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

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Terms of the set-aside of affordable units

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.

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.