Inclusionary zoning–a local government mandate that some new developments set aside some housing units at an “affordable” price point–is being discussed in Minnesota. Several Minneapolis council members have been supportive of an inclusionary zoning ordinance, and the council gave notice at the end of last year that they’re studying inclusionary zoning with an eye towards adopting a policy.
Although inclusionary zoning is often discussed as a question of zoning and housing, it’s really one of social policy or welfare. The problem we’re trying to solve is that some people’s incomes are insufficient to pay for a decent minimum standard of life’s basics of shelter, food, and clothing. There are several ways to address that problem of income falling short of expenses on the basics
- Give people more money (or “near money”, such as food stamps)
- Give people the things they need (food banks, school lunches, government owned housing)
- Regulate the prices people pay for the necessities of life.
Government built and owned housing is one way to meet the need for affordable housing (Glendale Townhomes, Minneapolis)
In meeting people’s needs for food and clothing our social policies rely on a combination of the first two strategies—we give people things and we give people money. Giving people money and giving people access to things (houses) is also an important part of meeting the need for housing at affordable prices. In housing the money is often given in the form of vouchers that can only be used for housing, or the payment is made in some way directly to a person who owns the property being leased or rented to a person with a lower income. American programs to meet housing needs are financed by a range of federal and state taxes, and then complicated further by county or municipal administration. The continued need for more affordable housing might suggest we need to look beyond existing programs and add new policy tools such as inclusionary zoning. A big problem like housing affordability surely needs many policies directed at it, one might argue. Yet a more effective principle in public policy is to find the programs that work, and expand those.
Affordable housing financed through the federal tax code.
The existing programs, despite their flaws, complications, and insufficient scale to meet everyone’s needs, have some virtues. Financed through federal and state taxation, they adhere to some important principles of how to pay for and organize social support.
- Government-provided social support should be financed by a broad cross-section of the community.
- The financing and provision of social support should be transparent. It shouldn’t be too hard to tell who is paying and who is benefiting.
- Government’s capacity to act should be independent of the timing and fluctuations of private decisions: if as a society we want to provide more help to the less fortunate we should vote to do do, tax ourselves, and distribute the money.
- We should set taxes to pay for social support in a way that doesn’t discourage the taxed population from doing things that are otherwise good for society
Inclusionary zoning fails many of these principles. It has a laudable goal: to help the less fortunate in society have decent housing. But if the goal is laudable, we should campaign for the most effective policies to meet it.
First, inclusionary zoning is often not financed by a broad cross section of the community. Indeed, it’s hard to think of a way to fund social welfare that is more narrowly designed. If we randomly selected a few hundred unlucky people in our cities to pay extra taxes to support public housing, that would be more unfair, but only slightly more. Inclusionary zoning policies vary considerably, but the basic design is that a percentage of units in multi-family developments must be provided at affordable rents.
In the worst form of inclusionary zoning policy the developer and the owners or renters of the other units have to make up the difference between the break-even on the inclusionary unit(s) and the affordable rent. In so doing, we are asking a small number of people who happen to be building or buying now or renting in new construction to fund our housing policy. Existing home-owners are entirely exempt from helping to pay.
New housing just over the St. Paul/Minneapolis border. Inclusionary zoning will tend to push development into cities without these extra costs.
The politics are understandable: looking forward the cost of the policy will be borne by some combination of developers and people living in hypothetical unbuilt multi-unit buildings. This has an obvious appeal to existing homeowners or people happy with their current situation who don’t think they’re going to move, and thus don’t think they will have to pay. The costs of it are not even clearly perceived by current renters looking to buy or move sometime soon, because right now you don’t know if in the future you’ll move into a building subject to the policy.
In some versions of the policy, cities make up the difference between the developer or owners’ break-even and the affordable rent. This is much more transparent and can be seen in city budgets. But if we think about this in the context of a metropolitan area with many different municipal governments the problems abound. Why should renters or owners in one city be mandated to support the costs of housing provision when their neighbors across the border pay less? If we are going to support people meeting their housing costs we should do so at a state or federal level.
