Inclusionary Zoning : carrot or stick?

Abstract

The public sector has become increasingly attracted to using regulatory mechanisms that stimulate the private production of affordable housing without direct subsidies. Inclusionary zoning ordinances in many U.S. cities, towns, and counties now require developers of market-rate housing projects, in certain circumstances, to refit or sell a percentage (often 10% to 20%) of the units at affordable prices without any financial subsidy from the government. Although inclusionary zoning is being adopted widely, very little research has been conducted regarding the arrival of the newest stakeholder in the provision of affordable housing: the private, for-profit developer. Although some for-profit developers already have a great deal of experience with affordable housing as a result of federal subsidy or tax credit programs, in many jurisdictions all developers of housing are now dealing with the complex issues of affordable housing, not just those developers who have developed an affordable housing expertise in the past. This research examines information obtained in interviews with for-profit developers to determine the response these developers have to such a policy. This research also explores the practical application of this policy and how it augments, alters, or interferes with the standard practices of housing developers. This research concludes with evidence that there are no social barriers within the development industry that prohibit the viability of inclusionary zoning. However, there is evidence of practical limitations to its application and a need for greater flexibility in its terms and predictability in its application in order to avoid restricting the production of housing altogether and exacerbating the housing crisis. This study also suggests further research that might be undertaken to maximize the effectiveness and efficiency of this important and potentially broad-reaching policy.