Inclusionary Zoning No Cure for Exclusionary Zoning

A review of new research from Byan Graveline examines the impact of inclusionary housing/inclusionary zoning  (IH/IZ) on affordability and residential segregation. It finds IZ to be a poor tool to make progress on either issue.

According to City Observatory, both housing unaffordability and residential segregation are caused largely by exclusionary zoning, like single-family zoning and minimum lot sizes. However, despite its name, inclusionary zoning does not undo exclusionary zoning. Rather, it asks developers to set aside a percentage of units in each new development to be affordable to low-income renters.

While this policy may sound agreeable at first blush, the report finds that inclusionary zoning does not meaningfully address either of the problems it tries to solve and can actually worsen the housing affordability crisis. Graveline recommends that jurisdictions hoping to confront issues of housing affordability and residential segregation forgo inclusionary zoning and instead focus on repealing exclusionary zoning.

The report evaluates inclusionary zoning policies across four criteria:

1. Effect on the housing market. Inclusionary zoning increases the price of new market-rate housing and decreases its supply. And because would-be tenants of new buildings live in older buildings when new construction is constrained, inclusionary zoning affects all segments of the housing market.
   
   
2. Production of below-market-rate housing. Most inclusionary zoning programs create less than 100 affordable units per year. This is a drop in the bucket compared to the need for affordable housing in most cities.
   
   
3. Effect on residential segregation. This topic is understudied in the current literature, so it’s difficult to draw definitive conclusions. However, inclusionary zoning is only as effective at fighting segregation as the number of units it produces. Because it produces so few units, it likely does not have a meaningful effect on segregation.
   
   
4. Effect on exclusionary zoning. Inclusionary zoning does not undo exclusionary zoning. In fact, it can entrench current exclusionary policies. Many inclusionary programs try to coax developers into creating affordable units by offering to reduce costly exclusionary policies (such as density limits). Some jurisdictions thus enact strict exclusionary policies just to give themselves leverage over developers. 

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In Portland, Oregon, where the city government implemented inclusionary zoning in February of 2017, and leaders even in 2021 discuss the plan in rosy, optimistic terms, the largest daily newspaper in the state cites disastrous numbers and the potential for adding fuel to the fire of less affordability and increasing homelessness.