Inclusionary zoning is a tax on new construction

The worst possible way to finance social housing

Sometimes, policies have unintended consequences or unforeseen downsides.

Other times, I’m not sure the downsides or adverse consequences are unforeseen or unintended at all.

This is how I feel about so-called “inclusionary zoning.” Proponents claim the policies promote the building of affordable housing, but they almost always make housing less affordable than it would be without the IZ.

Earlier this year, for example, Cambridge enacted a historic zoning reform that will allow four-story buildings by right throughout the city. The original proposal, though, was to allow six-story buildings. That was changed during the course of council debates to say that five- and six-story buildings are allowed, but they’re “required to have a minimum lot size of 5,000 square feet and for 20 percent of the units to be affordable.”

If you look at the legislative history, I think that change was pretty clearly made in order to deter the construction of six-story buildings. Similarly, the Cambridge zoning reform also has a proviso which says that if your building has ten or more units, then 20 percent of the units need to be set aside as affordable.

That’s a pretty significant limitation when you think about it. A lot of what gets built in urban multifamily construction is small one-bedroom apartments catering to young professionals who place a premium on proximity to restaurants and retail amenities. By making that kind of project harder to pull off, Cambridge is again blunting the impact of the reform.

As long as you understand it in those terms, it’s fine. The zoning changes are still a big deal. Allowing four-story structures by right is a big deal. The fact that six-story projects probably won’t get built doesn’t change that. And if non-profit developers take advantage of the opportunity to do a few mixed-income six-story buildings, that’s icing on the cake. Limiting the new projects to nine units or fewer is similarly unfortunate, but it’s still a big deal — there’s a lot that can be done through four-story buildings with nine or fewer units.

If it were up to me, of course, those limits wouldn’t exist. And buildings wouldn’t be capped at six stories either. But no one gets everything they’d like in life, and pairing a historic reform with some limitations is totally reasonable pragmatic politics.

What’s not good, though, is if these affordability rules are understood as mechanisms for actually making housing more affordable.

What makes housing more affordable is increasing the supply of housing. Affordability requirements do generate some quantity of subsidized units, which is nice for the people who get them. But it finances their construction in what has to be the most destructive possible way: a focused tax on nearby new construction. If Cambridge wants more subsidized housing, the way to do that is to zone as permissibly as possible, then use general tax revenue to pay for the construction of subsidized units.

The impact of inclusionary zoning

The whole concept of inclusionary zoning arises, historically, out of an older pre-YIMBY discourse about land use.