Incentives for Resilient Buildings

Fall 2015
“Natural” incentives for resilient design — protecting property values, reducing insurance premiums and boosting the owners’ investment — convinced Metro Loft Developers to incorporate resilient features at 443 Greenwich Street, a former book bindery in New York City’s Tribeca neighborhood that is being converted into 53 luxury multifamily housing units.

Because “building resilient” can reduce long-term risks for property owners, states and municipalities are beginning to offer incentives for those who do so.  

MANY REAL ESTATE owners today are concerned about how to protect their property from major shocks and disturbances, such as severe weather events. Are your property managers and development teams addressing these low-probability but high-risk concerns? There are plenty of reasons to believe that resilient design — designing buildings to adapt to changing conditions and to maintain functionality under duress — should become an integral part of the design, development and management process for commercial real estate.  

In addition, government agencies and municipal officials are increasingly interested in making their communities more resilient. They believe that better site planning and more robust construction practices will help reduce the costs of catastrophes. For the most part, that is true. For example, locating a building’s HVAC, telecommunications and electrical equipment well above the flood plane — on higher floors or rooftops rather than on ground floors or in basements — is one simple way to help prevent the crippling outages often caused by severe storms. Installing on-site emergency generators, solar power or other renewable sources of energy also can help properties ride out utility failures. (See “Resilient Power Hubs.”) Yet all of these features involve real and potentially prohibitively high costs. In the competitive world of commercial real estate, those costs may mean the difference between making a profit or not.  

Incentive Zoning

To help raise the bar on resiliency, a number of localities and states are considering incentive zoning to reward smart design and creative developments that protect occupants against hazards while also reducing insurance claims and the costs of emergency services. According to the American Planning Association, incentive zoning was first used in Chicago in 1957 to stimulate skyscraper construction. More recently, municipalities have awarded bonus densities and increased floor-area ratios to developments featuring parks, protected wetlands, renewable energy or improved building envelope performance. These incentives can similarly help motivate more resilient design and construction. They can also help open up waterfront areas for development and potentially cut insurance claims from future weather events. Incentive zoning can and should play an even larger role in the future.  

Similar incentives already in place today are considered effective. From California to Louisiana, from Florida to Delaware, communities in risk-prone areas are offering developers incentives such as height or bulk bonuses if they build systems to better control stormwater or incorporate other advanced design techniques to mitigate hazards or help cities adapt to climate change in other ways.  

According to the public-private initiative known as the Louisiana Resiliency Assistance Program (LRAP), incentive zoning “provides flexibility and discretion to traditional zoning through market-based measures.” It can be used to “offer density bonuses to developers in exchange for exceeding minimum mitigation requirements; for maintaining or protecting natural features that help mitigate hazards or climate change impacts; or for providing safe rooms or community shelters.”  

Other Techniques

Techniques such as conservation easements also can help make cities and development projects more resilient. These techniques have been used to protect wetlands since the 1980s, with some engineering approaches that also can increase resiliency. They include protecting certain open tracts or ecologically sensitive zones to control floods, stormwater runoff and even tidal surges.  

Additional Benefits

Incentive zoning would also benefit the many owners and developers of properties located in flood-prone areas and those subject to other recurring weather-related issues. Many of these vulnerable areas have outdated building codes and zoning rules, however, and those regulations often make it harder for owners to retrofit their properties in ways that could improve resiliency. Moreover, techniques to improve resiliency, such as relocating mechanical systems, adding hydrostatic walls or waterproofing existing foundations, can be expensive and complicated. 

By offering incentives and financing options, cities and states can address the limitations of today’s codes and zoning while also encouraging the construction of better-protected buildings as well as the redevelopment of existing properties for higher-value uses.  

Several projects demonstrate how developers can improve the resiliency of their buildings even without the use of incentives. In New York City, Metro Loft Developers has overcome potential threats from flooding for the adaptive reuse of a former book bindery and 19th-century landmark in Tribeca. CetraRuddy’s design for the 53-unit multifamily project at 443 Greenwich Street locates mechanical units and the boiler room on the roof, incorporates on-site emergency generators and features 12-inch-thick reinforced concrete hydrostatic walls along the cellar and in slabs to prevent water from seeping into lower levels.  

This kind of prescience and sensible development approach should be recognized and rewarded with incentives. The same is true for new large-scale waterfront developments where significant value is created and developers can assist municipalities in advancing a long-term resiliency plan. For new developments underway in Brooklyn’s Greenpoint neighborhood, for example, the results of resilient design and project incentives will yield a large-scale mixed-use community at a prominent East River inlet site that has been underutilized for more than 50 years. A 720-unit residential development at 77 Commercial Street, also designed by CetraRuddy, will incorporate various amenities and construction approaches that add resiliency. Residential units and all tenant amenities will be elevated at least 15 feet above a known flood plane and a new promenade will provide residents with pedestrian access to upper floors. All utility vaults will be waterproofed to resist damage, and mechanical units will be mounted on the rooftops.  

The Bottom Line 

Incentives should be available to encourage developers to include these types of resilient attributes in commercial and residential real estate projects nationwide. Resiliency is good for the economy, for the pro forma and for investors. Properties with smart, resilient features are likely to perform better and promise higher returns over a longer period. That’s another reason to use incentives: These market mechanisms will push owners and developers to act faster to adopt resilient design. All stakeholders should take a close look at better ways to fund resiliency. Investors need more reasons to incorporate resilient features, and there’s ample proof that incentives work.