Secondly, the financing of inclusionary zoning is often opaque. An inclusionary zoning policy that is financed out of city taxes still fails to spread the costs of social support across a broader community, but is at least transparent in a public budget. Inclusionary zoning that mandates a proportion of units be affordable without compensation from the city pushes the costs of housing support onto developers and residents of apartment buildings.
The politics here are understandable if undesirable. Developers of new multi-unit buildings are seen by many homeowners as making large profits. The residents of new apartments and condominiums are similarly seen as well-off given listed prices for new construction. Why not, from this perspective, have the city capture some of the developers’ profit and some of the well-off residents’ income to finance a few units for people on lower incomes? The precise division of the burden between developers and market-rate residents will depend on whose choices are more or less responsive to prices. If residents really want to live in a particular new building without much concern for the price, they will take more of the burden of paying for the mandate. On the contrary, if residents are flexible but developers really want to build in a particular city despite the inclusionary zoning ordinance, then developers will bear more of the cost. But none of this is clear in the way that it would be if the city announced it was raising property taxes x% to devote y million dollars to supporting housing affordability.
Does “luxury” mean the developer and residents have extra money to support affordable units?
Third, inclusionary zoning is a passive response to the problem of housing affordability. In most forms of inclusionary zoning policy, cities require that proposed developments include a certain proportion of affordable units. The policies don’t in themselves call any new housing into being, any units that are created are just a fraction of what private developers have decided to build. When you think about it, this is a little strange.
We don’t observe local governments requiring that upmarket supermarkets give 10% of what they sell at reduced prices to poor people. It would be a little strange if the amount of food we provided to the poor fluctuated with the demand for fancy dinners at downtown restaurants. Macy’s is not required by law to give five poor people overalls for every 100 suits they sell. Those policies would be the functional equivalent of inclusionary zoning for food and clothing. If it sounds absurd, perhaps it’s worth pondering why, and whether housing is really so different.
We don’t require new supermarkets to give a certain proportion of food away at lower prices.
Inclusionary zoning policies in many cities only apply to construction of larger buildings, with a typical threshold of 5 or 10 units before being subject to the policy. On the one hand, this will tend to discourage construction of larger multi-unit buildings, perhaps a politically appealing aspect of the policy. On the other, it holds the amount of housing affordability support hostage to the decisions of private developers about what they are going to build, and adds another layer of complexity to the zoning code.
Finally, inclusionary zoning policies discourage the construction of new market-rate housing. Inclusionary zoning is basically a tax on the construction of new market-rate housing. Proponents understandably don’t want to describe it as a tax, but a tax it is. Unless the city is funding the difference between the break-even and the affordable price from general taxation, inclusionary zoning is a tax on new construction.
Less new housing will be built if new housing is taxed, unless developers and potential residents are totally indifferent to the increased costs of market-rate housing. And indeed that is what research about the effects of inclusionary zoning has found: that it has increased the costs of housing and reduced the rate of construction, surely not what is desired. There are important urban-form implications here as well. If some cities mandate inclusionary zoning and others don’t, new development will be more likely to occur in the cities without inclusionary zoning. These shifts are unlikely to be easily discerned by policy makers who won’t see the developments that aren’t proposed because they are no longer profitable, and won’t see that a project is now being planned across the border.
The politics of inclusionary zoning are understandable. It sounds like policymakers are doing something about ensuring housing affordability. But the evidence is clear that inclusionary housing provides a tiny number of units relative to need, at best has no impact on overall housing prices while sometimes increasing them, discourages new construction, and comes with significant administrative and transaction costs.
