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Impacts of Inclusionary Zoning

A major component of inclusionary zoning research is evaluating its potential impacts on other land use, Transportation, and planning systems. While inclusionary zoning is likely to have a minor effect on a wide range of indicators, several of these are significantly impacted, including housing mix, income distribution, effects on minority and low-income groups, and Transportation. It should be noted that IZ is not a "one size fits all" strategy; various policies will produce different results in different places. For example, if the IZ policy allows developers to build the affordable units off-site or pay a fee in lieu of, then further income segregation could result if the units are built in solely low-income communities.

Inclusionary zoning stands to create the most benefit in areas with high growth rates, good access to transit and jobs, and little existing affordable housing. Under this circumstance, inclusionary zoning could produce a significant number of units, have a positive effect on increasing transit ridership, and bring people closer to work. While a more sophisticated analysis is required to accurately estimate the impacts of such IZ policies, it can be assumed that an IZ policy may not be appropriate for a city if it creates many affordable units where there are little to no transit or job opportunities. Furthermore, inclusionary zoning in communities with little to no anticipated household growth may not be able to produce a significant quantity of affordable units if the inclusionary zoning policy focuses only on new developments. Communities in ‘closed-in' locales may need to consider a wider variety of affordable housing production mechanisms.

Affordable Housing Distribution

Inclusionary Zoning should help low-income families find housing in communities from which they would otherwise be excluded, creating a positive impact on the housing mix and income distribution. However, the degree to which this occurs depends largely on income targeting. If all affordable units created through IZ were for those earning up to 60-80 percent of the median income, this policy could end up subsidizing housing solely for those of moderate income, leaving low-income families further behind. Municipalities that have a mix of targeting lower income and moderate income households will achieve a more equitable mix. Depending on the structure and thresholds of the income targeting of an inclusionary zoning policy, households at various income levels will be affected differently.


As noted above, a major objective of inclusionary zoning is to provide more affordable housing in less affordable communities. However, inclusionary zoning policies would not shift the distribution of affordable housing (thus income distribution) across the region appreciably. If a ten percent IZ policy were instituted region-wide, Cook County would still constitute the largest proportion of affordable housing in 2030. This is shown in Table 6.

Table 6. Distribution of Affordable Housing as a Proportion of Total Housing Units by County

  Share of Region's Housing Units in 2000 Share of Region's AFH in 2000 Share of Region's Households in 2030 Share of Region's AFH in 2030
Cook 70.60% 79.67% 62.53% 71.37%
DuPage 10.83% 4.98% 10.08% 4.88%
Kane 4.91% 4.54% 7.20% 6.81%
Lake 7.25% 4.97% 7.89% 5.75%
McHenry 2.23% 1.37% 4.12% 2.91%
Will 4.18% 4.47% 8.18% 8.29%


Also, as noted in previous sections, a tiered policy would more effectively distribute affordable housing units to municipalities who currently have the lowest affordable housing stock. The tiered IZ policy is nearly two times more effective at spatially distributing affordable units than applying a blanket 10-percent set-aside.

However, neither policy significantly closes the affordability gap between communities. The presented IZ examples would have to be coupled with other affordable housing policies to properly address equity between communities. Furthermore, while the spatial distribution of affordable housing may shift, an IZ policy would still have to carefully consider income thresholds to appreciably affect a more equitable mix of incomes across communities. It also important to note that IZ is primarily a homeownership tool and it does not typically address demand for affordable rental housing. Therefore, IZ policies should be coupled with other affordable housing strategies that address rental housing demands.

How effective do you think inclusionary zoning would be at improving the distribution of affordable housing throughout the region?

