The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from the San Francisco, Washington DC and Suburban Boston Areas

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1 F u r m a C e t e r f o r r e a l e s t a t e & u r b a p o l i c y N e w Y o r k U i v e r s i t y m a r c h s c h o o l o f l aw wa g e r s c h o o l o f p u b l i c s e r v i c e h o u s i g P o l i c y B r i e f w w w. f u r m a c e t e r. y u. e d u w w w. h c. o r g / h o u s i g / c h p - i d e x The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas Iclusioary zoig (IZ) is a affordable housig tool that liks the productio of affordable housig to the productio of market-rate housig. IZ policies either require or ecourage ew residetial developmets to make a certai percetage of the housig uits affordable to low- or moderateicome residets. I exchage, may IZ programs provide cost offsets to developers, such as desity bouses that allow the developer to build more uits tha covetioal zoig would allow, or fast-track permittig that allows developers to build more quickly. There is tremedous diversity i the structure ad goals of iclusioary zoig programs throughout the coutry: some IZ programs are volutary while others are madatory; they are triggered by differet sizes ad types of market-rate developmets; they target the affordable uits to differet icome levels; they have differet rules about whether the affordable uits must be located withi the market-rate developmet or may be located off-site; ad they impose the affordability restrictio for differet legths of time. Sice the first program was established i 1972, the umber of jurisdictios that have adopted iclusioary zoig policies has grow steadily, with a sigificat umber of jurisdictios adoptig programs i the last decade. While it is difficult to idetify a exact umber, well over 300 jurisdictios cities, tows ad couties have a iclusioary zoig ordiace o the books.

2 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas Argumets For ad Agaist IZ Despite, or perhaps because of, the rapid spread of iclusioary zoig across the atio, IZ programs ofte geerate sigificat cotroversy. Amog supporters, IZ is heralded as a importat evolutio i affordable housig policy because it requires less direct public subsidy tha traditioal affordable housig programs, ad therefore is cosidered more fiscally sustaiable. Propoets also argue that IZ programs that require affordable ad market-rate uits to be located i the same developmet promote ecoomic ad racial itegratio. 1 While propoets recogize that developers may lose moey o the affordable uits, they believe that developers ca recoup lost profits through icetives such as desity bouses. Critics, o the other had, argue that IZ programs, particularly madatory oes, will costrict developmet of market-rate housig by causig developers to build istead i jurisdictios that do t require developers to sell or ret a portio of the uits at below-market levels. By costraiig the supply of housig, the argumet follows, IZ programs will cause the prices of market-rate housig i the jurisdictio to rise, Poisettia Statio, Carlsbad, CA, BRIDGE Housig. ultimately reducig rather tha icreasig affordability. Oppoets also argue that it is ufair to place the etire burde of providig affordable uits o the developers ad purchasers of ew market-rate housig uits; to the extet the commuity believes affordable housig is a importat good, the whole commuity ought to pay for it. What Do We Kow About the Impacts of IZ Programs? I spite of its popularity amog housig advocates ad policymakers ad steady oppositio from critics, we kow relatively little about the effects of iclusioary zoig policies. At the ceter of the debate over IZ are two empirical questios. First, have IZ programs had the effect of restrictig the supply of market-rate housig ad icreasig its costs i the jurisdictios adoptig IZ? Secod, have IZ programs bee successful at producig affordable uits? Ufortuately, few researchers have tried to aswer these questios, ad may of the studies that have bee completed suffer from sigificat data ad methodological limitatios. It is difficult to obtai accurate data o the 2 1 Not all IZ programs require the affordable uits to be produced o-site; some allow developers to build the affordable uits elsewhere i the commuity, ad some allow developers to pay a i-lieu fee that the jurisdictio ca use to build affordable housig wherever it chooses.

