Possibly: There is some evidence that it is possible to set affordable housing requirements so high that they cause developers not to build or landowners not to sell. If this happens it can result in reduced supply of housing and ultimately higher housing prices. However, the data suggests that programs that provide incentives and flexibility can successfully require significant affordable housing without any impact on market supply or prices.
There seems to be agreement that inclusionary programs could theoretically diminish the supply of housing and therefore increase prices, but there is no agreement about how often this happens or how significant the impact is. A study by the libertarian Reason Foundation concluded that the production rate of market-rate homes fell following the adoption of inclusionary housing policies in Southern California.*
Basolo and Calavita* critiqued this study, pointing out that jurisdictions are most likely to adopt inclusionary housing policy toward the peak of the economic cycle, weakening the argument that inclusionary housing causes production to fall. A follow-up study by researchers at the University of California Los Angeles carefully compared the data for communities with and without inclusionary housing in Southern California. That study concluded that the adoption of inclusionary policies had no impact on the overall rate of production.*
The most rigorous study to date was conducted by researchers at the Furman Center at New York University,* who studied inclusionary programs in the Boston and San Francisco metropolitan areas. In the towns around Boston, inclusionary requirements modestly decreased the rate of housing production relative to nearby towns, and slightly raised the market price of residential real estate. In the San Francisco area, however, inclusionary programs had no impact on production or prices, suggesting that it is possible to develop inclusionary programs that don’t impact market prices. These same programs were also able to create more affordable units than their counterparts in the Boston area.
