The first is the mandatory model which requires that a . not made up of exclusively wealthy families, US Department of Housing and Urban Development, 2019 study of Marylands inclusionary zoning policies, Heres where Prince Georges County could ban townhouses, DCs downtown wasnt supposed to be where it is. Meanwhile, an additional 97,200 families and individuals earning less than 50% of median income are expected to move to the state by 2030, the study also noted, which will require a dramatic increase in affordable housing supply over the next 10 years. Most IZ policies also include offsets that compensate owners for the lost revenue associated with the affordable units. Inclusionary zoning can provide that middle ground by forcing developers to offer a certain percentage of units in new housing developments to residents below the median income. Tom Coale is an attorney with the law firm of Talkin & Oh, LLP. Inclusionary zoning aims to reduce residential economic segregation by mandating that a mix of incomes be represented in a single development. Local governments reflect and in some cases balance these competing interests. Finding the right balance and set of options will require careful analysis. But when efforts to integrate such communities take the place of meaningful efforts to create affordable housing, we all lose. In the case Home Builders Association of Northern California v. City of Napa, the California First District Court of Appeal upheld the inclusionary zoning ordinances of City of Napa that require 10 percent of units of the new development project to be moderate income housing against the Home Builders Association that challenged the City of Napa. Organizations that have experience administering affordable housing programs may be better equipped to ensure compliance with the additional requirements associated with IZ policies, and can help to ensure successful delivery and management of the affordable units. With this practice, inclusionary zoning has become a useful replacement for those who want to create the appearance of supporting affordable housing while doing very little to address the greatest needs of the housing crisis, which are units for low-income families. Ordinances that allow the "discount" to expire essentially grant a windfall profit to the inclusionary housing buyer, preventing that subsidy from being recycled to other needy households. Second, inclusionary zoning policies offload a societal obligation of providing affordable housing from the body politic to private interests. Alternatively, local officials can provide a formula or menu that offers more incentives for projects that provide a larger share of affordable units or serve households at lower income levels. Some lawsuits allege that requirements to include affordable housing constitute a taking of private property. Why Inclusionary Zoning Alone Won't Solve the Housing Crisis Alternatively, some communities do not establish a set affordability requirement or standardized menu of options, but rather determine the share of affordable units on a case-by-case basis. Affordable units take up space that could otherwise be allocated to more profitable market-rate units, and most communities work to compensate owners for some or all of that lost profitability. For distressed markets with little development activity, an IZ requirement may not be the most effective route toward developing or preserving affordable housing. A 2019 study of Marylands inclusionary zoning policies conducted by Emily Hamilton* at George Mason Universitys Mercatus Center demonstrated that in the absence of density bonuses to ameliorate the cost of selling units at below-market rates, inclusionary zoning increases home prices an additional 1% over what they would be in the absence of such policies. Some affordable housing advocates seek to promote the policies in order to ensure that housing is available for a variety of income levels in more places. Focusing particularly on the Montgomery County, MD ordinance and those found in three other . This is particularly important in areas that are experiencing gentrification or the conversion of older, more affordable, housing stock to new luxury units. Developers have options for compliance that include (a) preserving 8% of units to be affordable up to 60% of AMI for a period of 20 years, (b) preserving 4% of units to be affordable up to 30% of AMI for a period of 20 years, (c) seeking a loss offset financial assistance in which 20% of the units will have to be affordable at 50% of AMI for a period of 30 years, (d) paying an in lieu fee, (e) producing the units offsite or preserving naturally occurring affordable housing (NOAH) within a half mile from a market-rate project, or (f) donating land to Minneapolis. Some cities, towns and counties use a lottery system or draw from a waiting list managed by the local housing department, referring eligible households to the property owner or manager as units become available. Inclusionary zoning policies have been subject to lawsuits for a variety of reasons. Even the most ambitious inclusionary zoning requirement of 20% will only provide two subsidized units for every eight market-rate units. Only developments with projects less than 15 residential units are exempt from the ordinance. It is the sixth wealthiest county in the United States, yet it has built more than 10,000 units of affordable housing since 1974, many units door-to-door with market-rate housing. Inclusionary zoning can break up poverty density by imposing legal requirements to create affordable housing across neighborhoods. A recent pilot study sponsored by HUD's Office of Policy Development and Research, "Inclusionary Zoning and its Effect on Affordable Housing: Lessons From Two Counties," examined the IZ programs in Montgomery County, Maryland and Fairfax County, Virginia. Inclusionary zoning's supply effects are therefore largest for modest new construction. However, there is less experience with voluntary policies than with mandatory policies on which to draw. Governments can and should do more. Some cities, like New York City, allow developers to count rehabilitation of off-site housing as an inclusionary contribution. Mayor Michelle Wu is pursuing changes to the city's inclusionary development policy, or IDP. He lives with his wife and three children in Ellicott City, Maryland. As the cost of market-rate units increase, the disparity between those who can afford new housing and those who are selected to receive an MIHU will increase resulting in a lopsided barbell income distribution whereby 80% of the housing is for the very rich and 20% of the housing goes to the relatively poor. Inclusionary Zoning (IZ) Affordable Housing Program | dhcd In communities with voluntary policies, offsets function as incentives to encourage participation. Some argue that voluntary programs are less effective than mandatory programs. IZ and ADU Forms and Resources | dhcd - Washington, D.C. Often abbreviated as AMI. Denver, CO passed the Expanding Housing Affordability policy in June 2022 which is the first inclusionary zoning ordinance that includes mandatory affordable housing for developments with 10 or more units and linkage fees into the affordable housing trust. Inclusionary zoning ordinances have a series of predetermined parameters: they apply only Schwartz, Heather L., Liisa Ecola, Kristin J. Leuschner and Aaron Kofner. We welcome Emails to the Editor in response to news/analysis, opinion, and policy pieces. Cost offsets are a critical component of IZ policies, whether mandatory or voluntary, and can allow for provisions that require a larger percentage of units to be set aside as affordable. For example, high-rise housing costs more to build per square foot (thus raising compliance costs, perhaps prohibitively), so some ordinances exempt it from compliance. [23], All municipalities in the state of Massachusetts are subject to that state's General Laws Chapter 40B, which allows developers to bypass certain municipal zoning restrictions in those municipalities which have fewer than the statutorily defined 10% affordable housing units. Firstly, they can be mandatory or voluntary. Brown, K. (2001). Communities that adopt such policies may wish to stipulate that the units developed off-site be in a neighborhood of similar quality or higher along metrics associated with economic opportunity, such as school quality or the poverty rate. For example, some communities require a lower set-aside if the affordable units provide deeper affordability. This page provides forms, information and additional resources that can help residents and housing professionals with the specifics of the IZ and ADU programs. A 2006 study, found that 170 jurisdictions in California had some form of inclusionary housing. Log in below or create an account. Citation 2012). When effective, inclusionary zoning reduces the concentration of poverty in slum districts where social norms may not provide adequate models of success. Is inclusionary zoning creating less affordable housing? - Strong Towns Other communities permit developers to build the required affordable units at another location, often within a certain distance from the market-rate project. For example, housing advocates pushed Montgomery County, Maryland, and Fairfax County, Virginia, to adopt their respective inclusionary zoning ordinance (Levy et al. [12] The large low income resident population burdens Norristown's local government and school district, while much of the county remains unburdened. Can you make a one-time or recurring contribution today to keep us going strong? Inclusionary zoning policies may also apply in circumstances other than new construction, such as buildings undergoing substantial rehabilitation or conversion from non-residential to residential use or from rental units to condos. When naturally occurring affordable housing (i.e., older homes) is replaced by new homes with higher price tags, inclusionary zoning reduces displacement and integrates the new development with the surrounding community. Takings challenges are based on the Fifth Amendment of the U.S. Constitution, which states: Nor shall private property be taken for public use without just compensation. Courts assess the merits of takings claims on the basis of (1) whether the action substantially advances a legitimate state interest; or (2) whether it denies the property owner all economically viable use of the property. MPDU Program - Montgomery County Maryland MIHUs are sold or rented at affordable prices and rents set by the Department of Housing and Community Development. A Guide for Practitioners. [15] Cities have also attempted to impose inclusionary requirements on rental units. Moreover, with density bonuses allocated to property developers for the provision of IZ units, it implies the community would be bearing the cost of increasing population density and sharing existing infrastructure. Heres how. A new mandatory ordinance, enforced in 2003 with uniform expectations and rewards for developers, led to the creation of 3,400 affordable housing units, with 750 more planned in June 2004. Supporters of inclusionary zoning point out that low income households are more likely to become economically successful if they have middle class neighbors as peers and role models. Which types of housing construction the ordinance applies to. New York City Department of City Planning Advocates have long promoted inclusionary zoning (IZ) as a viable, market-based strategy for increasing affordable housing and creating mixed-income communities. Subtitle 4 - Inclusionary Zoning. [21] This shows that IZ policies may fail to disperse the low-income distributions when it is carried out without taking regional coordination into account. This is especially prominent in California, where only 16% of the population could afford the median-priced home during 2005.[6]. As a result of a lawsuit, Fair Share Housing Center v. The Zoning Board of the City of Hoboken (2021), where the New Jersey Superior Court partially struck down the prior ordinance, there is no opportunity to pay a fee in lieu of developing affordable units. Many jurisdictions require that inclusionary housing units be indistinguishable from market-rate units, but this can increase costs. 