Inclusionary zoning is no longer the new kid on the block for cities looking for ways to address their affordable housing shortages. There are now over 500 programs in 27 states that tie a provision of housing for low- and moderate-income households to market-rate construction.
These units help to mitigate displacement of low-income residents, especially in urban areas where housing prices are skyrocketing. But how these policies have been implemented nationwide has created wildly different outcomes for localities looking to combat gentrification. Meanwhile, many people still fear that such affordable housing regulations will hamper real estate development.
“What we’ve seen is there’s been a big difference in the effectiveness of programs depending on their details,” says Rick Jacobus, the author of a new report on inclusionary housing from the Lincoln Institute of Land Policy. “People have to study up on it in order to do it well.”
In “Inclusionary Housing: Creating and Maintaining Equitable Communities,” Jacobus uses existing research — often only available in academic journals or in consultant’s reports — to detail where city hall, real estate developers and local stakeholders have collaborated to design programs that generate affordable housing without slowing down development. The guide gives practical information to housing advocates and policymakers about economic impacts, how to build public support, and the nuts and bolts of designing an equitable inclusionary housing policy.
A case study from California illustrates the effectiveness of real estate market analysis: When the housing market began to heat up in Salinas, California, in the early 2000s, city officials hired a consulting firm to do an economic feasibility study that evaluated how different inclusionary housing requirements might impact development projects. Most inclusionary housing programs require developers to sell or rent a percentage of new construction units to residents who earn below the area’s median income. The analysis done for Salinas looked at the impact of percentages ranging from 15 to 40 percent of new residential units. Combined with interviews with local developers, the feasibility study helped the city to conclude that an ordinance requiring 20 percent affordable units was the “sweet spot” for Salinas.
The graph below shows trends in how developer incentives have been incorporated in local programs in California.
From the Lincoln Institute of Land Policy’s “Inclusionary Housing: Creating and Maintaining Equitable Communities”
“We have good evidence that the more successful programs have recognized that there are real economic challenges to these kinds of requirements,” says Jacobus, “and they’ve paid attention to the local housing market conditions to make sure that their requirements are appropriate and can be accommodated in local real estate development.”
When it comes to creating equitable cities, inclusionary housing — and its advantages and disadvantages — can differ project to project. Jacobus looked at two neighboring buildings owed to San Francisco’s inclusionary program: a mostly market-rate building that has affordable apartments too, and a tower where all the units are affordable. (The latter was built as an “off-site project” to offset the development of a nearby luxury building.)
While incorporating affordable units into a market-rate building can sometimes lead to the economic integration of local households, a low-income family living in the mixed-income building described living in a place with 24-hour spa treatments and dog walking services as “awkward.” Meanwhile the off-site building has larger apartments and more units than the developer would have had to provide on-site. That’s not always the case when units are built off site, but this building benefits from being a project of the nonprofit Tenderloin Neighborhood Development Corporation.
Last year in New York, the city’s affordable housing policies led to the so-called “poor door” controversy. A developer planned to reserve some apartments in a new building for low-income residents, but the renters would have one building entrance while market-rate-paying residents would have another.
In the Lincoln Institute report, Jacobus maintains that when it comes to inclusionary housing “with concerted effort, it is possible for communities to grow in ways that create and maintain meaningful economic diversity.” He cites one of the country’s earliest programs, enacted in 1973 in Montgomery County, Maryland. The effort has been held up as an exemplar on which other municipalities modeled their own programs.
Montgomery County, Maryland … has created more than 14,000 homes for lower-income families that are integrated into some of the area’s most expensive neighborhoods. A 2005 study found that this strategy had succeeded in promoting racial integration throughout the county. A later study found that the children living in affordable housing produced by the program were not only able to attend higher-quality schools than other children in lower-income families, but their school performance was significantly higher.
In terms of long-term sustainability of inclusionary policies, Jacobus’ research suggests periodic review is a must. For example, by 2005, only 3,000 affordable units remained in the Montgomery County program because of expired regulation. The county had to revise its hallmark legislation. Where the program lifespan was 10 years previously, affordable units are now required to remain affordable for 30 years.
The Low Income Housing Tax Credit still dwarfs inclusionary housing as a catalyst for the construction of affordable housing in the U.S., but Jacobus predicts that the latter is going to become much more prevalent. And inclusionary housing plays a very specialized role. From 2012 to 2014, 82 percent of multifamily rental units constructed in cities were in the luxury category. A well-crafted inclusionary housing policy can help ensure that if (or when) the trend persists, there continues to be space for low- and moderate-income people to live and feel welcome in cities.
“Inclusionary housing policies are not asking developers to resolve an area’s affordable housing problem,” writes Jacobus, “rather they are asking them to be responsible for the economic impacts of their development.”
Alexis Stephens was Next City’s 2014-2015 equitable cities fellow. She’s written about housing, pop culture, global music subcultures, and more for publications like Shelterforce, Rolling Stone, SPIN, and MTV Iggy. She has a B.A. in urban studies from Barnard College and an M.S. in historic preservation from the University of Pennsylvania.