May 10, 2023
By: Jenny Benitez, Analyst
The Purpose of Community Benefits Programs
Community benefits programs facilitate an exchange between cities and developers. Cities grant development entitlements to a project in return for specific amenities provided by the developer for the local community. When implemented well, community benefits programs and agreements lead to mutually beneficial exchanges where value is added to a project and then split appropriately between the developer and the community.
Understanding the Terminology
The term community benefits, sometimes called public benefits, refers to the developer-provided amenities. Popular examples of community benefits include the creation of parks and open spaces, infrastructure enhancements such as sidewalk improvements or bike lanes, transportation enhancements, and the development of affordable housing.
Development entitlements or allowances are granted by the city and allow developers to build a project with features that do not conform with local codes. Common examples of development entitlements include building above height restrictions, residential density bonuses, zone district changes, and additional floor area ratio. Developers know which allowances they need to add value to their project and make specific requests. A residential project may request density and height bonuses, for example, and the additional value from the additional units built can be clearly projected.
Community benefits programs and community benefits agreements are tools that help systematize the negotiation process between cities and developers. Community benefits agreements are legally binding contracts that establish timing, concrete deliverables, and monitoring requirements. Community benefits programs are established by cities to help streamline agreements by setting up a predefined list of community priorities and methods of managing financial contributions. This article focuses on exchanges between cities and developers, but community benefits agreements can also be negotiated solely between community organizations, such as neighborhood associations and developers.
How the Exchange Works
The value added to a project because of development entitlements is where the exchange comes in. Both parties work together to estimate community benefits that will not substantially reduce or eliminate the incentive to complete the project. Approaches vary across cities, but a clear example is surplus value being split 50-50 between the developer and the city. If a residential project makes $400,000 as a direct result from the additional units they built due to a development allowance from the city, then the developer would provide community benefits worth half of that amount, such as a $200,000 contribution toward affordable housing.
Cities have the freedom to decide what to prioritize and request based on the community’s needs and the unique capabilities of the developer. Community benefits can be provided directly and on the developer’s site or in the form of a financial contribution. A residential developer that is building an apartment complex, for example, has more potential to provide on-site affordable units. A strong motivation for community benefits programs is to mitigate the impacts that an unanticipated development has on a city’s resources by providing public improvements. A developer project that causes an increase in the local population causes a strain on the local infrastructure, and cities can alleviate that by requesting infrastructure improvements.
Best Practices and Ideal Outcomes
Ideally, an effective community benefits agreement results in a gain for the community and the developer, and helps cities manage incoming new development overall. Best practices include:
- Community involvement and input. Common methods to inform programs and agreements include community surveys and meetings.
- A written program or agreement with concrete deliverables and timing.
- Making it clear the exchange is voluntary.