “What we need is certainty in the policy, not just in the density but in the lift so that land can get priced fairly,” he said. “If you don’t have that it makes it very hard to get a grip on this problem.”

Vision Vancouver Coun. Raymond Louie disagrees.

“I am not sure that a blunt instrument [like set fees] would best serve our citizens. I think a finer-grain discussion or negotiation on what’s appropriate based on what the local needs [are] and what the individual property generates in profit is more appropriate,” he said.

My first reaction was that this is very bad, because it adds an element to uncertainty to development. But my next reaction was: If it weren’t for the ad hoc nature of the program, we might never have known its cost. In the US, where affordable housing mandates are known before developers start making their pitches, it can be difficult to see when the law is having a deleterious effect, because proposals simply won’t be made, and even sophisticated statistical analyses haven’t yielded definitive data on the effects of things like affordable housing and other community benefits. In Vancouver, though, we can see the tangible effect: “at least three potential developments along the new Canada Line have fallen apart.” But who only knows how many were never even proposed.

Anyone know of anything similar happening in other cities? Or maybe someone’s found more convincing evidence than I could about the tangible effects of things like this?

DC link list

I didn’t mean for these all (except the last one) to be about DC, but it looks like it turned out that way…

1. Matt Yglesias on lot occupancy rules in DC. I have a feeling, though, that these are more or less irrelevant in the face of other, stricter limits on density.

2. The feds, along with the Committee of 100 (surprise, surprise), are having a hissy fit over overhead wires on proposed streetcar lines. Regarding San Francisco: “But then you see these wires in the center. It’s like: Oh, great.”

3. WAMU manages to do a whole segment about DC’s historical streetcars without once mentioning that they were built and operated (at least for most of their history) by private industry.

4. WMATA institutes random bag checks on the Metro – an anti-terror strategy that has more holes in it than Swiss cheese.

5. Washington authorities might purposely make the Dulles Metro station inconvenient, to avoid “dual” terrorist threat. “We are not just looking at this (project) from a cost perspective.”

6. The price of gas in Iran skyrockets from 10¢ to 40¢ a liter, and China raises its fuel prices much more slightly, as governments feel the pinch of subsidized gasoline.

Japanese transit and what it can teach us

For a libertarian urbanist blogger, I’ve always felt kind of embarrassed by my lack of knowledge about East Asian transit, considering that it’s the only place left on earth with a thriving competitive private transportation market (they even have profitable monorails!). I’ve heard good things about South Korea, Singapore, and Hong Kong, but it looks like Japan is really the world leader in market urbanism. I always found Japan’s post-WWII dynamism quite intriguing – despite its supposed lost decade and what I understand to be a fairly corporatist entrepreneurial model (in the end, they lost the tech innovation game to Silicon Valley), Japan has managed to remain an elite economic power. I have a (completely unfounded) theory that a lot of the dynamism comes from not having to carry the burden of a shitty, state-run transportation network and stunted land use market – as I understand it, private railway companies are pillars of the Japanese economy, similar to what the auto industry was to the US at its height.

Anyway, I’ve been reading papers on Japan’s transit companies, and the first half of the abstract of this one I think sums up pretty succinctly the reasons why private transit (and, therefore, urbanism writ large) succeeds in Japan and fails in the US:

In Japan, a liberalization policy was implemented over railways and buses in 2000 and 2002 respectively. Under that policy, quantity regulations for railways and buses were abolished, withdrawal regulations were eased, although fare regulations were maintained. However, even after this liberalization, institutional design remains considerably different between Japan and EU countries. An argument for competitive tendering is missing in Japan as 87.5% of rail passenger transport in the three major metropolitan areas is provided by profitable private railway companies that enjoy high social evaluation in respect to managerial efficiency, quality of transport services, and the adequacy of are levels and systems. The major private railway companies in the big cities have built their present status by 1) being blessed with favourable transport markets, 2) developing commercialism in their investment activities, 3) pursing efficient management, and 4) engaging in business diversification. The Japan Railways group companies (former Japanese National Railways) and Tokyo Metro Co., which is in the midst of privatization, are now copying the style of corporate management of major private railway companies.

Each of these points offers a lesson for America:

  1. While it may be true that Japan is “blessed” with limited land, the Japanese state also doesn’t forbid the sort of density that allows transit to be viable. America doesn’t allow much dense development around rail stations, and its transit agencies actively prevent it by paving and maintaining free (or, at most, very low cost) parking lots around their stations. It may be that America’s geography will always be a problem for private transit, we can’t know this until we liberalize urban land use.
  2. American transit agencies don’t develop property.
  3. “Efficient management” is partly code for “is not run by an inept governmental bureaucracy.” But even those averse to private transit ownership could understand this as not hobbling transit agencies with restrictive union labor costs, trade protectionism, and onerous safety regulations. Systemic Failure covers this well from a left-ish perspective.
  4. “Business diversification” is partly the simple idea of owning restaurants, hotels, etc. near stations, but I think may partly be a result of the intensely corporatist Japanese policy incentives. I don’t think the latter point is really necessary for sustainable private transit.

