This report examines inclusionary policies all over the state of California and looks at their effectiveness, what kinds of homes were produced, who lived in these homes, and the overall impact on the city or county. View Report
By the Numbers:
30,000— Affordable units produced over a six-year period by California’s inclusionary programs.*
80,000— Units produced since adoption by 50 inclusionary housing programs across the country surveyed by the Innovative Housing Institute. *
7%— The neighborhood (census block group) poverty rate of a typical inclusionary housing unit is significantly lower than the poverty rate (16%) in neighborhoods without inclusionary housing units within the same jurisdictions. Inclusionary units are in low-poverty neighborhoods and the same study suggests that inclusionary units are in areas assigned to higher-performing schools than those without inclusionary units. *
There is no national data on the rate at which inclusionary housing programs are producing new affordable units. By comparison, the Low Income Housing Tax Credit (LIHTC) program has produced two million units since 1987.* In the communities that have long-established and well-designed programs, inclusionary housing can be an important source of units. Brown* found that inclusionary housing accounted for half of Montgomery County’s affordable housing production, and Mukhija and colleagues* found that inclusionary programs in Southern California were producing about as many units annually as the LIHTC program was creating. These studies suggest that if inclusionary housing were implemented more widely, the programs could be a major source of new affordable housing.
An economic feasibility study conducted by a qualified real estate economist can provide local policymakers with a clearer sense of how inclusionary housing requirements will impact the profitability of local development projects and the price that developers can pay for developable land. The economist will research local prices and rents as well as the key factors driving the cost of building. The economist will use this information to assess whether or not proposed affordable housing requirements would make typical projects infeasible. Any kind of feasibility study is necessarily somewhat imperfect, but the goal is to give policymakers a general sense of the likely impact of proposed housing requirements and incentives on land prices and development profits. Ultimately, a detailed feasibility study is the only way to address legitimate concerns about whether affordable housing requirements could do more harm than good.
Read more about conducting an economic feasibility analysis here.
No: Rents and home prices are set by a market. When a city imposes inclusionary housing requirements, it may increase a developer’s costs. But developers can’t really pass those costs onto home buyers or tenants because new units must still be competitively priced in the overall market. Instead, over time, land prices will fall to absorb the cost of the inclusionary housing requirements. Any incentives offered by a community would reduce the degree of land price reductions. Both theoretical and empirical economic research supports the conclusion that in the short term the costs associated with affordable housing requirements are born by developers and in the longer run they are passed on to land owners.
Probably Not: Inclusionary is only ever one among several tools that cities deploy to address the dire need for more affordable housing and the full set of policies is not enough to meet the full need in most cities. But that is no reason not to do all that we can. Denver City Council member Robin Kniech says “no one ever says we shouldn’t pave the roads just because we can’t fill every pothole.”
No national research on the affordable housing production in inclusionary housing programs has been conducted, but production numbers exists for some local programs at different points in time. In a review of inclusionary housing programs in California, NPH* found that about 30,000 inclusionary housing units were produced by approximately one-third of California’s inclusionary housing programs between 1999 and 2006, but production varied substantially across localities.
This report examines 11 inclusionary programs across the United States to determine the extent to which the policies serve lower-income families and provide inclusionary residents with access to low-poverty neighborhoods. They also evaluate whether inclusionary programs offer lower-income children opportunities to access high-performing schools. View Report