Overview

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Frazer Court mixed-income development in Redmond, Wash.

Inclusionary housing policies link market rate development to the creation of homes that are affordable for lower-income households. These policies, also referred to as inclusionary zoning, work through the local land use approvals process to either require or offer incentives for developers to make a share (generally 10 to 20 percent) of housing units available to low- or moderate-income households.

Inclusionary housing policies are an increasingly popular tool in strong housing markets for leveraging growth for affordability and broadly dispersing affordable homes. In an era of static or declining federal and state funding for affordable housing, localities have also found inclusionary housing appealing because it leads to the creation of homes affordable for lower-income households with less or no need for public subsidy.

How it works

Inclusionary housing policies are usually implemented as mandatory requirements, accompanied by various forms of regulatory relief or subsidies to help offset the costs of pricing units so that lower-income households can afford them.

Most inclusionary housing policies are part of the zoning code. But some inclusionary housing policies operate outside of a zoning ordinance—for example, in the general land use plan or through a neighborhood plan.

Policies are usually tailored to address local housing needs and market conditions, but follow a similar structure. Inclusionary housing policies commonly specify:

  • whether participation is mandatory or voluntary;
  • the geographic scope of the policy;
  • the types of developments subject to the policy (e.g., rental housing, for-sale housing, commercial developments);
  • the size of developments subject to the policy (e.g., 10 units or more);
  • the share of units to be made affordable;
  • the incomes served by the affordable units;
  • the required affordability duration;
  • whether density bonuses or other cost-reducing benefits are offered;
  • the availability of alternative compliance options, such as building the affordable units off-site, paying a fee, dedicating land); and
  • the process for appealing for a waiver.

Inclusionary housing is often best at helping to address the affordability needs of low- to middle-income households (e.g., 61 to 100 percent of median income) who earn too much to qualify for typical federal housing programs but are facing high cost burdens. Only with the help of substantial public subsidies are programs generally able to generate housing for extremely low-income families (30 percent or less of median income).

Where it works

Inclusionary housing policies have been adopted in nearly 500 jurisdictions and 28 states, including most coastal states and a growing number of localities in the Rocky Mountain West and the South. To date, inclusionary housing is estimated to have produced roughly 150,000 affordable housing units nationwide.

Recent research has found that inclusionary housing policies do a significantly better job of connecting lower-income households to better neighborhoods than federal housing programs. A 2012 RAND study found that 76 percent of homes created through the inclusionary housing programs studied were located in dispersed, low-poverty neighborhoods. Inclusionary housing units were four to six times more likely to be located in low-poverty school districts than affordable housing opportunities created through the Low-Income Housing Tax Credit and Housing Choice Voucher Programs.

Inclusionary housing policies work best in strong housing markets where new market rate housing development is occurring or projected to occur. If a community is experiencing little growth or new development, adoption of an inclusionary zoning policy will not result in the creation of many new affordable homes. However, communities that anticipate future growth may wish to begin the process of designing an inclusionary zoning policy that can be implemented when the market picks up. This can include policies for weak market or emerging neighborhoods within strong, high-cost cities and suburbs.

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Source: NHC’s Center for Housing Policy, 2015.

Policy and Program Tools

Resources

Research and WebTools

Organizations

  • Cornerstone Partnership
    A leading adviser on designing and implementing inclusionary housing programs, offering direct technical assistance, webinars and other resources.
  • Innovative Housing Institute
    An experienced nonprofit with an active board of national experts that provide technical assistance in planning for and implementing inclusionary housing.
  • NYU Furman Center
    Joint center of the New York University School of Law and the Robert F. Wagner Graduate School of Public Service providing academic and empirical research on a wide range of housing issues, including inclusionary housing.