 

Transportation

A wide range of affordable housing alternatives across many communities is important not only for its inherent equity and quality-of-life implications, but also for access to employment. In the Chicago metropolitan region, many employment subcenters exist along commuter train lines in economically vibrant communities, which often price out the lowest income households. These circumstances are in line with national trends. (Lipman, 2006) As the job market has drastically changed in the past few decades with the decline in manufacturing jobs and the increase in low-wage service sector jobs, so has the spatial distribution of jobs. As a consequence many residents cannot afford to live near work. Increasingly, low and moderate income workers must move farther from their jobs, incurring greater commuter costs. A range of 12 to 15 miles from employment is where increased Transportation costs tend to outweigh decreased housing costs, according to a 2006 study by the Center for Housing Policy. (Lipman, 2006) In the region there is a clear imbalance in median income between communities with direct access to job centers and those that fall in or beyond this range. Inclusionary zoning could help remedy this imbalance by locating affordable units in job centers directly, or by integrating them into communities along train lines that could shorten commute times and preclude the need for a car. With proper targeting of the locations of affordable housing created by inclusionary zoning, the strategy could increase transit ridership, reduce vehicle miles traveled, and have other beneficial Transportation effects.

What effect would you expect that inclusionary zoning policies would have on the Transportation system? Would locating additional affordable units in high-growth areas improve or worsen congestion and Transportation choice regionally?

Land Use and Development

An inclusionary zoning policy does not directly dictate where a housing unit is built. IZ restricts the sale price of a unit but does not make any assumptions as to where the unit will be developed. Therefore, if a community were to adopt an inclusionary zoning policy in which development consists primarily of greenfields, then the units may contribute to this kind of development. However, since the units would be built regardless of an IZ policy, inclusionary zoning does not directly contribute to greenfield development. Other linkages between affordable housing and greenfield development have been drawn. A frequent component of an inclusionary zoning policy includes a density bonus which allows the developer to build additional market rate units than otherwise allowed to help make up for any loss in revenue from the affordable units; anti-sprawl advocates cite inclusionary zoning as a mechanism to promote denser development near the urban core and reduce greenfield development. As density bonuses increase the capacity of developments, they can decrease the need to develop on fringe land and preserve open space (PolicyLink).

Just as IZ can be tied to reducing development on greenfield land, it is linked to promoting infill development. Infill development in underutilized areas can save taxpayers and new residents money when construction occurs in places where public services exist and may be underutilized. (California Housing Roundtable) Additionally, higher-density developments allow for greater capacity in areas with existing infrastructures, limiting the costs associated with building new infrastructure, such as roads and water mains. It has also been recognized that lack of affordable housing in urban centers increases sprawl as developers and residents will look to the fringe for more affordable development opportunities. (Brunick, Goldberg and Levine) An inclusionary zoning policy can help deter this move to greenfield development by mandating affordable housing options in and near the urban core alongside market rate developments.

An example of an inclusionary zoning policy that is linked to limiting sprawl is in Montgomery County, Maryland. In 1964, ten years prior to its IZ ordinance, Montgomery County created a plan based on preserving open space and channeling new development into urban centers. (Joint Center for Housing Studies, 2002) Creating a strategy to ensure affordable housing became a necessary component of this desired development pattern. Montgomery County's IZ policy has brought the county recognition as having a well crafted growth management system.

Do you think that inclusionary zoning policies would be likely to increase or decrease growth in suburban or infill areas? What effect would inclusionary zoning policies have on growth in your community?

Economy and Property Value

Despite the common argument that affordable housing and inclusionary zoning reduces the value of properties neighboring affordable units, extensive empirical research and numerous studies have shown this belief is largely a myth. Studies have determined the impact of affordable housing on property values of neighboring market rate buildings and indicate nearly conclusively that affordable housing does not cause property values to decline. The California Housing Authority has conducted a series of studies on this relationship and found that 14 out of 15 cases of affordable housing developments resulted in either a slightly positive or negligible effect on neighboring property values. (McLean County Regional Planning Commission) One of the most thorough and cited studies on this relationship is published by the University of Wisconsin and shows that the only instance property value was affected adversely is when the affordable housing is located in a concentrated area of poverty. (Green, 2002) Evidence from this study has shown that when affordable rental housing is located in higher income neighborhoods, the impact is actually positive on property values.

