Inclusionary Zoning: 
A Viable Solution to the Affordable Housing Crisis?
 
Inclusionary Zoning: Pros and Cons

By Dr. Robert W Burchell and Catherine C. Galley

Introduction and Definitions

The fundamental purpose of inclusionary zoning programs is to allow the development of affordable housing to become an integral part of other development taking place in a community. At the local level, this is accomplished by zoning ordinance, mandatory conditions or voluntary objectives for the inclusion of below-market housing in future market-level developments. Incentives designed to facilitate the achievement of these conditions or objectives are often included (Stegman and Holden 1987, 50).

A typical inclusionary zoning ordinance will set forth a minimum percentage of units to be provided in a specific residential development affordable to households at a particular income level, generally defined as a percentage of the median income of the area. The share of units allocated to such households is termed a "mandatory set-aside." The goal of such a process is to establish a relatively permanent stock of affordable housing units provided by the private market. This stock of affordable housing units is often maintained for 10 to 20 years or longer through a variety of "affordability controls" (Mallach 1984, 11). Often these are ownership units that do not require a great deal of community administration, except for the income qualification of successive occupants.

In many ordinances, some form of incentive is provided by the county or municipality to the developer in return for the provision of affordable housing. These incentives can take the form of waivers of zoning requirements, including density, area, height, open space, use or other provisions; local tax abatements; waiver of permit fees or land dedication; fewer required developer-provided amenities and acquisitions of property; "fast track" permitting; and/or the subsidization or provision of infrastructure for the developer by the jurisdiction (Calavita and Grimes 1998; Minnesota Housing Partnership 1999; Land Use Law Center 1999).

Historical Background

Inclusionary zoning programs are the mirror image of exclusionary zoning ordinances. They originate in areas where exclusionary zoning is visibly present or where housing costs are overly high despite more liberal zoning practices. Thus, it is not surprising that proactive inclusionary zoning took root in the Washington, D.C. metropolitan area, in California and in the New York metropolitan area (including New Jersey).

In the Washington, D.C., metropolitan area, the inclusionary zoning technique was first employed in 1971 in Fairfax County, Virginia. A mandatory zoning ordinance required that developers of more than 50 multifamily dwelling units provide 15 percent of their units within an affordable range, determined to be between 60 and 80 percent of median income. This ordinance requirement was overturned by the Virginia Supreme Court in 1973 on the grounds that it involved a "taking" [surrendering property rights without just compensation] (Board of Supervisors of Fairfax County et al. v. DeGrofj) (Rubinowitz 1974, 56). A voluntary program reemerged two decades later. Beginning at about the same time (1973) and still in existence today, Montgomery County, Maryland, instituted countywide mandatory inclusionary zoning, known as the Moderately Priced Dwelling Unit (MPDU) ordinance. Montgomery County is the leading national example of the use of this technique at the county level (Burchell et al. 1995). The program requires developers of more than 50 residential units to set aside 12.5 to 15 percent MPDUs, dispersed throughout their subdivisions. Since its inception, the Montgomery County program has produced nearly 10,000 units of affordable housing in that county (Innovative Housing Institute 1999a). In Montgomery County, affordable housing at 50 to 80 percent of median is approximately $85,000 to $125,000 per unit.

The State of California has a 15-year old statute that allows municipalities to incorporate inclusionary provisions into their zoning ordinances (Burton 1981; Schwartz and Johnston 1983, 5). Thirty-eight of 72 inclusionary housing programs identified throughout the United States in 1982 were operative in California communities (Mallach 1984, 201).

In the New York metropolitan area, with the exception of New Jersey, inclusionary housing programs are both scattered and relatively modest in scale. In New Jersey, most of the communities currently before the New Jersey Council on Affordable Housing (about 250 of 566 communities) have a de facto inclusionary housing requirement to meet affordable housing need with new construction. From 1986 to 1999, approximately 12,000 inclusionary units have been developed in New Jersey at about $75,000 each, or one-third the cost of new housing (Bishop 1999). Nationally, other locations of inclusionary zoning programs include Highland Park, Illinois; King County, Washington; Boulder, Colorado; Bellevue, Washington; and a growing number of communities in the states of Connecticut, Florida, Massachusetts, Oregon, Rhode Island, Virginia and Washington (Mallach 1984, 259; Taub 1990, 678).

