Inclusionary Zoning

Inclusionary zoning is an effective tool that can be used by municipalities to ensure adequate affordable housing is included in the normal course of real estate development. However, a distinction exists between the terms and incentive zoning. Inclusionary zoning is a mandatory approach that requires developers to make a portion of the housing units in their project affordable to low- and moderate-income households. Incentive zoning is a voluntary approach that either waives certain regulatory requirements or provides additional density (the incentives) for developers in exchange for providing affordable housing.

The mandatory zoning approach to affordable housing (often in concert with a density bonus, as is recommended) is the most effective means of increasing the number affordable housing units and creates a wider variety of affordability levels within a development.

In practice, an inclusionary zoning bylaw may include some flexibility to its mandatory provisions. For example, bylaws may only apply to certain types of development, such as new construction or substantial rehabilitation. Inclusionary zoning bylaws may include "in-lieu-of" payment or construction alternatives providing developers the option of paying a fee per unit, building affordable units off-site, or rehabilitating units elsewhere in place of constructing affordable units within the proposed development.

The voluntary zoning bylaws may contain incentives for developers such as density bonuses, expedited permitting, and cost offsets such as tax breaks, parking space reductions, and fee reductions. Inclusionary zoning bylaws also may contain a unit threshold (such as 10 units or more), identify income targets for the population to be served, and identify control periods and mechanisms (for example, permanent deed restrictions). These specific requirements may be covered by a Regulatory Agreement between the community and the developer.

Local partnerships with developers. The mixing of unit types in a project adds additional effort in design and marketing that may be unfamiliar to the developer. Local housing trusts, non-profits and agencies can offer assistance to ensure that the affordable units are managed efficiently.

Educated developers and financiers. The mixing of unit types has been successful in many projects. But, developers and financiers who are only familiar with one product type may need to be shown the opportunities are real. Information should be readily available to offer the development community.

Moderate to strong housing market. Potential for housing development, either in new apartments or in residential subdivisions, provides the opportunity to seek affordable units as part of that growth. With more profit and less risk (particularily if a density bonus is provided), the development community will more readily provide affordable units in development projects.

Local support for the provision of affordable housing. Local officials and citizens need to be educated regarding the necessity of providing affordable housing units within their community. The development of a strong community Master Plan or a targeted Planned Production Plan is an effective means to involving members of local government and the general community in discussions of the existing state of affordable housing, the goals of the community, and specific strategies for achieving these goals.

Community benefit. Communities that recognize that the inclusion of affordable units in the normal practice of development provides benefits for local businesses and government by housing middle- and low-income workers, does not devalue new housing projects, and only repositions them for a more diverse market, are communities that will create successful inclusionary programs.

Effective administration. Administration, monitoring and enforcement are critical to the success of an inclusionary zoning program (typically performed by the municipality, local housing authority, an affordable housing trust fund, or a housing consultant, working on behalf of the community). Carefully drafted local decisions and legal documentation to support long-term affordability are also essential to a successful inclusionary housing program.

• Expand Housing Opportunities: Inclusionary zoning helps provide housing to meet the needs of people of all abilities, income levels, and household types. Inclusionary zoning can also be used to help coordinate housing with existing jobs, transit and services.
  
  
• Advance Equity: Inclusionary zoning helps to ensure social and economic justice in a community by providing a more level playing field for developers and encouraging more low- and moderate-income housing.
  
  
• Make Efficient Decisions: Developers can also benefit from mandatory inclusionary housing bylaws as they provide a uniform, predicable process that gives more certainty up front about the feasibility of a development proposal.
  
  
• Increase Job and Business Opportunities: Inclusionary zoning supports the growth of new and existing businesses by increasing the supply of moderately priced housing for local workers.
  

The Primary attraction of inclusionary zoning is that it provides affordable housing without requiring municipal funding. In addition, inclusionary zoning bylaws aid a community's economic development efforts by providing housing for the local workforce, thus retaining and attracting business investment, and potentially increasing the amount of disposable income spent locally. A common concern about inclusionary zoning is that it may slow the pace of development, exacerbating the affordable housing supply problem and acting as a disincentive for private developers who may be considering investing in a community. Studies have shown that inclusionary zoning does not in fact slow the pace of private development in a community. Residential development rates are driven much more by the strength of the local housing market and broader economic and market trends.