Housing affordability is a problem, and one of the main causes is exclusionary zoning that makes it hard for new housing to be built. While the impact of zoning in Minneapolis on housing affordability is smaller than in Manhattan or San Francisco, there are many reforms that would improve affordable housing supply with modest impacts. Minimum parking requirements could be removed from all residences across the city, continuing the policy reform begun in 2015 that removed minimum parking requirements in larger buildings near high frequency transit (but not near the University of Minnesota).
2-6 unit buildings co-exist well with single family homes.
R1 zones could be changed en masse to R2 to allow renewed construction of duplexes and fourplexes that make good neighbors with single family homes throughout the city, yet house eight to twelve people on the same amount of land as a single family house with two to five residents. Inclusionary zoning sounds nice, because who doesn’t love inclusion, but we should pursue more effective policies to deal with such important issues.
Agreed. IZ is extremely unfair and distortionary, but it is unfair and distortionary in a system that is already unfair and distortionary. Therefore we have to evaluate it on outcomes instead of theory. Where I live, almost nothing would get built if we didn’t have IZ. IZ is the bone that we throw to local activists who argue that new construction is a giveaway to developers and drives up costs on existing residents. It’s like paying off the mob. You know it’s wrong, and you’d really prefer not to do it, but it often makes sense to do it anyway. It’s possible that in Minnesota you have consensus that new development is useful and helps with affordability, in which case you can get away without IZ, but that consensus does not exist everywhere.
Evan,
The points you make are intuitive, but — after working on housing outside of the usual affordable housing groups the past year — I have to say that inclusionary zoning is the least worst of housing ideas.
Currently, we have complete opacity in our state housing programs. There are simply no other welfare-ish programs that are as well-funded as affordable housing programs, as compared to other programs the state tackles. The hearing rooms at the Capitol are completely filled with well-meaning champions of affordable housing, who are actually supporting banks and developers. Why? Because of the lack of hard unit cost restrictions. As a result, an insane amount of public dollars gets thrown at affordable housing with very little to show for it (and that’s not even going into the sky-high pay of affordable housing program CEOs). In no other set of programs is there zero expectation of the problem getting better, only that some units are created.
With inclusionary zoning and the lifting of restrictions in supply, at least the market can somewhat solve the problem. What we have now — local restrictions on supply + enormous funding for expensive units in the areas that can least oppose them — I think inclusionary zoning can at least help integrate areas and help folks live close to where they work (without wasting so much public $$).
Finally: “If it sounds absurd, perhaps it’s worth pondering why, and whether housing is really so different.” It’s because housing is stuck in one location, which makes is unique.
Thanks, these are great thoughts. I agree that one of the appeals of IZ is that the system is complex anyway, and IZ is politically feasible now in a way that more income support or more publicly built housing might not be.
In the “extended remix” first draft which the editor will tell you was far too long I had a couple of paragraphs about durability, and how this does alter the policies in important ways.
But on that point I would say that inclusionary zoning ties municipal governments into long-term contracts with a range of different property owners, adding another layer of opacity to the system. Public ownership seems to me a better response to this issue.
Despite the fact that IZ seems feasible to implement (doing something), I think its better to put our political energies into things that improve the mix of policies.
Clear and concise explanation about how a policy can have unintended consequences. I especially liked this: “If as a society we want to provide more help to the less fortunate we should vote to do do, tax ourselves, and distribute the money.”
That’s crossed my mind many times with the Crossroads Apartments controversy in Richfield.
http://www.startribune.com/upscale-changes-at-massive-richfield-apartment-complex-spark-discrimination-lawsuit/367359251/
There clearly is a great need for affordable housing, and there’s a consensus among policy makers that that’s the case. So it seems unfair to ask one developer to bear the brunt of the cost instead of dividing that cost among all taxpayers. It also would likely discourage reinvestment in aging properties.
That’s really where I’m coming from. As a member of society I don’t object to subsidizing the poor, but we’re doing it in the wrong ways. Two of my related viewpoints:
1) Anything that monkeys with or tries to replace the free market is bad.
2) Anything that balloons the size of the government is bad.
