Jury is out on inclusionary zoning

"Minnesota cities are embracing so-called inclusionary zoning rules despite a thin record of research on the pros and cons of the policies," writes William Morris in a March 7, 2019 article in Finance & Commerce.

Morris continues,

Inclusionary zoning is a tool cities use to push developers to include affordable units in market-rate multifamily developments. Some policies are mandatory for some or all projects, while other cities make it an opt-in program with various incentives for developers that participate, according to Ed Goetz, director of the Center for Urban and Regional Affairs at the University of Minnesota’s Humphrey School of Public Affairs in Minneapolis.
It’s a hot trend for public officials in many markets, including the Twin Cities, he said.
“Everyone’s doing it because it doesn’t always require public expenditure,” Goetz said in an interview. “It’s a way of getting affordable housing built when private sector and market-rate housing is getting built. If the program is structured correctly, then it doesn’t often require these kinds of big subsidies from programs that aren’t well-funded in the first-place.”
Economists studying the issue so far have found signs the policies can, indeed, spur the creation of a considerable amount of affordable housing, and also spread such units into neighborhoods that wouldn’t have had them otherwise, Goetz said. But the research is too spotty, and many policies too new, to fully evaluate their impact, including warnings from many opponents that inclusionary zoning leads to less development and higher market-rate rents, he said.

Minneapolis has had an affordability requirement for projects receiving city funding for more than a decade, Morris notes, and is working on a comprehensive inclusionary housing policy for adoption this year. Go HERE

for a status report from the city's website.

One drawback to inclusionary zoning is that it only works when the overall market is strong, said Mary Bujold, president of Golden Valley-based Maxfield Research and Consulting.
“As soon as the market gets soft, then developers are not going to see a benefit of having to include affordable units, unless there’s a significant incentive for them to do it,” she said. “And the market will get soft. It’s inevitable.”
For that reason, Bujold and Goetz both said cities need to view inclusionary zoning as one tool in a broader strategy to create and preserve affordable housing. Community land trusts, tax abatement for naturally occurring affordable housing and strengthened legal protections for renters are all part of the conversation, Goetz said.
“I think most cities are coming to the realization they have to do things in a lot of different ways,” he said.
For Bujold, the entire debate fails to address the cost drivers that have made it impossible to develop housing, single-family or multifamily, at a cost that will be affordable to entry-level renters and buyers. Inclusionary zoning can play a role, she said, but it will take a lot more than offering carrots and sticks to developers to bring down the costs of housing for all.
“There’s no silver bullet here. It has to be a lot of different tools that all have to work together,” she said. “It’s not like you can do inclusionary zoning and suddenly think you’re done developing affordable housing.”

The full article is HERE.