Inclusionary Zoning: A Key Tool in the Search for Workable Affordable Housing Programs

By Rusk, David | Public Management, April 2006 | Go to article overview

Inclusionary Zoning: A Key Tool in the Search for Workable Affordable Housing Programs


Rusk, David, Public Management


Local governments in the country are experiencing an imbalance between housing need and housing supply. Recently, the rise in housing prices has spiked that gap and created serious problems for local governments and their moderate income citizens.

A PIONEER RESPONDS

In the late 1960s, Montgomery County, Maryland, a suburb of Washington, D.C., was faced with dramatic and rapid growth, increased housing costs and a lack of housing available to essential community workers, including teachers, firemen, nurses, retail, and office workers. These vital employees were commuting long distances from other counties (and even other states) to get to their jobs in Montgomery County, and construction workers were camping out in county parks. At the same time, older and substandard communities were being demolished to make way for the growing suburbia, displacing longtime, low-income citizens.

Montgomery County's response provides a model others can emulate. More than 135 communities already have followed that county's lead. In 1974, thanks to the work of a community coalition including area religious congregations, the League of Women Voters, and other "good government" groups, the county council adopted an inclusionary zoning (IZ) ordinance that has, to date, created more than 12,000 moderately priced dwelling units (MPDUs) as integral parts of market rate developments. In the years since, more than 135 communities already have followed Montgomery County's lead.

IZ ... WHAT IS IT?

Inclusionary zoning relies on the production of housing by private industry. It requires developers to produce a percentage of "affordable" housing units along with the development of market rate units. The local government sets income limits (income targeting) and price limits for the inclusionary units. Developers are provided a density bonus and/or other benefits to offset the cost of development of the IZ units.

For example, if the IZ law requires an IZ "set-aside" of 15 percent but provides a 20 percent density bonus, the developer would be automatically allowed to construct 120 units on a site normally zoned for a maximum of 100 market rate units; 15 percent of those 120 units (18 units) must be affordable, but 102 units are market rate, so the developer gets two extra market rate units.

The density bonus, in effect, provides free land for both the IZ units (significantly lowering their cost) and for the bonus market rate units (significantly enhancing their profitability). Resale and rent control periods are part of most programs. There is usually a period of time specified for affordability (control period). Usually local government has an administrative system to ensure compliance.

TAILORING IZ LAWS TO FIT LOCAL CONDITIONS

Each community tailors its ordinance to its own housing needs and building industry conditions. The key issues for a community to determine are minimum project size, percentage of units required (set-aside of affordable units), income ceiling for eligible households, size of the density bonus and other cost-offsets, and the length of the control period. To be effective, IZ laws must be mandatory, not voluntary. In virtually all instances where the ordinance is voluntary, IZ units don't get built.

Among existing programs, inclusionary requirements are triggered for housing developments as low as a minimum of five units to as large as a minimum of 50 units. (Montgomery County started with 50 units and recently amended the ordinance to 25.) Almost three-quarters of the communities with IZ programs require setting aside between 10 and 15 percent of the total units in the IZ development as affordable.

Minimum eligible income ceilings range from 30 percent area median income (AMI) to as high as 120 percent AMI. Many communities with IZ ordinances apportion affordable units among different income levels (for example, 25 percent for households at less than 50 percent AMI, 50 percent for between 51 percent and 80 percent AMI and 25 percent between 81 percent and 120 percent AMI). …

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