Inclusionary Zoning Background and Examples

History and National Case Studies

The first inclusionary zoning policy was drafted in 1971 by Fairfax County, Virginia. Though struck down by the state courts as unconstitutional, its principles resurfaced in subsequent policies that were upheld in other parts of the country. In 1974, Montgomery County, Maryland enacted the first legally defensible IZ policy. Today more than 200 localities have similar statutes. Inclusionary zoning ordinances can be applied at the local, county and state levels. California has statewide legislation that applies to all redevelopment areas requiring private developers to set-aside fifteen percent and public agencies to set-aside thirty percent of units for affordable housing. Nearly every municipality in New Jersey has an inclusionary zoning ordinance due to the state's Supreme Court ruling that all municipalities have a constitutional obligation to provide a fair share of current and prospective housing needs to low and moderate income families. In Minnesota, the state legislature created a voluntary inclusionary zoning program which provides developers gap financing and regulatory relief if ten to fifteen percent of units are set-aside as affordable to low income households. According to building permit calculations by the Campaign for Sensible Growth, if in 1974 the Chicago region had instituted the same policy as Montgomery County to only half of its new structures, 136,000 units would have been created by 1999. In Chicago alone, 19,675 would have been created.

Much of the research on IZ analyzes the variations between policies in terms of both variables and impacts. All these policies share the same objective: to set-aside a proportion of housing units as affordable for a specific income group. Likewise, the over-arching goals of inclusionary zoning policies are typically similar in that they strive to preserve and improve the availability of affordable housing and encourage mixed-income communities. Finally, the impetus for most IZ policy formation is driven by either market conditions or exclusionary zoning regulations discouraging the development of affordable housing. Beyond these similarities, inclusionary zoning polices typically break down into many components with many variations. Adding to this complexity is the tendency for an ordinance to define a single variable in multiple ways. For example, the IZ policy in Cambridge, Massachusetts defines the affordable unit set-aside requirement as either 15 percent of units or 15 percent of square footage.

The key variables to be determined in an inclusionary zoning policy include:

1. Set-aside: the percent of the development that will be affordable.
2. Development size threshold: the triggering point at which the ordinance is required, typically the number of units in a development.
3. Type of development: new, rehab, for-rent, for-sale, multi-unit, subdivision, conversion, etc.
4. Income targeting: defines the income group the units will be affordable. For example: the units created through IZ will be made available to only those that earn 30-50% of the Area Median Income.
5. Developer incentives: mechanisms that help off-set lost income to the developer, including density bonuses, tax breaks, fee waivers, etc.
6. Alternatives to meeting the set-aside requirement: fee-in-lieu, off-site development, etc.
7. Voluntary vs. mandatory: whether or not the set-asides are optional or mandatory for projects meeting the development threshold
8. Affordability control periods: length of time the units must remain affordable

Reviewing specific case studies can be helpful to understanding how inclusionary zoning can be implemented. More detailed information on the case studies is available at the end of this report.

• Denver's 2002 inclusionary zoning policy provides a good example of the flexibility possible within such an ordinance.
• Localities vary in how they approach the process of establishing an inclusionary zoning ordinance; however a typical process includes a committee, task force, or interest group that organizes to support an inclusionary zoning policy to fulfill established goals. Baltimore went through a well-documented process to establish an inclusionary zoning ordinance.
• Given the complexity of local growth patterns, inclusionary zoning shows different results in different places. In fact, many cities, including San Francisco, enact an ordinance that is later deemed ineffective due to its guidelines.
• Boston adopted an inclusionary zoning ordinance in 2000, but a fee-in-lieu of option has limited the amount of affordable housing constructed
• The St. Cloud area's inclusionary zoning policy turned out to be less successful than others. Due to changing market conditions and insufficient public and private grant funding St. Cloud's inclusionary zoning policy was terminated in 2007 until the market is deemed more appropriate for such a policy.