Inclusionary Zoning: Not a Cure for Exclusionary Zoning
This is a report I wrote for my housing policy course at UCLA. I’ve been interested in inclusionary zoning and its potential side effects for a while now, so I was glad to be able to spend the spring quarter researching the topic and writing up my findings. For a 30-second overview, read just the abstract. For a 5-minute version, check out the introduction. Or, if you have some time on your hands, read the whole report.
The folks at City Observatory were nice enough to highlight this paper in their weekly newsletter, The Week Observed. Scroll to the “New Knowledge” section of the article to see it.
Table of Contents:
Abstract
Inclusionary zoning attempts to solve two problems prevalent in America’s urban areas: a lack of affordable housing and residential segregation. Both of these problems are caused largely by exclusionary zoning. However, despite its name, inclusionary zoning does not undo exclusionary zoning. It does not meaningfully address either of the problems it attempts to solve and it can worsen the housing affordability crisis. I recommend that jurisdictions hoping to confront issues of housing affordability and residential segregation repeal or refrain from enacting inclusionary zoning ordinances. I further recommend that they refocus their efforts toward repealing exclusionary zoning and offering targeted financial support to very low-income households that the private housing market will not serve.
Introduction
Urban areas across the country are facing a housing crisis. The cost to own and to rent homes is increasing, and this is especially true in high opportunity regions such as coastal California and the Northeast Corridor. In Los Angeles, as of 2017, more than half of residents pay more than 30 percent of their income in rent and over 30 percent of residents pay more than half their income in rent. (Myers et al, 2018) In New York City, median home values increased by 48 percent from January 2012 to January 2020. (Zillow, 2021) Increasingly exorbitant housing costs most directly hurt low-income people, who are priced out of high-opportunity neighborhoods in these regions or even priced out of the regions entirely.
Concurrent with and exacerbated by this crisis, urban areas across the country remain residentially segregated across both economic and racial lines. A typical American white person lives in a neighborhood that is 75 percent white and 8 percent African American, while a typical African American person lives in a neighborhood that is only 35 percent white and 45 percent African American. (Greene et al, 2017) While segregation measures in the U.S. have improved slightly in the 21st century, both racial and economic residential segregation persist today.
These crises have been largely self-inflicted. Since the beginning of the 20th century, jurisdictions across the country have enacted exclusionary zoning practices like single-family zoning (Manville et al, 2020), minimum lot sizes, and parking requirements with the intent of inflating residential property values and thus excluding low-income and minority families. (Bertolet, 2016) These policies were successful. And because they largely remain in place today, they continue to exacerbate housing costs and prevent integration. Indeed, in the American Jobs Plan proposal, President Joe Biden called for the elimination of exclusionary zoning. The proposal noted that these policies “have inflated housing and construction costs and locked families out of areas with more opportunities.” (The White House, 2021)
To try to combat these crises, some jurisdictions have sought to roll back exclusionary zoning practices, such as minimum parking requirements (Garcia et al, 2021) and single-family zoning. (Trickey, 2019) Other jurisdictions have enacted policies intended to directly help consumers afford housing, such as Section 8 vouchers and rent control, or policies intended to produce more deed-restricted affordable housing, such as low-income housing tax credits and inclusionary zoning ordinances. The last of these policy efforts is the focus of this report.
Inclusionary zoning policies across the U.S. vary greatly. Broadly, these policies ask developers to set aside a percentage of units in each new development to be affordable to low-income residents. Some policies mandate this set-aside (mandatory inclusionary zoning), while others instead offer incentives to developers who choose to do so (optional inclusionary zoning). Mandatory inclusionary zoning frequently includes concessions for developers, such as density bonuses, reduced parking requirements, or reduced development fees. Optional inclusionary zoning policies always include these concessions. Policies also vary in the level of affordability required, in the percentage of units that must meet this standard, and in whether developers can create affordable units off-site or pay a fee in-lieu of creating the units at all.
In this policy report, I evaluate inclusionary zoning policies, distinguishing between mandatory and optional versions. I evaluate these policies across a variety of criteria: 1) their effect on the supply and price of market-rate housing, 2) how much designated affordable housing they create, 3) their effects on residential segregation, and 4) whether they reduce or reinforce exclusionary zoning.
Based on my review of the current literature on inclusionary zoning policies, I find the following:
- Mandatory inclusionary zoning increases the price of market-rate housing and decreases its supply. This contributes to housing affordability problems across all price points. Optional inclusionary zoning does not directly affect the price or supply of market-rate housing.
