Inclusionary zoning

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Inclusionary zoning (IZ) is municipal and county planning ordinances that require or provide incentives when a given percentage of units in a new housing development be affordable by people with low to moderate incomes. Such housing is known as inclusionary housing. The term inclusionary zoning indicates that these ordinances seek to counter exclusionary zoning practices, which exclude low-cost housing from a municipality through the zoning code. (For example, single-family zoning makes it illegal to build multi-family apartment buildings.) Non-profit affordable housing developers build 100% of their units as affordable, but need significant taxpayer subsidies for this model to work. Inclusionary zoning allows municipalities to have new affordable housing constructed without taxpayer subsidies.^[1] In order to encourage for-profit developers to build projects that include affordable units, cities often allow developers to build more total units (a "density bonus") than their zoning laws currently allow so that there will be enough profit generating market-rate units to offset the losses from the below market-rate units and still allow the project to be financially feasible.^[1] Inclusionary zoning can be mandatory or voluntary, though the great majority of units have been built as a result of mandatory programmes.^[1][2] There are variations among the set-aside requirements (percentage of units set-aside for low-income residents), affordability levels (what income level is considered "low-income"), and length of time the unit is deed-restricted as affordable housing.^[1]

In practice, these policies involve placing deed restrictions on 10–30% of new houses or apartments in order to make the cost of the housing affordable to lower-income households. The mix of "affordable housing" and "market-rate" housing in the same neighborhood is seen as beneficial by city planners and sociologists.^[3] Another goal of inclusionary zoning is to build mixed-income communities, rather than having poor households concentrated in specific city neighborhoods.^[1] Economists state that IZ functions as a price control on a percentage of units and has similar negative effects as other price controls (rent control) being that it discourages the supply of new housing.^[4] It can also be understood similar to impact fees as an "inclusionary tax" on market-rate units which raises the prices of new non-price-controlled units in that development and thereby diminishes the financial incentive to create new housing.^[4]

Most inclusionary zoning is enacted at the municipal or county level; when imposed by the state, as in Massachusetts, it has been argued that such laws usurp local control. In such cases, developers can use inclusionary zoning to avoid certain aspects of local zoning laws.