‘Inclusionary zoning’ is perhaps the most commonly referred to mechanism for securing affordable housing as part of new development, but the term is often misunderstood. In the strict sense, inclusionary zoning makes affordable housing inclusion a development requirement, through the zoning scheme. In other words, development meeting particular criteria (typically residential and/or commercial development) and occurring within a designated zone, will need to meet obligations for affordable housing. These obligations might be set in the zoning scheme and relate to a fixed proportion of total dwelling units, or floor space, or might be able to be provided as a cash contribution, usually determined as a reflection of the true cost of providing units which would otherwise be delivered on site. Depending on the requirements of the scheme, the developer might be required to absorb the full cost of constructing the affordable units which must then be gifted or made available to a local affordable housing programme or for lower-income renters meeting set eligibility criteria. Or the scheme might allow or require the developer to partner with an affordable housing provider who will finance the capital development costs of the low-income portion of the total project. Another variation is to deliver the affordable units as part of a low-cost home ownership scheme for eligible purchasers. One of the features of inclusionary zoning schemes in the USA is that they act to directly counteract the socio-spatial segregation associated with traditional public housing projects.
Imposing a requirement of this type is virtually costless to the city, but can add to the supply of affordable housing and promote greater economic and racial residential integration (Calavita et al. 1997). However, inclusionary zoning has the limitation that it can only be effective in strong markets where there is considerable development activity. If the demand in a community is weak, developers will be unwilling to accept the imposition of inclusionary zoning and develop housing in communities where the demand is stronger. Similarly, without significant development activity, an inclusionary housing scheme will deliver very few affordable units. This implies a circular problem, where the ‘exclusionary’ zoning techniques which have contributed to a particular type of housing demand may also foster the conditions by which ‘inclusionary’ zoning codes are likely to be most successful.
Further, support for inclusionary zoning has been difficult to build and sustain in many parts of the USA. Households who live in a community may feel threatened by the development of housing for low- or moderate-i ncome housing, fearing that the value of their own homes may be lessened (Pendall 1999; Schively 2007). The households who will benefit from the development of low-income housing may not live in the community. Thus, the opponents of inclusionary zoning will likely already be present and vocal in local politics whilst the proponents may not be present and will have not standing to speak in the local political process. Of course, developers have also been active in opposing inclusionary zoning schemes and will often argue that affordable housing obligations make housing more expensive across the market, or discourage new housing supply.