Inclusionary zoning (IZ) is a type of urban planning intervention with the aim of increasing the supply of affordable housing. It is sometimes enacted through a local ordinance or development plan requiring (or providing incentives for) a percentage of units in real estate development be affordable by people with low to moderate incomes.
It is named in contrast to exclusionary zoning, which is zoning requirements (such as single-family zoning or minimum parcel or house sizes) that result in exclusion of low-income residents. Inclusionary zoning is the urban planning counterpart to 'affordable' housing. 'Affordable' housing has a specific meaning in Australia and the United States. In the US, "affordable housing developers" are non-profits which build 100% of their units as affordable, but need significant taxpayer subsidies for this model to work. While inclusionary zoning allows municipalities to build 'affordable' housing with no financial cost, they have an opportunity cost which is not a small subsidy.
The bulk of economic evidence indicates inclusionary zoning, without well-calibrated incentives, substantially restricts new housing supply and reduces overall affordability. The typical inclusionary zoning ordinance in California reduces annual new residential construction by 31.8%, and the cost of generating an affordable unit through IZ is approximately $800,000. This is more than the cost of directly subsidizing housing in California, which is estimated to be $441,000.Reid et al., 2026
Alternatives to unfunded inclusive zoning with the aim of improving housing affordability include funded (or "bonus") inclusionary zoning, providing rent controls, public housing, rent subsidies, or allowing more housing.
Background
Non-profit affordable housing developers build 100% of their units as affordable, but need significant taxpayer subsidies for this model to work. Inclusionary zoning allows municipalities to have new affordable housing constructed without explicit taxpayer subsidies. In order to encourage for-profit developers to build projects that include affordable units, cities often allow developers to build more total units (a "density bonus") than their zoning laws currently allow so that there will be enough profit generating market-rate units to offset the losses from the below market-rate units and still allow the project to be financially feasible.
Inclusionary zoning can be mandatory or voluntary, though the great majority of units have been built as a result of mandatory programmes. There are variations among the set-aside requirements (percentage of units set-aside for low-income residents), affordability levels (what income level is considered "low-income"), and length of time the unit is deed-restricted as affordable housing.
In practice, these policies involve placing deed restrictions on 10–30% of new houses or apartments in order to make the cost of the housing affordable to lower-income households. The mix of "affordable housing" and "market-rate" housing in the same neighborhood may be seen as beneficial by city planners and sociologists. Another goal of inclusionary zoning is to build mixed-income communities, rather than having poor households concentrated in specific city neighborhoods.
Most inclusionary zoning is enacted at the municipal or county level; when imposed by the state, as in Massachusetts, it has been argued that such laws usurp local control. In such cases, developers can use inclusionary zoning to avoid certain aspects of local zoning laws.
History During the mid- to late-20th century, new suburbs grew and expanded around American cities as middle-class house buyers, supported by federal loan programs such as Veterans Administration housing loan guarantees, left established neighborhoods and communities. These newly populated places were generally more economically homogeneous than the cities they encircled. Many suburban communities enacted local ordinances, often in zoning codes, to preserve the character of their municipality. One of the most commonly cited exclusionary practices is the stipulation that lots must be of a certain minimum size and houses must be set back from the street a certain minimum distance. In many cases, these housing ordinances prevented affordable housing from being built, because the large plots of land required to build within the code restrictions were cost-prohibitive for modestly priced houses. Communities have remained accessible to wealthier citizens because of these ordinances, effectively shutting the low income families out of desirable communities. Such zoning ordinances have not always been enacted with conscious intent to exclude lower income households, but it has been the unintended result of such policies.
Supporters of inclusionary zoning point out that low income households are more likely to become economically successful if they have middle class neighbors as peers and role models. When effective, inclusionary zoning reduces the concentration of poverty in slum districts where social norms may not provide adequate models of success. Education is one of the largest components in the effort to lift people out of poverty; access to high-quality public schools is another key benefit of reduced segregation. Statistically, a poor child in a school where 80% of the children are poor scores 13–15% lower compared to environments where the poor child's peers are 80% middle class.
Income requirements for the "affordable" housing differ among jurisdictions where inclusive zoning is implemented. In California, 16% of the population could afford the median-priced home during 2005.CAR
Potential Benefits
Expanding affordable housing may give poor and working families would access to a range of opportunities, including good employment opportunities, good schools, comprehensive transportation system and safe streets.Brown, K. (2001). EXPANDING AFFORDABLE HOUSING THROUGH INCLUSIONARY ZONING: LESSONS FROM THE WASHINGTON METROPOLITAN AREA (1st ed.). The Brookings Institution Center on Urban and Metropolitan Policy.
Some affordable housing advocates seek to promote the policies in order to ensure that housing is available for a variety of income levels in more places. These supporters hold that inclusionary zoning produces needed affordable housing and creates income-integrated communities.
Inclusionary zoning may alleviate the problem of inadequate supply of Affordable Housing
Affordable housing may avoid economic and racial segregation, which helps reducing crime rate, failing schools and improving social stability
Affordable housing requires relatively small amount of explicit subsidies required for adopting IZ as a market-based tool.Brunick, N., Goldberg, L., & Levine, S. Large Cities and Inclusionary Zoning (1st ed.). Business and Professional People for the Public Interest.
Criticism
The bulk of the existing academic evidence indicates that mandatory IZ (without incentives), substantially restricts new housing supply, making affordability worse.
Inclusionary zoning may only have low production of affordable housings, which produced approximately 150,000 units over several decades in the United States. Other schemes, such as Housing Choice Vouchers (which assists approximately two million households) and the LIHTC program have produced over two million affordable homes
Inclusionary zoning may result in unstable production of affordable housing that highly affected by local housing-market conditions.
There is very little research on outcomes for participants in these programs. Although these affordable housing programs, by definition, offer lower-cost units that municipalities promote as inclusive, the deed restrictions imposed on participants in these programs result in additional economic disparities and other hardships not faced by market-rate homeowners.Perry, A. (2022, May 24). The money pit-falls of Boulder's permanently affordable housing [Guest opinion]. Daily Camera.
Some advocates state that Inclusionary Zoning can have the opposite effect and actually reduce affordable housing in a community. For example, in Los Angeles, California, inclusionary zoning apparently accelerated gentrification, as older, unprofitable buildings were razed and replaced with mostly high-rent housing, and a small percentage of affordable housing; the net result was less affordable housing. In New York, NY, inclusionary zoning allows for up to a 400% increase in luxury housing for every unit of affordable housing and for an additional 400% luxury housing when combined with the liberal use of development rights. Critics have stated the affordable housing can be directed to those making up to $200,000 through the improper use of an Area Median Income, and used as political tools by organizations tied to various politicians. New York City communities such as Harlem, the Lower East Side, Williamsburg, Chelsea and Hell's Kitchen have experienced significant secondary displacement through the use of Inclusionary Zoning.
Real Estate industry detractors note that inclusionary zoning levies an indirect tax on developers, so as to discourage them from building in areas that face supply shortages. Furthermore, to ensure that the affordable units are not resold for profit, deed restrictions generally fix a long-term resale price ceiling, eliminating a potential benefit of home ownership.
Free market advocates oppose attempts to fix given social outcomes by government intervention in markets. They argue inclusionary zoning constitutes an onerous land use regulation that exacerbates housing shortages.
Homeowners sometimes note that their property values will be reduced if low income families move into their community. Others counter consider their concerns thinly-concealed classism and racism.
Local residents in Massachusetts begun a lawsuit fighting affordable housing projects.
Other legal battles have occurred in California, where many cities have implemented inclusionary zoning policies that typically require 10 percent to 15 percent of units to be affordable housing. The definition of affordable housing includes both low-income housing and moderate-income housing. In California, low-income housing is typically designed for households making 51 percent to 80 percent of the median income, and moderate-income housing is typically for households making 81 percent to 120 percent of the median income. Developers have attempted to fight back these requirements by challenging local inclusionary zoning ordinances through the court legal system. In the case Home Builders Association of Northern California v. City of Napa, the California First District Court of Appeal upheld the inclusionary zoning ordinances of City of Napa that require 10 percent of units of the new development project to be moderate income housing against the Home Builders Association that challenged the City of Napa. Cities have also attempted to impose inclusionary requirements on rental units. However, the Costa-Hawkins Rental Housing Act prohibits cities in California from imposing limitation on rental rates on vacant units. Subsequently, developers have won cases, such as Palmer/Sixth Street Properties, L.P. v. City of Los Angeles (2009), against cities that imposed inclusionary requirements on rental units, as the state law supersedes local ordinances.