- Most mandatory inclusionary zoning policies produce little affordable housing. The vast majority of mandatory policies across the country create less than 100 affordable units per year, a drop in the bucket compared to the need for affordable housing. Optional inclusionary zoning policies perform worse: most of them create no affordable housing in a typical year.
- To the extent that mandatory or optional inclusionary zoning policies produce below-market rate units, they decrease residential segregation levels. However, to the extent that they worsen housing affordability, they drive out low-income residents from neighborhoods, cities, and even entire regions. The net effect of inclusionary zoning on residential segregation has not been studied. However, because inclusionary zoning policies produce few below-market rate units, I assume this effect to be either minimal or negative.
- The concessions in inclusionary zoning policies can be used to loosen exclusionary zoning restrictions. However, some jurisdictions opt to pursue inclusionary zoning policies in lieu of addressing exclusionary zoning restrictions. Additionally, some jurisdictions employ “pretextual zoning”, creating especially exclusionary requirements to make sure developers cannot develop housing without taking advantage of the concessions offered through a policy. The net effect of inclusionary zoning on exclusionary zoning has not been studied. However, based on qualitative findings from jurisdictions around the country, I find that inclusionary zoning does not undo exclusionary zoning; rather, it tends to strengthen it.
Based on these findings, I recommend that jurisdictions repeal or refrain from enacting inclusionary zoning policies. These policies do not meaningfully address the lack of affordable housing or residential segregation. Further, they are likely to worsen the housing affordability crisis. I further recommend that jurisdictions hoping to confront issues of housing affordability and residential segregation refocus their efforts toward repealing exclusionary zoning and offering targeted financial support to very low-income households that the private housing market will not adequately serve.
Evaluation Criteria
This section describes the criteria that I use to evaluate inclusionary zoning policy prescriptions. These evaluation criteria correspond to four of the most important (and contentious) topics in the inclusionary zoning policy space.
1. Effect on Supply and Price of Market-Rate Housing
This criterion evaluates the effect of inclusionary zoning policies on the housing market. Proponents of inclusionary zoning claim that while it reduces developer profits, developers are not able to pass its costs along to buyers and renters. Opponents claim that developers respond to inclusionary zoning policies as they would a tax on development: some developers leave the market and others produce more expensive housing to subsidize the cost of the below-market rate units. This criterion reviews causal studies and economic analysis to evaluate inclusionary zoning’s impact on market-rate housing.
2. Production of Below-Market Rate Units
This criterion evaluates the affordable housing produced by inclusionary zoning policies. It examines both the number of units created and the in-lieu fees collected. It also considers the types of affordable housing created. Who lives in the housing? Is it offered primarily to middle-income or to lower-income households? Is there a mismatch between residents’ incomes and net worths?
3. Effect on Residential Segregation
This criterion evaluates the effect on inclusionary zoning policies on residential segregation patterns. Proponents of inclusionary zoning cite integration as an important benefit of the policy. There is a lack of literature assessing the causal relationship between inclusionary zoning and segregation. So, in this section, I rely on qualitative and anecdotal data to evaluate inclusionary zoning’s effects on residential segregation patterns.
4. Effect on Exclusionary Zoning
The final criterion evaluates whether inclusionary zoning policies tend to loosen or exacerbate existing exclusionary zoning policies. Inclusionary zoning’s concessions can be used to bypass existing exclusionary requirements. However, it can also be used to prop up exclusionary policies. This criterion unpacks the different ways inclusionary zoning is used in policy landscape and assesses its net effects on exclusionary zoning.
Evaluation
This section evaluates both mandatory and optional inclusionary zoning policies. It does so based on the criteria described in the previous section. To do so, it uses literature that investigates the performance of inclusionary zoning policies with respect to each criterion.
1. Effect on Supply and Price of Market-Rate Housing
Both a fundamental economic analysis and the current state of literature point to mandatory inclusionary zoning as a source of housing cost increases and production decreases. Optional inclusionary zoning, however, does not have this effect.
The economic analysis, first set forth by Ellickson (1981), argues that inclusionary zoning should be viewed as a tax on the production of housing. Ellickson argues that in cities with no perfect substitutes, part of the tax will fall on homebuyers and developers, raising the cost and reducing the supply of new housing, respectively. He further argues that these results disrupt the filtering process and thus raise prices not only on new market-rate units but also on used housing. That is, because used housing is a substitute for new housing, an increase in the price of new housing causes a subsequent increase in the price of used housing. Ultimately, Ellickson claims that inclusionary zoning is a “misguided undertaking that is likely to aggravate the housing crisis it has ostensibly been designed to help solve.”
