Inclusionary zoning policies
Program overview
Creating affordable housing: Inclusionary zoning (IZ) policies seek to facilitate the creation of affordable housing. They do so by requiring or incentivizing developers to make a portion of the units in a new development affordable to low- or moderate-income households.
Varied set-aside and coverage requirements: While requirements vary, most IZ policies require that between 10 and 20 percent of units be designated as affordable for households at a certain income level (e.g., 80 percent of area median income). Similarly, cities and counties differ in terms of what size developments are covered by their IZ policies, though most exempt very small projects (e.g., a single triplex) that would otherwise become financially unfeasible.
Taking advantage of stronger markets: Since IZ policies leverage the profitability of new development, they can create new affordable units without significant government subsidy. However, this means that IZ policies are most effective in strong markets, where profit margins on development are large. In weaker markets, local governments may need to offer more significant incentives for developers to proceed with projects.
Offering incentives to developers: Local governments typically offer incentives to offset some or all of the lost profitability from the inclusion of affordable units. The most common offset is a density bonus, which allows a developer to build more units on a property than the zoning regulations would otherwise allow.
- Strategies
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Creating affordable housing
- Cost per Participant
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Not applicable
Multiple studies with rigorous designs provide some evidence for inclusionary zoning policies as a strategy for increasing access to quality, affordable housing.
- This assessment of the evidence is based on a 2022 research synthesis.
Staff to support builders: Due to the variability and complexity of development projects, any IZ policy will require some dedicated staff capacity to ensure it is implemented effectively. Local governments should hire sufficient staff to assist developers in interpreting and applying the IZ policy and ensure staff have the level of technical expertise needed to appropriately exercise discretion on individual projects.
Monitor rental units to preserve affordability: In order to preserve the long-term affordability of rental units created through an IZ policy, local governments should work with developers and property management companies on an ongoing basis. This includes selecting or monitoring the selection of tenants, recertifying tenant incomes, and other actions to ensure units are occupied by the tenants for which they were intended.
Develop a fair, transparent selection process: Since demand for quality, affordable housing typically outstrips supply, local governments need to design a fair and transparent process for selecting among many applicants. Instead of using a first-come-first-serve system, local governments should keep application periods for units open for a defined period (e.g., 30 days) and select applicants using a lottery system.
Select a mechanism to manage purchasable units: To ensure homes remain affordable and in good condition after their initial sale, local governments should place units under the stewardship of a shared equity program, like a community land trust. In addition to monitoring and enforcing resale restrictions on units, a community land trust can market to eligible buyers, maintain properties, and more.
Collect and analyze program data: By collecting data on program performance and feedback from key stakeholders, IZ programs can identify and address problem areas. Programs should pay special attention to the number and affordability of units created and the amount of in-lieu fees collected and the use of those fees.