3 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas 3 adoptio ad characteristics of iclusioary zoig programs across jurisdictios ad over time, ad to track the umber of uits produced uder these programs. Recogizig the eed for objective, rigorous aalysis to help iform the academic ad policy debate about IZ, the Ceter for Housig Policy asked NYU s Furma Ceter for Real Estate ad Urba Policy to coduct a i-depth, logitudial aalysis of the effects of IZ. 2 Our research addresses three primary questios: 1) What kids of jurisdictios have adopted IZ? 2) How much affordable housig has bee produced i differet IZ programs, ad what factors have iflueced productio levels? 3) What effects has IZ had o the price ad productio of marketrate housig? To aswer these questios, we selected three metropolita areas i which IZ programs are fairly prevalet ad well-documeted, ad for which the data about housig supply ad prices are available: the Sa Fracisco area, suburba Bosto, 3 ad the Washigto D.C. regio. Due to data costraits, we were ot able to completely ad defiitively aswer each of these questios for each of the regios we studied. I particular, the small umber of jurisdictios i the D.C. area preveted us from coductig statistical aalysis o that regio. Despite these challeges, our fidigs sigificatly advace the curret uderstadig of the effects of IZ policies ad have importat implicatios that advocates, critics, ad jurisdictios cosiderig adoptig a IZ program should bear i mid. Variatio Amog IZ Programs ad Regios The desig of iclusioary zoig programs varies tremedously across jurisdictios. This variatio reflects a umber of key differeces amog the jurisdictios themselves, icludig the compositio of their populatio ad housig stock ad their political goals. For example, some jurisdictios place a higher priority o achievig ecoomic itegratio through IZ while others are more cocered with maximizig the umber of affordable housig uits produced. The diversity also reflects differeces i the larger regulatory framework i which the jurisdictios work: some states allow jurisdictios a great deal of freedom to eact ew forms of lad use legislatio, while others are more restrictive of local cotrols. The IZ programs i our three study areas reflect this diversity. Table A provides a overview of some key elemets of the IZ programs i these regios. Please ote that these statistics reflect the data we used i our study; more recet data may ow be available from each regio. Because IZ programs may take some time to have a impact, we were ot able to evaluate the impacts of the most recetly adopted IZ policies. Table A illustrates sigificat differeces amog the programs i our study areas. IZ programs i the Sa Fracisco area were established earlier, are more likely to be madatory, ad are more broadly applicable to differet types ad sizes of developmets tha the programs i suburba Bosto. 2 This policy brief presets a summary of our fidigs; the etire study ca be foud at: or 3 While the City of Bosto has a IZ program, it was ot icluded i the database that forms the basis of our study because Bosto has differet authority over lad use regulatios tha other jurisdictios i the state.

4 Table A: Variatio Amog IZ Programs i Our Three Study Areas Sa Fracisco Area Suburba Bosto Washigto D.C. (as of 2004) (as of 2004) Area (as of 2000) Prevalece of IZ 7/10 couties 48/104 cities/tows 4 99/187 cities/tows 5/23 couties (# of all jurisdictios adoptig) Year program was adopted: Media Rage % of programs that are madatory 93% 58% 80% Breadth of applicability to differet types ad sizes of developmets Broad Narrow Fairly Broad % of programs providig desity bous 67% 71% 100% The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas % of programs allowig developers to pay fees i lieu of buildig uits % of uits that must be affordable Media Rage Icomes targeted for affordable uits How log uits must remai affordable 86% 15% 5-25% Very low to moderate The media legth of affordability is 45 yrs. Source: This table combies data from various sources, icludig: Calavita & Grimes (1998); Brow (2001); CCRH ad NPH (2003); Fox & Rose (2003); Vadell (2003), adapted from Rusk (2003); Pioeer Istitute for Public Policy ad the Rappaport Istitute for Greater Bosto Local Housig Regulatio Database (2004); CCRH Iclusioary Housig Policy Database (2007); NPH (2007); ad a supplemetal telephoe survey of the Sa Fracisco ad D.C. areas, coducted by the Furma Ceter i Jue, Because each of these data sources used a differet survey methodology ad because the cotet of IZ programs varies greatly, the data across jurisdictios are ot always comparable. Our aalysis excludes ewer programs that have ot existed log eough to produce measurable results. Data for the Sa Fracisco regio ad suburba Bosto cover programs eacted through 2004, ad data for the Washigto D.C. area iclude programs adopted prior to See referece list for full citatios. 38% 10% 5-60% Low to moderate Oe-third of the programs require permaet affordability; half do t specify. 100% 8.13% % Low to moderate For owers, rage is from 5-15 years; for reters rage is I order to assess the impacts of IZ o housig prices ad permits, our study used data o IZ programs i the Sa Fracisco area as of Accordig to NPH (2007), there are ow 77 jurisdictios i the Sa Fracisco area with IZ.