Literature Summary
Only a few researchers have attempted to determine inclusionary zoning’s effects on the supply and price of market-rate housing. This may seem surprising, given the topic’s level of debate in the housing sphere. One potential cause for this relative dearth of literature is the difficulty of studying this phenomenon. A bevy of factors work together to determine regional housing supply and prices. Teasing out the role that inclusionary zoning ordinances play in this process is a difficult task. The lack of robust literature also speaks to the relative inaccessibility of zoning data and data on units produced under inclusionary zoning ordinances.
Below, I briefly summarize six research efforts that aim to identify these effects in real-world inclusionary zoning policies. As described in Table 1, four of the six studies find that inclusionary zoning policies either suppress the production of market-rate housing, increase the price of market-rate housing, or do both.
Table 1. Effect of Inclusionary Zoning on Supply and Price of Market-Rate Housing
The variation in findings in each study again speaks to the difficulty of determining the role that inclusionary zoning ordinances play in the housing market and the difficulty of finding high-quality datasets. It also speaks to the diversity of inclusionary zoning program types and markets they have been implemented in. The authors of these studies are aware of these restraints. For example, Schuetz et al (2009) state “these results should be interpreted with caution.” Hollingshead (2015) similarly states “we may cautiously interpret these results.” Hamilton (2021 interview) noted that “it’s really difficult to tease out the effects of inclusionary zoning statistically.”
Silver Bullet or Trojan Horse? The Effects of Inclusionary Zoning on Local Housing Markets in the United States (Schuetz et al, 2009)
Schuetz et al use panel data from the San Francisco metropolitan area and suburban Boston to estimate the effect of inclusionary zoning policies on the price and production of market-rate housing. The authors find that inclusionary zoning policies had varied results in both regions of study. The analysis does, however, offer a “certain amount of evidence that [inclusionary zoning] has constrained housing supply and increased prices.” However, the authors state that this effect was relatively small.
In Boston, the analysis suggests that inclusionary zoning increased the price of housing and lowered housing production when the market was hot. However, the analysis did not find these results under cooler markets. In the San Francisco area, the analysis did not find any effect of inclusionary zoning policies on the production of housing. It did find that inclusionary zoning increases single-family home prices in hot markets but may decrease prices in cooler markets.
Housing Market Effects of Inclusionary Zoning (Bento et al, 2009)
Bento et al examine California housing construction data from 1988 to 2005 to estimate the effects of inclusionary zoning programs on both housing production and price.
They find that inclusionary zoning programs had a small and statistically insignificant effect on total housing starts during the study period. They also find that inclusionary zoning policies had a significant positive effect on the ratio of multifamily to single-family housing starts. They explain this shift by stating that inclusionary zoning policies place a greater burden on single-family development than multifamily development, causing a shift toward the latter. Additionally, they find that inclusionary zoning policies lower the average size of new housing by 48 square feet, with the largest effects on lower-priced homes.
They also find that inclusionary zoning policies cause housing prices to increase by approximately 2.2 percent more than in cities without these policies. This difference in prices, however, was uneven across the housing price spectrum. Inclusionary zoning policies lowered the rate of housing price increase for houses that sold for less than $187,000 (in 1988 dollars) by 0.8 percent and increased this rate for housing that sold for more than this amount by 5 percent.
Can Inclusionary Zoning be an Effective and Efficient Housing Policy? (Mukhija et al, 2010)
The authors evaluate the effects of inclusionary zoning policies in 17 cities in Los Angeles and Orange Counties. They examine these policies both in terms of affordable units produced and in terms of effects on the price and production of market-rate housing.
They present data on the total number of affordable units produced under inclusionary zoning ordinances in California but note the difficulty in using this data to gauge effectiveness of the policy. First, they note a lack of data on the length of affordability of below-market rate units, their targeted income groups, their tenure type (rental or ownership), etc. Additionally, they note the difficulty in translating in-lieu fees into equivalent housing units. They do present the finding that mandatory inclusionary zoning policies create more below-market rate units than voluntary programs, which tend to create very few, if any, affordable units. They also find that inclusionary zoning programs can contribute as much as the low-income housing tax credit to the development of affordable housing, though the latter may achieve deeper subsidy.
