Inclusionary zoning

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Inclusionary zoning, also know as inclusionary housing, refers to city planning ordinances that require a given share of new construction be affordable to people with low to moderate incomes. The term inclusionary zoning is derived from the fact that these ordinances seek to counter exclusionary zoning practices which aim to exclude affordable housing from a municipality through the zoning code. In practice, these policies involve placing deed restrictions on 10%-30% of new houses or apartments in order to make the costs of the housing affordable to lower income households. The mix of "affordable" and "market-rate" housing in the same neighborhood is seen as beneficial by many, especially in jurisdictions where housing shortages have become acute. Inclusionary zoning is becoming a common tool for local municipalities in the United States to help provide a wider range of housing options than the market provides on its own.

Most inclusionary zoning is enacted at the local level. However when imposed by the state, as in Massachusetts, it can be argued that it usurps local control. In these cases, developers can use inclusionary zoning to avoid local zoning laws.

1 Historical background
2 Differences between ordinances
3 Alternative solutions
4 Controversy
5 Inclusionary zoning in practice
6 Works cited
7 Additional reading
8 See also

[edit] Historical background

During the mid to late 20th century, new suburbs sprouted around American cities as middle class homeowners fled established neighborhoods for newer communities. These newly-populated places were generally far 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. For instance, 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 by a certain minimum space. In many cases, these housing ordinances have prevented affordable housing from being built, because the large plots of land required to build within code are cost-prohibitive for more modest homes. Communities have remained only available to the upper classes because of these ordinances, effectively shutting the poor out of access to desirable communities.

Ordinances of this sort have not always been enacted with the conscious intent of excluding lower income households. In many cases it has however been the unintended result of such policies.

By denying poor families access to suburban communities, many feel that exclusionary zoning has contributed to the maintenance of inner city ghettos. 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. As education is one of the largest components in the effort to lift people out of poverty, access to high-performing public schools is another key benefit of a reduction in segregation. Statistically, a poor child in a school where 80% of children are poor scores 13-15% lower compared to environments where the poor child's peers are 80% middle class. [1]

Note that in many of the communities where inclusionary zoning has been put in practice, income requirements allow households that earn 80-120% of the median income to qualify for the "affordable" housing. This is because in many places, high housing prices have prevented even the middle class from buying market-rate properties. This is especially prominent in California, where only 16% of the population could afford the median priced home during 2005. [2]

[edit] Differences between ordinances

Inclusionary zoning ordinances vary substantially between municipalities. These variables can include:

Mandatory or voluntary ordinance. While many cities require inclusionary housing, many more offer zoning bonuses, expedited permits, reduced fees, cash subsidies, or other incentives for developers who voluntarily build affordable housing.
Percentage of units to be dedicated as inclusionary housing. This varies quite substantially between jurisdictions, but appears to range between 10-30%.
Minimum size of development that the ordinance applies to. Most jurisdictions exempt smaller developments, but some require that even developments incurring only a fraction of an inclusionary housing unit pay a fee (see below).
Whether inclusionary housing must be built on site. Some programs allow housing to be built nearby, in case of hardship.
Whether fees can be paid in lieu of building inclusionary housing. Fees-in-lieu allow a developer to "buy out" of his/her inclusionary housing obligation. This may seem to defeat the purpose of inclusionary zoning, but in some cases the cost of building one affordable unit on-site could purchase several affordable units off-site.
Income level or price defined as "affordable," and buyer qualification methods. Most ordinances seem to target inclusionary units to low- or moderate-income households, earning approximately the regional median income or somewhat below. Inclusionary housing typically does not create housing for those with very low incomes.
Appearance and integration of inclusionary housing units. Many jurisdictions require that inclusionary housing units be indistinguishable from market-rate units, but this can increase costs.
Longevity of price restrictions attached to inclusionary housing units, and allowable appreciation. Ordinances that allow the "discount" to expire essentially grant a windfall profit to the inclusionary housing buyer, preventing that subsidy from being recycled to other needy households. On the other hand, preventing price appreciation removes a key incentive of homeownership. Many programs restrict annual price appreciation (by, for instance, enrolling inclusionary housing into community land trusts), often tying it to inflation plus market value of home improvements, striving to balance the community's interest in long-term affordability with the homeowner's interest in accruing equity over time.
Whether housing rehabilitation counts as "construction," either of market-rate or affordable units. Some cities, like New York City, allow developers to count rehabilitation of off-site housing as an inclusionary contribution.
Which types of housing construction the ordinance applies to. For example, high-rise housing costs more to build per square foot (thus raising compliance costs, perhaps prohibitively), so some ordinances exempt it from compliance.