I should add that the second half of the abstract deals with the “market failures,” so it’s not all roses. But even these are dealt with by relatively minor subsidies – on the order of 20% of new infrastructure costs and 5-20% subsidization of operative costs, which appear to be much lower American road subsidies. Not to mention that all Japanese rail companies (I think?) also pay taxes. And even these subsidies seem to be concentrated in more far-flung locales, which themselves might be the result of the Japanese tendency to subsidize rural constituents (rural, not suburban/exurban) with rice subsidies and road spending.

Western Europe does a little better on these four metrics than the US, but it doesn’t do nearly as well as Japan, which may account for its lower overall transit use. It allows more density around its stations than America does, but I believe that height and density restrictions are much more prevalent than in Japan. European transit agencies also don’t own property or diversify. And while their union, safety, and protectionist regulations may not be as bad as America’s, the agencies are still publicly run bureaucracies and therefore take a certain efficiency hit.

Anyway, you can consider this an open thread for all things Japan. Also, in addition to the paper excerpted above, here are a few more that I’ve found if you’re looking for more info:

  1. Shoji, Kenichi and Bruce Killeen. “Diversification strategy of the ‘minor’ private companies in Japan.” [source]
  2. Enoch, Marcus. “Japan – the world’s leading transport technology test-bed.” [source]
  3. Smith, Jeffery and Thomas Gihring. “Financing transit systems through value capture: An annotated bibliography.” [source]

Downtown Brooklyn’s $2 million affordable apartments (correction)

Inclusionary zoning is a bad enough idea, but at least it doesn’t cost taxpayers anything directly. But New York State’s Housing Finance Agency is taking the worst of both worlds – affordable housing mandates and public subsidies – and plopping them down in new luxury construction in the heart of Downtown Brooklyn. Behold, some of the most expensive “affordable housing” in all five boroughs (at least, let’s hope it’s the most expensive!):

Brooklyn's idea of "affordable housing"

• 388 Bridge Street Apartments, between Willoughby and Fulton streets in Downtown Brooklyn, a 234-unit, brand new 49-story multifamily rental apartment building controlled by the estate of Stanley Stahl, which received $94.6 million in financing. Forty-seven of the units will be set aside for tenants with household incomes up to $39,600 for a family of four.

• 25 Washington St., between Plymouth and Water streets in DUMBO, a 106-unit, eight-story multifamily rental apartment being converted by Two Trees Management Co., which received $22.2 million in financing. Twenty-one of the units will be set aside for tenants with household incomes up to $39,600 for a family of four.

• 29 Flatbush Ave., at Nevins Street in Downtown Brooklyn, a 333-unit, brand new 44-story multifamily apartment building controlled by The Dermot Company, which received $99 million in financing. Sixty-seven of the units will be set aside for tenants with household incomes up to $39,600 for a family of four.

That comes out to a little over $2 million per subsidized apartment in the first tower, $1 million in the second, and almost $1.5 million in the third. And that’s not even counting the rent that the future impoverished (because, let’s face it, if you earn less than $40k for a family of four in NYC, you’re impoverished) tenants will have to pay. That’s $215 million spent (see correction) so that New York can fulfill its social engineering wet dream of moving more 136 families into gleaming glass-and-steel luxury skyscrapers in an area that’s in the running for the Curbed Cup neighborhood of the year. Just imagine how far that money could have gone if it were given to families to choose their own housing, in, I dunno, say, a building where their neighbors don’t have an income an order of magnitude larger than theirs?

Correction: It looks like I overstated the benefit. Adam explains in the comments:

It’s not a grant, its tax-free, low-interest financing. Also, just to be clear, the “94.6m” is for the financing of the whole building because it conforms with affordable housing requirements. Some ratio must be affordable, like 70/30, etc. To calculate the “subsidy” per affordable unit, you’d have to calculate the present value of the interest savings over the lifetime of the lower-interest loans and divide that by the number of affordable units. Its still a number in the hundreds of thousands per unit, but not quite in the millions.

In other words, the benefit really depends and is very hard to calculate. I found the exact program, though – it’s called the 80/20 program, and here are the terms, which I don’t totally understand:

Under the 80/20 program, for specific periods of time 20% of a project’s units must remain affordable to low-income households and these units will be subject to a Regulatory Agreement between the owner and HFA. HFA’s Regulatory Agreement assures that the maximum rent on these affordable units cannot exceed 30% of the applicable income limits. The remaining units in an 80/20 project can be rented at market rates.

The tax-exempt bond financing generates 4% “as of right” Low Income Housing Tax Credits, which can either be syndicated to generate part of the required equity a borrower must contribute to the financing or be utilized to offset the borrower’s tax payments. All bonds or bond financed mortgages, including those financed under the 80/20 Program, must be credit enhanced.

Credit enhancement provides security for bondholders and ensures a higher rating on the bonds issued, which in turn produces a lower mortgage rate. Click here for more information on credit enhancement options.

Maybe someone with more knowledge of development financing can interpret that for us and give a rough estimate of the NPV of the benefit.