The authors also explore the effects of inclusionary zoning on the housing market in Los Angeles and Orange Counties, using median annual housing permits issued as a proxy measure for the housing market. They find no evidence of adverse effects on the housing supply, leading them to conclude that critics underestimate the adverse effects on inclusionary zoning on housing supply.
They cite density bonuses and other concessions to developers as critical to the feasibility of inclusionary zoning policies. They state that these can offset the costs of providing below-market rate units, making the policy cost-neutral to developers. Finally, they conclude that inclusionary zoning is no panacea; the total number of affordable units developed is likely to be modest. So, cities need a comprehensive approach to address their lack of affordable housing.
Unintended or Intended Consequences? (Means and Stringham, 2012)
Means and Stringham use panel data from cities in California to estimate the effect of inclusionary zoning policies on housing construction and prices.
They find that these policies decrease construction and increase prices, in line with orthodox economic analysis. They find that from 1980 to 1990, inclusionary zoning policies resulted in an average of 8 percent fewer homes and 9 percent higher prices. They find that from 1990 to 2000, these policies resulted in 7 percent fewer homes and 20 percent higher prices.
When and How Should Cities Implement Inclusionary Housing Policies? (Hollingshead, 2015)
Hollingshead uses a 2009 decision by a Los Angeles court that limited cities’ ability to implement inclusionary zoning. Some cities responded to the ruling by effectively eliminating or weakening their inclusionary housing policy; Hollingshead compares cities the housing market conditions in cities that changed their policies to cities that did not.
One unique attribute of this study in the literature is its ability to bypass issues of reverse causality. Jurisdictions often enact inclusionary zoning in response to rising housing prices. Studies analyzing jurisdictions that do enact inclusionary zoning and others that do not may interpret the rising home prices found in the jurisdictions that do as the effect, not the cause, of inclusionary zoning. Because this study examines legally mandated changes in inclusionary zoning policies, it avoids this potential pitfall.
Hollingshead finds that after cities in the Los Angeles area eliminated or weakened their inclusionary zoning policies, developers did not lower rental prices. Overall, she found that weakening an inclusionary housing policy is associated with a 2 percent increase in median rental price and a 3 percent increase in the price of low-cost units. She did not study the effect of inclusionary zoning on housing supply.
Inclusionary Zoning and Housing Market Outcomes (Hamilton, 2019)
Hamilton uses data from 56 permitting jurisdictions in the Baltimore-Washington area to estimate the effect of inclusionary zoning policies on new housing supply and prices. She compares the change in market outcomes after jurisdictions adopt inclusionary zoning policies to market outcomes in jurisdictions that did not adopt it.
She finds that mandatory inclusionary zoning policies cause increases in housing prices but does not find that these policies decrease new housing construction. She finds that optional inclusionary zoning policies are typically not effective; the concessions jurisdictions offer developers are apparently not valuable enough to offset the cost of producing below-market rate units.
Rebuttals to Common Critiques of Orthodox Economic Analysis
Below, I briefly summarize two critiques that proponents of inclusionary zoning policies make of the orthodox economic analysis that treats inclusionary zoning as a tax. I then briefly rebut these critiques.
The Importance of Concessions
Some proponents of inclusionary zoning, such as Mukhija et al, concede that mandatory inclusionary zoning could function as a tax on housing production, but argue that the concessions jurisdictions make to developers (such as density bonuses) rectify the cost of providing below-market rate units. However, we can test this claim by examining the uptake of optional inclusionary zoning programs. If the concessions jurisdictions give developers through mandatory inclusionary zoning do rectify the cost of the tax, we should find optional inclusionary zoning programs popular. This is because jurisdictions typically give more lucrative incentives through optional programs than they do through mandatory programs.
However, Mukhija et al (2010) and Hamilton (2019) both find that optional inclusionary zoning programs produce far fewer units than mandatory programs. Indeed, they often produce zero units. When developers are given the choice, they clearly show that the losses incurred by below-market rate units are not offset by the concessions cities give them. It is conceptually possible to design a mandatory inclusionary zoning program that includes concessions that offset the cost of providing below-market rate units. However, the outcomes of optional inclusionary zoning programs show that this is not currently the case.