I’d support just distributing cash as something like a Guaranteed Minimum Income- figure out how much it costs for basic food, clothing and rent in a given area and let people make their own lifestyle choices based on their own priorities Maybe they want more kids, and are willing to eat simpler meals. Maybe they want fewer kids and want to buy steaks and pop at the grocery store instead of buying hamburger and drinking tap water.
Healthcare might be the exception, because you generally can’t choose the amount of care you need (as opposed to choosing tap water or craft beer), and if someone has spent all their money on other things rather insurance hospitals would still be obligated to treat them.
So you support getting rid of the mortgage interest tax deduction distorting the free housing market then?
If we weren’t distorting the housing market by artificially restricting the number of available lots, as well as the lower taxes from eliminating all kinds of government workers, that would offset not having it.
Why not? Anything that makes a loan more affordable makes the things you buy with that loan less affordable. Deducting mortgage interest from taxes is like a negative income tax on bank products (loan services). This is the policy that created the no-affordable-housing suburbs to begin with. As long as loans are cheap or subsidized, housing will be expensive.
Monte: 1) there is no such thing as a “free” market, which is not to say that markets are not useful, if they are set up properly. 2) If gov’t fills a void that the private sector is not, it is not necessarily a bad thing. In fact it is usually a good thing. How big do you want the gov’t when you buy a house? Big enough to make sure you’re not being ripped off. How big do you want it when a tornado takes out your house and neighbourhood? Very big indeed. 3) Speculation restricts the number of available lots. This is the market distorting itself. So does property (capital) tax, which subsidizes under-used land, like parking lots, at the expense of developed land. This is gov’t not setting up a market properly.
Huh. So I started reading this thinking that inclusionary zoning didn’t sound like a bad idea, but you made a convincing case against it. Well done.
Interesting topic. I’d rather just see basic income, and ditch all this complicated stuff. But inclusionary zoning sounds much less appealing now.
You’ve written 2000 words about inclusionary zoning without addressing what is perhaps the primary policy rationale for it, which is that it’s an effective way to finance and produce affordable housing that is well-integrated into market-rate housing, decreasing racial and economic segregation.
The problem with exclusionary zoning is not “because of exclusionary zoning, there is no land on which we can build all these affordable units we can finance.” The problem is that the available land is not anywhere that most people would want to live.
I agree with you, it’s my one critique of the whole piece. However, I would say it’s not an effective means of doing this. If we look across the country at places that have adopted IZ, the number of units generated is very small: http://marketurbanism.com/2014/05/29/how-affordable-housing-policies-backfire/
This is not to say it’s a bad policy or we shouldn’t do it, or that we couldn’t craft a more effective ordinance. Just that we should not expect it to do the heavy lifting of meeting affordability, even in well-heeled areas. And also that it does have drawbacks, namely that it makes building new housing for more moderate incomes unprofitable, as Let’s Go LA discusses here: https://letsgola.wordpress.com/2013/08/01/why-inclusionary-zoning-fails/
My point in the piece is that it’s not an *effective* way to finance affordable housing, since it concentrates the costs of housing support on a relatively small number of developers and owners of new housing.
The other argument here is that inclusionary zoning decreases segregation by putting affordable and market-rate housing in the same building. My argument here is against putting that requirement in the zoning code where it becomes a hard requirement and another layer of complexity in building market rate housing. If we want cities to pay for that, put it on budget and have the city or some other entity negotiate with developers to pay for the affordable units.
You failed to differentiate between developers and landowners. They are not always the same. An alternative to the theory that 100% of the costs of MIZ is passed onto tenants from developers is that developers will bid less for the land knowing they have an additional cost for which to account. The reality is landlords will set the rent as high as the market will bare. Cutting development costs by X amount won’t necessarily be distributed to an equivalent reduction in rents.