5 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas 5 Programs i the Sa Fracisco area also are more likely to allow developers to satisfy requiremets by payig i-lieu fees rather tha buildig the uits themselves. I Washigto D.C., most programs are madatory, but the requiremets are limited oly to larger developmets, rather tha the broader set of developmets subject to IZ i the Sa Fracisco area. I the D.C. regio, programs require the uits to remai affordable for less time tha i either of the other study areas. I additio to this variatio across regios, there is also sigificat variatio i the structure of IZ programs withi each regio. Table A does ot reveal the complicated regulatory structure withi which each of these regios operate, which may affect the likelihood of adoptio of IZ, the form i which IZ takes, ad the ultimate impacts of a IZ policy. State or regioal regulatory regimes may ehace or impede the formatio ad success of local IZ programs i a umber of ways. For example, Califoria grats local govermets broad authority over lad use decisios but also has a umber of statewide affordable housig policies. Similarly, Palmer s Dock, Brookly, NY, L&M Equity Participats ad Du Developmet Corp. Photo: Courtey Wolf. Massachusetts has a strog traditio of local self-goverace, ad tows ad cities (but ot couties) have a tremedous amout of authority over lad use decisios. The Massachusetts state law kow as Chapter 40B, which requires cities to provide expedited permittig ad other beefits to developmets that set aside a specified percetage of affordable uits, complicates the icetives a jurisdictio has to adopt IZ. Some muicipalities may adopt IZ to help them respod to 40B, while others may fid 40B to be a sufficiet mechaism for producig affordable housig o its ow, ad accordigly thik they do ot eed a IZ program. Our study was uable to upack these complicated icetives ad costraits, but it is worth otig that state regulatios play a sigificat ad somewhat upredictable role i jurisdictios decisios to adopt IZ. Which Jurisdictios Adopt IZ ad How Does it Affect Their Housig Markets? What kids of jurisdictios adopt IZ? Our aalysis of jurisdictios i the Sa Fracisco area ad suburba Bosto helps us uderstad some of the characteristics that predict whether a jurisdictio is likely to adopt a IZ program. 5 We fid that larger, more affluet jurisdictios are more likely to adopt IZ. Those ear other jurisdictios with IZ also are more likely to adopt IZ. For example, i suburba Bosto, we fid that the probability of adoptig a IZ program icreases as the umber of other jurisdictios i the same couty with IZ 5 Because of the small umber of jurisdictios i the Washigto D.C. area with IZ, we were uable to perform a regressio aalysis for this regio. Accordigly, most of the fidigs summarized i this brief are based oly o data from the Sa Fracisco ad suburba Bosto areas. However, the full report cotais detailed iformatio o IZ programs i the Washigto D.C. area, as well as fidigs o IZ productio ad other observatios o the effects of IZ i this area.

