Is Inclusionary Housing the New Normal for High-Cost Places?

March 05, 2015

For anyone who follows the issue of affordable housing, it’s not exactly news that New York City can be a tough market for people on the hunt for a safe and affordable neighborhood relatively close to their workplaces.

But when Mayor Bill de Blasio decides to make its voluntary inclusionary zoning program mandatory… well, that’s another story.

Though the practice of inclusionary zoning — requiring below-market-priced housing units in pricier urban areas — dates back to the 1970s, it’s getting a second life in many cities as housing costs soar in the rebound from the Great Recession.

De Blasio even used the megaphone of his recent “State of the City” address to flesh out his now-controversial proposal to increase affordable housing in the city. He hopes that with mandatory inclusionary zoning, New York will add 80,000 new affordable housing units by 2024. The City Council will take up his proposal later this year.

Critics began attacking the mayor’s plan last spring when he announced the basic idea. The New York Times published an editorial at the time noting that though de Blasio’s ambition was understandable, his “moon shot” 116-page plan raised enough questions to “fill another book.” The debate has not subsided, nor has the city’s gaping need for affordable housing.

The National Shift toward Inclusionary Housing

More than 400 communities across the country have enacted some form of inclusionary zoning ordinance, which enlists developers to set aside a portion of housing units in residential projects at below-market rate prices. Whether voluntary or mandatory, all inclusionary ordinances offer developers an incentive for participating, such as allowing additional housing units on the site to make up for units with lower rents and purchase prices.

A 2014 study found that about 150,000 below-market-rate units have been built through inclusionary zoning in the United States since the 1970s. Many of the programs weren’t implemented until the 1990s, according to Robert Hickey, the study author and senior research associate at the National Housing Conference.

If New York City does make its program mandatory, it will find itself in good company. A 2004 report by Business and Professional People for the Public Interest, based in Chicago, found that Boston, Denver, Sacramento, San Diego and San Francisco, “all chose mandatory ordinances in the face of severe affordable housing shortages.” According to the report, “their uniform and predictable nature, coupled with their documented success in producing more affordable units, has clearly made mandatory programs the better option for communities looking to address their need for affordable housing.”

Though either approach to inclusionary housing adds to communities' affordable stock, other programs have tackled affordable housing in much greater volume. For instance, 2.5 million units have been built since 1987 through the Low-Income Housing Tax Credit (LIHTC) program, and 1.8 million affordable units have been added through Housing Choice Vouchers, a HUD program that began in the 1970s.

Even so, housing experts typically give inclusionary zoning high marks because it can bring people into better, safer neighborhoods. A 2014 MacArthur Foundation issue brief linked inclusionary housing to improved opportunities for poorer children to attend better schools because they were able to move to lower-poverty neighborhoods.

The Innovative Housing Institute, an advocacy group based in Baltimore, touts benefits of inclusionary housing that extend beyond educational opportunities. According to the group, inclusionary zoning:

Offers families across the economic spectrum access to good jobs, good schools, good transportation, safe neighborhoods, quality commerce, and recreational and cultural amenities;
Increases communities' economic, racial and social diversity;
Strengthens local economies so that employers can attract and retain a diverse workforce and the community can house its essential workers;
Protects the environment by reducing commutes;
Contributes to healthy and active lifestyles by supporting the development of walkable pedestrian environments.

Even if de Blasio succeeds with his ambitious plan, challenges might lie ahead. Courts have overturned inclusionary zoning ordinances in some communities, ruling that they are illegal forms of rent control. In other communities, inclusionary zoning has passed but was never enacted because of policymakers’ concerns that the programs could crimp a recovery in the housing market. Two states — Oregon and Texas — prohibit mandatory inclusionary zoning requirements.

Hickey says now is the optimal time for more inclusionary zoning, as cities and city centers seek to “expand inward.” The growing demand for housing, he says, is likely to help loosen up zoning restrictions.

“That kind of opportunity comes in cycles and will be harder to do when the current cycle ends,” he says.