As communities across the country grapple with rising housing costs, local leaders are looking for ways to expand the supply of housing that is affordable to lower- and moderate-income households. Inclusionary housing or inclusionary zoning is often discussed as a key tool for expanding housing options.
At a high level, inclusionary housing policies link the production of affordable homes to new market-rate residential development. A local community requires or incentivizes a developer to make a share of the homes in a new development affordable to households at specified income levels. In return, developers may receive benefits such as additional density, reduced development requirements, or a streamlined approval process.
The basic concept is straightforward. But the details get complicated quickly.
Inclusionary housing programs can vary considerably from place to place depending on market conditions, housing needs, and state enabling authority. Some inclusionary housing policies are mandatory, while others are voluntary and incentive-based. Communities also make different choices about how many affordable units should be provided, what income levels should be served, how long homes should remain affordable, and whether developers can meet their obligations through alternatives such as off-site units or contributions to an affordable housing fund.
Inclusionary housing programs have been implemented in a remarkably diverse set of communities, from major cities and high-cost resort areas to suburbs and smaller communities. But the most important lesson from best practices around the country is that the specific policy adopted by a local community needs to reflect local market conditions and needs.
A requirement that works in a strong, high-cost market will not work in a community where rents or home prices cannot support the additional development cost. Likewise, a program that produces housing for moderate-income households may not address a community’s greatest needs if homelessness is its most significant housing concern.
Inclusionary housing is therefore best viewed as one part of a broader local housing strategy and not a silver bullet. When designed around local market conditions and combined with other housing tools, however, it can help communities capture some of the value created by new development and translate it into expanded housing opportunities.
