Establish Inclusionary Zoning Requirements or Incentives
 
Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives


What is inclusionary zoning?

Inclusionary zoning is a flexible tool for creating new affordable rental and ownership opportunities in connection with market-rate housing development. Inclusionary housing policies may be mandatory or voluntary, and either require or offer incentives for developers of market-rate projects to set aside a modest percentage of units for low- and moderate-income households. Many ordinances require below-market units to be built at the same time, in the same location, and with an appearance similar or identical to the adjacent market-rate units [1], helping to create diverse, mixed income neighborhoods and disperse affordable homes throughout the community.

Most inclusionary zoning policies are implemented by cities and counties through a zoning ordinance or executive order, although some states have adopted fair share and other inclusionary programs intended to achieve similar results on a broader scale. Learn more about state-level fair share programs and other inclusionary programs at the state level.

From the Forum...

"We want to ensure that developers build the affordable units that our ordinance requires to a standard that is similar to their market rate units but we are not sure it makes sense to require that they be identical. Is there some way to allow for reasonable flexibility [without] leading to substandard affordable units?" See what other people said and sign in to add your response

The HousingPolicy.org Forum is a place to pose questions, exchange ideas, and learn from the experience and expertise of others. This section of the site features interactive forums organized around policy areas, including inclusionary zoning.

What problems can inclusionary zoning solve?

Communities adopt inclusionary zoning policies primarily to increase new housing opportunities for moderate-income families. However, inclusionary zoning can also help stem displacement of existing residents in neighborhoods undergoing redevelopment, where the cost of housing increases to levels that are unaffordable to current residents. In addition to increasing the overall supply of affordable homes, inclusionary zoning can play a role in alleviating the "spatial mismatch" that occurs in many high-cost areas when local housing prices rise out of reach of low-wage workers who serve the community. By ensuring that a portion of newly created homes are affordable to working families, inclusionary policies allow workers to access opportunity- and amenity-rich neighborhoods and avoid long commutes from areas with lower housing costs. During a slowdown in local housing development, inclusionary zoning can help to ensure that affordable homes will continue to be a part of the local housing landscape when market-rate development resumes.

While inclusionary zoning policies have been successful in producing affordable housing opportunities in many markets, it is important to note that this tool is not a panacea or a substitute for a broad-based affordable housing strategy. In particular, inclusionary zoning does not address the fundamental problem of regulatory and other obstacles that constrain the ability of the market to respond to increases in the demand for housing, which can drive up housing prices in the first place. Inclusionary housing policies ultimately are most effective as part of a larger and more comprehensive approach to solving a community's housing challenges. Learn more about building a comprehensive housing strategy.

Where is inclusionary zoning most applicable?
Solutions in Action
Poinsettia Station
Photo courtesy of BRIDGE Housing.

Poinsettia Station, in Carlsbad, California, is a transit-oriented development providing 92 affordable rental homes within walking distance of a commuter train station, the ocean, and retail services.

These units are part of a larger master-planned community, and were developed by non-profit BRIDGE Housing to satisfy the affordability requirements of the Carlsbad Inclusionary Housing Ordinance.


Visit the Gallery to learn more about Poinsettia Station.

Inclusionary zoning is a market-based policy and its success depends a great deal on market conditions. If a community is experiencing little growth or new development, adoption of an inclusionary zoning policy will not result in the creation of many new affordable homes. However, communities that anticipate future growth may wish to begin the process of designing an inclusionary zoning policy that can be implemented when the market picks up. [2]

Similarly, inclusionary mandates may not be useful in declining neighborhoods struggling to attract any development whatsoever, as local officials may want to offer developers maximum flexibility in order to stimulate new investment. However, in areas that typically experience moderate to rapid growth, inclusionary zoning can be a powerful tool for ensuring that affordability is a part of new development.

During an economic downturn, these communities may be pressured to rescind their inclusionary zoning requirements in order to create incentives for new development. A community should consider the long term consequences of removing such a valuable affordable housing tool and determine whether removal of the requirements would actually spur new development or whether the pressure is being generated by opponents who simply do not agree with the policy in any market condition. A well-structured inclusionary zoning ordinance should provide meaningful and achievable offsets to developers to cover the loss of revenue from affordable units; if the offsets are structured appropriately, the IZ ordinance should not act as a disincentive for new construction. Moreover, once an ordinance has been rescinded, it may be difficult or impossible to reinstate. Since most historically strong markets can expect the housing market to recover at some point and start producing new housing units, it is important to make sure the appropriate policies are in place to ensure that affordable housing is included in the mix of new residential development.


Poinsettia StationLearn more about establishing inclusionary zoning requirements or incentives




6 NorthGo back to learn about other policies that capitalize on market activity



[1] Some inclusionary zoning policies allow affordable units in for-sale developments to be slightly smaller and/or less well-appointed than neighboring market-rate units; however, in some cases too much variation between units may impact the development's overall marketability. Other inclusionary zoning policies allow the affordable units to be built off-site.

[2] The growth of a neighborhood is often difficult to predict, though a wide range of studies have identified a variety of factors that are associated with an area prior to rapid growth and gentrification. The most commonly cited include having an older, pre-1940 housing stock; proximity to high-cost neighborhoods; proximity to transit lines; and high percentages of transit users, non-family households and renters in the area.


Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives


How do inclusionary zoning policies work?

Inclusionary zoning policies increase the availability of affordable homes by requiring (or encouraging through incentives) developers of new residential buildings or subdivisions to set aside a modest portion of homes for low- and moderate-income families. While there are some basic elements that all policies cover, the specific terms of an inclusionary zoning ordinance are relatively flexible and may be tailored to address local housing needs and market conditions.




Listen to a podcast from September 2008 with Vicki Been, Director of the Furman Center for Real Estate and Urban Policy at New York University. She is one of the authors of The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from the San Francisco, Washington DC and Suburban Boston areas, a report prepared by the Furman Center for the Center for Housing Policy on the effects of inclusionary zoning in three housing markets. Dr. Been discusses the findings from this report and implications for communities interested in adopting their own inclusionary policies.


Click on the linksbelow to learn more about how inclusionary zoning policies work:

Mariposa ApartmentsAffordability Provisions
All inclusionary zoning policies contain basic components specifying when and how the policy is applied, including whether participation is mandatory or voluntary, the income level(s) targeted and the share of units that must be set aside as affordable.

Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.


Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Affordability Provisions


While the essential features of inclusionary zoning policy tend to be similar across jurisdictions, municipalities have considerable discretion over the specific terms of the ordinance. This flexibility allows decision-makers to tailor inclusionary zoning policies to the community and strike a balance between meeting local housing needs and both attracting and maintaining the economic viability of new development.


Photo credit: Lynn Schmid, Chelsea Investment Corporation.
Click on the links below for an overview of the key features of inclusionary zoning policies related to affordability requirements or incentives:

Circumstances that trigger inclusionary requirements

Terms of the set-aside of affordable units

Location of affordable units



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Affordability Provisions
All inclusionary zoning policies contain basic components specifying when and how the policy is applied, including whether participation is mandatory or voluntary, the income level(s) targeted and the share of units that must be set aside as affordable.

Other pages in this section:

Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.

Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Incentives and Cost Offsets


Many inclusionary zoning ordinances include density bonuses or other offsets to compensate land owners for the foregone revenue associated with inclusionary zoning requirements. Well-designed offsets help to facilitate political acceptance of inclusionary zoning policies, lessen the chances of successful legal challenges, and also reduce the likelihood that inclusionary zoning policies will create disincentives for new development, which could reduce the supply - and thus increase the price - of market-rate homes. Policies that are effective offsets may also be useful as incentives for voluntary inclusionary zoning policies.

The economics of development vary substantially from community to community and from housing type to housing type. It is thus important for jurisdictions to carefully consider what offsets are appropriate for their community, rather than simply borrowing policies that have been adopted elsewhere. Because for-profit developers are well-positioned to speak to market realities, and may be a political force affecting the chances of passage of an inclusionary zoning policy, it is important to include them in discussions around the design of appropriate offsets, along with affordable housing advocates and nonprofit developers. This process can sometimes take a considerable amount of time and require serious negotiation, but many communities have found this legwork to be worthwhile in developing and building support for effective inclusionary zoning policies.

Click on the links below to learn about popular incentives and cost off-sets:

Density bonuses

Flexible zoning and design standards

Reduced parking requirements

Fee waivers or reductions

Local tax abatement

Expedited permitting and review processes

Housing subsidies
Solutions in Action
Finding Common Ground on Inclusionary Zoning -- In July 2005, the Non-Profit Housing Association of Northern California, an affordable housing advocacy group, and the Home Builders Association of Northern California, a building industry trade organization, jointly issued On Common Ground: Joint Principles on Inclusionary Housing Policies [PDF]. While the two groups have different perspectives and opinions on inclusionary zoning, this document represents an effort to find "common ground" and identify shared areas of agreement.

Recommendations in the policy brief include allowing market-rate builders to satisfy inclusionary requirements through land donation and off-site construction and making sure the local community is contributing to affordable housing production by offering density bonuses and providing dedicated staff to administer the inclusionary program.



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Incentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Other pages in this section:

Mariposa ApartmentsAffordability Provisions
All inclusionary zoning policies contain basic components specifying when and how the policy is applied, including whether participation is mandatory or voluntary, the income level(s) targeted and the share of units that must be set aside as affordable.


Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.



Density bonuses

One of the most widely-used cost offsets included in inclusionary zoning policies, density bonuses allow more homes to be built on a parcel of land than would otherwise be permitted by the underlying zoning code. For example, a 10 percent density bonus would allow 110 units of housing in an area originally zoned for 100 units. When offered in conjunction with inclusionary zoning, density bonuses can help developers recoup the reduced revenue associated with offering a share of units at below-market rates by increasing the number of units that may be sold at market rates.

It is important to note that density bonuses are only as valuable as developers' ability to overcome NIMBY objections to higher density development and find a site able to accommodate the proposed new construction. Developers of density bonus programs should take into consideration the typical density of the community in which the bonus will be applied to ensure that new development will be marketable and compatible with existing homes. Relaxation of other land use regulations, such as those related to required set-backs and lot size, may need to be applied in conjunction with the density bonus in order for its full benefits to be realized. In addition, public education and outreach can help to allay concerns about the appearance and impact of higher density development.

A common complaint among developers is that city planners or zoning officials refuse to allow them to build as many units as they are entitled to under the density bonus policy. To the extent these complaints are true, they would appear to undermine political support for inclusionary zoning and potentially reduce the number of market-rate units that get built, preventing the market from responding effectively to increased demand. Communities with inclusionary zoning policies should ensure that all city officials are on the same page in making offsets meaningful and achievable.

Click here to read a case study, prepared by Abt Associates for the National Association of Home Builders, describing the inclusionary zoning program in North Kingstown, Rhode Island.

In 2004, the Building Industry Association of Greater Los Angeles/Ventura County issued an alternative policy proposal in response to a proposed mandatory inclusionary zoning ordinance put forth by members of the Los Angeles City Council. Authors of the counterproposal, Housing For All: Fair Share Program [PDF], recommend the creation of Housing Incentive Zones throughout the City, within which developers would have the option to build at higher densities than ordinarily allowed, without the need to secure a rezoning or other special exception, in exchange for inclusion of a modest share of affordable units.

As suggested by this proposal, by combining greater density and affordability with the greater predictability afforded by as-of-right development, local jurisdictions may be able to design an inclusionary zoning policy that satisfies all stakeholders.


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Flexible zoning and design standards

In addition to specifying allowable land uses and densities, zoning policies generally include regulations related to the placement of buildings on individual lots. For example, setback requirements dictate how far removed a structure must be from the street or neighboring lots; height restrictions limit the number of stories that may be built; and lot size specifications and floor-area ratios determine the overall allowable density.

Relaxation of these standards allows developers who participate in inclusionary zoning programs to reduce the costs of development associated with low-density, large-lot construction. Some communities go even farther and allow multifamily or attached housing to be built in districts zoned for single family homes as an offset for inclusionary zoning requirements. By increasing
the share of buildable land, flexible zoning and design standards may also be

Row 8.9n
Photo credit: Affordable Housing Resources.
needed to help developers realize the full benefits of density bonuses.


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Reduced parking requirements

Many communities have parking requirements that establish a minimum number of off-street parking spaces that must be provided with each residential unit. As residential parking spaces can be costly to develop and occupy land that could otherwise accommodate additional homes, parking requirements may have the effect of increasing development costs and/or resulting in fewer homes built.

Particularly for developments with good access to public transit and other amenities or targeted on small households, the elderly and working families [1], local parking requirements may result in an overgenerous supply of parking. Some inclusionary zoning policies relax residential parking requirements for properties with an inclusionary set-aside, thus lowering development costs and freeing up land for the development of affordable homes. Click here to leave this section and learn more about reduced parking requirements.


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Heart of the City
Heart of the City, Burnsville MN -- Photo courtesy of LHB, Inc.
Fee waivers or reductions

Many communities assess various types of fees on developers of new homes. These range from permit fees associated with new development applications to impact fees that cover the infrastructure associated with new units. These fees can quickly add up and substantially increase per-unit development costs. Some communities offer to eliminate or reduce various locally assessed fees on development that includes an affordable set-aside. Click here to leave this section and learn more about impact fees, one of the fees that can increase the cost of new homes.


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Local tax abatement

Some inclusionary zoning policies offer to eliminate local property taxes for a specified period of time or grant other tax breaks to developers who include an affordable set-aside. By making these allowances, municipalities allow developers to reduce their ongoing operating costs and recoup some of the costs associated with delivery of below-market units. Click here to leave this section and learn more about tax abatements.


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Expedited permitting and review processes

In some municipalities it can take months or even years to secure all the approvals needed to begin construction on a proposed development. While waiting for permits to come through, the soft costs associated with a property -- including property taxes and insurance payments, legal and other professional fees, and accrued interest -- can add up, eating away at the bottom line and making affordable homes more difficult to deliver. Some communities allow participants in inclusionary zoning programs to circumvent this lengthy process and access an expedited review and approvals track for the affordable units, or for the entire development. Click here to leave this section and learn more about expedited permitting and review processes.


