Many Inclusionary Programs offer developers the option to pay a fee instead of building units. Learn more about the pros and cons of offering a fee option here. If the fee option is allowed, then the jurisdiction will need mechanisms for collecting, pooling, and utilizing fee revenue.

Typically, cities deposit fee revenue from either an in-lieu or housing development impact fee into a housing trust fund. Cities then use these funds to facilitate construction of additional units for low- and moderate-income households or to achieve other affordable housing goals.

However, cities’ policies can vary widely in terms of the guidance issued on when and how fees should be spent. Some inclusionary housing ordinances provide no guidance and some have very specific rules. Often cities develop criteria for spending fee revenue, including:

  • Avoiding further concentration of poverty by not locating affordable housing in low-income neighborhoods.
  • Requiring or prioritizing sites that offer access to transit.
  • Allowing only sites that conform to local plans.
  • Allowing only sites that offer proximity to stores or services.
  • Avoiding undesirable land uses (e.g. not near highways).

Boulder, Colorado

Boulder has been able to use inclusionary housing in-lieu fees very flexibly to fund a set of housing needs. Fee revenue has been used for capital improvements and other maintenance of affordable housing stock, down payment assistance programs, foreclosure prevention programs, special-needs housing such as battered women shelters, homeless shelters, and homes for people with disabilities

Monterey County, California

The Monterey County Housing Department provides the County Supervisors with an annual housing report. This report includes projections of in-lieu fee income from their inclusionary housing ordinance and projections of likely demand for housing subsidies from potential affordable housing projects. The inclusionary fees are presented alongside similar projections for other housing funds, which helps policymakers understand how the in-lieu fees contribute to the county’s overall affordable housing program.


The Housing Trust Fund Project

The Housing Trust Fund Project is a program of the Center for Community Change.  The project helps communities establish effective local housing trust funds.  Visit Site.