6 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas 6 icreases. This makes sese; if eighborig jurisdictios already have a IZ program i place, it may be less likely that IZ will scare developmet to other locatios. It also may idicate that jurisdictios lear from the experieces of their eighbors, or that there is a badwago effect for promisig or tredy policies. Fially, i suburba Bosto, we fid that jurisdictios with growth maagemet policies ad cluster zoig are more likely to adopt IZ. 6 Our iterviews with program admiistrators revealed that some jurisdictios adopt IZ programs because of a desire to satisfy state regulatios or expectatios, rather tha out of a desire to adopt a progressive affordable housig policy. These differig motives may impact the amout of housig Key fi di gs o iz adoptio Jurisdictios are more likely to adopt a IZ program whe they: Are larger ad more affluet Have more eighborig jurisdictios that have IZ Have adopted other lad use regulatios (specifically cluster zoig or growth maagemet) produced. If the program is adopted solely to satisfy exteral requiremets, it may be writte, implemeted or eforced i a differet way tha if it resulted from more local political pressure. Specifically, oe might thik that commuities that adopted IZ merely to satisfy a state madate may have adopted policies that are less effective or less carefully crafted; additioal research would be eeded to test this hypothesis. What iflueces how much affordable housig has bee produced uder IZ? We fid that the strogest predictor of how may affordable uits a jurisdictio s IZ program has produced is the legth of time the program has bee i place. This makes sese for a umber of reasos: projects that trigger the IZ program are likely to take several years to be completed ad geerate ew IZ uits, developers ad admiistrators udoubtedly eed some time to become more familiar with the program ad work out ay kiks, ad the productio of affordable uits through IZ adds up over time. We also fid evidece that programs i the Sa Fracisco regio that exempt smaller projects or provide desity bouses ted to produce more uits, idicatig that more flexible programs may result i greater productio. While early all IZ programs i the Sa Fracisco area have produced some affordable uits, some 43% of the jurisdictios i suburba Bosto with a IZ program o the books have ot produced ay uits, ad over oe-third are uable to report how may uits have bee produced. This may idicate that jurisdictios i the Bosto area have adopted IZ programs for reasos other tha producig affordable housig, such as creat- 6 Cluster zoig provisios allow developers more flexibility tha covetioal zoig allows, such as reductios i the miimum lot size or other dimesioal requiremets, i exchage for settig aside protected ope space. May of the suburba Bosto IZ programs are desiged as part of cluster zoig, allowig developers to receive icreases i the total allowable uits i retur for producig affordable housig (or some other form of commuity beefit). The prevalece of IZ programs amog jurisdictios with growth maagemet policies, such as aual caps o buildig permits, may suggest that those commuities are cocered both with the pace of residetial growth ad pressures o housig affordability.

7 Key Fi di gs o IZ Productio The loger IZ programs have bee i place, the more affordable uits they have produced I the Washigto D.C. area, IZ programs have produced a total of 15,252 affordable uits (as of 2003). Nearly three-quarters of the uits come from Motgomery Couty which adopted oe of the first IZ programs i the coutry, datig back to I suburba Bosto: As of 2004, 43% of jurisdictios with IZ had ot produced ay affordable uits. Precise couts are ot available, but surveys suggest that IZ programs have produced relatively few affordable uits, probably i part because so may IZ programs i the area were eacted relatively recetly. The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas 7 I the Sa Fracisco area: Almost all jurisdictios report havig produced some affordable uits. The media aual productio across all programs is 9 affordable uits/year. For the regio as a whole, IZ programs have produced 9,154 affordable uits (as of 2004).* Programs with desity bouses ad exemptios for smaller projects have produced more affordable uits. * Updated productio umbers are available i NPH s 2007 report, Affordable by Choice: Treds i Califoria Iclusioary Housig Programs available at: ig a mechaism to satisfy the requiremets of state law 40B. It also may be a fuctio of the fact that IZ programs are a relatively ew pheomeo i the regio, ad these jurisdictios simply have ot yet brought their programs to scale. Aother explaatio for the low productio could be that may of the Bosto-area programs are volutary ad apply to a arrow rage of developmets. What effects have IZ programs had o the price ad productio of marketrate housig? The fial questio we try to aswer is the most importat, ad the most difficult, of the issues surroudig the debate over IZ: how do IZ programs impact housig prices ad productio? I order to get a better uderstadig of the uderlyig issues, it is helpful to cosider a simplified theoretical model to predict developers behavior.