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Housing subsidies

A study of inclusionary zoning [PDF] in California by the Nonprofit Housing Association of Northern California found that close to half of all jurisdictions with inclusionary zoning offer local housing funds to help subsidize inclusionary projects. Many of these jurisdictions are using these funds strategically to generate projects that exceed the minimum affordability requirement, lower the cost to the developer and help the jurisdiction get its money into housing more quickly.


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[1] Studies have shown that car ownership is correlated with income level - as incomes rise, so does the number of cars a household is likely to own. See, for example, Parking Requirement Impacts on Housing Affordability [PDF]. 2006. By Todd Litman. Victoria, BC: Victoria Transport Policy Institute, p. 4.
Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Other Considerations


Few housing policies have attracted as much attention, or controversy, in recent years as inclusionary zoning. While advocates view inclusionary zoning as a way to increase the stock of economically-integrated affordable homes at little cost to the public, critics charge that inclusionary zoning policies amount to a "tax" on new development that unduly burdens developers and adversely impacts the cost and availability of market-rate homes.

Legal objections to inclusionary policies may also be raised, challenging their constitutionality or the local statutory authority to enact an inclusionary zoning ordinance. As many communities have found, however, opposition to inclusionary zoning can be reduced by adopting a well-designed policy that incorporates input from a broad group of stakeholders and balances the priorities of both advocates and developers.

Click on the links below to learn about more about arguments against inclusionary zoning, and legal issues that may arise when implement inclusionary ordinances:

Arguments against inclusionary policies

Legal issues



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Other Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Other pages in this section:

Mariposa ApartmentsAffordability Provisions
All inclusionary zoning policies contain basic components specifying when and how the policy is applied, including whether participation is mandatory or voluntary, the income level(s) targeted and the share of units that must be set aside as affordable.

Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Click here to view more resources on inclusionary zoning.



Arguments against inclusionary policies

Common arguments in opposition to inclusionary zoning policies include:

Inclusionary zoning ordinances increase the cost of new development, which may then be passed on to market-rate buyers through increased home prices.

Inclusionary zoning ordinances cause developers to build fewer units - either because developers choose to build in jurisdictions without inclusionary policies and/or because the inclusionary policies change the economics of development such that other land uses (e.g., retail) are more profitable.

By reducing the supply of new homes, the argument goes, inclusionary policies increase the cost of market-rate housing in the community implementing the policy and in neighboring areas (as reductions in supply in one jurisdiction may increase home prices for the whole metropolitan area by reducing the supply of housing available to satisfy the area's demand).  During a period of slow development, community members may also express concerns that inclusionary zoning policies will make it harder for development activity to get back on track.

Inclusionary zoning policies unfairly place the burden of economic integration on housing developers.

Many of these critiques can be resolved through a well-structured ordinance that enables developers participating in an inclusionary program to earn returns that are equivalent to, or greater than would otherwise be possible. When developers are able to build as profitably with an inclusionary zoning policy as without one, new construction activity will be much less likely to taper off following adoption of an inclusionary zoning ordinance. Because market conditions can change rapidly, it is important to periodically revisit inclusionary requirements and offsets to ensure they are in line with the market.

The Center for Housing Policy commissioned a study from the Furman Center at New York University to examine these questions. While authors of the study, The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from the San Francisco, Washington DC and Suburban Boston areas, were not able to provide definitive answers, it nevertheless represents the best-available data on these issues.

The study found no statistically significant relationship between inclusionary zoning and the price or supply of market-rate homes in the San Francisco area, but did find that the adoption of an inclusionary zoning ordinance among suburban Boston jurisdictions was associated with a small but significant increase in home prices and decrease in supply. While preliminary, these findings confirm the importance of carefully designing inclusionary zoning policies to ensure they provide economically meaningful and realistically achievable offsets to minimize any unintended consequences on the price or supply of market-rate homes.


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Legal issues *

Legal challenges to inclusionary zoning can be based on several arguments. Even when challenges are unsuccessful, they can take years to resolve, using up valuable time and money. As noted earlier, through outreach, consultation, and negotiation, communities can build support for inclusionary zoning policies among a broad range of stakeholders, reducing the likelihood of litigation.

Enabling authority - In some states, state enabling legislation may be needed before local jurisdictions can adopt inclusionary zoning ordinances. This prerequisite is particularly important in states that actively enforce the Dillon Rule, where failure to adopt enabling legislation may result in challenges to local inclusionary zoning policies. "Dillon Rule" states assume that municipalities are allowed only the powers that are explicitly granted to them by the state legislature, in addition to those considered essential for the municipality to function (as opposed to Home Rule states, which give municipalities the authority to govern their own internal affairs). Failure to obtain explicit authority to adopt an inclusionary zoning ordinance may lead to accusations that the locality exceeded its statutory authority, rendering the ordinance invalid.

Takings challenges - The Fifth Amendment of the U.S. Constitution declares "nor shall private property be taken for public use, without just compensation," and is often used as the basis for so-called "takings" challenges. In the land use world, a "taking" may occur when developers are not fairly compensated for land that has been "taken" from them - either literally, or through regulations that result in excessive devaluation of property - for a public purpose.

To avoid takings challenges to mandatory inclusionary zoning ordinances, it is important to show that developers will be able to receive a reasonable economic return on residential development, even with an inclusionary policy in place. Most zoning laws and land use regulations impose limitations that reduce the economic value of property in some way; however there is no single test or formula used to determine when devaluation has gone too far. Rather, challenges are considered on a case-by-case basis. [1] Involving developers in the design of the policy can help to ensure that set-asides and incentives are properly calibrated so that development can still be profitable.

Takings challenges to inclusionary zoning ordinances may also be based on failure to demonstrate a "rational nexus" between the local need for affordable homes and the role of an inclusionary set-aside and/or fees in-lieu in meeting that need and serving the public interest. Communities can undertake a nexus study, similar to the studies required before adopting impact fees, to establish the relationship between affordable homes and inclusionary zoning.
Solutions in Action
Fairfax County, Virginia passed one of the country's first inclusionary zoning ordinances in 1971. This mandatory ordinance required developers of multifamily projects with more than 50 units to set aside 15 percent of units for households earning between 60 and 80 percent of area median income. No cost offsets or incentives were provided to developers in exchange for participation.

Only two years later, the ordinance was overturned by the Virginia Supreme Court, which ruled that failure to provide just compensation resulted in a "taking." The ordinance was further overturned on the grounds that Virginia is a "Dillon Rule" state and the County failed to receive state legislative authorization to adopt a local inclusionary zoning policy.

In 1990 Fairfax County adopted another inclusionary zoning ordinance that offers density bonuses on a sliding scale. A 1989 amendment to the Virginia code explicitly permits local jurisdictions to enact inclusionary zoning ordinances. Since making these revisions, Fairfax County has not yet been faced with any court challenges.


Click here to learn more about Fairfax County's Affordable Dwelling Unit program.

In addition, it is important to show that the affordability requirements imposed on developers are roughly proportionate to the affordable housing needs created by the new development. Data gathered while conducting the nexus study can be used to help demonstrate the impact of new market-rate development on economic integration and the availability of land for affordable homes. Learn more about the concepts of rational nexus and rough proportionality in the Impact Fees section.


