Multifamily development glossary

The terms that come up in every multifamily project, defined in one place.

Approvals

• Entitlement: the approval of a specific project on a specific site.
• By right: allowed under the zone without a discretionary decision, where every standard is met.
• Ministerial: decided on objective standards, with no discretion and, in California, outside CEQA.
• Discretionary: decided by a body that can approve, condition or deny, usually after a hearing.
• Ready to issue (RTI): plan check approved and every clearance signed, so the permit can issue.

Capacity

• Density: the units permitted per acre or per area of lot.
• Floor area ratio (FAR): the building's floor area divided by the lot area.
• Test fit: a drawn floor plan that proves how many units a site holds.
• Set-aside: the share of units restricted for income-qualified households.
• Area median income (AMI): the income level set-asides are measured from.

Returns

• Net operating income (NOI): revenue less vacancy and operating expenses.
• Yield on cost: stabilized NOI divided by the total development cost.
• Cap rate: NOI divided by value, the rate at which the market prices income.
• Total development cost: land, hard cost, soft cost, financing and contingency.

Questions

What does RTI mean in construction permitting?

Ready to issue: plan check is approved and every clearance is signed, so the building permit can issue.

Sources