A literature review of 17 studies shows that several factors influence the extent to which property values are lowered due to affordable housing, including design and management of affordable housing, compatibility between affordable housing and surrounding neighborhood, and concentration of affordable housing. (Nguyen, 2005) In the affluent Fairfax County, VA and Montgomery County, MD where inclusionary zoning has been enacted for several decades, a study tested whether subsidized housing causes the decline in value of non-subsidized housing. The study found proximity of subsidized housing made no difference in property values relative to the market as a whole. (Innovative Housing Institute) A local study of four very low-income family residential developments in suburban Chicago has also shown positive impacts on surrounding property values. (BPI, 2004) Overall, the studies on the effects affordable housing has on property values show a limited relationship, especially when affordable housing is dispersed.Rainbo Village Courtyard

When analyzing cost through a strict fiscal lens, municipal revenues and expenditures are central. Expenditures have been indirectly discussed in the greenfield and infill sections (if inclusionary zoning necessitates new infrastructure due to increased greenfield development or decreased infill development, expenditures will go up). Revenues, however, are less straightforward and more controversial. Many critics of inclusionary zoning claim that compulsory "affordable" developments hinder or diminish the value of neighboring market-rate properties. They further argue that these lesser property values weaken the tax base and create less solvent municipal governments. (Powell and Stringham) As previously discussed, the contentiousness of these claims has prompted ample research, the vast majority of which found no negative correlation between affordable housing developments and adjacent property values (Innovative Housing Institute; Pollakowski et al), nor a marked difference in municipal revenue due to inclusionary zoning policies or mixed-income development. (Nakajima et al)

Inclusionary zoning also impacts more general economic factors. For instance, the County Council of Montgomery County, Maryland found that their lack of affordable housing caused longer commute times for low-income residents who could not afford to live near their jobs. This in turn led to greater personnel turnover in local businesses, industries and public agencies, which hurt the local economy and placed an undue financial burden on the taxpayers of the county. (Burchell et al) As previously stated, Montgomery County was one of the first places in the country to administer an inclusionary zoning policy.

Another contentious issue of IZ centers on the question of who is actually subsidizing the units. Some state that IZ is an unfair tax on developers (Ellickson) while others argue that the real cost is born by landowners, who face decreased bids on their land, and homebuyers (Burchell et al), who face increased housing prices to help off-set the profits lost by selling the additional units at an affordable rate. However according to a recent study by Business and Professional People for the Public Interest (BPI), "Because most inclusionary housing programs contain a unit ‘threshold' of 5, 10, or even 50 units, the incidence of the program would be born by landowners of vacant land of significant size, not single-family homeowners largely dependant upon the amount of equity in their homes for livelihood and retirement… Furthermore, a moderate reduction in land costs is precisely what is needed to help improve affordability and enable developers to produce affordable homes in a rapidly escalating real estate environment." (Brunick)

 

Our research indicates that affordable housing has little effect on nearby land values. Have you seen evidence, either in studies or through your experience, of the effect of affordable housing on the value of nearby properties? Do you know of local case studies or anecdotes on this topic?

 

Infrastructure

Inclusionary zoning's impact on necessary infrastructure has not been evaluated at length, however several effects are possible. These impacts are related directly to the degree to which greenfield development is discouraged and infill development is promoted, as a result of such a policy. Increases in density permitted through density bonuses and other development incentives can decrease development along the urban fringe and redirect development to areas already served by infrastructure such as water, sewers, and schools. This will reduce costs of new infrastructure while providing additional property tax revenues to maintain and improve existing infrastructure. Additionally, inclusionary zoning can have a positive effect on Transportation infrastructure when it allows low-income workers to live closer to their jobs, reducing commute distances and wear on local roads. (Burchell)

Do you think there is a relationship between inclusionary zoning policies and infrastructure such as water, sewers, or schools?

 

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