* This section draws heavily from Opening the Door to Inclusionary Housing [PDF]. By Mary Anderson. Chicago, IL: Business and Professional People for the Public Interest, pp. 46-60; Inclusionary Zoning: Legal Issues [PDF]. 2002. Prepared by the California Affordable Housing Law Project of the Public Interest Law Project and Western Center on Law & Poverty; and Zoning Affordability: The Challenges of Inclusionary Housing. 2003. By Lynn M. Ross. Zoning News. Chicago, IL: American Planning Association. Please see these resources for further information.


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[1] Inclusionary Zoning and the Constitution. 2002. By Jerold S. Kayden. In Inclusionary Zoning: Lessons Learned in Massachuetts. NHC Affordable Housing Policy Review 2(1).
Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Circumstances that Trigger Inclusionary Requirements


One of the principle decisions that communities have to make when designing an inclusionary zoning ordinance is when and where inclusionary requirements or incentives will apply.

Click on the links below to learn more about some of the principal questions that jurisdictions typically address in determining when inclusionary zoning policies will apply:

Mandatory or voluntary - Will developers be required to participate in the inclusionary program, or encouraged to do so through incentives?

Development size - How many units must be developed before inclusionary requirements or incentives kick in?

Type of development - Do inclusionary zoning programs apply to new development only, or also to existing buildings undergoing substantial rehabilitation or conversion?



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Circumstances that trigger inclusionary requirements

Other pages in this section:

Terms of the set-aside of affordable units

Location of affordable units


Jump to:

Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.



Mandatory or Voluntary

Inclusionary zoning may be adopted as a mandatory policy applied to all new development or on a voluntary basis through incentives offered to developers that choose to participate. The consensus view of inclusionary zoning advocates is that mandatory requirements produce more units than
voluntary policies [1]. In some cases, localities that initially adopted voluntary ordinances have switched to mandatory policies and have seen much higher levels of affordable housing development since the change. For example, for ten years Cambridge, Massachusetts had a voluntary inclusionary zoning program that failed to produce a single unit of affordable housing. Since transitioning to a mandatory program in 1999, more than 135 affordable units have been developed [2].

On the other hand, there are some notable exceptions where voluntary policies appear to have been effective in
One important question for future research is why some voluntary programs have successfully stimulated production of new affordable units, while other jurisdictions have had low participation rates and achieved minimal results.

Are incentives in the jurisdictions that produced few units not sufficiently powerful to stimulate participation, or do affordability requirements simply add too many extra regulatory hurdles for developers to jump through? Are developers in certain markets unwilling to build affordable units even when it might be economically advantageous to do so?
producing affordable units. New York City, for example,
offers valuable density bonuses as an incentive to developers in areas rezoned for medium or high density residential use, such as the Brooklyn waterfront, Hudson Yards in Manhattan, and along Queens Boulevard, if the developers agree to set aside at least 20 percent of units for moderate-income families. Take-up of the incentive has been strong, with 1,770 affordable units completed or in progress within three years of the first rezoning [3].

A third alternative is to design a "hybrid" policy, where affordable housing set asides become mandatory only in specific circumstances. In most hybrid inclusionary policies, affordability requirements are triggered as a quid pro quo for projects that benefit from some form of public allowance, such as a zoning variance or conditional use permit.

The City of Chicago's Affordable Requirements Ordinance provides a useful example.

Incentive zoning is another tool communities can use to build on activity in the real estate market and secure public benefits, including affordable housing. Similar to a voluntary inclusionary zoning policy, incentive zoning offers certain benefits and allowances to developers who agree to provide desired amenities in addition to the proposed development.

However, incentive zoning applies more broadly to both residential and non-residential development, and may be used to achieve a wide variety of community objectives.

Learn more about incentive zoning


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Development size

Montecito Vista
Photo courtesy of ULI Development Case Studies.
Typically, inclusionary zoning requirements only kick in once the number of units in a proposed development surpasses a specified size threshold. This threshold varies widely -- from a minimum of 50 units in Fairfax County, Virginia to projects as small as five units in Palo Alto, California. Because typical development size varies from locality to locality, it is important to tailor size requirements to reflect local conditions.

Inclusionary zoning policies often exempt smaller projects because of the disproportionate financial burden that affordable housing requirements place on smaller developments and the limited land available to accommodate, and benefit from, density bonuses and other cost offsets typically offered with inclusionary zoning policies. In many localities where small
projects are not exempt from affordability requirements, developers are given the alternative of paying a fee in-lieu of providing affordable units onsite or making an off-site land contribution to fulfill program requirements.


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Type of development

In addition to requiring an affordable housing set-aside in new construction, many inclusionary zoning programs also apply to developments undergoing substantial rehabilitation, conversion from rental units to condominiums or any other change in use.

For example, Denver, Colorado's Moderately Priced Dwelling Unit (MPDU) plan, passed in 2002, applies to existing buildings that are substantially rehabilitated or remodeled to provide residential units, as well as new construction. For-sale developments of thirty or more units trigger a mandatory requirement to set aside at least ten percent of units for households earning up to eighty percent of the AMI. [4]

The MPDUs must remain affordable for at least 15 years after they are first sold. Developers receive a modest cash payment for each affordable unit; additional cost offsets include a density bonus, reduction in parking requirements and access to an expedited permitting process. Alternatively, developers may apply to build the units off-site in the same neighborhood or an adjoining neighborhood, or within one-half mile from a transit hub, provided that a greater number of affordable units are built than would otherwise be required.


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[1] See, for example, Voluntary or Mandatory Inclusionary Housing? Production, Predictability, and Enforcement [PDF]. 2004. By Nicholas Brunick, Lauren Goldberg and Susannah Levine. Chicago, IL: Business and Professional People for the Public Interest; Inclusionary Zoning [PDF]. Ideas You Can Use. HUD's Regulatory Barriers Clearinghouse.

[2] Voluntary or Mandatory Inclusionary Housing? Production, Predictability, and Enforcement [PDF]. 2004. By Nicholas Brunick, Lauren Goldberg and Susannah Levine. Chicago, IL: Business and Professional People for the Public Interest.

[3] New York City Zoning Reference: Residential Districts: Inclusionary Housing. February 17, 2009. New York City Department of City Planning. New York, NY: Author.

[4] Denver's inclusionary zoning policy also applies to buildings that have 3 or more stories, elevators and structured parking, in which 10 percent of units must be set aside for households earning up to 95 percent of AMI.

Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Incentive Zoning


Much like inclusionary zoning, incentive zoning policies enable local governments to provide density bonuses and other incentives to developers, in exchange for the delivery of specific public benefits and amenities. When used to stimulate affordable housing, incentive zoning looks a lot like a voluntary inclusionary housing policy. However, incentive zoning can also be used to stimulate a broad range of other outcomes, including the creation of walkways, parks and other open space, the inclusion of street-level retail in new development and the creation of new child care facilities. Generally voluntary in nature, incentive zoning also applies to a wider range of building types (residential, commercial, office, etc.) than inclusionary zoning.

By combining incentives for affordable housing with incentives for building higher density housing near public transit and preserved open space, incentive zoning can also address a broad agenda that aims to reduce energy usage and emissions of greenhouse gases and promote smart growth land use patterns.

