When AvalonBay Communities, Inc., builds new apartments in the suburbs of Boston, it builds workforce housing.

At least a quarter of the 387 apartments at Avalon at Lexington Square, in Lexington, Mass., will be affordable to families earning up to 80 percent of the area median income (AMI). The rest will rent at market rates.

Wealthy towns like Lexington, where the average single-family home costs $650,000, are famous in Massachusetts for fighting apartment developers. But the town council voted in favor of Lexington Square, and the workforce housing it will bring, by a two-thirds majority. That’s a very warm welcome for this part of the world.

In a growing list of places, developers can only build new, luxury apartments if they agree to include some percentage of workforce housing. Usually these workforce units must be affordable to residents earning between 80 percent and 120 percent of AMI.

Sometimes local governments demand these workforce units. In other towns and villages, local officials hate apartments so much that developers must use state laws that encourage workforce housing to win the right to build.

In Lexington, it was a combination of both. The town wants AvalonBay to build its workforce housing units to bring Lexington into compliance with the state’s Chapter 40B. Under 40B, if less than 10 percent of a community’s permanent housing stock is affordable to people earning up to 80 percent of AMI, then state officials can override some of that community’s local zoning regulations to allow a new development.

To avoid that, some towns like Lexington are making their own plans for workforce housing.

Local governments encourage, demand workforce housing

Across the country, a growing number of local officials have begun to realize that workforce housing can be an economic development issue for their towns, and the trend has spread far beyond big cities like New York and Boston. Sometimes they are helped along by state laws requiring each town to include some housing affordable to low- and moderate-income families. Other towns are prodded by their own citizens.

Officials in Austin, Texas, now offer to speed up the approvals process for developers that agree to build a percentage of workforce housing at their mostly market-rate projects.

In Seattle, officials offer a 10-year property tax exemption to developments that include a percentage of workforce housing. These can also earn a density bonus allowing them to build more housing than the zoning on their site would usually allow.

Towns that begin voluntary programs often turn them into mandatory inclusionary zoning programs, in which developers are required to include some workforce housing units units if they want to build.

“The market usually doesn’t respond to voluntary programs,” said Lynn Ross, planning advisory service manager for the American Planning Association and a member of the American Institute of Certified Planners.

That’s what happened in Palm Beach County, Fla., where very few developers took advantage of a voluntary workforce housing program, despite some generous giveaways. The county offered participating developers a density bonus of 40 to 50 percent and a break on traffic requirements.

“We had next to no interest,” remembered Patrick Rutter, chief planner for the county.

In December, Palm Beach County made its program mandatory. Now any project in the unincorporated parts of the county must reserve three-quarters of its apartments for low- and moderate-income tenants at various income levels.

Officials are waiting to see how the development community responds to the new mandatory program. “With Florida’s steady or explosive growth, it’s difficult to anticipate a dry-up in construction,” Rutter said.

Some housing experts in Santa Fe, N.M., worried that after the city made its voluntary workforce housing program mandatory in August 2005, developers would flee the city.

But today Santa Fe housing planner Ron Pacheco can count 20 housing developers building new projects that will include workforce housing. Before Santa Fe’s program became mandatory, very few developers took advantage of it.

The new law requires all housing developers to reserve at least 30 percent of their units for residents earning between 50 percent and 120 percent of AMI.

The mandatory inclusionary zoning program in Carlsbad, Calif., has been running since 1993, making it one of the oldest mandatory programs. The city requires developers to hold back 15 percent of their housing units for residents earning up to 80 percent of AMI.

That’s not a heavy requirement, so Carlsbad doesn’t offer developers a density bonus. The city used to offer housing developers a subsidy to help them build the workforce housing units at their projects, but developers lost interest after the state required all projects that receive state money to pay its construction workers the prevailing wage.

Some local programs offer developers a chance to pay a fee instead of building workforce housing, but not Carlsbad. “We learned that you really do need to require the actual production of the units rather than accepting a fee,” said Debbie Fountain, housing and redevelopment director for Carlsbad.

That’s because it’s very difficult to turn the money from a fee into the workforce housing units it’s meant to build. The cost of development rises so quickly that fees rapidly lose their value.

But over the years, even developers that concentrate on building market-rate housing have come to accept Carlsbad’s mandatory requirement to build workforce housing units. Developers now have more than 3,000 units of housing under construction in Carlsbad, including 275 units of workforce housing.

“It’s become part of the process, part of the cost of doing business,” Fountain said.