8 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas 8 The amout of reveue a developer ca gai by sellig or retig a uit required to be affordable by a madatory IZ policy is geerally lower tha the costs of developig that uit, so uless developers ca offset these losses, IZ programs may cause developers to ear lower profits. Ecoomic models predict that developers are likely to react i a umber of ways to madatory IZ programs that do ot provide meaigful beefits to offset developers reveue losses. First, developers may build or ivest i other jurisdictios that do ot have IZ programs. Secod, they may try to make up the lost reveues by raisig the prices they charge for market-rate uits. Third, they may lower the prices they are willig to pay for lad. Their ability to do ay of these optios will deped o a umber of market factors, but uder each sceario, the productio of housig i the jurisdictio is likely to fall. If the umber of ew housig uits produced i the area falls, ad demad ad other market factors remai costat, housig prices will likely icrease due to the law of supply ad demad. The theoretical models predict that the size of the impact o housig productio ad prices will deped upo may factors, icludig the extet to which the IZ programs offer cost offsets such as desity bouses, the strigecy of the IZ requiremets, the dyamics of housig supply ad demad, the extet to which other types of supply costraits have bee adopted i the commuity ad broader area, ad the extet to which eighborig jurisdictios have adopted IZ. Previous studies have tried to test these theoretical models ad gauge the impact of IZ programs o prices ad productio, but the methodologies ad data used i those studies are widely questioed. 7 We use well-accepted regressio aalysis techiques to isolate Key Fi di gs o IZ s Impact o Productio a d Prices of M arket- R ate Housi g I the Sa Fracisco area, there is o evidece that IZ impacts either the prices or productio of siglefamily houses. I suburba Bosto, IZ seems to have resulted i small decreases i productio ad slight icreases i the prices of sigle-family houses. the effects of IZ programs o jurisdictios housig markets. Specifically, we cotrol for variatios i the jurisdictios characteristics that may cotribute to chages i housig prices ad productio, such as populatio size, desity, ad demographic compositio, icludig race, age ad educatio levels. Our aalysis fids o evidece that IZ programs have had a impact o either the prices or productio rates of market-rate sigle-family houses i the Sa Fracisco area. 8 I suburba Bosto, however, we see some evidece that IZ has costraied productio ad icreased the prices of siglefamily houses. The umber of affordable housig uits produced uder the suburba Bosto IZ programs, ad the estimated size of the programs impact o the supply ad 7 Previous studies iclude Powell ad Strigham (2004a) ad Powell ad Strigham (2004b); for critiques of those studies, see, e.g., Basolo ad Calavita (2004). 8 We chose to use sigle-family permits because they make up the overwhelmig majority of all housig permits issued i all three areas durig the period from 1980 to I ay give year, sigle-family permits average over 90 percet of total permits, ad betwee 50 ad 90 percet of jurisdictios i our sample issued o permits for multifamily housig.

