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The Reason report found compelling evidence that the approach is a poor substitute for policies designed to ease governmental restrictions on the supply of new housing:
- Inclusionary zoning produces few units. In the 12 cities in the two-county area studied, only 6,379 affordable units were produced, and 70% of those were in Irvine. “After passing an ordinance, the median city produces less than eight affordable units per year,” far below the number needed.
- Inclusionary zoning has high costs. In half of the jurisdictions studied, the cost associated with selling each inclusionary unit exceeded $575,000. In current prices, the cost of inclusionary zoning in the average jurisdiction has been $298 million, bringing total costs to date for Los Angeles and Orange Counties to $3.9 billion.
- Market-price housing becomes more expensive. The prices of new homes in the median city increase by $33,000-$66,000 because of inclusionary zoning, the report found. That amount jumps to more than $100,000 in high-cost cities such as San Juan Capistrano and Laguna Beach.
- The mandates decrease new housing production. In the eight cities where there was sufficient data, researchers found that housing production decreased by 17,296 units, or $11 billion, in the period following adoption of inclusionary zoning compared to the seven-year period prior to their implementation. Those cities produced only 770 affordable units during the seven years when the mandates were in force.
- Inclusionary zoning takes a toll on government revenue. Because inclusionary zoning lowers assessed values and restricts resale values for a number of years, the report estimates that $752 million in tax revenue has been lost.
- Price controls are not addressing the problem. The report says that one study found that 90% of the difference between physical construction costs and the market price of new homes can be attributed to land use regulation.
The new Reason report follows up on a similar study it released in the spring on inclusionary zoning in the San Francisco Bay Area, where cities starting adopting it in 1973.
To date, the 50 cities in that area with inclusionary zoning have produced fewer than 7,000 affordable units, averaging only 228 units. At current rates, the zoning will only produce 4% of the estimated 24,000 affordable housing units the region needs annually, according to the earlier report.
From 1990-2000, the Bay Area added 550,000 jobs but only 200,000 new homes, only about 55% of the housing that was needed to accommodate that increase in employment, according to the California Department of Finance.
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