Inclusionary Zoning
Inclusionary zoning can be a suggested policy solution for local governments to deal with rising housing costs. As typically proposed, these ordinances require all future rental construction in a city be priced so that the majority of residents pay higher rental prices to subsidize the rent of others, based on income level. Under inclusionary zoning, hardworking residents like firefighters, nurses, and policemen would be required to shoulder increased rental costs on behalf of their neighbors.
The most common formula is to require that 20% of all new rental housing be rented to persons making less than 60% of the average area monthly income (AMI), at a rental rate below 60% of the average area monthly rent. When this occurs, the remaining 80% of the units will be required to pay 10% more in rent to fund the subsidy.
Inclusionary zoning ordinances must provide the developer an alternative to constructing affordable housing units. However, since there are no limitations on what developer alternatives might be, local and state governments can adopt unfunded affordable housing requirements that require a builder to either pay a development fee or offer rent-restricted units. This stifles development of new housing and transfers the full cost of subsidized rent to the other residents in the community.
Additionally, the housing units under inclusionary zoning restrictions are required to all be identical. Developers are unable to build lower value units alongside the higher value units to compensate for the rent changes. Since construction prices do not decrease, the cost of one persons’ rent is shifted to their neighbor, making it unfair for the majority of residents.
Simply transferring rental costs from one group of residents to another is not a decrease in the cost of housing. Instead, the entire burden of housing is placed on the backs of our vulnerable populations.
In March of 2020, the city of Broomfield passed Inclusionary Zoning Ordinance 2100, “Local Government Authority Promotes Affordable Housing Units.” The ordinance mandates that 20% of any rental development must be affordable for low-income residents or a payment of a large development fee will be charged to the builder. There is a 40-year deed restriction on all rental properties in Broomfield to uphold the standard. Broomfield will now unfairly require mid-income residents to pay the rent of other residents.
A better affordability solution is to build more units.
Local governments should focus on removing barriers to creating additional housing units. If the state can help reduce the costs and delays of constructing new multifamily developments, they will create more available units for residents and accumulate affordable housing long-term.
