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Inclusionary Zoning

Inclusionary zoning is a program in which developers provide affordable dwelling units in new housing developments. They may be allowed to participate voluntarily, or the program may be mandatory. A mandatory program requires developers to set aside a required percentage of dwelling units for sale or rent to lower income households. This obligation may or may not include compensating benefits, but more usually the ordinance offers a density bonus and possibly other incentives in exchange for the production of affordable housing.

Inclusionary zoning is an important strategy for overcoming the exclusion of lower income households through low housing densities and a ban on multifamily dwellings. New Jersey's Mount Laurel cases are an example. The courts struck down an exclusionary suburban zoning ordinance and held that local governments in the state must provide their fair share of regional housing needs. The court required inclusionary zoning programs as part of this mandate. A statute has codified the zoning obligations required by the Mount Laurel cases. Other states have statutes that authorize inclusionary zoning and density bonuses for affordable housing in inclusionary developments, but local governments usually base inclusionary zoning ordinances on home rule or implied statutory authority.

Program Elements

Inclusionary zoning practices vary considerably but have some common characteristics. Two key issues include deciding on the minimum size of a housing development that must be in the program and the percentage of the housing that must be affordable. Requiring a minimum development size between 20 and 50 units is common, and the programs often require between 10% and 15% of the housing to be affordable. Eligible income groups are specified, and the programs set income limits for participants and rents and prices for affordable units. They often do not serve the very poor, and a program may accept applicants with incomes up to and beyond the median income level for the region.

The affordable units are usually built on-site, but the ordinance may allow them to be built off-site. There are also differences in where affordable units are sited within a development. They may be scattered throughout or may be clustered in one location. Better integration is achieved and less social isolation occurs if the affordable housing is not clustered. Developer buyouts through in lieu cash payments may be authorized as an alternative, and there may be an option to operate the affordable units as public housing.

Density bonuses are an important option in inclusionary zoning programs because they offset the cost of providing the affordable units. There is no objective and accepted formula under which bonuses must be calculated, but they give developers an incentive to provide the affordable housing by increasing their return. There may be a limit in the zoning ordinance on how much of a density increase is allowed; density increases between 15% and 25% are common. In effect, the density bonus creates additional lots at no additional expense for the developer, giving the developer a place to build the affordable units. There may be additional offsets such as expedited processing, fee waivers, subsidies, and a relaxation of site regulations. Additional units to be sold or rented at market rates may also be allowed.

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