Tax Incidence
Other proponents of inclusionary zoning draw from Ellickson’s (1981) arguments on the incidence of the inclusionary zoning tax. In his article, he notes that in cities with perfect substitutes (that is, cities for which buyers and renters would be perfectly willing to live elsewhere), developers will not be able to pass the cost of the tax on to buyers and renters. If they were to do so, buyers and renters would move elsewhere. Ellickson instead argues that in these locations, the tax incidence will be passed back to landowners.
There are two conceptual issues with this framework. The first is that no city has a perfect substitute. Some cities are more unique than others, certainly. But in any city, households seeking to buy or rent property will be willing to bear at least some amount of cost to live in the city they set out to live in. They may be willing to bear great costs in superstar cities (which are frequently the cities that enact inclusionary zoning) and may be willing only to bear small costs in other cities, but in all cases at least some of the tax incidence will be passed on to them.
The second issue with this framework is that it assumes costs can be passed backwards to landowners unilaterally. That is, it assumes that because the supply of land is perfectly inelastic, the supply of residential land is perfectly inelastic. This is not the case. Landowners that may have previously sold their land to residential developers may instead choose to sell their land to commercial or other types of developers given the lower prices offered for residential uses in the face of inclusionary zoning. Thus, the tax incidence may fall somewhat on landowners, but it is unlikely to fall completely on them. On the other hand, a land value tax would fall completely on landowners and could be used to create affordable housing, but that is an argument for another paper.
Since the tax incidence is unlikely to fall completely on landowners, it will fall at least partially on both property buyers and sellers and on developers. To the extent that the tax incidence falls on property buyers and sellers, the cost of housing will increase. To the extent that the tax incidence falls on developers, some will leave the market and the supply of housing will decrease.
2. Production of Below-Market Rate Units
Inclusionary zoning policies vary greatly in the quantity of below-market rate units they produce. The most productive inclusionary zoning program in the United States is in Montgomery County. Between 1974 and 2015, it created over 14,000 affordable units. (Hertz, 2016) Nearby Washington, DC, on the other hand, created just 80 units through its policy between 2006 and 2014. Freeman and Schuetz (2017) reviewed nationwide inclusionary zoning programs and found that the affordable housing produced under inclusionary zoning represents less than 0.1% of the national housing stock. They state that “local IZ and statewide ‘fair share’ laws have produced relatively small numbers of affordable units and are therefore unlikely to substantially mitigate the effects of rising housing costs.” This data led Cortright (2017) to conclude that inclusionary zoning programs are too small to make a dent in housing affordability.
Cortright (2016) also points out that in New York, inclusionary zoning has produced less than 3,000 units in a decade. Meanwhile, Portland, Oregon created 2,300 affordable units in just one neighborhood using Tax Increment Financing.
Sturtevant (2016) reviewed research studies across the country to summarize the affordable housing produced by a variety of inclusionary zoning policies. She found that most inclusionary zoning programs create less than 100 affordable units a year. In California, no program produces more than 134 units per year.
Mandatory inclusionary zoning policies tend to produce more affordable housing than optional inclusionary zoning policies. Both Mukhija (2010) and Hamilton (2019) found that the optional inclusionary zoning policies they studied produced very few, if any, units.
Critics of inclusionary zoning (Ellickson, 1981) have also argued that inclusionary zoning ordinances primarily benefit middle-class recipients. They note that many set-aside requirements allow developers to target income levels up to 120% of area median income. Additionally, because sale or rental price is often based on buyer or rental income, developers seek out the wealthiest buyer or renter they can find. For example, the most successful inclusionary zoning program in the United States is in Montgomery County, Maryland. It targets households earning $30,000 to $81,000 annually, leaving out the least well-off residents. (Hamilton, 2018)
Hamilton (2021 interview) points out another reason that inclusionary zoning requirements may not help the neediest households. When inclusionary requirements dictate the production of below-market rate housing for sale, the recipient must secure a mortgage from the bank. However, banks are less likely to allow individuals with low net worths to take out mortgages. Because of this, inclusionary units often end up benefiting high-net worth but low-income individuals.
Even proponents of inclusionary zoning recognize that it “is no panacea; the total number of affordable units developed is likely to be modest.” (Mukhija, 2010) Most mandatory inclusionary zoning policies produce few units and most optional inclusionary zoning policies produce few, if any, units. However, the relatively small effect of inclusionary zoning does not, in and of itself, make it a bad policy. If it has no other negative side effects, producing even a small amount of affordable housing is to be commended. The key question is whether inclusionary zoning comes with costs that offset its relatively meager benefits.
