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Inclusionary Zoning

Inclusionary Zoning

Issue Overview

Adopted by over 500 localities across the country, inclusionary zoning (also known as inclusionary housing) policies typically fall into two catagories: voluntary measures that encourage the development of affordable housing by offering incentives such as increased density for the development, or mandatory programs that stipulate a percentage of units be set aside and fixed below market rents as a condition of approval for new development. Increasingly, the latter is being used by state and local governments to grow affordable housing in communities experiencing high rates of growth. While well intentioned, these policies result in the opposite outcome of it's intended aim, as they act as a tax on construction. Moreover, the incentives provided are rarely substantial enough to offset the costs imposed by set-aside requirements, and it's been shown in practice to generate little in the way of affordable housing. Mandatory inclusionary zoning is a form of rent control that stymies development and leads to overall price increases. 

As an Owner or Operator, How Does this Affect My Business?

Mandatory inclusionary zoning can vary significantly in their implementation. Jurisdictional mandatory inclusionary housing requires a percentage of units are set aside as a condition of development. Often, jurisdictions will allow a developer to pay in-lieu fees as an option for developers to satisfy their inclusionary zoning requirement. These fees are exactions that municipalities mandate from builders in the event that developers do not include below-market-rate housing in the apartment community. These programs can apply to either or both single family, and multifamily housing. In addition, in some jurisdictions, an agency will be created to help enforce compliance with the program in applicable properties, whereas other local governments will lack compliance mechanism to ensure set-aside units are rented to low to moderate income individuals and families.