The City of Madison
Inclusionary Zoning (IZ) Program

General IZ Info
Definition and Overview
Policies and Protocols
Madison's IZ Ordinance
Ordinance Evaluation Study
Maximum IZ Sales Prices
Mortgage Calculator (Price Points for IZ Units by Bedroom Size)
Mortgage Calculator (Condo Units)
Maximum IZ Rents
Income Limits

Homebuyer Links
Frequently Asked Questions
IZ Homebuyers' Guide
IZ Unit Purchase Income Qualification Form
IZ Income Certification Form
City Option to Purchase
Buyer Promissory Note
Buyer Mortgage Form
Available IZ Units

Rental Links
Frequently Asked Questions
Available IZ Units

Owner/Developer Links
Inclusionary Dwelling Unit
Plan Application

Owner/ Developer IZ Process Checklist
Non-Profit Certification Form
IZ Unit Sale Notification Form for CD Office
IZ Marketing Notice Letter Format
Sample Legal Documents
Rental Utility Allowances
IZ Unit Purchase Income Qualification Form
IZ Income Certification Form
Developer Certification of IZ Unit Buyer Income
Documentation Checklist

Related Links
IZ Unit Purchase Income Qualification Form
City Option to Purchase

Available IZ Units
Downpayment Assistance
American Dream (ADDI) Program
HOME-BUY Program

Madison IZ Home
CD Office Home
City of Madison Home

Homeownership and
Inclusionary Zoning (IZ)

Frequently Asked Questions (FAQ)

Who is eligible to purchase a property listed as an IZ property?

Eligibility is based on the income and asset limitations established for a household buying the unit.

All IZ units must initially be marketed to households with less than 80% of Area Median Income (AMI). See this chart for incomes based on family size. Some units must be marketed to households with lower AMI levels. The developer will tell the buyer what the income limit is for each available unit. The AMIs change annually in March, and are determined by the Federal Department of Housing and Urban Development (HUD).

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What counts as income?

The City will count gross income from all the members of the household over the age of 19 from the previous tax year, or their projected income for the current tax year, based on current earnings. For persons who are dependent upon their parents, a guardian, or trust for more than half their income, the City will count the household income of the parents, guardian or trust.

Documented proof of income will need to be provided in the form of either a copy of the filed income tax returns from the previous year, or three current wage receipts.

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If I receive a bonus, will this be included in my income?

Yes, a developer will include a bonus in the measure of income eligibility, whether it is one-time or routine.

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Is income determined at time of application/offer, or at the closing?

A developer will qualify a household on the basis of their income at the time of application or offer to purchase.

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Does a young adult living in a household count toward either family size or income?

A developer will qualify a household on the basis of who lives in the unit, and count all of the income of those adults participating in the workforce. Someone who is 19 and living with his or her parents and earning income should be counted, both in terms of income and in terms of household size.

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How will the City mortgage and equity share of the property be determined?

Within 30 days of the date of closing on a property, the City or the first mortgage lender will have a market rate appraisal conducted on the property in order to determine what the full fair market value of the property would be if it were not on IZ property with a restricted sale price.

Using that appraisal, the City will calculate its relative share of value in the property according to the formula used in the example below:

IZ Set Sale Price:  $175,000
Fair Market Value of the Unit:  $200,000
City's share of value:  ( $200,000 - $175,000 ) = $25,000 / $200,000 = 12.5%

Per the IZ ordinance, at the time of sale the City's Option price shall be the City % share of 95% of the appraised value at time of sale. So:

If at time of sale by first homeowner the sale price is $300,000, the City would be owed ($300,000 x 95%) x 12.5% = $35,625.

If the City exercises its option, it would pay the seller the full $300,000 less its share of value, or $263,375. The property would be resold by the City to an income eligible buyer.

If the City declines to exercise its option to purchase, the owner would sell on the open market for no less than the appraised value, repay the City $35,625, and the IZ regulations for that property are removed.

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Does the purchaser of an IZ unit gain equity on the unit?

Yes. The purchaser of a unit builds equity on their full investment in the property. They do not earn equity on the value of the unit that they did not pay for when they bought the home (the difference between the appraised fair market value and the IZ set price of the home).

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How will the City's share of value be used?

At the time an owner wishes to sell a unit, the City will have the Right of First Refusal on the unit, which means the City will have the right to buy the unit at the appraised value at the time the unit is being sold.

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Can a buyer of an IZ unit add improvements to the property at the time of purchase?

Yes. However, because the City will take a second mortgage for the full difference between the full fair market appraised value of the property at the time the unit is purchased and its IZ set sale price, the City will not allow the contract sales price or purchase price to exceed the IZ set price for the unit. Therefore, any improvements must either be owner financed at purchase or must be covered by a third mortgage.

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How will the City compute property taxes owed?

The City Assessor will base the property taxes owed on the full fair market value of the property.

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How will the City monitor the income levels of the families?

The City will monitor 5% of the owner inclusionary dwelling units to determine if the household qualified for the program at the time of the sale, and to determine if the household qualifying for the program at the time of the sale is still the occupant of the property.

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Can a purchaser of an IZ unit rent out an IZ unit?

Yes. However, an owner may rent out their IZ property for no more than 12 months in any seven-year period of their ownership.

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Can an owner of an IZ single-family home or condominium make improvements to an IZ property?

Yes. At the time the owner wishes to sell the unit, the City will allow a 5% deduction from the market value of the unit at that time in calculating its equity share as a way to allow an owner to recoup some (if not all) of their improvement equity.

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Will the owner of an IZ unit be able to refinance the unit? Will the owner of an IZ unit be able to borrow against the equity in their home?

Yes. The IZ ordinance allows an owner to both refinance a unit and to borrow against their share of equity appreciation, but limits the ability of the owner to borrow against the City's share of the equity in the property. The homeowner is required to notify the City Planning Director and the CDBG Office when they wish to refinance a unit. In no case, however, may the owner borrow against the City's equity share of the property.

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Housing Developers' Toolbox  |  CD Office  |  Department of Planning & Community and Economic Development  |  City of Madison
Dane County Housing Authority
  |  Home Buyers' Round Table of Dane County  |  HUD Information for Homebuyers

The CD Office is a part of the City of Madison's Department of Planning and Development. Click here for department info. Community Development Office
City of Madison Department of Planning & Community and Economic Development
215 Martin Luther King, Jr. Blvd., Room 280
PO Box 2985, Madison, WI  53701-2985
Phone: (608) 267-0740  |  Fax: (608) 261-9661