Current Use

A survey of programs compiled in the early 1980s by Mallach (1984) identified inclusionary programs in 72 local jurisdictions across the country. Inclusionary housing programs were operative in the states of California (38); New Jersey (16); Colorado (5); Massachusetts, Illinois and New York (2 each); and Connecticut, Delaware, Florida, Maryland, Oregon, Virginia and Washington (1 each). Mallach described this now 15-year-old survey as neither definitive nor complete (Mallach 1984, 256). In a more recent 1990 survey, Mary Nenno identified some 50 local inclusionary programs nationally, again with a disproportionate number in California (Nenno 1991, 484). Similar to Mallach*s findings, Nenno noted that her listing was illustrative of the inclusionary programs existing in the United States at that time, not exhaustive. According to a survey by Edward Goetz (1991, 341), of 133 U.S. cities with a population of more than 100,000, only about 10 percent (12 cities) had inclusionary provisions in their zoning ordinances. This is about the same percentage of those cities that required linkage fees, replacement of demolished units, rent control or other means of facilitating low-income housing. Thus, a city with an inclusionary housing program also was likely to implement other affordable housing activities. Finally, in the early 1990s, a California survey identified more than 50 inclusionary programs in that state that had produced over 20,000 affordable units during their histories (San Diego Housing Commission 1992; Newman 1993). Thus, even though no definitive source or comprehensive national survey of these efforts exists, the literature indicates that there are 50 to 100 jurisdictions nationally that employ one or more, or a variant, of these programs.

The Positive Features and Outcomes of Inclusionary Zoning

The Provision of Affordable Housing at Little or No Financial Cost to Local Governments

Advocates of inclusionary zoning argue that this regulatory tool creates economically diverse communities and allows local governments to create more heterogeneous communities at little or no direct financial cost (Hill 1984; Smith et al. 1996, 170; Parrott 1999). Generally, the provision of affordable housing units as part of an inclusionary program does not require significant expenditure of public funds. Inclusionary units are delivered in step with market units through incentives to developers such as density bonuses, fee waivers and/or local tax abatements offered by the local jurisdiction (Municipal Research and Service Center of Washington 1999). Inclusionary zoning relies on a strong residential market to create below-market units. This type of program reached its zenith in the 10-year period from 1975 to 1985. During this time (except for the 1980-82 recession), market housing was built in record numbers, and a share of this housing was allocated to lower-income households.

The Creation of Income-Integrated Communities

The affordable housing enabled by inclusionary programs is not produced as an "island" of the poor but rather is integrated into the development of the overall community in lockstep with market-rate units. The integration of a percentage of low- and moderate-income housing units into market-rate housing developments thus avoids the problems of overconcentration, ghettoization and stigmatization generally associated with solely provided and isolated affordable housing efforts (Innovative Housing Institute 1999a; Municipal Research and Service Center of Washington 1999). Inclusionary programs make possible the integration of populations that traditional zoning segregates—young families, retired and elderly households, single adults, female/male heads of households, minority persons and households of all types.

Suburban and exurban employers further benefit from the presence of this proximate low- and moderate-income work force (Downs 1992). The oft-cited spatial mismatch between available suburban jobs and employment-seeking urban households is significantly reduced by inclusionary zoning.

"Inclusionary zoning is a compromise that I support to ensure that more housing is closer to places of employment, social services, and public transportation; allowing certain privileges in return for affordable housing will enable local business to prosper while awarding [sic] residents with these advantages (Sheila T. Russell, Cambridge, MA, Councilor 1995)."

Less Sprawl

Findings from the County Council of Montgomery County, Maryland, indicate that the inadequate supply of housing in the County for persons of low- and moderate-income results in large-scale commuting from outside the County to places of employment within the County, thereby overtaxing existing roads and tra Yet another argument advanced by the proponents of inclusionary zoning is that it provides the critical mass necessary to create a town center and reduce the proliferation of sprawled bedroom subdivisions (Downs 1992; Innovative Housing Institute 1999a). nsportation facilities, significantly contributing to air and noise pollution, and engendering greater than normal personnel turnover in the businesses, industry and public agencies of the County, all adversely affecting the health, safety and welfare of and resulting in an added financial burden on the citizens of the County (Innovative Housing Institute 1999b).