When designing their incentive zoning policies, communities may choose to establish an as-of-right -- that is, codified -- bonus schedule, or to negotiate agreements on a case-by-case basis. As-of-right systems enumerate specific amenities and the corresponding bonuses provided, introducing greater predictability and helping local governments avoid charges of unequal treatment. In contrast, discretionary implementation of incentive zoning policies allows customized benefits packages to be developed for each project, but may be more costly and time-consuming to execute. In practice, local
governments typically administer incentive zoning policies through some combination of these two approaches. [1]

Click on the links below to learn more about:
Or read a case study of Seattle's Downtown Incentive Zoning programs.



Common Amenities Sought through Incentive Zoning

The first incentive zoning policy was adopted in Chicago in 1957. Chicago's bonus system focused on attracting developers of high-rise office buildings to the city by offering density bonuses in exchange for the inclusion of public plazas and pedestrian walkways. New York City's program, initiated several years later, had the dual goals of promoting street-level retail and walkways, and preserving the character of theatre districts and other special neighborhoods. Today, incentive zoning programs are used to achieve a variety of development goals including, but not limited to:

- Affordable housing
- Child care facilities
- Improved transit access
Linkage Fees

Incentive zoning policies represent one approach to using non-residential development to stimulate the provision of other amenities such as affordable homes. However, communities also use linkage fees for this purpose.

Levied on the developers of new commercial, industrial or retail properties, linkage fees are based on the assumption that economic development and job growth will increase the demand for housing, driving up housing prices. Payments usually vary in amount based on the locality and project type, and typically are assessed on a per-square-foot basis.

Linkage fee payments may be deposited into a local housing trust fund and used to help offset related housing impacts of the development and provide opportunities for low- and moderate-income families to live near their work.
- Parks and other open space
- Pedestrian plazas and walkways
- Preservation of historic buildings and historic and/or cultural districts
- Street-level retail
- Streetscape improvements (fountains, public art)
- Other design features and development types, including transit-oriented and mixed-use development


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Common Bonuses Included in Incentive Zoning Policies

Incentive zoning policies need to be carefully designed to ensure that bonuses offer a pay-off large enough to encourage developer participation, without spending more public resources than needed to achieve the target outcome. Communities should also consider whether incentive zoning is the most appropriate means for securing the desired amenity. In some cases, it may make more sense to require, rather than incentivize, specific design features through zoning ordinances and other regulatory mechanisms. In other cases, it may be more efficient for the local government to provide the desired amenities directly. [2]

Where incentive zoning policies have been adopted, incentives most commonly include density bonuses that allow developers to build at a higher density than would have been allowed by the underlying zoning code. Other bonuses, many of which are described in greater detail elsewhere on HousingPolicy.org, include:

- Builder's remedy
- Expedited permitting processes and fee waivers
- Reduced parking requirements
- Reduced set-backs
- Tax abatements
- Transfer of development rights


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Legal Issues Associated with Incentive Zoning

As with inclusionary zoning, states generally must pass enabling legislation that authorizes communities to adopt incentive zoning policies before such policies are considered valid. (Learn more about enabling legislation.) Local jurisdictions may also be required to perform a nexus study� to justify the relationship between the public benefits requested of developers and the impact the new development will have on the community.

Incentive zoning policies have been met with some criticism, particularly in cases where they are perceived to offer "give-aways" to developers or, on the flip-side, provide insufficient compensation for desired allowances. Overall, however, incentive zoning has drawn fewer legal challenges than inclusionary zoning programs, perhaps because participation is always voluntary (rather than mandatory). Because market conditions and community needs change, regular re-evaluation of desired amenities covered by the policy, as well as the bonuses available to developers that provide those amenities, them can help to ensure that the policy will reflect the city's development goals and changing market conditions, leading to the desired results.


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[1] Incentive Zoning: Meeting Urban Design and Affordable Housing Objectives. 2000. By Marya Morris. Planning Advisory Service Report Number 494. Washington, DC: American Planning Association.

[2] See Incentive Zoning: Meeting Urban Design and Affordable Housing Objectives, p. 9 for more on "the necessity issue."


Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Case Study: Downtown Seattle Incentive Zoning


In order to meet a series of objectives including: development of affordable housing, promotion of the arts, creation and improvement of open space, and preservation of historic structures, Seattle, Washington has offered some form of incentive zoning program for downtown development since the 1960s. The city's Downtown Commercial Bonus Program was adopted in the 1980s and extended to residential development in 2006.

  • The Downtown Commercial Bonus Program allows developers of office buildings and hotels to build at higher densities than normally allowed, in exchange for making a cash contribution of $22 per square foot (as of June 2009) to the City for new affordable rental housing and childcare.
Alternatively, developers may elect to build the affordable homes and childcare facilities themselves, or satisfy the program's requirements through some combination of "payment" and "performance." An additional component of the program helps to fulfill other public benefits objectives through participation in the City's Transferable Development Rights (TDR) program. (Learn more about Seattle's TDR)

Photo Credit: Board of Trustees of the University of Illinois, (c) 2001
  • The Downtown Residential Bonus Program allows developers of residential properties to build at higher densities than normally allowed, in exchange for inclusion of a specified number of affordable units on-site or payment of a cash contribution to the City's affordable housing fund. To qualify for either program, the new structures must be built to LEED Silver certification, a provision that helps to promote energy efficiency, healthier living and working environments, and reduced spending on utilities. (Learn more about green building)

In 2006, the state passed HB2984, enabling legislation that "strengthens the City's legal authority to create or expand incentive programs that offer increased development capacity or flexibility in exchange for housing affordability." Among other things, this bill eliminates the need to conduct a nexus study when designing an incentive zoning program where bonuses are intended to stimulate development of affordable housing. Nexus studies can be costly and time-consuming, and this allowance helps to make affordable housing an attractive element to be included in incentive zoning programs that may be adopted by other Washington state localities.

Click here to leave this site and learn more about incentive programs in Seattle.


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Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Terms of the Set-Aside of Affordable Units


Inclusionary zoning policies also specify the share of units that must be set aside as affordable, the income levels on which those units are targeted and the length of time for which rent- or resale restrictions apply.

Click on the links below to learn more about some of the major considerations jurisdictions address when setting the terms of an inclusionary zoning policy:

Share of units set aside
- What proportion of units must be reserved as affordable to qualify for incentives or comply with program requirements?

Target income level
- At what income level must the units be considered affordable in order to comply with program standards?

Period of affordability
- How long should units remain affordable?




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Terms of the set-aside of affordable units

Other pages in this section:

Circumstances that trigger inclusionary requirements

Location of affordable units


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Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.



Share of units set aside

Like other components of inclusionary zoning ordinances, the share of units that must be reserved as affordable varies in different localities, although in most cases the required set-aside falls between 10 and 25 percent [1]. Jurisdictions that set the set-aside too high, without providing sufficient cost-offsets, run the risk of reducing the incentives for new development, which could decrease the supply and thereby increase the price of housing for market-rate residents. On the other hand, jurisdictions that set the set-aside very low could end up producing fewer affordable units. Some communities allow developers to fulfill their affordable housing obligation off-site, but increase the required set-aside for those who choose to do so. In San Francisco, for example, all projects with 5 or more units must reserve 15 percent of units for low-income households; that requirement rises to 20 percent when the units are built off-site.

Solutions in Action
In Burlington, Vermont, the share of units that must be set aside as affordable in for-sale developments is dictated by the average price of the market-rate units. As the average cost of new homes increases, so does the required set-aside.

For example, if the average sales price of new homes in a development is affordable to households at 100 to 139 percent of the area median income (AMI), then 15 percent of units must be reserved for households earning 75 percent of AMI. For more expensive developments where the average sales price is affordable only to households earning 180 percent of AMI and above, 25 percent of units must be set aside for moderate-income households.

Click here for more information on inclusionary zoning in Burlington.



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Target income level

Localities have a great deal of flexibility in specifying the income level(s) at which inclusionary units must be affordable; in general, however, requirements typically range from 50 to 120 percent of AMI[2]. To achieve these requirements, designers of an inclusionary zoning policy may allow some flexibility in the pricing of individual units, but require that all inclusionary homes achieve an "average" level of affordability.

Some localities choose a "tiered" approach, specifying requirements for multiple levels of affordability in order to address a range of needs. Boston, Massachusetts combines these approaches: At least one-half of inclusionary units must be affordable to households earning less than 80 percent of the AMI; the balance may be affordable to moderate-income households earning between 80 to 120 percent of AMI, provided that, on average, these units are affordable at 100 percent of the AMI.

Census data show that households with incomes below 30 percent of the area median income typically have the most severe housing needs [3]. By itself, however, inclusionary zoning generally cannot provide housing that is affordable to families at this income level. This is because the amount of foregone revenue needed to make units affordable to families with such low-incomes would dwarf the value of any cost offsets that could be provided to developers. For this reason, when used as a stand-alone tool, inclusionary zoning is best thought of as a mechanism for producing units affordable to moderate-income families, rather than low-income families.

On the other hand, many jurisdictions have chosen to combine inclusionary zoning policies with direct subsidies in order to reach families with lower incomes than is possible using inclusionary zoning alone. One approach is to use an "administrative set-aside," wherein a share of moderately affordable units produced through inclusionary zoning is specifically reserved for purchase by a nonprofit or public entity that commits to maintaining long-term affordability for very low-income families. For example, Montgomery County, Maryland and Fairfax County, Virginia are able to achieve deeper income targeting by enabling the Counties to purchase some of the affordable units and rent them out to very low- and extremely low-income households. Some communities also require that a small share of inclusionary zoning units be rented to Section 8 voucher-holders or, on the owner side, offer additional homeowner assistance in order to enhance affordability. Still another option is to dedicate in-lieu fees to serving very low-income families -- for example, as gap funding to make a low-income housing tax credit deal work.

From the Forum...

"One common challenge for IZ programs is that when affordable units are part of home owners associations there is a risk that market rate owners will vote to increase fees beyond the means of lower income owners."This issue came up on the 12-16-08 Webinar; the following brief exchange clarified the concern. If you have ideas or experience about how to best address this issue please post a response to this thread." See what other people said and sign in to add your response

The HousingPolicy.org Forum is a place to pose questions, exchange ideas, and learn from the experience and expertise of others. This section of the site features interactive forums organized around policy areas, including inclusionary zoning.


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Period of affordability

Yet another choice to be made when designing an inclusionary zoning policy is the length of time for which inclusionary units must remain affordable. Rent- or resale-restrictions may apply for as little as five or ten years, extend to longer periods such as 20 or 30 years, or be enforced in perpetuity.

In general, longer periods of affordability will be more effective in providing a lasting increase in affordable opportunities for moderate-income families, whereas shorter affordability policies have the effect of transferring wealth to a limited number of beneficiaries. Several localities, including Newton, Massachusetts and Montgomery County, Maryland have extended their affordability period to avoid the loss of inclusionary units [4]. Inclusionary zoning can also be combined with other tools, such as shared equity homeownership to facilitate long-term affordability while still ensuring opportunities for individual asset growth.

Communities that wish to use inclusionary zoning to make a permanent, rather than temporary, dent in their affordable housing challenge may wish to give serious consideration to shared equity homeownership or other policies that ensure that inclusionary units remain affordable over time, such as permanently-affordable rental housing and community land trusts.

From the Forum...

"As the housing market has collapsed we have seen market rate home prices fall to a level that is not much higher than our moderate income affordable prices. This has made it very hard to sell inclusionary housing units with long term resale controls. Have any programs found ways to respond to this challenge?" See what other people said and sign in to add your response

The HousingPolicy.org Forum is a place to pose questions, exchange ideas, and learn from the experience and expertise of others. This section of the site features interactive forums organized around policy areas, including inclusionary zoning.


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[1] See Inclusionary Zoning. Equitable Development Toolkit. Oakland, CA: PolicyLink.

[2] See Inclusionary Zoning. Equitable Development Toolkit. Oakland, CA: PolicyLink.

[3] See, for example, Initial Assessment of 2005 American Community Survey Indicates Growing Housing Cost Burdens for Lowest Income Households. [PDF] 2006. By Danilo Pelletiere and Keith Wardrop. Research Note #06-04. Washington, DC: National Low Income Housing Coalition.

[4] For more detail, see Opening the Door to Inclusionary Housing. [PDF] (no date). By Mary Anderson. Chicago, IL: Business and Professional People for the Public Interest, pp. 37-38.
Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Location of Affordable Units


Many advocates of inclusionary zoning believe that it is essential that below-market homes be fully integrated with market-rate units in the same development. In many cases, however, inclusionary policies offer developers several alternatives to satisfying affordability requirements on-site.

Click on the links below to learn about decisions communities make regarding the location of affordable units:

On-site or off-site - Does the entire inclusionary requirement need to be satisfied within the development, or do developers have the option to build some or all of the affordable units in another location?

Fee in-lieu - Do developers have the option of paying a fee in-lieu of building their full inclusionary requirement?




You are currently reading:

Location of affordable units

Other pages in this section:

Circumstances that trigger inclusionary requirements

Terms of the set-aside of affordable units


Jump to:

Villas on SixthIncentives and Cost Offsets
Mandatory inclusionary zoning policies frequently include provisions, such as density bonuses, designed to "offset" any foregone revenue associated with the inclusionary requirements. In a voluntary inclusionary zoning program, similar concessions are provided as incentives for participation.

Fairbanks RidgeOther Considerations
Few housing policies have generated as much attention and controversy as inclusionary zoning. Beyond the basic mechanics of the ordinance, there are other key issues that communities thinking about inclusionary zoning should consider.

Click here to view more resources on inclusionary zoning.



On-site or off-site

The decision of whether or not to allow inclusionary zoning requirements or incentives to be satisfied through the off-site construction of affordable housing units depends in part on the jurisdiction's principal goals in adopting an inclusionary zoning policy. To the extent the jurisdiction seeks to ensure that affordable housing units are spread throughout a community, or located in specific high-growth areas - such as within transit-oriented development within walking distance of public transit - it may choose to require on-site affordability.

However, to the extent a jurisdiction seeks to maximize the overall number of affordable housing opportunities, it may want to consider allowing affordability requirements to be met through off-site construction. In some cases, production of affordable housing units may be less expensive in off-site locations, increasing the number of units that can be built or reducing the amount of offsets the communities may need to provide. Allowing off-site construction also may lessen opposition to the ordinance among developers and land owners. Communities that permit off-site construction may wish to consider the amenities offered by the off-site location to ensure that the affordable housing opportunities are provided in opportunity-rich neighborhoods near public transit and/or jobs.

Some places resolve these competing goals by increasing the set-aside for developers who choose to build new units off-site. In Boston, Massachusetts, for example, the inclusionary zoning set-aside increases from 10 to 15 percent when inclusionary requirements are satisfied off-site. In Sacramento, California, developers may fulfill inclusionary requirements off-site only if they are able to demonstrate that the off-site location is either more cost-efficient for production of the inclusionary zoning units, or offers greater transportation access or otherwise exceeds standards established by the City's residential planning criteria.

In some jurisdictions, market-rate
developers are able to make onsite land available to a nonprofit developer who then assumes responsibility for developing the affordable homes needed to satisfy local inclusionary zoning requirements.

In general, this approach makes it easier for developers to comply with affordability requirements by allowing all parties to specialize in what they do best: for-profit developers can focus on building conventional market-rate homes, while nonprofit developers that are familiar with affordable housing programs and financing build, and in some cases manage, the inclusionary units.


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Fee in-lieu

Rather than mandating the fulfillment of inclusionary zoning requirements through new construction, some communities allow developers to pay a fee in-lieu of construction of the affordable units. The fee is generally based on the cost of development, and may be determined by a formula or negotiated on a case-by-case basis. The revenue from fee payments is then used to facilitate construction of additional units for low- and moderate-income households or to achieve other affordable housing goals.

The option to pay a fee in-lieu provides greater flexibility, particularly for developers of small projects; however, in areas with high land costs, few buildable lots, or where the fee is set too low to allow new development, the trade-off may be fewer affordable units built. In response to these realities, some communities require proof that development of affordable units will create an insurmountable burden, economic or otherwise, before granting permission to pay a fee in-lieu.

A 2008 study, The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from the San Francisco, Washington DC and Suburban Boston areas, conducted by the Furman Center for Real Estate and Urban Policy at New York University for the Center for Housing Policy, found that the adoption of more liberal rules for satisfying inclusionary requirements, such as allowing off-site construction, in-lieu fees, etc., was associated with the production of a greater number of affordable units. The study could not determine what caused this outcome, but one potential explanation is that developers felt more comfortable building in areas with these types of rules; another potential explanation is that the in-lieu fees were used to leverage other subsidies, such as the low-income housing tax credit. While this evidence is not definitive, it does suggest that such policies deserve serious consideration.


From the Forum...

"What is the best way to set the level of fees in lieu of building inclusionary units?" See what other people said and sign in to add your response

The HousingPolicy.org Forum is a place to pose questions, exchange ideas, and learn from the experience and expertise of others. This section of the site features interactive forums organized around policy areas, including inclusionary zoning.


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Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Case Study: Chicago's Affordable Requirements Ordinance


Chicago's Affordable Requirements Ordinance (ARO) was initially passed in 2003, but the policy was expanded in May 2007 (effective August 2007) to broaden its reach. View the case study below to learn more about how the elements of an inclusionary zoning ordinance are applied in Chicago. Click on each of the inclusionary zoning ordinance elements to skip to a longer, general description of how it works.

Circumstances that trigger inclusionary requirements
  • Mandatory or voluntary? Chicago has a hybrid inclusionary zoning policy that is triggered only in specific circumstances (see details below).
  • Development size? Any rental or for-sale development with 10 or more units is subject to the terms of the ARO, if the project also involves:
    • Any purchase of land from the City (the previous ARO only included developments where City land was purchased at a below-market rate);
    • A zoning change resulting in increased project density or a change in land use that allows residential uses not previously permitted; or
    • Receipt of financial assistance from the City (including tax increment financing).
Most projects located within a planned development zone are also covered by the ARO.

Terms of the set-aside of affordable units
  • Share of units set aside? Developers receiving financial assistance from the City must set aside 20 percent of units as affordable; all other conditions require a 10 percent set-aside. However, the new ordinance allows developers to reduce the required affordable housing set-aside if they target for-sale units to households that earn at or below 80 percent AMI.
  • Target income level? Like the original ARO, the amended ordinance establishes target income levels at up to 60 percent AMI for rental housing and up to 100 percent AMI for for-sale housing.
Location of affordable units
  • In-lieu fees? Developers may opt to make in-lieu payments of $100,000 per affordable unit not produced as established by the 2003 ARO; however, the 2007 amendment links this in-lieu fee to inflation. The amount of the fee will be adjusted annually based on the Consumer Price Index. Payments are directed to the City's Affordable Housing Opportunity Fund.
Incentives and cost offsets
Any incentives and cost offsets are negotiated on a case-by-case basis between developers, aldermen, and the City's Department of Housing and Department of Planning and Development.

Visit the City's ARO website to learn more.


Continue learning about circumstances that trigger inclusionary zoning requirements.

Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Key Resources


The following is a list of key resources on topics related to inclusionary zoning. If you're aware of other resources that should be added, please contact us.

From the Forum...

The following resources are drawn from posts to the Inclusionary Zoning Discussion Group on the HousingPolicy.org Forum, an interactive section of this site that allows members to ask questions, offer advice, and share their experience. Any document attached to a Forum post will be added to this list. If you have a resource that should be included, simply reply to a related thread on the Forum - or create a new thread - and attach the file to your post. Click here for instructions on how to add an attachment to your reply.

City of Lafayette Community Housing Guidelines [PDF] -- amended in 2007, describes the cash-in-lieu schedule for the Community Housing Program in Lafayette, Colorado.
Posted in: Setting In Lieu Fees

City of San Leandro Performance Deed of Trust [DOC] -- template used by the City of San Leandro, CA, to secure the City's loan when subsidizing an affordable housing development.
Posted in: Foreclosures on Inclusionary Units

City of Tallahassee Inclusionary Housing Ordinance [PDF] -- adopted in 2005, describes Tallahassee, Florida's inclusionary zoning program.
Posted in: Setting In Lieu Fees

Inclusionary Zoning in a Down Market [PDF] -- slides from a December 2008 presentation sponsored by the Lincoln Institute of Land Policy on how the falling market has impacted inclusionary zoning programs.
Posted in: Webinar 12/16/08: Inclusionary Zoning in a Down Market

Issues to Consider When Creating an Inclusionary Housing Ordinance [PDF] -- prepared by Business and Professional People for the Public Interest (BPI), lists the major components of inclusionary zoning policies and provides guidance to policymakers interested in designing an inclusionary zoning ordinance, including segments of actual ordinance.
Posted in: Setting In Lieu Fees

Lincoln Institute of Land Policy & Center for Housing Policy Best Practices for Inclusionary Zoning issue memos -- provide an overview of best practices related to homeowner association fees; comparability; and in-lieu fees [PDF].
Posted in: HOA Fees and Ongoing Affordability of IZ Units; Ensuring units are comparable; Setting In Lieu Fees

National Examples of Fee-in-Lieu Provisions Under Inclusionary Housing Programs [DOC] -- prepared by BPI, chart provides details on fee-in-lieu payment provisions in more than 20 municipalities.
Posted in: Setting In Lieu Fees

Websites & Organizations

Business and Professional People for the Public Interest has issued many useful reports on inclusionary zoning, all of which are available here. Selected reports include:

Opening the Door to Inclusionary Housing. (no date). By Mary Anderson -- This comprehensive report offers a wealth of information about inclusionary zoning. The first half of the paper describes the various elements of an inclusionary zoning policy and decisions that must be made when developing a policy. The second half of the report contains case studies of inclusionary zoning programs from 12 communities across the country. A condensed version of the report is also available here[PDF].