7-401. It may also be more suitable in states that limit local authority to regulate home rents. [3] Inclusionary zoning is a tool for local municipalities in the United States to allegedly help provide a wider range of housing options than a free market provides on its own. The Wisconsin Supreme Court declined the City's request to review the case. The clash between these various interests is reflected in this study published by the libertarian-leaning Reason Foundation's public policy think tank, and the response of a In California, low-income housing is typically designed for households making 51 percent to 80 percent of the median income, and moderate-income housing is typically for households making 81 percent to 120 percent of the median income. In order to tackle the gaping deficit of units for low-income families, state and federal governments will need to dedicate resources to build housing and subsidize rents. More details are provided at the Montgomery County Department of Housing and Community Affairs website. Language links are at the top of the page across from the title. This varies quite substantially among jurisdictions, but appears to range from 1030%. There are two main approaches to building affordable housing through the planning process.. [17], Citizen groups and developers have also sought other ways to strengthen or defeat inclusionary zoning laws. Other legal battles have occurred in California, where many cities have implemented inclusionary zoning policies that typically require 10 percent to 15 percent of units to be affordable housing. ZoningOpinionBy Tom Coale (Guest Contributor) April 5, 20226. It is often granted to buildings that accomodate a fair share of affordable units for working families.es are the most common form of offset, allowing for construction of a greater number of units than would otherwise be permitted on the site. Also referred to as inclusionary housing. Developers have the option of preserving fewer affordable units if they target deeper affordability of AMI tiers. The term inclusionary zoning indicates that these ordinances seek to counter exclusionary zoning practices, which aim to exclude low-cost housing from a municipality through the zoning code. The mix of "affordable housing" and "market-rate" housing in the same neighborhood is seen as beneficial by city planners and sociologists. Region's median household income, calculated by the Department of Housing and Urban Development. approved an ordinance to be codified in December 2022 that requires (a) 10% of all units newly created in low-, moderate-, and middle-income census tracts to be affordable, (b) 15% of units developed in upper-income census tracts or those receiving tax credits from Jersey City must be affordable, and (c) 20% of units created must be affordable if the development has tax credits from New Jersey state. However, there is less experience with voluntary policies than with mandatory policies on which to draw. In communities where IZ policies are mandatory, affordable units (or approved alternatives, discussed below) must be included in all proposed projects covered by the policy. Offsets are important to ensure that owners continue to have strong incentives to develop new housing, which is necessary to ensure an adequate supply of housing in the market, as well as to produce affordable housing through IZ, since IZ will only produce affordable units if there is market-rate development. Therefore, the new ordinance provides for payment of fees or forming discretionary agreements with community benefits agreements in lieu of setting aside affordable housing units. More details on the policy as well as Minneapolis Unified Housing Policy drafted in response to the citys comprehensive 2040 plan can be found here. In California, the League of Cities has created a guide to inclusionary zoning which includes a section on the pros and cons of the policies. Most families making 80% of the area median income can afford homes within the existing housing stock. But inclusionary zoning is challenging in other ways too. Under CO state law, local governments are required to include alternatives to participation in mandatory IZ programs. High house prices and limitations on new housing supply make density bonuses highly valuable in Alexandria and Falls Church. While the requirement to include a housing element in all new and updated comprehensive plans in Maryland may have only become effective on June 1, 2020, many planning methods and practices for implementing affordable housing are well established. Chicago, ILs Affordable Requirements Ordinanceapplies to developments with 10 or more units that (a) receive financial assistance from the city, (b) involve city-owned land, (c) are granted a zoning change that increases project density or allows a residential use in an area not previously zoned for residential development , or (d) are planned developments in the downtown area. Statistically, a poor child in a school where 80% of the children are poor scores 1315% lower compared to environments where the poor child's peers are 80% middle class. Since it was enacted, the inclusionary zoning . In the traditional housing model, community land trusts sells the homes on the land they manage at affordable prices to a qualifying homebuyer. Instead, IZ helps ensure that new development, in which units are commonly the most expensive on the market and draw high-income purchasers, is not made up of exclusively wealthy families. Counselors can prepare prospective buyers for homeownership, and can also work with them post-purchase to identify and quickly resolve any problems that could lead to default or foreclosure. See the related resources below for links to more detailed guidance on these and other considerations related to adoption of an IZ policy. However, the Costa-Hawkins Rental Housing Act prohibits cities in California from imposing limitation on rental rates on vacant units. Inclusionary zoning is a land-use policy, first developed in Montgomery County, Maryland, in the 1970s, as a way to foster mixed-income communities. Fees are deposited into the housing trust fund, which is later used to build more affordable homes.