9 The Effects of Iclusioary Zoig o Local Housig Markets: Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas price of housig are both relatively modest. These results reflect the most appropriate aalysis of the best available data. Because of limitatios i the scope ad quality of the available data, however, both the Sa Fracisco ad the suburba Bosto results should be iterpreted with cautio. 9 Give the variatio amog the programs i the two regios, it is ot surprisig that our aalysis of the two regios produced differet results. As we cautioed earlier, IZ is ot a oe-size-fits-all tool. Not oly ca the desig ad scope of a program vary greatly, but its impacts may deped o may variables specific to the jurisdictio. The differet results from the Sa Fracisco ad suburba Bosto aalyses are a importat remider that IZ policies come i may shapes ad sizes ad eed to be thought of as a piece of the larger regulatory framework, ot a stad-aloe solutio. The impact of a IZ policy may be affected by the specific desig of the IZ program ad the effectiveess of its cost offsets, a jurisdictio s reliace o other affordable housig tools, its reasos for adoptig IZ, the ature ad stregth of its housig market, ad the state regulatory framework i which it operates. 15 Quicy, Brookly, NY, BFC Parters ad Pratt Area Commuity Coucil. Photo: Courtey Wolf. What are the Implicatios for IZ Policies? The fidigs from our research suggest a umber of poits that policymakers should bear i mid as they cosider whether to adopt ad if so, how to structure iclusioary zoig policies: Each idividual ordiace should be cosidered o its ow merits. We foud tremedous variatio i the details of IZ policies from oe jurisdictio to the ext. This suggests that IZ is ot a sigle policy but rather a umbrella term for describig may differet but related housig policies, each of which may well have differet effects o the umber of affordable housig uits produced ad o the price ad supply of market-rate homes. I light of this variatio, broad geeralizatios about IZ would seem to be less helpful tha case-by-case aalysis of particular proposals or ordiaces. May IZ policies produce affordable uits, but IZ is ot a paacea for solvig a commuity s housig challeges. The IZ policies that we examied had varied success i producig affordable uits. Some have produced very few or o affordable uits, while others have produced thousads of uits, makig a sigificat cotributio to the availability of affordable homes. Eve those ordiaces that have produced the most affordable housig uits, however, have ot solved the commuity s housig challeges. This suggests that commuities should thik of IZ as oe piece of a broader ad more comprehesive housig strategy, rather tha as a stad-aloe policy respose. 9 9 Please cosult the full study for a discussio of the data limitatios.

10 The Effects of Iclusioary Zoig o Local Housig Markets: 10 Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas More flexible IZ policies may lead to greater productio of affordable uits. Our aalysis of the IZ programs i the Sa Fracisco metro area foud that more flexible IZ policies those that grat desity bouses or exempt smaller projects were associated with a greater productio of affordable uits. The study was ot able to determie why policies that provide desity bouses ad exempt smaller projects produced more affordable housig uits, but oe possible explaatio is that this flexibility cotributed to (or was a maifestatio of) a regulatory climate that ecouraged ew developmet. I cosiderig whether to adopt, ad if so how to structure, IZ policies, the potetial impacts o the price ad supply of market-rate housig should be cosidered. Both our theoretical aalysis ad our aalysis of IZ policies i suburba Bosto suggest that i some settigs, IZ programs may lead to impacts o the price ad supply of market-rate housig that reduce its affordability. While the average size of the price icreases ad supply decreases of market-rate housig across all jurisdictios i the Bosto sample were fairly small, they were evertheless sigificat ad could be larger i some commuities. O the other had, we foud o evidece that IZ caused a icrease i the price or a decrease i the supply of market-rate housig i the Sa Fracisco area, despite the fact that 93 percet of those programs were madatory. These results suggest that adverse price ad supply effects are ot ievitable outcomes of IZ. As explaied more fully i the ext poit, it seems likely that the details of the policies particularly the iclusio of effective cost offsets matter cosiderably. IZ policies that provide meaigful ad achievable desity bouses or other beefits to offset the profits lost o affordable uits should be less likely to impact adversely the price ad supply of market-rate housig. Data limitatios preveted us from separately aalyzig how differet types of IZ ordiaces impacted the price ad supply of market-rate housig. However, our theoretical aalysis suggests that adverse impacts o the price ad supply of market-rate homes ca be mitigated or eve avoided etirely by providig beefits to developers that fully compesate them for losses associated with sellig or retig IZ uits at below-market prices. The most commo compesatory beefit icluded i the IZ ordiaces we studied was a icrease i allowable desity. Other compesatory beefits iclude fast-track permittig (which decreases the time ad costs of ew developmet) ad reduced parkig requiremets (which reduce the amout of lad eeded per uit). To the extet that such beefits allow developers to realize the same or similar profit uder a IZ policy as might have bee achieved without oe, we would expect that there would be fewer impacts o the price ad supply of market-rate homes. Differet cost offsets may be eeded i differet commuities ad i differet market cycles. The ecoomics of the developmet process vary sigificatly from commuity to commuity. They also vary sigificatly over time, eve withi a sigle commuity. For this reaso, it is likely that differet commuities will eed to adopt differet offset policies to esure that IZ policies fully compesate for losses associated with below-market uits. These policies also will eed to be reviewed over time to esure they remai meaigful ad effective.