Voluntary or Mandatory Inclusionary Housing? Production, Predictability, and Enforcement. 2004. By Nicholas Brunick, Lauren Goldberg, and Susannah Levine. This brief paper provides reviews several major arguments in favor of adopting a mandatory, rather than voluntary, inclusionary zoning ordinance.

See also:

Issues to Consider When Creating an Inclusionary Housing Ordinance [PDF]
This "policy tool" lists the major components of inclusionary zoning policies and provides guidance to policymakers interested in designing an inclusionary zoning ordinance. Segments of actual ordinances are included so readers can learn how programs are designed in other communities.

California Inclusionary Housing Policy Database, maintained by the California Coalition for Rural Housing -- This searchable database contains information on the characteristics of inclusionary zoning policies in California jurisdictions. Users may search by many different variables, including compliance type (mandatory or voluntary); construction alternatives (in-lieu fees, land dedication, etc.); length of affordability; targeted income group and more. The database contains information on all these variables, as well as production statistics where available.

PolicyLink's Equitable Development Toolkit -- This online resource provides information on an array of strategies, including inclusionary zoning, and is intended to provide guidance to advocates interested in advancing social and economic equity.

The National Inclusionary Housing Conference website includes links to an extensive list of publications on inclusionary zoning.

The Innovative Housing Institute is a non-profit organization that provides technical assistance on numerous housing issues, including inclusionary zoning.

Researchers with the National Housing Conference and Center for Housing Policy have prepared a series of reports on inclusionary zoning. These include:

Inclusionary Zoning: A Viable Solution to the Affordable Housing Crisis? [PDF] 2000. New Century Housing 1(2).
This collection of short essays includes analysis of pros and cons related to inclusionary zoning; potential arguments that may be anticipated in opposition of inclusionary zoning (and suggested responses); and reactions from the developer and homebuilder perspectives.

Inclusionary Zoning: Lessons Learned in Massachusetts. [PDF] 2002. NHC Affordable Housing Policy Review 2(1).
This collection of short essays looks specifically at inclusionary zoning in Massachusetts, and includes three case studies of communities in the state that have implemented inclusionary zoning ordinances. Other essays assess the constitutionality of inclusionary zoning policies and strategies for involving developers in the creation of an inclusionary ordinance.

Inclusionary Zoning: The California Experience. [PDF] 2004. NHC Affordable Housing Policy Review 3(1).
This collection of short essays examine how inclusionary zoning policies have been applied in California, including local origins of inclusionary zoning, an overview of the evolution of inclusionary programs and findings related to how programs are designed. Additional essays discuss constitutional challenges related to inclusionary zoning and research related to its impact on housing and land markets.

The Non-Profit Housing Association of Northern California and the Home Builders Association of Northern California issued On Common Ground: Joint Principles on Inclusionary Housing Policies [PDF], which represents an agreement among advocates and developers in the Bay Area on principles to guide inclusionary zoning.

Reports

Affordable by Choice: Trends in California Inclusionary Housing Programs. [PDF] 2007. San Francisco, CA: Non-Profit Housing Association of Northern California.
This report examines housing produced through inclusionary housing programs in California from 1999 to mid-2006.

Inclusionary Zoning: A Framework for Assessing the Advantages and Disadvantages. [PDF] 2008. By Dustin C. Read. Prepared for Homes for Working Families.
This paper provides an overview of the potential benefits and drawbacks associated with inclusionary zoning policies, including a discussion of the advantages and disadvantages of economic incentives that may be offered to participating developers. The analysis also reviews evidence regarding the economic incidence of inclusionary zoning policies and assesses the likely effectiveness of inclusionary policies in strong and weak markets.

Inclusionary Zoning Guidelines for Cities and Towns. [PDF] 2000. By Edith M. Netter, Esq. Prepared for the Massachusetts Housing Partnership Fund.
This detailed checklist walks through a series of decisions that need to be made when designing and implementing an inclusionary zoning ordinance. While written primarily for local policymakers in Massachusetts, the checklist nonetheless offers useful guidance for a general audience.

Inclusionary Zoning: Legal Issues. [PDF] 2002. Prepared by the California Affordable Housing Law Project of the Public Interest Law Project and Western Center on Law & Poverty.
This report, while directed at readers in California, provides useful guidance on legal issues related to inclusionary zoning. Topics covered include police power and land use, authority to impose inclusionary requirements, "takings" challenges and nexus studies.

Long-Term Affordable Housing Strategies in Hot Housing Markets. [PDF] 2008. By Jesse Mintz-Roth. Washington, DC: NeighborWorks America and Cambridge, MA: Harvard Joint Center for Housing Studies.
This paper reviews housing policies that can be used to create and maintain long-term affordability in "hot" markets. Specific tools discussed include shared equity and limited equity cooperatives, housing trust funds, and inclusionary zoning. The author also evaluates the trade-offs associated with each of these policies related to longevity, affordability, and equity-generation.

The Mix of Housing by John McIlwain and Making Inclusionary Zoning Work by David Holtzman. Both in Multifamily Trends. September/October 2007. Washington, DC: Urban Land Institute.
These short essays provide key principles to be considered when designing an inclusionary zoning ordinance. These include "Keep it Simple," "Be Generous with the Incentives" and "Collaboration is Key."

Inclusionary Zoning White Paper. [PDF] 2011. Washington, DC: National Association of Home Builders.
This paper reviews research on the impact of inclusionary zoning and concludes that inclusionary zoning policies often limit new housing development. The report also describes several inclusionary zoning best practices in jurisdictions where inclusionary zoning policies have been effective.


Go to the Inclusionary Zoning main page.
Goal: Increase the Availability of Affordable Homes
Role: Capitalize on Market Activity
Policy: Establish Inclusionary Zoning Requirements or Incentives

Case Study: North Kingstown, Rhode Island Inclusionary Zoning program


The Town of North Kingstown, Rhode Island, adopted an inclusionary zoning ordinance in 2007 to help achieve local "fair share" affordable housing goals. The mandatory ordinance requires developers of residential projects to reserve as affordable at least 10 percent, and up to 25 percent, of new units. To help offset the costs associated with selling units at below-market prices, developers may receive a density bonus that allows them to build twice the number of affordable units included above the 10 percent requirement.

To learn more about the program, view a case study [PDF] excerpted from a guide to state and local housing affordability solutions prepared by Abt Associates for the National Association of Home Builders.

Click here to go back to the previous page, or click here to learn more about inclusionary zoning.