To Fix Inclusionary Zoning, Fund It
Sightline Institute
A nonpartisan think tank for sustainability: strong communities, a just, green economy, and a healthy environment.
Lessons from places that are solving the biggest problem in abundant housing politics and policy.
On Labor Day weekend, Sound Transit opened four more stops of its light rail line north of Seattle. But when I took my inaugural ride, I had my eye on something equally important as the shiny new transit line to the future of the region’s cities: new apartment buildings sprouting up near the stations.?
And not just any apartment buildings, but four of them built through a rare new policy that may be a key to digging out of the statewide housing shortage: funded inclusionary zoning. ?
Public investments in rail and bus transit create immense opportunities for healthy, low-carbon, economically diverse communities clustered around jobs, services, and transportation choices. But only if those communities also allow ample mixed-income housing to grow up alongside those hubs. ?
One way some North American cities have tried to meet that challenge is by requiring private developers to offer a set percentage of their new apartments at reduced rents, known as inclusionary zoning (IZ). But there’s a big problem with that. If the IZ mandate is unfunded, it actually backfires: the rent revenue lost on the required affordable apartments can make it a money-losing proposition to construct the building in the first place, and homebuilders walk away from projects altogether. This conventional model of IZ—unfunded inclusionary zoning—impedes construction of much-needed affordable and market-rate homes, and squanders the new transit-unlocked opportunities.???
The good news is there’s a way to avoid the unfunded-IZ backfire: use public dollars to cover the cost of the affordability mandate. That is, funded inclusionary zoning.??
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When IZ is funded in this way it doesn’t harm the financial feasibility of homebuilding, and so it avoids the unintended consequences of unfunded IZ that worsen the housing shortage and make rents higher for everyone. And funded IZ still ensures that all new apartment buildings include affordable homes and create mixed-income communities.??
In my full article, I:?
Legalizing larger apartment buildings near jobs and transit is a critical piece of unfinished business for cities throughout North America to meet the long backlog of homes residents need—from young people starting out to retirees downsizing their digs, growing families to growing workforces. Unlike unfunded inclusionary zoning that can backfire and thwart that goal, funded IZ can unlock an abundance of homes—including income-restricted homes—in urban centers with both employment opportunities and robust transit connectivity. For Washington state in particular, funded IZ offers a solution for equitably leveraging the state’s transit investments and creating communities where all neighbors are welcome.?
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