Inclusionary zoning (IZ) requires that a percentage of housing units in new residential developments be rented or sold for prices that are affordable to low- and moderate-income households. In exchange for providing this affordably priced housing, developers are occasionally granted density bonuses (allowing more houses per lot), zoning variances (forgiving parking requirements or other exceptions) and/or expedited permitting (reducing costs by helping a project move more quickly). These regulatory concessions help to offset the developers’ cost of renting or selling 10 or 20 percent, or some other mandated percentage of their newly constructed units for a below-market price. Since inclusionary units are integrated with market-rate units, IZ ensures not only the production of affordable units, but also the spatial distribution of affordable units across a jurisdiction.
Various phenomena in the housing market can spark a community’s interest in inclusionary zoning: rapidly escalating housing prices leading to displacement of lower-income residents (as was the case in Washington, D.C.); rezoning of major swaths of land from industrial/manufacturing to housing/commercial (as is underway in New York City); the incorporation of new land (as is the case in Sacramento); or, more recently, massive rebuilding of destroyed homes after natural disasters (as is occurring in New Orleans). Inclusionary zoning can become a central component of a community’s affordable-housing toolbox, because it can help meet multiple housing goals, including:
- Fostering communities that are racially and economically mixed;
- Ensuring housing for a diverse labor force;
- Expanding housing opportunities for residents living in high-poverty neighborhoods-or residents historically excluded from affluent neighborhoods.
IZ can meet these goals, however, only if the municipality pays as much attention to the long-term preservation of the inclusionary units as it does to the short-term production of these units. The affordability of rental housing produced through IZ is most effectively preserved by conveying it to a public housing authority or a nonprofit housing organization or by controlling its rents through a multi-year regulatory agreement between the developer and the municipality. The affordability of owner-occupied housing produced through IZ is most effectively preserved by converting it into shared-equity homeownership-i.e., using a durable deed covenant, a community land trust or a limited-equity cooperative to ensure that homes that are made affordable today via IZ will remain affordable for many years.