Can Durham get more affordable housing through proffers?
Developers offer a small percentage of affordable units or cash payments in exchange for rezoning.
This BCPI: Open Sources (BCPI.OS) article is written by Lucia Constantine. BCPI.OS stories focus on delivering data-driven discoveries from publicly-available datasets.
As Durham has become a hotspot for development, developers have sought to rezone parcels for residential use and higher density. At the same time, the need for affordable housing across the city has grown more acute. Unable to mandate a certain percentage of new development be affordable under state law, the City has encouraged developers to make proffers—voluntary contributions in the form of cash payments, affordable units, or other improvements in exchange for changing the zoning. Durham implemented the use of proffers in 2010, and the use of affordable housing proffers has increased significantly since 2021 as the city has become a more competitive and lucrative development environment.
“It may seem counterintuitive, but in order for developers to feel comfortable committing to affordable or income-restricted units, rents have to rise to a level that the market-rate units can cover the lower revenue that will be realized on the income-restricted units,” said Aaron Cain, principal planner with the City of Durham.
Developers have also recognized that affordable housing wins points with City Council. Although the City Council and the Planning Department will be quick to point out they can’t deny a project on the basis of affordable housing, having an affordability component makes projects more palatable.
A zoning change must go through a legislative approval process that includes neighborhood engagement, public notification and public hearings before the Planning Commission and Durham City Council. The public can provide comments during public hearings, but only nearby parcel owners are directly notified through mailing and signage. As an advisory body, the Planning Commission offers a recommendation while ultimate approval rests with City Council.
According to the 2023 annual report for the Durham Planning Commission, 33 of the 40 rezoning cases heard last year involved residential zoning. Of those, only 18 had an affordable housing component.
“When there’s a zoning case where we’re looking at large swaths of land with many acres or there may have been a lot of neighborhood or community engagement, I’ve seen proffers used,” said Kimberly Cameron, who has served on the Planning Commission since 2020 and is currently acting as its chair.
In some cases, the Planning Commission will deny a project and developers may make more generous proffers to increase the likelihood of approval before City Council. That’s what happened with Perry Farms, a project that was ultimately approved last November, despite significant concerns raised by surrounding residents and advocacy groups about environmental impacts.
The Perry Farms developer was ultimately approved to build 665 townhomes and single-family residences on over 280 acres of forested land near Falls Lake. Initially submitted in September 2020 as “Kemp Road Subdivision”, the original proposal offered no affordable housing and was unanimously denied by the Planning Commission in July 2022. In the public hearing before city council in January 2023, the developer offered 3% of units as affordable and a one-time contribution to Durham Public Schools of $4,000. That would have been approximately a $6 donation per unit. The developer submitted a new rezoning request as “Perry Farm” in May 2023 that was approved by a 4-3 Council vote on November 6, 2023. The final proffers were 20 affordable units and a $71,000 contribution to Durham Public Schools, roughly 3% of total units and $107 per proposed unit. Given this project is projected to add 191 students to Durham Public Schools, that amounts to a one-time developer contribution of $372 per new student while the annual Durham County contribution per pupil is $5,374.
Proffers are difficult to track
In the absence of resident advocacy or media attention, tracking a project from proposal to approval requires following a paper trail of applications, zoning change reports, Planning Commission agendas and City Council meeting minutes. The City keeps limited public records on proffers beyond a static table buried in a presentation or memo to public officials and an incomplete dashboard. And even then, sources conflict.
The Durham Planning Dashboard shows 182 affordable unit proffers in 2022 and 596 in 2023 while a table in a presentation to the Joint City-County Planning Committee on April 3 this year shows 453 affordable unit proffers in 2022, of which 432 have been approved and 1,046 unit proffers in 2023, of which 222 had been approved. While the table shows units in 2020 and 2021, the dashboard only goes as far back as the end of 2021. Neither source defines affordability levels. And little to no information seems to exist online about payments to Durham Public Schools or the Dedicated Housing Fund.
BCPI.OS put in a public records request in late January for all development projects that have provided financial or affordable unit proffers in the past five years, broken out by income restrictions. At the end of March, we received two spreadsheets showing 98 projects that had requested rezoning since 2019 and passed the approval process. Of these, 45 projects made only payments, 33 projects included affordable units, and 10 projects included both payments and affordable units. Unit count was not provided for projects that made cash payments. According to the aforementioned dashboard, there have been 247 rezoning requests since 2019 which suggest that about 40% make proffers of affordable units or cash payments.
Limited affordability and financial benefit gained from proffers
In total, projects approved for rezoning between 2019 and 2023 made voluntary payments of $2.46 million to Durham Public Schools and $5.54 million to the Dedicated Housing Fund. The largest payment came from 751 South—a project that has been in the making for over a decade—which committed $1M to Durham Public School and $2M to the Dedicated Housing Fund to build 1,753 units off N.C. 751 in southern Durham. The average payment across the remaining projects was $78,181 per project. By comparison, affordable housing projects financed in part by the City’s affordable housing bond range from $4M to $31M for a single project.
Of the 43 rezoning cases that made affordable housing proffers, 34 projects (81%) had less than 10% of total units as affordable. Eight projects involved 15% or more affordable units including four projects that were 100% affordable because of federal or municipal subsidies like the Low-Income Housing Tax Credit and the City’s affordable housing bond. These projects were already affordable so they weren't necessarily “volunteering” additional units. Three projects with a significant affordability component leveraged the Affordable Housing Density Bonus, which allows developers to exceed allowable density if they designate at least 15% of units as affordable. Combined, these projects proposed 16,671 new units with proffers of 1,528 affordable units.
Affordability is usually measured in terms of how much a household earns, referred to as area median income or AMI, and how much they spend on rent. Spending less than a third of income on rent is considered affordable. Of the 1,528 affordable units proffers, 57 units (less than 4%) were for renters earning 30% area median income and below, which is where the biggest need is currently. Rents for these households would have to be less than $682 for a two-bedroom unit The majority of units (96%) were for renters earning 60% - 80% AMI, which works out to between $1,365 - $1,820 for a two-bedroom unit.The affordability periods for these units ranged from 10 to 30 years, with the majority adhering to a 30-year affordability period, which aligns with city and federal housing policy.
Improving the use of proffers
In the 2023 annual report, Planning Commission Chair, Kimberly Cameron, wrote “Durham will continue to face challenges of equity, diversity and affordability if the trend continues that 88% of rezoning cases are comprised of townhomes with 2 – 5% of the units designated at 80% AMI affordability.”
“While we’re certainly grateful that more developers are doing proffers, the need is truly in the lower AMIs and at a higher percentage,” said Cameron. She’d like to see developers partner with local affordable housing providers to achieve deeper affordability.
Former Planning Commissioner and current City Council member Nate Baker agrees with Cameron. “We need to establish better zoning practices so that we can stop having to negotiate affordability through proffers. And we also need to set higher expectations for developers,” said Baker.
With limited mechanisms and means to build new affordable housing, conditional zoning seems to represent an underutilized tool in the housing toolkit. Although Durham officials believe they can’t require a certain percentage of new development be affordable, interpretations of those statutes seemingly differ by locality, and local governments do have some flexibility and power in their conditional zoning processes and through development agreements. With development projects hurting local businesses, impacting the water quality, and not paying their share of taxes, the City could consider ways to extract greater benefits for public good.