Inclusionary Housing (Zoning)

Designed as a local regulatory tool, inclusionary housing (zoning) requires developers to include a number of affordable homes in new residential developments over a certain size. The number of affordable units to be included in the new developments is based on a percentage of the total number of units in the development (generally 12% - 15%). The cost of providing the affordable units is offset with a density bonus. The affordability level of the designated units can target one income group, such as households earning 50% of the median income, or may serve a range of incomes. Additionally, the resale price of the affordable units is restricted for a number of years. 

Highlights

  • Must be enacted through local ordinance.
  • Applies to new residential developments at and above a certain size (i.e., 50 units or more).
  • Cost of developing the affordable units is generally offset with a density bonus.
  • Affordable units may target particular income groups or serve a range of incomes.
  • Price controls are set for a number of years (e.g., 20—30 years).

In Practice

Montgomery County, Maryland. Enacted in 1974, the county’s Moderate Priced Dwelling Unit (MPDU) Ordinance requires developers of projects of 20 or more units to make 12.5% to 15% of the new units affordable to lower income households. In exchange for the affordable units, developers are granted a 22% density bonus. Since the inception of the ordinance in 1976, more than 11,800 affordable units have been developed.

Madison, Wisconsin. Adopted in January 2004, the Inclusionary Zoning Ordinance (IZ) requires 15% of the dwelling units within new residential projects to be affordable to households at certain income levels. The program was expected to create approximately 200-300 affordable units per year. During the first year of the program, sixteen projects were reviewed and approved and 311 or 15.7% were affordable.

San Diego, California. When San Diego wanted to increase the supply of affordable housing in their city, they adopted two new inclusionary housing programs to help. The first policy, in the “North City Future Urbanizing Area” (NCFUA) had twenty percent of all new units set aside at prices affordable for families making 65 percent or less of the city’s area median income (AMI). By early 2004, more than 400 affordable homes have been built under this program. The second program was applied to the rest of the City of San Diego. Under this policy, where there were two or more homes, ten percent of the units of every new housing development had to be affordable to lower income families.

 
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