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New Study Finds Inclusionary Zoning a Flawed Policy
Inclusionary zoning programs are a tax on housing consumers, according to new research from the National Center for Smart Growth Research and Education at the University of Maryland (UMD).
“Just like other taxes, the burdens of inclusionary zoning are passed on to housing consumers, housing producers and landowners,” according to the study, which was conducted by Gerrit Knaap, Antonio Bento and Scott Lowe using data from a large number of jurisdictions in California from 1988 through 2005.
The University of Maryland study is one of three major research projects funded by NAHB in an effort to identify the most effective housing affordability strategies. The two other research initiatives were case studies on housing affordability by Abt Associates of Cambridge, Mass.and a look at inclusionary zoning statutes and ordinances, by Tim Hollister of the law firm Shipman and Goodwin in Hartford, Conn.
The UMD study finds that inclusionary zoning ordinances in the state failed to increase the total supply of new housing, but showed measurable effects on a variety of market factors:
- Increasing a city’s multifamily housing starts by 7%, but by as much as 12% when inclusionary zoning requirements were higher, essentially shifting production to multifamily from single-family product
- Raising the price of new homes by 2% to 3%, and by as much as 5% for more expensive homes, compared to communities without inclusionary zoning
- Reducing the size of new homes by 48 square feet
These results were all found to be statistically significant and were consistent with other economic analysis suggesting that such programs act like a tax on housing construction and that their costs outweigh their benefits.
Although the price increases and size reductions may seem relatively small, any policy that moves in the direction of making housing less affordable is undesirable and ineffective. Also, there are easier ways of getting smaller multifamily units built, if that is a community’s express goal, than by using this complex market intervention.
“This is important research that gets to the heart of the inclusionary zoning issue,” said Jerry Howard, NAHB’s executive vice president and chief executive officer. “Inclusionary zoning is a manipulation of the housing market that hurts far more low- and moderate-income families than it helps.”
Hollister has reviewed inclusionary zoning statutes and ordinances across the country to provide a national perspective on them. He found that inclusionary zoning is a complex market intervention that should not be taken lightly or simply copied from another community. It must be considered carefully before it is adopted.
Some communities have enjoyed significant success with other state and local programs designed to address the housing affordability challenge, and many of the most innovative and successful approaches have been detailed in the comprehensive report prepared by Abt Associates. The 350-page compilation of state and local affordability strategies explains how these strategies work, how they are funded, where they have been used and the advantages and disadvantages of each.
In the most extensive report ever compiled on the subject of non-federal affordable housing solutions, researchers at Abt Associates have produced 30 detailed case studies explaining how local governments have used these strategies to address their housing needs. For the most part, the report provides new examples that have not previously appeared in research by such organizations as the Department of Housing and Urban Development, the Center for Housing Policy and the Urban Land Institute.
The Abt Associates study found that the most successful localities have pursued a variety of strategies to encourage affordable housing, and that the strategies getting the most press have not necessarily been the most effective. As an example, it cites North Kingstown, R.I., which used state mandates and guidance for local planning and a significant density bonus and streamlined permitting program for developers.
For resources on housing affordability available from NAHB — including all three reports, which are downloadable for free as public documents — click here (nahb.org/housingaffordability).
For more information, e-mail Debbie Bassert at NAHB, or call her at 800-368-5242 x8443; or contact Ed Tombari, x8309.
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