The Effects of Inclusionary Zoning on Local Housing Markets
Local inclusionary zoning (IZ) laws create affordable housing by encouraging or requiring developers to set aside a percentage of housing units to be sold or rented at below-market prices. These laws aim to provide housing to low-income residents who would otherwise be unable to afford it.
IZ laws have been growing in popularity, and a recent estimate listed 866 jurisdictions with some form of IZ policy (Thaden and Wang 2017).
These laws are also increasingly subject to state pre-emption: as of 2017, 11 states had adopted laws that prevent localities from enacting mandatory IZ or limit their discretion in designing voluntary IZ policies (Schragger 2017).
Proponents of state pre-emption of IZ often cite concerns about its impacts on private development and prices. Those advocating against pre-emption argue that affordable housing is most effectively approached at the local level because policy efforts can best be tailored to local market characteristics and needs.
But the evidence on IZ’s effects on the private market is mixed, and a consensus has not been reached on whether these policies restrict development or raise prices. Some evidence suggests that IZ is effective at increasing the affordable housing supply and encouraging economic opportunity, but overall research findings remain mixed.
This indicates that the effects of IZ policies may be particularly sensitive to policy design considerations and market characteristics. In this brief, we synthesize the evidence on the effectiveness of local IZ laws and suggest areas in which further research could help policymakers, advocates, and the public improve state and local laws regarding IZ.
State and Local Trends The first IZ policy, which is still active, began in Fairfax County, Virginia, in 1971.3 Although these policies have existed for decades, they have been growing in popularity over the past decade: over 70 percent of local IZ laws and policies were adopted after 2000 (Thaden and Wang 2017).
Most IZ policies are local (adopted by cities and counties), although some state policies also encourage fair siting of affordable housing across diverse communities, such as New Jersey’s Council on Affordable Housing and the Massachusetts Chapter 40B requirement. The Grounded Solutions Network keeps a database of IZ policies and has identified 866 jurisdictions within 25 states with some type of inclusionary housing policy (Thaden and Wang 2017).
Most programs are concentrated in Massachusetts, New Jersey, and California, but they exist throughout the country. IZ laws are not identical, and some key differences in their design and implementation may influence their outcomes. Some laws require affordable units to be constructed at the same location as the market units, or “on-site”; others allow off-site affordable construction.
Most IZ laws are mandatory, typically requiring developers to set aside affordable units; some other programs are voluntary but provide incentives for inclusionary development. IZ policies can apply to rental or for-sale units and specify varying terms of affordability. Jurisdictions can also offer different incentives to developers in return for building affordable units, such as density bonuses, zoning variances, or fee reductions.
IZ laws are intended to create affordable, below-market housing that would otherwise not be created by private developers. IZ policies’ effectiveness can be measured in different ways, such as the number of affordable units produced, how long units remain affordable, and who benefits from IZ laws.
However, evaluating the effectiveness of IZ programs can be difficult because of variations in the design and implementation of each program that may affect outcomes. For example, mandatory IZ laws may have a different effect on housing construction than voluntary ones.
Programs with varying cost offsets, such as density bonuses or fee waivers, may also have different impacts on housing production and other measures of effectiveness. With these limitations in mind, the evidence on the effectiveness of IZ has been mixed and is often dependent on location and policy type.
Estimating the exact number of affordable units created nationwide through IZ is difficult because of a lack of consistent data. Recent studies have claimed total counts of 150,000 to 173,000 (Sturtevant 2016; Thaden and Wang 2017). These estimates can be difficult to interpret because of missing data and variation between programs, but they generally indicate that IZ programs are successfully creating affordable housing.
However, these estimates represent the total number of units created over decades, since the earliest programs in the mid-1970s, and the number of units varies significantly across regions and jurisdictions.
Read more: Inclusionary zoning,
Zoning: What It Is, How It Works