Inclusionary Zoning: What’s Lost and What’s Gained?

The Furman Center released a big report yesterday about how inclusionary zoning affects prices and development. In other words, the report looked into whether incentivizing the creation of affordable housing puts an undue strain on developers, forcing them to raise prices for market-rate units or scrap would-be projects. The study focused on how inclusionary zoning has worked in San Francisco, D.C., and suburban Boston areas, and it more or less concluded that it does not sink development or cause unnatural price hikes. “Our analysis refutes the ‘sky-is-falling’ cries from IZ opponents; we find no evidence that IZ programs have reduced housing production in the San Francisco area, and find evidence of only slight effects on production in the Boston area,” said Vicki Been, Director of the Furman Center, in a statement. “However, we found that IZ policies have produced only a modest number of affordable housing units, suggesting that IZ by itself is not a panacea for a community’s affordable housing challenges.” Indeed, the current practice of simply requiring a small percentage of affordable housing in an otherwise market-rate development—which is one of the main ways New York City is addressing its affordability crisis—is something, but it’s hardly everything.
Report on the Impact of Inclusionary Zoning Programs [Furman Center]
Photo by Housing Here and Now.

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  • Typical BS study. They looked at S.F., Boston and D.C. during the biggest housing bubble in history (in cities that exploded the most) and conclude that the program has little effect on investment and housing creation.
    Lets see the same study after a protracted downturn

  • Unfortunately, what has become evident in the case of Williamsburg, granting zoning bonuses as part of an inclusionary zoning deal has resulted in the developers NOT building the affordable housing.

  • Governments shouldn’t support programs that provide affordable housing for a small percentage of a populous while the rest of the populous is forced to pay market prices. Why favor one citizen over another. A person making $40,000 must pay full price while anther making $60,000 gets an apartment below market price. WHY!!! These programs are just like corporate welfare but on a smaller scale. Instead of giving some a cheaper rent the government should spend less money and LOWER EVERYONE’S TAXES!!! That’s how you make it easier on EVERYONE!!! Our taxes are way out of control!!! We pay more in city and state taxes than anyone else. We have all of these brilliant minds in NYC and we can’t figure out how to run a government on fewer dollars per capita than any of the other states – not one!! Scrap these government programs that only help a select few and help everyone else by LOWERING OUR TAXES!! Make NY affordable by putting more money in our pockets.

  • 10:04 Grover? Grover Norquist? Is that you?

  • whaddya mean – many of the new luxury condos in 11211 are blighted by “affordable housing” components

    eg northside towers, the edge

  • One big question is how these developments are displacing existing affordable housing in the area. (i.e. rent control). I don’t see this study addressing that.

  • As always, there is no free lunch. The discount given to the occupant of one “affordable home” is a premium added to the price of another.

    The free market handles real estate better than any other mechanism. Government intrusion is almost always disastrous.

    Meanwhile, the best way to ease real estate expenses for people with less is to increase the number of people in NY City with more.

    Waterfront property should sell as waterfront property always does when government gets out of the way. For a big premium.

    When residents pay market prices for the best real estate, more property tax revenue flows to the city, which is then able to open the door to development and upgrading of less desirable areas.

  • bloody socialism. gov’t should not be messing around with the market.

  • bloody socialism. gov’t should not be messing around with the market.

  • 11:17 Amen. Why I was down in Bear Stearns the other day and there was one of those corporate welfare brokerage kings driving a brand new Beamer he bought with his check from the government bailout. I say make these lazy corporate bucks get a real job. Maybe bookmaking. That’s honest work–at least with bookies if their bets don’t pan out, they lose money.

  • Let’s not forget the most important fact regarding real estate regulation in NYC.

    The NIMBY types are a small minority that provides the veneer of popular support for oppressive laws. The politicians however are bankrolled by the rich development families. They want to keep the barrier to entry high and the vacancy rates forever low so that demand will always be astronomical and THEY will reap the rewards of THE lowest risk and highest reward investment game in town.

  • Most of the above comments seem to be directed at affordable housing subsidy programs in general. One point that I think is being missed here is that Inclusionary Zoning does not involve a government subsidy, at least a monetary, tax-payer funded one (in NYC, in fact, in most cases IZ projects are prohibited from using any form of government subsidy to fund their developments.)

    IZ basically allows a developer to build a little more floor area than would normally be allowed by zoning (typically 20% more in certain zones) so long as a portion of the extra units are set aside for low-income people (typically folks earning 80% or less of the area median income – that is, about $62k/yr for a family of 4, $43k/yr for a single person.) IZ is unique among affordable housing programs in that it can incentivize construction of affordable units with no tax-payer funded subsidy.

  • Minneapolis and Minnesota has a similar requirement for rental buildings and it has not deterred development downtown for new apartment buildings. On the contrary, downtown and urban Minneapolis saw a huge revival that wasn’t just about the bubble but about people hating the heinous commuter traffic and wanting to live near their offices. Just a portion of apartments in the buildings have to be section-8 housing and the management gets to decide who they accept.

    But no program should aim to be a “panacea”. This is not a communist country. The way to afford a nice home is to actually care about getting an education which too much of the low income communities do NOT, they just don’t give a crap. And then to work hard and earn that house. Education education education. It’s the answer. Money better spent ultimately would be for college scholarships for low income people. And free Vo-Tech colleges for people to get their Associates Degree and a certificate in some kind of specialized field. Also health initiatives to get people to eat better. Studies prove low income kids who eat junk food and crap are unable to concentrate in school. Go to the root of the problems. No more band-aid solutions that are designed only to get votes for politicians.

