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Developer reneges on zoning deal after receiving height bonus

In our previous blog post, we wrote about how a developer used the height bonus provision in the Philadelphia zoning code to obtain permission to add 15 feet to its proposed apartment building by adding specified amenities. Now, the city is facing a different quandary regarding a height bonus that it granted for a commercial real estate development. After the city granted a height bonus based upon the developer's apparent agreement to include a number of below-market rate apartments, the developer has reneged on the agreement, even though construction is almost complete.

In its nearly finished state, the building towers 190 feet above the Delaware River. During the zoning approval process, the developer agreed to include 25 below-market rentals in the 250 unit building in exchange for a 48-foot height bonus. The height bonus allowed the developer to add five floors and 30 market rate units to the building. Market rate units in the building will cost about $1,795 per month, and below-market rate about half that amount.

As noted, the building is nearly completed, but the developer has revealed that it does not contain a single below-market rate unit. The developer did not give a reason for its decision to back out of the height bonus agreement. Meanwhile, the city's zoning officials have said that they will not issue certificates of occupancy for the finished units, meaning that no one can move into the building until the dispute has been resolved. The city has told the developer that it must re-start the zoning approval process from scratch. The city has suggested several alternative solutions, including adding ground floor retail units, a public art space or a contribution to the city's Housing Trust Fund. The developer has not yet responded to the city's statements on the matter.

The height bonus is just one of the many incentives in the zoning code intended to encourage developers to include desirable albeit less-profitable features in their buildings. Any commercial property owner contemplating submitting an application to the city for any kind of zoning approval or variance can benefit from consulting an attorney who specializes in zoning and land use cases. A knowledgeable lawyer can provide advice on how the proposed project might be affected by zoning laws and assistance in preparing and submitting the necessary information to obtain a speedy approval.

Source: Philadelphia Inquirer, "City: Luxury apartments will sit empty until developer complies with zoning deal," Inga Saffron, June 7, 2016

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