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. 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.
Potential Benefits
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