  • 2:31, excellent points. I think it’s more effective to change the root of the problem and education is the key. More $ for schools helps, but the desire to learn and the self-discipline necessary to achieve long-term goals are paramount. That’s why so many poor immigrants and their children succeed in this country.

  • I thought that in land use law there has to be some nexus between the amenity and the effects of the project. Or does that only apply to mandatory extractions, and not to voluntarily-sought bonuses? In some Manhattan zoning districts, you can get a density bonus for providing public open space, on the theory that the open space offsets the impact of the additional density. How does limiting the price of the residential units justify allowing more floor area? Even if it’s not a matter of law, it seems that if 6 FAR is the right density for a site, given transit access, surrouding context, etc., why does 8 FAR become OK based on how the units are priced?

  • 2:31, in some cases, education is as important as you emphasize. You might consider starting with your own. You are clearly ignorant to the many variables associated with people within the category of low-income.

    This world is made up of all kinds of people. Some folks are content simply working a low paying job (and we need these people, think of the range of necessary employment positions). Some folks are not cut out for school. Some folks have too much going on to even consider all of the things that are involved with furthering their education. Some can’t even imagine that more education is an option.

    What this nation needs, is housing, for all income levels, that is affordable (historically 20-35% of income). This housing need not be equal in amenities; amenities should be reflected in the cost of the housing. But decent, safe, and sanitary housing that is affordable should be supplied for all. If the market is not supplying for all levels of income, it is a problem; and this is when the government should step in. And this particular problem is one of the reasons the government did step in in the 1930s, and created public housing. Unfortunately, currently and for the past 10+ years, public housing from the U.S. government is no longer developed, it is only destroyed.

    As of 1999 decennial census data, 19% of US households who rent spent more than 50% of their income for housing, and 13% spent between 35% and 49% of their income for housing. Is the share of your income for housing in this range? Probably not. Imagine how your lifestyle would need to change if you had to fork over half of your pay for rent/mortgage. This is why there is such effort and outcry associated with this particular topic.

  • 9:53 sounds great – I actually think we all should get free housing, but since I live in the real world and understand that affordable housing for all is not possible (because of the gross lack of supply which is driven by NIMBYs, overregulation by our governments, the cost of construction materials, cost of labor, cost of land, and an employers cost of insurance, workman’s comp, unemployment insurance, health insurance etc) I won’t sit around waiting for the government to help me out.
    Instead, I’ll continue to work 70 hrs a week to provide for my family. Even though the government will take 44% of my income in taxes and give it people who watch Jenny Jones reruns all day – hard work is still the key to my success.
    PS – the projects have been a HUGE FAILURE!!! I’m grateful the government is demolishing them in other cities and I hope and pray, for everyone’s sake, that we demolish the ones in NYC as well. Concentrating poverty into any neighborhood has proven to lead to it’s demise.

  • 12:40, bravo for your decisions to have a family and work 70 hours to provide for them. I believe you too should have access to affordable housing, and if the market wasn’t providing that for you, I would have the same argument.

    PS – Your opinion that public housing has been a huge failure is based on a few select projects of the high-rise variety. This failure is mainly because of policy that had resulted in a lack of maintenance and security.

    Please give an example of where efforts toward de-concentrating poverty have resulted in environments that can be described as a success.

  • The greed and selfishness of some of the bloggers on here is pathetic. Poor people deserve a roof over their heads just as much as rich people do. Would you deny food to them as well? Affordable housing should be a priority in any area, especially Brooklyn! How many poor and minority people were pushed out of Brooklyn areas because of so called “Gentrification”, which is basically just the well off stomping over the less fortunate? The current real estate crisis is a godsend, because we are now seeing this gentrification nonsense slowing to a standstill, and even starting to reverse. If the government finally does its job and begins to bail out and help the less fortunate among us, we will see the true meaning and promise of what America is supposed to be all about. Brooklyn should be a place where people of all colors, backgrounds and economic levels have a place to call home, not just the big income earners who come here to save a buck on Manhattan prices.

  • As originally conceived, inclusionary zoning coupled the requirement for building cheaper, price-fixed housing with density bonuses. Whatever the effect that requirement had on builder decisions, they at least had the same number of units to sell at market rate. That original concept vanished in many jurisdictions over the years. Instead, building on one’s property became conditioned on the exaction of a certain percentage of the units that the property was zoned for being set aside in government fixed prices.

    Assuming that those receiving the subsidy of government housing exactions weren’t among the potential buyers for the market rate housing (wasn’t that it’s rational?), what inclusionary ordinances do is take the existing supply of market rate housing and decrease it by the inclusionary percentage. When supply is reduced, demand must also be reduced in order to reach market equilibrium. That is done through rising prices, essentially pricing that percentage of people out of the market.

    The way to make housing affordable is to simply make sure that enough is built to keep the price in line with people’s incomes. Yet the same liberals who support inclusionary ordinances support the anti-development ideologies and environmental laws that limit the supply as well as the massive development fees that have shown up in many places over the last. Worse yet many also support mass immigration including being against enforcing immigration laws, which constitutes the driving force behind the majority of the country’s population growth. Without population growth the supply issue becomes easy to manage as existing housing meets most of the demand.

    Nowhere are these conflicting and destructive ideologies of the left more prevalent than on college campuses where tenured professors protected from any market spin out rationalizations of their own belief systems under the guise of academics.