As other commenters have noted, land is a unique good: “The fundamental insight to understand is that because each parcel has unique value, landowners command a monopoly on their location. A piece of land within walking distance to a subway station is fundamentally different than one within walking distance to a bus stop. Developers compete among each other in an open market against monopolist landowners who extract all of the value (up to the point that development would no longer make sense). Ultimately, the worth of urban benefits flows to landowners.” https://www.theurbanist.org/2015/05/07/why-urbanists-must-support-linkage-fees-and-inclusioinary-zoning-a-scalable-policy-for-affordable-neighborhoods-in-seattle/
Neighborhoods like Uptown are North Loop are hot markets and will continue to see tons of development. Meanwhile Columbia Park for example won’t see the same kind of dense mixed used development any time soon because there isn’t the demand or infrastructure there. So if you want low income folks to have some access to the most desirable neighborhoods in Minneapolis, MIZ can accomplish this where other programs struggle.
I’m not sure the person you are quoting really has a firm grasp on the economic terms he’s using.
Nor am I sure that inaccurately labeling land owners as monopolists does anything to further the discussion.
But yes, it seems that the best argument for inclusionary zoning is creating access to more amenity-rich areas (and desegregation). That’s not really an answer to the evidence that suggests it doesn’t work, though.
Maybe it’s my big government-loving heart, but I guess it makes more sense to me to just build some public housing in at Lake and Hennepin (yeah, I know that’s not realistic).
The concept I was trying to get at is high land values are precisely why market housing is not affordable in the most popular urban areas. The market will never build a significant amount of affordable housing in the most desirable Minneapolis neighborhood because the land alone is too expensive even without adding in construction costs. One solution to this is to greatly relax zoning so more units can be built and almost everyone serious about addressing the housing shortage and affordability agrees this is a good idea.
I’m not sure the evidence shows MIZ doesn’t work. It’s inconclusive for either extreme. The San Francisco study every cites showed MIZ had almost no impact on supply. We would expect a big drop in development based on the assumptions that MIZ strangles the market and is just a tax on developers. But MIZ didn’t create a significant drag on development. The California LAO study that also been making the rounds has a similar weakness where correlation is made to equal causation across a diverse set of jurisdictions each with distinct MIZ programs. Most of the research not from libertarian think tanks shows MIZ has a negligible impact on supply but can produce real affordable units in desirable neighborhoods. Much depends on how the program is set up of course.
We also have to remember than equity isn’t just about preventing displacement. It’s also about providing continued access. A hot neighborhood might double its population and manage to minimize displacement thanks to building dense and tall. However, if the vast majority of the new residents moving in are upper class and white and the neighborhood swings from somewhat racially and economically diverse to mostly homogeneous, are we doing enough on equity?
“Why should renters or owners in one city be mandated to support the costs of housing provision when their neighbors across the border pay less? If we are going to support people meeting their housing costs we should do so at a state or federal level.”
I agree we should do something at the state level, but disagree that means we shouldn’t also work on a city level.
1) There will always be borders. If Minnesota enacts something and other states don’t doesn’t, then Stillwater has to do something that Hudson does not and Moorhead has to do something that Fargo does not, no different than Minneapolis vs it’s neighbors.
2) Federal and state policy often are not granular enough. What works for New York City is different from what works in Omaha is different from what works in Duluth.
3) The Minneapolis economy is doing well and I want to close the gaps we have. While we should work toward a state solution, I don’t want to wait for that to start addressing the issue.
4) We do this already with almost everything else! Minneapolis taxes vs Columbia Heights taxes are very different. But people choose to live in Minneapolis anyway. I guess its “unfair” that we are mandated to pay to support our beautiful city and Columbia Heights is not, but to me (and the other 20,000 new residents over the past few years) it’s a wonderful tradeoff to make.
