Communities considering the adoption of an inclusionary housing program balance the goal of creating affordable units against the potential that onerous set-aside requirements will cool the housing market and slow home construction. Typically, programs require that between 10 and 20 percent of units be set aside for low- and moderate-income households, depending on the strength of the market. Getting the balance right is often a difficult process, and one that is aided by inviting feedback from a broad array of stakeholders, including builders and developers, as well as advocates, when creating or modifying the regulations.

Programs vary widely in the income level at which below market units are targeted. Most inclusionary housing programs serve families earning 50 to 120 percent of area median income (AMI), targeting the lower end of the income spectrum with new rental units and higher-income households with homeowner units.

In recent years, programs have begun adding flexibility into their affordability requirements, allowing developers to select from a menu of affordability targets. For instance, a program that normally asks a developer to make 15 percent of total units affordable for households at 80 percent of AMI might also allow the developer to meet their obligation by making a smaller share of apartments affordable for households at 50 percent of AMI, or a greater share affordable at 100 percent of AMI.

Case Studies

Affordable Housing Production Program (Santa Monica, Calif.)

Santa Monica’s Affordable Housing Production Program (AHPP) is a mandatory inclusionary housing program adopted in 1998. The program employs a variable affordability requirement for rental properties, depending on the income bracket served. If the affordable units are priced for low-income households (earning 80 percent of AMI), 20 percent must be affordable. The affordability percentage drops to 10 percent if units are priced for very low-income households (earning 50 percent of AMI), and to five percent if units are affordable for extremely low-income households (earning 30 percent of AMI). To date, the program has generated approximately 1,000 affordable apartments. Developers frequently choose the option of providing fewer units at a deeper level of affordability.

For More Info:

Jim Kemper, City of Santa Monica Housing and Economic Development
Email: [email protected]