Inclusionary zoning (IZ) policies, which require or incentivize developers to provide some income-restricted housing units in otherwise market-rate projects – may be a double-edged sword, according to a new study by Pioneer Institute. The study found that while IZ policies help address urgent, short-term housing needs for a few families, they also can discourage new supply and increase higher market-rate prices, jeopardizing long-term, broad-based affordability.
Massachusetts has one of the highest concentrations of IZ policies in the country with 141 communities implementing some form of IZ. Seventy-one of these communities mandate a set percentage of below-market units per development and 43 require a certain percentage of affordable units in select districts or project types. IZ is voluntary in the remaining 27 communities, although most offer density bonuses to allow for extra units beyond what is allowed in non-inclusionary projects.
The IZ programs have yielded more than 1,000 affordable units each in Boston and Cambridge, but one-third of the state’s IZ programs hadn’t generated any new units as of 2019, the report found.
“Except in Boston and Cambridge, most of these policies have produced a paltry amount of affordable housing,” said report author Andrew Mikula. “It’s extremely difficult to find a scalable way to align the math behind real estate development with programmatic mandates for affordable housing.”
The report suggests that mandatory IZ policies force developers to raise market-rate prices to offset losses on income-restricted units. IZ may work best in areas that have expensive housing, strict traditional zoning and strong political support for affordable housing, large-scale development and growth, said Mikula.
Recently, Boston increased the required percentage of income-restricted units from 13% to 17%, lowered the average income threshold from 70% to 60% of the area median income, and required an additional 3% of units to be set aside for households using Housing Choice Vouchers. A Harvard study, however, found that these changes could lead to a 5% to 12% decrease in the number of new units created.
“Cities and towns need to counterbalance affordability mandates by reducing other cost barriers to see the best results,” said Brian Golden, former director of the Boston Planning and Development Agency.