3. Effect on Residential Segregation
To the extent that developers produce below-market rate units under inclusionary zoning policies (and those units become occupied by low-income residents), those policies improve residential segregation at the building level. In fact, inclusionary zoning is one of the few tools that can affect segregation at the building level.
However, to the extent that inclusionary zoning policies exacerbate the affordable housing crisis, they worsen economic segregation, as low-income residents are the first to be priced out of expensive metropolitan areas. Additionally, tight housing markets open the door Fair Housing Act violations that worsen racial segregation. (Demsas, 2021)
Little research has been conducted to determine the net effect of inclusionary zoning policies on segregation. This is due to many of the same reasons its effects on the housing market has not been robustly studied: data is difficult to collect and the effects are difficult to tease out. In the case of segregation, the causal link between inclusionary zoning and the effect is even more difficult to isolate than it is for the case of the supply and price of market-rate housing.
Inclusionary zoning policies produce few below-market rate units, so its overall effect on segregation is likely to be either minimal or negative. It may have a slightly positive effect on building-level segregation but a slightly negative effect on regional segregation. If this is the case, an assessment of its overall effects on segregation would need to determine which level of segregation is more important to address. That question goes beyond the scope of this report.
4. Effect on Exclusionary Zoning
Despite its name, inclusionary zoning is not primarily a method of undoing exclusionary zoning. In fact, depending on how it is used, it can be used to break down or to strengthen exclusionary zoning policies. Inclusionary zoning can loosen exclusionary zoning through density bonus or parking requirement reduction concessions. However, some jurisdictions pursue inclusionary zoning policies in lieu of addressing exclusionary zoning restrictions. Additionally, some jurisdictions employ “pretextual zoning”, creating especially exclusionary requirements to make sure developers cannot feasibly develop housing without taking advantage of the concessions offered through a policy. While the net effect of inclusionary zoning has not been robustly researched, I find through case studies and anecdotal data that inclusionary zoning is more frequently used to maintain, rather than to loosen, exclusionary zoning.
Hills (2017) argues that the concessions from exclusionary zoning typically built into inclusionary zoning policies are important in and of themselves. He states that, absent inclusionary zoning, “Cities like Berkeley, San Francisco, Walnut Creek, and other hyper-restrictive jurisdictions will be delighted to shut down housing markets altogether with their absurdly restrictive limits on multi-family housing. Inclusionary requirements provide a bit of political cover for local politicians seeking to loosen the zoning envelope. Bar those conditions, and you likely leave housing markets even more regulated.”
David Alpert makes a similar claim in the Greater Greater Washington urban planning blog. He states that “much of the opposition to greater density involves a feeling that it is just a ‘giveaway’ to developers who make the profit and impose some collateral burden on a neighborhood, but many people are more supportive of the density if it serves an affordable housing goal.” (Hamilton, 2012) As Phillips et al (2021) document in a literature review, the claim that developers impose some collateral burden on a neighborhood is overblown; new development in a neighborhood improves that neighborhood’s housing affordability. Still, if the public sees tangible proof that new development directly provides affordable housing, perhaps new development will become more politically popular.
Senate Bill 50 (2018), a failed effort in California at statewide upzoning near transit, offers a relevant case study in the political usefulness of inclusionary zoning requirements. Upzoning, a common method of eliminating exclusionary zoning restrictions, is politically unpopular. As Laura Bliss (2020) pointed out, the primary political opponents are “suburban homeowner groups- a powerful contingent of largely wealthy, white, older Californians.” As Ellickson (1981) describes, homeowners benefit from reductions in the supply of new housing. As such, they benefit greatly from exclusionary zoning.
Inclusionary zoning requirements can make efforts at reducing exclusionary zoning more popular. With this knowledge, SB 50 included a provision requiring up to 25% of all development of 10 units or more to be set aside as affordable housing. As Walker pointed out, though, this requirement was not enough for housing advocacy groups, who contributed to the bill’s demise in part because its affordability requirements were not strict enough. Inclusionary zoning can serve as useful political cover for dismantling exclusionary requirements, but it’s far from a surefire strategy.
