Inclusionary Zoning

Inclusionary zoning — a policy that requires or encourages developers to set aside a fraction of newly constructed housing units to be affordable to lower-income households — is an affordable housing tool used to advance racial and economic equity by hundreds of jurisdictions nationwide as they support residential growth and development. The broader purpose of the tool is to address historic patterns of exclusion and racial segregation. Inclusionary housing units are primarily rentals and part of multifamily developments, but can also be for low-income ownership, typically with  “shared appreciation” resale restrictions that cap price appreciation to maintain affordability while ensuring the owner can build wealth.

Inclusionary zoning counters historic patterns of exclusion and segregation by ensuring that housing is available for lower-wage workers (who are predominantly people of color); guarding against concentrations of poverty and affluence; and making it possible for lower-income households to live in neighborhoods with access to quality jobs, well-resourced schools, transit options, services, and fresh food grocers. Typically, a city or county will adopt an inclusionary zoning ordinance to both add more affordable homes to its inventory and ensure that lower-income households can live in neighborhoods that have been well-resourced and invested in by the public and private sectors — where they would otherwise be priced out, and in neighborhoods where housing supply is increasing. Inclusionary zoning policies may also minimize adverse effects of gentrification such as displacement of families with low incomes. 

In California alone, more than 170 jurisdictions have implemented inclusionary zoning policies resulting in the addition of an estimated 30,000 newly constructed affordable homes in higher-opportunity neighborhoods in California since 1999 — bringing the total number of Californians living in housing produced as a result of inclusionary programs to 80,000. Inclusionary zoning can help reduce racially concentrated areas of poverty, which tend to negatively impact residential health, educational achievement, and economic mobility. 

Check out Grounded Solutions Network, the Urban Institute, County Health Rankings & Roadmaps, the U.S. Department of Housing and Urban Development, and the Joint Center for Housing Studies at Harvard University for more resources on inclusionary zoning.

• Elected and appointed state and city officials can propose and pass inclusionary-zoning land-use ordinances.
   
• Business leaders, particularly equity-oriented developers, can broadcast support for inclusionary zoning as a critical policy to stabilize neighborhoods.
   
• Community-based organizations and other advocates can build grass-roots coalitions around housing affordability, incorporating inclusionary zoning as a key measure to protect against gentrification and maintain access as opportunity investments change neighborhoods.
   
• U.S. Department of Housing and Urban Development (HUD) has launched the Pathways to Removing Obstacles to Housing (PRO Housing) program to support communities who are actively taking steps to remove barriers to housing, including barriers caused by outdated zoning, land use policies, or regulations. Through the program, HUD seeks to provide grants totaling $85 million to twenty jurisdictions. The grants are eligible to state, county, and city or township governments, as well as Metropolitan Planning Organizations and multijurisdictional entities. The 2023 Notice of Funding Opportunity (NOFO) has a deadline of October 30, 2023. 

Jurisdictions seeking to implement inclusionary zoning must consider a range of related legal and logistical questions.

• Program design: Cities and counties must decide on many different factors when designing their inclusionary zoning ordinance. For example, what types of buildings will the ordinance apply to (5+ unit buildings or 20+ unit buildings)? What percentage of units must be affordable? Who are the units affordable to (30% AMI or 60% AMI)? Will development fees, land donations or off-site developments be accepted in lieu of on-site affordable development? Will the inclusionary zoning requirements change as neighborhoods and the housing market change? Robust local market research will help inform these important decisions.
   
• Equitable zoning reform: As jurisdictions seek to reverse the harms of exclusionary zoning policies, it is important to consider that undoing the harms of strict zoning laws (i.e., single-family zoning) requires more than simply upzoning. Inclusionary zoning policies can emerge from efforts to increase density and housing supply. In doing so, jurisdictions should consider these principles for equitable zoning reform from our partners at the Alliance for Housing Justice. These principles include focusing on exclusionary areas, prioritizing deeply affordable housing, ensuring equitable access to funds, and more. 
   
• Incentives for Developers: In order to promote adoption of these policies, municipalities may offer density bonuses, decreased parking requirements, expedited permits and approvals, relaxed design standards, fee waivers. Policymakers have the option to make certain provisions or the entire policy mandatory for certain neighborhoods or districts and may apply to the city writ large.
   
• Nexus requirements: Federal and state laws require that inclusionary zoning policies requiring land or in-lieu fees for affordable housing justify the inclusionary zoning requirements by demonstrating the impact of new market-rate housing developments on the demand for affordable housing in an area. Developers may waive this component by entering into an agreement with a city or jurisdiction to include affordable housing in a project.
   
• Preemption: In some states legislatures and governors have used preemption to prevent cities and localities from implementing inclusionary zoning of their own will. The National League of Cities has a report on preemption and inclusionary zoning that can be found here.
   
• Voluntary versus mandatory: Communities implementing inclusionary zoning must choose between voluntary and mandatory programs. Generally speaking, mandatory inclusionary zoning is more effective at producing affordable housing, particularly for low- and moderate-income households. However, every jurisdiction must balance incentives that encourage developers to choose to build affordable units with mandates for affordability to maximize affordable housing production without undermining development altogether.
   
• Consideration of other benefits: Affordable housing is critical, but is far from the only public benefit resulting from well-crafted land-use policies. Inclusionary zoning can be paired with other land-use strategies to drive resources toward improving schools, public parks, libraries, emergency services, complete streetscapes, and other opportunity infrastructure.
   
• Maintaining long-term affordability: In urban areas where land values are only projected to increase in the coming decades, it is essential to think beyond the initial phase of affordability. For example, creating affordability covenants can help stabilize long-term affordability. Another approach is having the affordable units administered by a community land trust in which a nonprofit owns the land for the permanent benefit of low-income households.
   
• Cost considerations: Inclusionary zoning requirements can potentially generate revenue with in-lieu fees, and be relatively seamlessly integrated into a jurisdiction’s existing land use and zoning policies. While public coffers are not directly implicated, private developers do have to address higher production costs, which can result in higher consumer prices and reductions in the size of affordable housing units.

Inclusionary zoning policies have been implemented in more than 400 jurisdictions nationwide.

• In 2021, the City of New Orleans enacted a mandatory inclusionary zoning ordinance. The law sets forth a 99-year affordability period, the number of affordable units required, affordable housing design standards, density bonuses, and offers developers the opportunity to provide payment in-lieu fees when they do not want to construct the affordable units.
   
• In March 2016 New York City made the switch from voluntary to mandatory inclusionary zoning. The voluntary program has helped to create nearly 7,000 affordable units, dating back to 1987. The new mandatory program would require 20 to 30 percent of all new units to be set aside for affordability as part of the city’s plan to preserve or produce 200,000 affordable units over ten years.
   
• In 2017, Newark, New Jersey adopted an inclusionary zoning law requiring projects of 30 units or more to set aside 20 percent of their units for tenants earning up to 40 percent, 60 percent, and 80 percent of the area median income. Although the law only went into effect in 2019, over 920 housing units priced at reduced rates were in the development pipeline by July of that year. Local housing advocates note that the policy remains crucial in preventing the displacement of poor communities of color. In March 2022, Mayor Baraka introduced amendments to strengthen inclusionary zoning, including ensuring that developments of 15 units or more are covered, extending the period over which units must remain affordable from 30 to 50 years, and requiring each development to pay a $2,000 fee to finance enforcement of the ordinance. 
   
• Washington, D.C.’s inclusionary zoning policy went into effect in 2011 and requires that residential developments with ten or more units designate 8 to 10 percent of project square footage to affordable housing. These units must be priced at or below 80 percent of the area’s median for-sale unit price. While the policy initially failed to generate affordable units due to a series of developer lawsuits, it eventually led to the development of more than 580 affordable units in some of the city’s most expensive neighborhoods from 2016 to 2018 alone. 
   
• Montgomery County, Maryland is home to the oldest continuously operating inclusionary zoning program. Begun in 1974 to address the need for workforce housing, the policy requires housing developers to set aside 12 percent of new homes at below-market rates and allow the public housing authority to purchase a portion of these units. In 2018, the county began to require developers to set aside at least 15 percent of homes in affluent neighborhoods. The policy has generated over 13,000 affordable housing units evenly distributed throughout the district and has resulted in thousands of low-income children attending low-poverty schools in their neighborhoods.  Evaluations find that the students who attend these schools show significant improvements in school achievement compared to their counterparts in moderate-to-high-poverty schools, demonstrating the principle that good housing policy is good school policy.
   
• San Francisco originally passed its inclusionary zoning program in 1992, which required every new market-rate development of 10 or more units to do one of the following: include a certain amount of affordable units on-site, build the required units off-site, pay a fee to build affordable housing elsewhere, or donate land to fulfill the requirement. In 2016, voters passed a measure that would increase the on-site inclusionary zoning set aside for affordable units from 12 percent to 25 percent, the highest in the nation. Since 1992, the city’s inclusionary zoning program has created over 3,800 new affordable housing units.