Up-zoning

Another approach commonly used by cities in the United States for leveraging regulatory powers is up-zoning, that is, changing the zoning to allow for higher-value (for example, from industrial to residential) or more dense use (for example, increasing allowable FAR). As with density bonuses, up-zoning can be successfully deployed as a kind of financing tool for urban regeneration only when sufficient market demand exists.

An example of how one city used up-zoning to advance its vision for urban regeneration can be found in Washington, DC. The city up-zoned land adjacent to Union Station, the city’s major multimodal transit hub, and created a new, 358-acre mixed-use neighborhood, called NoMa. By 2012, NoMa was contributing US$49 million more annually, relative to 2006 levels, in property taxes to the city. In this example, the city did not use capital resources to invest in infrastructure upgrades in the neighborhood; instead, it incentivized landowners and developers to do so. Therefore, the private sector was highly motivated to capture gains made possible by the increase in allowable density. NoMa’s success as an urban regeneration story is tied to its unparalleled proximity to the city’s major multimodal transit hub, an upswing in market conditions, and a rising trend of people seeking to live near their place of work.

Apart from these examples of successful use of incentive zoning to effectuate urban regeneration goals, the history of incentive zoning generally has been mixed. In New York City, for example, more than three and a half million square feet of public space has been created as part of bonus density programs (City of New York 2014b). However, some spaces are not of high design quality, other spaces are functionally inaccessible, and still other spaces are devoid of the level of design or amenities that can attract public use. One possibility is that it may be more efficient to require, rather than to incentivize, specific design features (for instance, a civic space whose size is tied to the size of the development) through other regulatory mechanisms, such as a city retaining preapproval rights of open space design.