From a regional perspective, density bonuses often make possible residential environments of a variety of housing types. They enable developments to be built more densely than those of primarily single-family zones, which helps to reduce the sprawl that would otherwise be created by single-purpose residential zones. A large development containing inclusionary zoning often allows for mixed-use and transit-oriented development, while protecting surrounding open spaces (Burchell et al. 2000).

 

The Negative Features and Outcomes of Inclusionary Zoning

The Shift of the Cost of Providing Affordable Housing to Other Groups in Society

Critics claim that inclusionary zoning changes the financial characteristics of real estate developments and reduces the saleable value of the development upon completion. They equate inclusionary zoning mandates with a tax on new development—especially when there are no compensating benefits provided to developers to cover the full cost of providing affordable housing. Opponents of inclusionary programs assert that developers cannot make money on affordable housing and thus are saddled with the burden of economically integrating neighborhoods that have been demographically homogeneous for decades (Innovative Housing Institute 1999a). Developers become scapegoats for problems beyond their control (Breckenfield 1983) but quickly pass this burden onto the new occupants of the housing that they develop (Mallach 1984; Ellickson 1985; O*Sullivan 1996; Johnson 1997; Calavita and Grimes 1998).

Who pays for inclusionary zoning? The requirement of subsidized housing has the same effect as a development tax... The developer makes zero economic profit with or without inclusionary zoning, so the implicit tax is passed on to consumers (housing price increases) and landowners (the price of vacant land decreases). In other words, housing consumers and landowners pay for inclusionary zoning (O*Sullivan 1996, 294).

Another deficiency of the inclusionary zoning strategy is that it is based on a market-supply equation that relies primarily upon a developer*s ability to sell

market-level units—as an example, eight market units for every two affordable units produced. This reliance on the private sector to finance affordable housing based on the sale of market units is not necessarily a major issue when the economy flourishes, but it is a very serious one when the economy falters.

Finally, "shift" criticisms of inclusionary zoning have become focused on the very structure of the inclusionary zoning technique. Inclusionary programs that are mandated without compensation were challenged constitutionally in the 1990s as a taking.

Breaking Up Pockets of the Poor

A lingering criticism of inclusionary zoning is that it "distills" the most upwardly mobile poor from central neighborhoods and artificially transports the citizens who could do the most for reviving central city neighborhoods to the suburbs. The "best" of the poor are enticed outward by a write-down on the cost of housing there. While this is certainly a valid concern, and the more economically mobile residents may move out, leaving the less mobile behind, such is the nature of residential choice; it has existed in housing markets since time immemorial (Burchell et al. 1995).

Similarly, in-kind housing subsidies are nontransportable devices that may not significantly improve the welfare of recipient families (Ellickson 1985). These programs may provide individual economic benefits that are difficult to "cash out." For example, affordable housing units usually carry with them affordability controls that typically limit the sales price increase on such housing to a small multiple of the rate of inflation.

More Development/Induced Growth

In instances where density bonuses are provided as part of the inclusionary solution, criticisms about "massing" have emerged. Some argue that increased density represents an unwanted and unplanned-for glut of development that burdens both the overall environment and the public service capacity of local governments (Innovative Housing Institute 1999a).

In New Jersey, New Jersey Future (a conservation and State Plan advocacy group) brought suit against the New Jersey Council on Affordable Housing (a legally mandated affordable housing oversight agency known as COAH) because housing need in agricultural preservation or environmentally sensitive areas would be met primarily by inclusionary programs operating outside a State Plan-designated center. Development would require a density bonus, thus producing an overall greater number of units outside the center because affordable housing would be provided at the developer*s expense. The New Jersey Future lawsuit caused COAH to acknowledge inclusionary programs in non-center areas contributed too much growth (Bishop 1999).

Conclusions and Future Directions

Inclusionary zoning is simple to understand and apply, and coupled with density bonuses and other incentives, allows higher-income communities to achieve a balanced economic composition. Inclusionary zoning also helps limit sprawl by concentrating more development in a single location.

Inclusionary zoning works best when combined with developer incentives. It has delivered the greatest numbers of units when the populations "included" are closest to median income. Inclusionary zoning is the by-product of expensive housing markets that have been spawned by either raw demand or exclusionary zoning controls. Typically, these have been in northeastern and western United States housing markets and today are likely to extend to specific locations in southeastern and southwestern U.S. housing markets.

In summary, inclusionary zoning has been criticized for shifting the burden of affordable housing provision to other groups, for distilling the upwardly mobile poor from the remainder of central city residents and for causing undue growth in locations that would not otherwise experience it. These criticisms, while warranted and substantive, pale by comparison to the roster of accomplishments and benefits attributable to inclusionary housing programs.

Historically, there has been no equivalent to this mechanism that enables a community to retain its character while accommodating affordable housing. Adopting an inclusionary zoning ordinance does not require basic zones in the community to be altered significantly. The standards that govern development there remain intact. When certain conditions are met (for example, the developer delivers 25 percent of his units as affordable), the builder is granted an increase in density in the zone. Additional conditions that must be satisfied as part of the permitting process include buffering the development from other existing and future development in the zone and providing a traffic mitigation plan to control traffic congestion that occurs beyond that expected to occur in the absence of inclusionary zoning. Other development in the zone proceeds at its original density. The inclusionary provisions differ markedly from the typical community-wide review of densities and housing types allowed in each zone, and the subsequent revision of these provisions to accommodate affordable housing.

Inclusionary zoning will continue to be sought in tight and expensive housing markets where there is socially responsible interest in providing both housing opportunity and economic balance. The technique must be implemented cautiously, however, with sensitivity to the locality paying for it and the population benefiting from it.

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‘The term affordable housing usually applies to below-market housing in a particular geographic location. It often relates to the median price of housing in an area. For the purpose of this article, affordable housing includes housing valued between 40 and 120 percent of a statewide median. This is a somewhat different range than HUD Section 8 income requirements wherein low-income is defined as between 50 and 80 percent of median and very low-income is defined as below 50 percent of median. Most states term HUD*s two income categories of low income and very low income as moderate and low income, respectively.

References

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Burchell, Robert W., David Listokin and Arlene Pashman. 1995. Regional Housing Mobility Strategies in the United States. Washington, DC: U.S. Department of Housing and Urban Development.

Burchell, Robert W., David Listokin, and Catherine C. Galley. 2000. Smart growth: More than a ghost of urban policy past, less than a bold new horizon. Housing Policy Debate 11, 1 (forthcoming).

Burton, Carolyn. 1981. "California Legislature Prohibits Exclusionary Zoning, Mandates Fair Share: Inclusionary Housing Programs a Likely Response." San Fernando Valley Law Review 9:19-46.

Calavita, Nico, and Kenneth Grimes. 1998. "Inclusionary Housing in California: The Experience of Two Decades." Journal of the American Planning Association (Spring): 150-169.

Downs, Anthony. 1992. "Creating More Affordable Housing." Journal of Housing 49,4 (July/August): 174-183.

Ellickson, Robert C. 1985. "Inclusionary Zoning: Who Pays?" Planning (August): 18-20.

Goetz, Edward G. 1991. "Promoting Low-Income Housing Through Innovations in Land-use Regulations." Journal of Urban Affairs 13: 337-35 1.

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Mallach, Allan. 1984. Inclusionary Housing Programs: Policies and Practices. New Brunswick, NJ: Center for Urban Policy Research.

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O*Sullivan, Arthur. 1996. Urban Economics. 3rd ed. Chicago, IL: Irwin Publishers.

Parrott, Britt. 1999. "Ensure Variety of Housing Prices." The Oregonian (July 3). World Wide Web page <http://www.oregonlive.com/cgi-bin/ printer/printer.cgi> (Accessed October 1,1999).

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