inclusionary zoning: overview

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 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.