Density Bonus in H1-H2 Residential Districts

Overview

Per Zoning Code Section 66.231 table note (b), a zoning density bonus is available for properties zoned H1 and H2 residential districts and allows property owners to build one or two additional principal dwelling units (homes) on a lot than what is permitted by right on the lot in exchange for developing affordable homes, homes with three or more bedrooms, and/or retaining existing housing.

What is a density bonus?

A density bonus authorizes additional development beyond what’s normally allowed by a zoning code as an incentive for property owners to develop in a way that contributes to desired City policy goals.

What you get for using the density bonus

• Up to 2 additional housing units in H1 or 1 additional unit in H2 permitted beyond the maximum number of units permitted on the lot by right. These additional units are not subject to the minimum lot area per unit standard.
• Additional 5% total building lot coverage

Density bonus options

• Provide affordable rental units at 60% of AMI
• Provide affordable ownership/owner-occupied units at 80% of AMI
• Provide units with three or more bedrooms
• Convert or make an addition to an existing residential structure

How do you use the density bonus?

1. Determine the number of units permitted on the lot by right
   
   Use the lot area and the zoning district’s lot area minimum (per principal unit) and the maximum number of principal units per lot to determine the maximum number of principal units permitted on the lot by right. Round down to the nearest whole number.

   Zoning District	Lot Area Minimum  (per principal unit)	Maximum Number of Principal Units Per Lot
   H1	1,500 square feet	4
   H2	1,000 square feet	5

   For example:

   • In H1: 6,250 sq. ft. lot / 1,500 sq. ft. per unit = 4 principal units permitted by right
   • In H2: 5,400 sq. ft. lot / 1,000 sq. ft. per unit = 5 principal units permitted by right
      
2. Choose a density bonus option to be permitted 1 or 2 additional units
   
   If more housing units are desired than what is permitted by right, the property owner can choose a density bonus option and meet the requirements to be permitted to add up to 2 additional units in H1 or 1 additional unit in H2. These units do not count toward the zoning district’s lot area minimum per unit standard, but all other zoning district standards need to be met.

Option 1: Provide affordable rental units at 60% of AMI

By providing 20% of units on the lot at 60% of AMI, a maximum of 2 additional units in H1 or 1 additional unit in H2 is permitted beyond the maximum number of units permitted on the lot by right. This option cannot be combined with any other options.

Meeting the requirements for this option would make the property eligible for the State of Minnesota’s Low-Income Rental Classification Program, which allows the property to classified at a lower tax class rate. See Sec. 66.231 note (b)(1).

Requirements:

• 20% of the total number of principal units on the lot must be leased at a rate at or below 60% of the area median income (AMI) rent limits as defined by the Multifamily Tax Subsidy Program published by Minnesota Housing and are affordable to and occupied by households earning up to sixty 60% of AMI for at least 10 years. To view the rental limits, go to Minnesota Housing’s Multifamily Rent and Income Limits page, click the “Multifamily Tax Subsidy Project” heading, click the table with the latest date, and view the “Maximum Gross Rents by Bedroom Size (post 1989)” under Ramsey County.

  Number of total principal units on the zoning lot with a density bonus	Number of units required to be affordable at 60% of AMI on the zoning lot
  2	1
  3	1
  4	1
  5	2
  6	2

• Each affordable unit must have at least the same floor area as another principal dwelling unit on the zoning lot.
   
• Prior to issuance of a building permit for the new building (or building expansion or conversion), demonstration of the commitment to affordable housing must be provided as a deed restriction or other contractual agreement with the city, or a city housing and redevelopment authority financing agreement or other similar financing agreement. Upon occupancy of the units, documentation of the households’ income qualifications is required.

What the property owner receives in exchange:

• By providing 20% of units on the lot at 60% of AMI, a maximum of 2 additional units in H1 or 1 additional unit in H2 is permitted beyond the maximum number of units permitted on the lot by right. The additional unit(s) is not subject to the district’s minimum lot area per unit standard.
   
• 5% additional maximum lot coverage for all buildings (50% total maximum lot coverage in H1, 55% in H2).

Option 2: Provide affordable ownership/owner-occupied units at 80% of AMI

For each 80% of AMI ownership unit provided, up to 2 additional units in H1 or 1 additional unit in H2 is permitted beyond the maximum number of units permitted on the lot by right. Options 2-4 are able to be combined to be permitted the maximum of 2 additional principal units in H1. See Sec. 66.231 note (b)(2).

Requirements:

• The number of additional units (up to 2 in H1 and 1 in H2) beyond the number of units permitted on the lot by right must be principal units sold at a price affordable to a household earning up to 80% of the area median income (AMI) as defined by the Metropolitan Council’s Livable Communities Act Affordability limits for ownership housing. To view the home price for the current year, go to Metropolitan Council’s Ownership and Rent Affordability Limits page, and view the affordable home price at 80% of AMI under the “Ownership housing” heading.
   
• The affordable dwelling unit must have at least the same floor area as another principal dwelling unit on the zoning lot.
   
• Prior to issuance of a building permit, demonstration of the commitment to affordable housing in accordance with this footnote must be provided as documentation of the fair market sales price via an appraisal based on full plans and specifications. Upon sale of the affordable unit to the end buyer, documentation of the household’s income qualifications is required, and may include but not be limited to base pay or variable pay, income from business or self-employment, income from financial assets, government transfer payments, and insurance or benefit payments.

What the property owner receives in exchange:

• For each 80% of AMI ownership unit provided, up to 2 additional units in H1 or 1 additional unit in H2 is permitted beyond the maximum number of units permitted on the lot by right. The additional unit(s) is not subject to the district’s minimum lot area per unit standard.
   
• 5% additional maximum lot coverage for all buildings (50% in H1, 55% in H2).

Option 3: Provide units with three or more bedrooms

For each unit with three or more bedrooms provided, up to 2 additional units in H1 or 1 additional unit in H2 permitted beyond the maximum number of units is permitted on the lot by right. Options 2-4 are able to be combined to be permitted the maximum of 2 additional principal units in H1. See Sec. 66.231 note (b)(3).

Requirements:

• The number of additional units (up to 2 in H1 and 1 in H2) beyond the number of units permitted on the lot by right be principal units containing three or more bedrooms.

What the property owner receives in exchange:

• For each 3+ bedroom unit provided, up to 2 additional units in H1 or 1 additional unit in H2 permitted beyond the maximum number of units is permitted on the lot by right. The additional unit(s) is not subject to the district’s minimum lot area per unit standard.
   
• 5% additional maximum lot coverage for all buildings (50% in H1, 55% in H2).

Option 4: Convert or make an addition to an existing residential structure

By retaining at least 50% of the floor area of an existing principal residential structure on the lot, 1 additional unit in H1 and H2 is permitted beyond the maximum number of units permitted on the lot by right. Options 2-4 are able to be combined to be permitted the maximum of 2 additional principal units in H1. See Sec. 66.231 note (b)(4).

Requirements:

• At least 50% of the floor area of an existing principal residential structure on the zoning lot is retained.

What the property owner receives in exchange:

• By retaining at least 50% of the floor area of an existing principal residential structure on the lot, 1 additional unit in H1 and H2 is permitted beyond the maximum number of units permitted on the lot by right. This additional unit is not subject to the district’s minimum lot area per unit standard.
   
• 5% additional maximum lot coverage for all buildings (50% in H1, 55% in H2).