11 Cost offsets eed to work i practice, ad ot just o paper. Practitioers report that i may commuities, desity bouses or other offsets that are provided i a IZ ordiace are ot i fact realizable because of oppositio from commuity members, plaig departmet staff, ad others, or because other policies such as height caps prevet developers from buildig the additioal uits. To the extet that promised offsets do ot materialize i particular commuities, developers may become less iclied to build there, or may eed to raise the price of housig for market-rate customers. Broad-based cosultatios with stakeholders may be helpful i desigig effective policies ad moitorig their implemetatio. To esure that IZ policies are truly effective i offsettig the costs associated with below-market uits, it may be helpful to egage a broad rage of stakeholders, icludig both for-profit ad oprofit developers. These stakeholders ca help commuities develop policies that take ito accout the realities of costructio costs ad market dyamics ad provide ivaluable feedback o how the policies are workig oce they are implemeted. These stakeholders also ca help advise jurisdictios o whether there are particular types of housig or particular areas of the commuity i which IZ policies may ot be eeded, may be couterproductive, or may eed to be more flexible to work effectively. Related Housig Policies The Effects of Iclusioary Zoig o Local Housig Markets: 11 Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas The followig are two housig policies that are closely related to IZ that commuities may wish to cosider as part of a comprehesive housig strategy; Reductios i Regulatory Barriers to Developmet. There are may regulatios ad other practices at the local level that make it difficult or expesive to develop ew housig ad do ot produce sufficiet beefits to justify those extra expeses. Other research suggests that these regulatory barriers are drivig up housig prices by costraiig the ability of the market to respod effectively to demad. Reducig those barriers ca help to expad the supply of housig, moderatig home prices, ad mitigatig cocers that IZ might costrai ew developmet. By icreasig the amout of ew developmet, such policies also might icrease the umber of affordable uits produced through a IZ ordiace.* Shared equity homeowership. Uits produced through IZ policies may be affordable whe origially produced, but will likely become much less affordable oce ay affordability restrictios expire. Through commuity lad trusts ad other shared equity homeowership strategies, commuities ca esure that affordable uits produced through IZ stay affordable over time, while still providig residets with a opportuity to build assets.** Similar policies ca be applied to retai the affordability of retal uits over time, though ogoig operatig subsidies may be eeded i some cases. * For more iformatio, see HUD s Regulatory barriers clearighouse ( the Ceter for Housig Policy s olie guide to state ad local housig policy ( ad the followig publicatios: Glaeser et. al. (2005) ad Schuetz (2007). **For more iformatio, see the Ceter for Housig Policy s suite of materials o shared equity homeowership at

12 Refereces Basolo, Victoria ad Nico Calavita Policy Claims with Weak Evidece: A Critique of the Reaso Foudatio Study o Iclusioary Housig i the Sa Fracisco Bay Area. Workig paper. Brow, Kare Destorel Expadig Affordable Housig Through Iclusioary Zoig: Lessos from the Washigto Metropolita Area. Washigto DC: Brookigs Istitutio Ceter of Urba ad Metropolita Policy. Calavita, Nico ad Keeth Grimes Iclusioary Housig i Califoria: The Experiece of Two Decades. Joural of the America Plaig Associatio 64(2): Califoria Coalitio for Rural Housig ad No-Profit Housig Associatio of Norther Califoria Iclusioary Housig i