City Observatory has done several great pieces about inclusionary housing.policies. Here’s the one most focused on it: http://cityobservatory.org/inclusionary-zoning-has-a-scale-problem/
Here’s another one showing the link between market-rate construction and displacement, including a call-out for areas with inclusionary housing policies: http://cityobservatory.org/report-market-rate-housing-construction-is-a-weapon-against-displacement/
To say that something has a scale problem is not the same as saying that it is a bad idea. No reasonable observer of urban area housing could conclude that inclusionary zoning would produce the huge number of affordable units needed. But it can produce some.
Economists always like to say that any public service/facility should be funded with general taxes. There’s a certain abstract logic to this. But what it really means–particularly when the issue is housing–is that it probably won’t be built at all. I’ll assume that nothing is not the outcome the economist wants, but it’s likely to still be the outcome.
I’m not anti-developer. But developers of large buildings in high cost cities are benefitting from decades of public investment. Sometimes they get a direct upzoning, which is essentially the City putting money in their pocket. That’s fine where it’s appropriate, but it’s not unreasonable to ask them to give something back, like inclusionary units. Politically in many cities if inclusionary zoning were abolished NIMBY resistance to apartment construction would be even fiercer. At least now a City Council can tell the neighbors that the city is getting lower cost units.
Again, abstractly, new construction could drive down the cost of housing to affordable levels. But if that would mean doubling the number of housing units in a city, low and moderate income people would be waiting for decades.
Inclusionary zoning isn’t an elegant, economists’ equation solution to housing problems. But it is a tool that’s available now, in a pretty bare toolbox.
I’d be interested to compare the number of housing units from IZ policies vs housing units created by general tax funds across regions or cities. Minneapolis has leveraged the affordable housing trust fund to help build some units over the past decade. To say we’d get at least some from IZ but ignore actual public or non-profit housing built is a bit misleading.
I’d also like to address the “something back for upzoning” comment. CM Lisa Bender, who I’d follow off a cliff (joking, of course, but I strongly support her work as a CM thus far) has also said something to this effect. A developer getting an up-zone or variance is not getting something for nothing. Our property tax system mainly taxes improvements, so a building XX% larger than zoning would allow, or YY% larger thanks to an upzone will almost assuredly pay a similar amount more in taxes. Development and public investment are synergistic as well. A new development raises the value of properties around it, whether it’s a new business making the neighborhood better for residents, new residents making businesses more viable, etc. Yes, public infrastructure responds to and can also be built to capture the value it creates. But it’s not just a one-way street.
Again, I’m not opposed to IZ. I think it would be smart to use it as a major carrot – big time density bonuses, etc well above what existing zoning allows in exchange for a set amount of units, or of a specific design, something.
That’s the plan in Seattle and generally most programs are set up to trade greater density for mandatory affordable units. The less successful IZ programs likely don’t have a big enough carrot with too large of a “stick.” It’s important that the city continue to see big housing growth or MIZ won’t produce many units. That isn’t too big a worry in Minneapolis which is thriving.
Alan Durning, who run the Sightline Institute which is doing excellent research on parking, housing, the environment, ect, thinks MIZ is central to Seattle’s affordability plan:
“Mandatory inclusionary zoning (MIZ)” is the beating heart of the HALA plan. It couples permission for taller, bigger buildings (aka, “upzones”) in much of the city with mandates on developers: under MIZ, for example, four-story zones become six-story zones, but developers must reserve a large share of the additional apartments for low-income households. Under MIZ, building more market-rate housing automatically generates more affordable housing too.”
http://www.sightline.org/2015/07/13/hala-and-the-100000-question/
Very good article.
IZ is a feel-good bandage that doesn’t address the issues. It reminds me of the right-wing’s beloved school voucher program in Wisconsin. A few benefit, but it doesn’t address the real problems. In fact, it can lead to isolation and ostracizing of those who are fortunate enough to grab one of the prime spots.
It would be better to use resources to provide real affordable housing to more people than to require IZ. Show me where IZ is working, and maybe I’d lighten up a bit.
Whoa whoa whoa slow your roll there. Allowing low income people access to booming neighborhoods generally with better schools, transit access, job access and services is NOT isolating and ostracizing them. I don’t follow. Sociologists have shown than mixed income neighborhoods provide the best results and have more social mobility. Concentrating poverty isn’t a good route.
One prominent example is Montgomery County, Maryland where IZ has created about 12,500 units as of 2014 or so. We are in the process of implementing it in Seattle so a few years down the road we will be a case study too if all goes to plan.
http://nlihc.org/article/40-years-ago-montgomery-county-maryland-pioneers-inclusionary-zoning
What resources are you talking about? I’d love to see housing authorities much more aggressively expand public housing but they don’t have the budgets and no one is jumping up and down to increase property taxes enough augment their budgets significantly enough.
I interpreted the comment as saying that the few that are chosen for these IZ units will be ostracized by and isolated from their (now former) community by those not “lucky” enough to leave.
Oh the old crab in a bucket idea. I don’t think this fear of resentment of success should drive policy decisions.
Thanks Peter for clarifying that for me.
It isn’t fear of resentment of success that I am talking about here. I’d much rather see incentivized developments that increase supply, than a trickle-down approach like IZ.
Agreed, Montgomery Co. MD. appears to be an example of how IZ might help, but I think the dynamics of that metro area are more at play.
However, I would tread cautiously, and as nobody wants zoning imposed on them, I would leave it up to current residents to decide whether they actually want it. Let the policy speak for itself and try it in a small zone if desired.
It might be the antidote is worse than the poison here.
Sorry fear of resentment. Typo. I don’t understand how IZ is a trickle down approach? It provides some affordable housing almost immediately. New market development is almost always going to priced high in a hot market. Minneapolis is a pretty hot market. Now we certainly do have to increase supply a lot but to think that’s all we have to do in the near term ignores how much time filtering of new units down into lower income markets will take.
Feel free to elaborate on how the dynamics are different and which incentives you’re referring to. Few want zoning imposed on them but too bad it already is. Right now in most cities single family owners get to the keep the zoning they want at the expense of new residents and tenants trying to find housing in an increasing restricted market.
Trickle-down may not be the right term, but a trickling of affordability is what you get. You are relying on a few well off people to create capital for the less fortunate. Sprinkling a few poorer folks into the building doesn’t adequately address the concerns of affordable housing.
Lisa Bender was quoted in the Strib: “We’re looking for ways to either encourage or require developers to include affordable housing units within market-rate projects,”.
Encourage: Good! Require: Bad. Minneapolis may be a hot market today, but mandated IZ could easily douse that fire. Better to reduce barriers and encourage affordable housing by developers who actually want to build it. The burdens of an IZ mandate may require the development to grow larger than appropriate: density bonuses.
While Montgomery and Hennepin counties might look similar side-by-side, Montgomery has the benefit of being part of a greater metro instead of being the center of it.
I’m over the river in Wisconsin. IZ is essentially illegal here.
So you’d support IZ if was an optional way for developers to boost height limits and FAR? If they didn’t take the option they would have lower zoned heights and FAR under this scenario.
Market housing is not going to meet some low income needs. Micro housing and aggregate housing offer good options for single low income folks if only they could be legalized and embraced by the codes. However the market provides few new 2 BR apartments and even fewer 3 BRsrevenue market so low income family housing is going to be largely foisted on the government. So this isn’t an argument for IZ so much as a warning against thinking the market alone can do it alone if somehow unfettered.
People keep framing IZ as well off tenants subsidizing low income tenants. I don’t that that’s the right frame. Again, developers get something: the ability to build more units in exchange for taking on this social responsibility. They also be able to run the numbers of their projects knowing full well how much IZ will decrease their exected revenue. They can decrease their land bids to compensate and because land is inelastic good they will still be able to find land to build. Or in a non mandatory scenario, they can just pass on the program and build a smaller building.
Montgomery county is also a great example of the conditions under which IZ works and its shortcomings.
It worked great when the county was largely undeveloped and was being built out at a rapid clip. That ended years ago.
It stopped producing notable numbers of affordable units once the county was largely built out, because few of the developments were big enough to trigger the requirement.
The real question is, “What does that mean for communities in Minneapolis?”
How do you call 245 units per year between 2000 and 2013 not notable? By way of reference, accoridng to the Minneapolis Housing Authority website they manage 6000 public housing units and administer 4600 Section 8 vouchers. The truth is there justarent that many affordable units out there so 245 per year is not insignificant.
And I have to disagree with your premiae that you need greenfield sites to trigger projects big enough for IZ. Minneapolis just passed the 400,000 population mark but i seem to remember Mayor Hodges predicting the city would get to 500,000. Those 100,000 additional people aren’t going to live in SFH. The city will build lots of large multi family and that’s already what we see.
IZ is not a silver bullet but I don’t understand why it’s dismissed so easily. It augments what the housing authorities build and it puts units in the most desirable locations with great services and amenities. True it’s a temporary band-aid but when you’re bleeding I don’t know why you’d pass up first aid.
SFB was spot on above. Theoretically inclusionary zoning is far from perfect. But in many ways it is a fantastic program: inclusionary requires mixed-income communities, which leads to better outcomes for low income families and their kids; allows low income folks to live near more jobs, with accompanying quality of life and environmental benefits via shorter commutes; and actually gets units built, which is fantastic in light of the insane capital stacks required to build affordable housing via the allegedly transparent federal, state, and local programs.
In short, it’s easy to throw stones at inclusionary zoning (unless you’re the Supreme Court-thank goodness). But I’m curious what theory-focused folks think of density bonus programs that require inclusionary units (I.e. Increase density maximums and height limits but require some portion of the units allowed via the increase to be affordable — kind of a more honest inclusionary program because the public is taking a portion of what it is giving away).
“We don’t observe local governments requiring that upmarket supermarkets give 10% of what they sell at reduced prices to poor people.”
Never thought of that. I like your Inclusionary Groceries idea a lot.
Zone R2B requires a 10,000 square foot lot for a two-family dwelling established after January 1, 2015. A typical 40×130 lot is 5200 square feet. So the ordinance effectively requires two lots for one duplex. Any rational person would chose to construct two single family houses instead one duplex if they had two lots side by side.
If the City seeks to encourage density in a form similar to existing neighborhoods (as suggested by the last paragraph of the article above), that would require a code amendment to existing R2 and R2B zoning since new duplexes are effectively not permitted in the current two-family zones.
Thanks for this comment — this is a point worthy of a longer post. The humble duplex and fourplex on a SFH-sized lot are a great feature of our actually existing cities, strange we make them hard to rebuild or build new ones.
More thoughts on the finance of inclusionary zoning. As discussed above, the costs of providing mandatory affordable units could be passed along to the people renting the market rate units. Although there may be only so much ability to increase rents, so when trying to get the numbers to work reducing the quality of construction would be the next best approach. Think cheaper metal panels, and no more brick accents. That affects rents less than taking away the granite countertops and in unit laundry.
The City already offers density bonuses for other things, so to add one more density bonus for affordable housing to get from 4 to 6 stories seems like it would have few takers. Since a 6 story building (5 stick frame over 1 concrete) is the most economical to build, additional density above and beyond that is not much of a carry. The 4 to 6 story carrot is already out there, so it would be hard to put that back in the box.
A more effective carrot would be if the City were to increase its bonding authority for affordable housing project. There isn’t a limit for 4% LIHTC projects like there is for 9% projects, although 4% deals are required to meet a 50% public bonding threshold. If the City was willing to do more short-term bonds for 4% projects, that could provide additional tax credit dollars to fund more affordable housing units. If the City could do short-term bonds, it would be easier to recycle the funding faster into new projects. The downsides to this approach might be depressing the market for the floating 4% credit (it is usually closer to 3.5% which brings in less tax credit dollars).