[edit] Alternative solutions

While many suburban communities feature Section 8 for low income households, they are generally restricted to concentrated sections. In some cases, counties specify small districts where Section 8 properties are to be rented. In other cases, the market tends to self-segregate property by income. For instance, in Montgomery County, Pennsylvania, a wealthy suburban county bordering Philadelphia, only 5% of the county's population live in the borough of Norristown yet 50% of the county's Section 8 properties are located there. [3] Norristown's local government and school district are burdened with a large population of lower income residents, while much of the county is free to reap the benefits of a wealthy tax base.

Inclusionary zoning aims to reduce residential economic segregation by mandating that a mix of incomes be represented in a single development.

[edit] Controversy

Inclusionary zoning is a controversial issue. Affordable housing advocates seek to promote the policies in order to ensure that housing is available for variety of income levels in more places. These supporters hold that the inclusionary zoning produces needed affordable housing, and creates income-integrated communities.

Detractors claim 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 much of the benefit of home ownership.

Free market advocates oppose attempts to fix given social outcomes by government intervention in markets. They claim inclusionary zoning as one of many onerous land use regulations that exacerbate housing shortages. Affordable housing supporters note that the very act of zoning land creates value through the associated roads, utilities, sewers, and schools that are non-market benefits, subsidized by taxpayers, that accompany zoning decisions.

Homeowners sometimes contend that their property values will be reduced if low income families are given access to their community. Others counter that this is thinly-concealed classism.

Some of the most widely publicized inclusionary zoning battles have involved the REIT AvalonBay Communities. According to the company's website, AvalonBay seeks to develop properties in "high barrier-to-entry markets" across the United States. In practice, AvalonBay uses inclusionary zoning laws, such as Chapter 40B in Massachusetts, to bypass local zoning laws and build large apartment complexes. In some cases, local residents fight back with a lawsuit.[4] In Connecticut, similar developments by AvalonBay have resulted in attempts to condemn the land or reclaim it by eminent domain.[5] In most cases AvalonBay has won these disputes and built extremely profitable apartments or condos.

The clash between these various interests is reflected in this study published by the libertarian-leaning Reason Foundation's public policy think tank, and the response of a peer review of that research. Local governments reflect and in some cases balance these competing interests. In California, the League of Cities has created a guide to inclusionary zoning which includes a section on the pros and cons of the policies.

[edit] Inclusionary zoning in practice

More than 200 communities in the United States have some sort of inclusionary zoning provision. [6]

Montgomery County, Maryland is often held to be a pioneer in establishing inclusionary zoning policies. It is the 6th wealthiest county in the United States, yet it has built more than 10,000 units of affordable housing since 1974, many units door-to-door with market-rate housing. [7]

All municipalities in the state of New Jersey are subject to judicially imposed inclusionary zoning as a result of the New Jersey Supreme Court's Mount Laurel Doctrine, and subsequent acts of the New Jersey state legislature (See NJ Fair Housing Act).

Madison Wisconsin's inclusionary zoning ordinance respecting rental housing was struck down by Wisconsin's 4th District Court of Appeals in 2006 because that appellate court construed inclusionary zoning to be rent control, which is prohibited by state statute. The State Supreme Court declined the City's request to review the case.

Other communities with inclusionary zoning ordinances on the books include: