Is Inclusionary Zoning a Solution to Supply and Demand?

Nov 10, 2017

One solution floated often in large cities grappling with a dire lack of affordable housing is inclusionary zoning — letting developers have certain leeways in residential or mixed-use projects if they include housing units capped at below-market rent or sales for people below a certain income limit.

For example, a developer might earn the right to build a taller structure with more units than local zoning might allow, in exchange for allocating 20 percent of those units to affordable housing. They might earn a tax deferment, or in some cases, pay a fee that goes to municipal housing in place of building the affordable housing on their site.

The goal is to use incentives to spur the free market to help alleviate the housing crunch, but results can sometimes be mixed.

A study out in late August, reported by the Washington City Paper, found 191 new affordable units went on the market in 2016, in 22 developments, spurred by city inclusionary zoning, or IZ, that began in 2011. In a region notorious for a fast-moving high cost of living, anything helps.

But it’s not without issue. The majority of the properties were rented to singles and couples making 51 to 80 percent of the area median income (AMI). It’s true that someone in the district proper earning on the low end — under $60,000, over $55,000 — struggles with finding reasonable rent.

But there’s a large swatch of people, including families with children, who make far less than the 50 percent AMI rubric and desperately need an affordable place to live. While AMI is variable depending on the size of the household, there are plenty of folks making less than 50 percent of the adjusted AMI who need help.

Single men and women earning $55,000 a year in the district arguably don’t face the same financial struggles as a single mom of two earning much less. The challenges around affordable housing are very real in Fairfax County, too. A local two-bedroom rents for around $1,700, which would mean $70,000 in income.

Not all developers are on board with the idea of inclusionary zoning, either. In California, a pending lawsuit accusing IZ of taking away developer’s property rights.

“The homebuilders believe that local government-imposed inclusionary zoning ordinances constitute an unlawful taking of private property,” notes CityLab. “They also don’t believe that inclusionary zoning actually increases affordable housing.” The argument for the latter portion assumes that the housing market is so demand-driven that artificially limiting supply via forcing affordable housing drives up demand, and cost, elsewhere.

Research appears to undermine that argument — in high-demand areas, affordable housing doesn’t have that type of negative impact on costs, but does offer a small lifeline to some folks who are struggling to find housing.

But there’s still plenty of room for improvement. Imagine if IZ included units for very low income families, easing their burden and requiring less dollar investment by municipal agencies or nonprofits that do build housing for those populations.

As Katy Miller, regional coordinator of the U.S. Interagency Council on Homelessness notes, policies only work as well as they’re written. Careful consideration must be given to the needs of the local community, based on high-quality research about the local market. Creating well-thought-out rules that are communicated clearly helps ensure an even playing field with fewer complaints, and more goals met.

And a discussion of the pros and cons, and successes, of IZ point to a larger issue: The need for creative solutions to the dire housing crunch in our growing cities.

Supply and demand rewards those who can afford it, but shuts out those whose earnings can’t keep up — but they still need safe, reliable places to live.