Perhaps because of its name, jurisdictions pursuing affordable housing can be tempted to believe that inclusionary zoning is the cure for exclusionary zoning. A relevant example comes from a Montana House Local Government Committee meeting in 2021. The committee was discussing a proposed bill that would allow duplex, triplex, and quadplex development by right statewide. (Montana State Legislature, 2021) Bozeman, like many Montana cities, employs exclusionary zoning practices such as single-family zoning, minimum lot sizes, and minimum parking requirements. A speaker from Bozeman nevertheless stated “Bozeman doesn’t have exclusionary zoning; it has an inclusionary zoning ordinance.” (Hamilton, 2021 interview)
Beyond simply not being a cure for exclusionary zoning, inclusionary zoning relies upon exclusionary zoning to function. Mukhija et al state that over 90% of local governments in Southern California offer density bonuses to attempt to offset the cost of providing below-market rate units. Cities also frequently offer concessions such as setback and parking reductions. These concessions are all examples of reduced exclusionary zoning requirements. While I previously described that these concessions are not enough to offset the cost of providing below-market rate units, even jurisdictions that implement inclusionary zoning policies recognize that without lifting exclusionary zoning requirements, it would not be feasible to ask developers to provide below-market rate units.
Because inclusionary zoning relies on exclusionary zoning to function, it promotes exclusionary zoning. Planners and policymakers that are aware of the injustices of exclusionary zoning often either allow it to continue or outright support it to maintain their ability to implement inclusionary zoning. Pretextual zoning, or implementing a policy for a reason other than the stated purpose, diminishes faith in public government and leads to unintended side-effects. (Herriges, 2021) As UCLA professor Michael Manville pointed out (Manville, 2021), the California APA is currently withholding support from California Assembly Bill 1401 (2021) on these grounds. While AB 1401 would reduce an exclusionary requirement (parking requirements) throughout the state, California APA would prefer to maintain these exclusionary requirements so jurisdictions can offer to reduce them in exchange for the production of affordable housing. In this instance, the pursuit of inclusionary zoning is propping up exclusionary zoning, not undoing it.
Pretextual zoning can cause planners and policymakers to resist the reduction of exclusionary zoning. It can also cause them to create even more exclusionary policies than they otherwise would choose to, with the expectation that developers will undo some of the effects through the production of affordable housing. As Hamilton described (2012), a West Chelsea neighborhood’s rezoning process serves as a pertinent example of this occurrence. An assembly member suggested that the Commission “look for places to lower the base FAR to allow the area available for affordable housing to increase.” The Commission acted upon his suggestion and reduced building density in the entire district “in order to provide more incentives for developers to apply for higher density under the inclusionary housing program.”
Inclusionary zoning is especially unlikely to undo exclusionary zoning when its proponents are arguing in bad faith. Ellickson (1981) states that exclusionary zoning and inclusionary zoning are likely to achieve the same objective: an increase in the price of housing, enriching incumbent homeowners at the expense of others. He argues that some proponents of inclusionary zoning support it in order to drive up the price of housing and enrich themselves. He points to data showing that cities with inclusionary zoning policies are also more likely to have other anti-housing growth policies.
Schuetz et al (2009) corroborate this argument with research showing a positive correlation between jurisdictions that adopt inclusionary zoning requirements and jurisdictions that adopt anti-housing growth policies. Means and Stringham (2012) find evidence in support of Ellickson’s hypothesis, concluding that inclusionary zoning programs “may not be about increasing the supply of housing or making it more affordable overall.”
Recommendations
Based on the findings above, I recommend that jurisdictions repeal or refrain from enacting inclusionary zoning policies. These policies do not meaningfully address the lack of affordable housing or residential segregation. Further, they are likely to worsen the housing affordability crisis. I further recommend that jurisdictions hoping to confront issues of housing affordability and residential segregation refocus their efforts toward repealing exclusionary zoning and offering targeted financial support to very low-income households that the private housing market will not adequately serve.
References
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Bliss, Laura. (2020). “The Last Days of SB50, California’s Doomed Upzoning BIll.” https://www.bloomberg.com/news/articles/2020-01-30/california-sb50-upzoning-bill-has-one-last-chance
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Cortright, Joe. (2021). Phone Interview.
Demsas, Jerusalem. (2021). “The Housing Shortage Makes Housing Discrimination Much Easier.” https://www.vox.com/2021/5/26/22453293/housing-supply-shortage-discrimination-real-estate-cover-letters
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Freeman, Lance and Schuetz, Jenny. (2017). “Producing Affordable Housing in Rising Markets: What Works?” https://www.huduser.gov/portal/periodicals/cityscpe/vol19num1/ch11.pdf
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