Califoria: 30 Years of Iovatio. Califoria Coalitio for Rural Housig Califoria Iclusioary Housig Database. Fox, Radhika ad Kalima Rose Expadig Housig Opportuity i Washigto, DC: The Case for Iclusioary Zoig. Oaklad, CA: PolicyLik report. Edward Glaeser, Jey Schuetz ad Bryce Ward Regulatio ad the Rise of Housig Prices i Greater Bosto. Harvard Uiversity, Rappaport Istitute for Greater Bosto workig paper. The Effects of Iclusioary Zoig o Local Housig Markets: 12 Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas No-Profit Housig Associatio of Norther Califoria Affordable by Choice: Treds i Califoria Iclusioary Housig Programs. Pioeer Istitute for Public Policy Research ad the Rappaport Istitute for Greater Bosto Local Housig Regulatio Database. Prepared by Amy Dai ad Jey Schuetz. Powell, Bejami ad Edward Strigham. 2004a. Housig Supply ad Affordability: Do Affordable Housig Madates Work? Los Ageles: Reaso Public Policy Istitute, Policy Study No Powell, Bejami ad Edward Strigham. 2004b. Do Affordable Housig Madates Work? Evidece from Los Ageles Couty ad Orage Couty. Los Ageles: Reaso Public Policy Istitute, Policy Study No. 320 Schuetz, Jey No Reters i My Suburba Backyard: Lad Use Regulatio ad the Retal Housig Market i Massachusetts. New York: Furma Ceter for Real Estate ad Urba Policy Workig Paper Series. NoretersimyBackyardcombied.pdf Vadell, Kerry D Iclusioary Zoig: Myths ad Realities, Ceter for Urba Lad Ecoomics Research at Uiversity of Wiscosi Madiso workig paper.

13 Ackowledgemets This issue brief is based o research coducted by Jey Schuetz, Rachel Meltzer, ad Vicki Bee of the Furma Ceter for Real Estate ad Urba Policy at New York Uiversity. The study was commissioed by the Ceter for Housig Policy. The study beefited from the advice ad review of a diverse advisory board, comprised of: Victoria Basolo, Associate Professor, Departmet of Plaig, Policy ad Desig, Uiversity of Califoria-Davis; David Crowe, Seior Staff Vice Presidet for Federal Regulatory ad Housig Policy, Natioal Associatio of Home Builders; Richard Gree, Oliver T. Carr Jr. Chair i Real Estate ad Fiace George Washigto Uiversity; Joatha Levie, Professor of Urba ad Regioal Plaig Uiversity of Michiga; Jeffrey Lubell, Executive Director, Ceter for Housig Policy; ad Kalima Rose, Seior Director, PolicyLik. Complete ackowledgemets may be foud i the workig paper draft, available olie at or All opiios, errors or omissios, however, are those of the Furma Ceter aloe. Fairbaks Ridge, Sa Diego, CA, Chelsea Ivestmet Corporatio. Photo: Ly Schmid. The Effects of Iclusioary Zoig o Local Housig Markets: 13 Lessos from the Sa Fracisco, Washigto DC ad Suburba Bosto Areas Authored by Amy Armstrog, Vicki Bee, Rachel Meltzer, Jey Schuetz The Furma Ceter for Real Estate ad Urba Policy is a joit research ceter of the New York Uiversity School of Law ad the Robert F. Wager Graduate School of Public Service at NYU. Sice its foudig i 1995, the Furma Ceter has become the leadig academic research ceter i New York City dedicated to providig objective academic ad empirical research o the legal ad public policy issues ivolvig lad use, real estate, housig ad urba affairs i the Uited States, with a particular focus o New York City. More iformatio about the Furma Ceter ca be foud at The Ceter for Housig Policy is the research affiliate of the Natioal Housig Coferece (NHC). I partership with NHC ad its members, the Ceter works to broade uderstadig of the Natio s housig challeges ad to examie the impact of policies ad programs developed to address these eeds. Combiig research ad practical, real-world expertise, the Ceter helps to develop effective policy solutios at the atioal, state ad local levels that icrease the availability of affordable homes. More iformatio o the Ceter is available at: