Guide: An Overview of the Tool
What is
it? Is your community (or other
communities in your region) experiencing a
significant shortage of affordable housing? Or,
is most of the affordable housing
disproportionately concentrated in certain areas
within a particular neighborhoods, cities, or
counties? Whether your community is
characterized by an overall lack of affordable
housing, by the geographic segregation of the
existing affordable housing supply, or by both,
implementing a mandatory inclusionary housing
requirement can help address both problems
simultaneously.
Mandatory inclusionary housing policies require
developers to construct a certain percentage of
units in any new residential development for
low- and moderate income households. In exchange
for building affordable housing, developers
typically receive regulatory flexibility such as
expedited permitting, reduced permit fees,
increased allowable densities, reduced parking
requirements, relaxed development standards
(i.e., reduced setbacks, narrower street widths,
etc). Cities may also provide one or more
financial incentives or ‘cost offsets’ to
developers such as below-market rate
construction loans or land ‘write-downs’
(selling publicly-owned land for reduced price),
or tax-exempt mortgage financing for low- and
moderate-income homebuyers. This financial
assistance is often made available via a local
housing trust fund, state housing bonds,
or federal
Community Development
Block Grants.
Why use it? There are three main
reasons to implement a mandatory inclusionary
housing requirement in your community: 1)
to increase the supply of affordable housing
in your region, 2)
to
better integrate affordable housing in diverse
neighborhoods throughout the region, and
3)
to
help stabilize neighborhoods experiencing
displacement as a result of rapid
gentrification.
Increasing the supply of affordable housing:
Communities all across the country are
experiencing a critical shortage of affordable
housing, and inclusionary housing requirements
are one strategy that many communities are
pursuing to address that crisis. Consider the
following statistics:
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An
increasing number of Americans are paying
too much for housing. The
Millennial Housing
Commission, established by
Congress to analyze the country’s current
housing policy, stated in its
final report
that in 1999 there were 28 million US
households– more than one in four– that
paid more than 30 percent of their income
(the national affordability standard) for
housing. Of these 28 million households,
twelve million were paying more than
half of their income for housing. |
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A
growing number of working families have
critical housing needs.
The National Housing
Conference reported in a
recently released
study that between 1997 and
2001, there was a 60 percent increase
(from 3 million to 4.8 million) in the
number of ‘working families’ (households
with at least one full-time worker) with
‘critical housing needs’ (defined as
families paying more than 50 percent of
their income for housing, living in a
physically dilapidated structure, or
living in overcrowded conditions). Clearly
a job is no longer an automatic guarantee
that one will find an acceptable housing
situation when one in every seven American
households with at least one full-time
worker is paying more than half of its
income for housing or living in slum-like
conditions. |
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There
is a shrinking supply of affordable
housing.
The Millennial
Housing Commission’s report
also found that the number of rental units
affordable for low- and moderate-income
households fell by 9.5 percent between
1985 and 1999, meaning that the difference
between the supply of affordable rental
units and the demand for these units was
1.8 million. |
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Incomes are not keeping pace with housing
costs. A
recent report
issued by the
National Low Income
Housing Coalition found that a
person working full time in the US would
have to earn an average of $14.66 an hour
(nearly three times the federal minimum
wage of $5.15) to be able to afford the
market-rate rent on a modest 2-bedroom
apartment or house without paying more
than 30 percent of their income. In fact,
from 1999 to 2002 there was no
metropolitan area in the US where a
full-time, minimum-wage job would allow a
one-earner household to rent a 2-bedroom
home at the region’s fair market rent
without exceeding the 30 percent
affordability standard. And in 2002, there
was no metropolitan area in the US (with
the exception of Puerto Rico) where such a
household could rent a one bedroom home
without exceeding the 30 percent
affordability standard. |
As the above statistics show, numerous
communities across the country– including many
in California– are in desperate need of workable
strategies that will increase the supply of
affordable housing in their region. Mandatory inclusionary housing policies have proven
successful in producing significant numbers of
affordable housing units (see the ‘Is
This the Right Tool for You’ section for
studies of inclusionary housing’s effect on
increasing the affordable housing supply in
three different communities).
Integrating affordable housing throughout the
region: In addition to increasing the supply
of affordable housing, inclusionary housing
requirements also help integrate
affordable housing into the many different types
of neighborhoods that exist in a community or
region. Thus, implementing mandatory
inclusionary housing policy in your community
can help address problems that can occur when
the majority of affordable housing stock is
concentrated in certain neighborhoods,
including:
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Segregation
of working families in certain
neighborhoods with affordable housing can
limit these families’ access to employment
and educational opportunities thereby
reducing the region’s ‘social capital’ and
economic competitiveness. |
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A regional
imbalance between the places where working
families can afford to live and the places
where available jobs are located can
worsen traffic congestion by forcing many
low- and moderate- income workers to
travel longer distances to their place of
employment. |
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By limiting
the pool of workers who can live within a
reasonable commuting distance, this
‘housing/jobs imbalance’ can also cause
employers difficulty in recruiting and
retaining appropriately-skilled workers. |
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Concentrating affordable housing can
create distressed areas that cause
moderate-income families (who don’t want
to live in ‘bad neighborhoods’ but cannot
afford to buy into higher-priced areas) to
abandon older neighborhoods in search of
affordable housing in outlying
neighborhoods, thereby further
concentrating the working poor and
contributing to the deterioration of the
housing stock in the neighborhoods that
are left behind. |
Stabilizing
neighborhoods experiencing displacement:
Implementing a mandatory inclusionary housing
policy in your community also limits the
displacement of low- and moderate-income
families from neighborhoods that are
experiencing gentrification. For example, older
communities that are undergoing relatively rapid
population growth will often begin to see rising
housing prices and, ultimately, new high-end
residential redevelopment in older
neighborhoods. Mandatory inclusionary housing
ensures that when higher income households move
into working-class neighborhoods, affordable
units will be developed along with higher-end
units so that some share of all new housing
developments will remain affordable to current
neighborhood residents.
Relatedly, inclusionary housing also helps
stabilize neighborhoods by promoting the
development of ‘life-cycle housing’ (the
construction of a diversity of housing types and
at all price levels within the same
neighborhood) thereby giving long-time residents
the option to remain in their existing
neighborhood and maintain existing community
network as their housing needs change throughout
their lifetime For example, providing a
diversity of housing types within each
neighborhood gives people the opportunity to
stay in the same neighborhood throughout their
life, even if they need a larger home as they
have children, want to be in close proximity to
elderly parents who may need caretaking, or,
upon retirement, choose to ‘move-down’ to a
smaller home that requires less upkeep.
When coupled with a full array of strategically
chosen public policies aimed at preserving and
increasing the supply of affordable housing (such
as
incentive zoning, regional fair-share housing
requirements, and
development impact fees and exactions), a mandatory inclusionary
housing requirement can help your community
create more affordable housing that is
better integrated throughout the region’s
neighborhoods and will help stabilize
older neighborhoods by reducing resident
displacement and turnover.
How does it work? Inclusionary
housing is a flexible affordable housing
strategy that can be tailored to respond to the
unique economic and political climate of a
community of any size. Thus, inclusionary
housing is successful in creating more
affordable housing in both small and large
communities, in fast growing suburban areas with
a large supply of undeveloped land and in
‘built-out’ urban areas that are pursuing
redevelopment opportunities. The following
illustrates the flexibility of inclusionary
housing as an affordable housing strategy:
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Some
inclusionary housing policies are
voluntary, while others are mandatory. |
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Many cities
offer developers incentives in exchange
for building affordable units, while
others simply require the units to be
built outright in any development of a
certain size (usually varying from 5 to
100 units). |
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Some cities’
ordinances require developers to construct
the affordable units within the same
development, while others allow developers
to construct the units at another
location, to donate an equivalent parcel
of land suitable for future housing
development, or to simply contribute to a
city-administered affordable housing fund
in-lieu of constructing the units
themselves. |
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Cities’
affordability requirements vary
substantially: the number of units that
are set aside as affordable can vary from
5 to 30 percent, the length of time that
the units must be maintained as affordable
can vary from 10 to 50 years (or in
perpetuity), and the targeted income group
for the affordable units can include
Moderate Income, Low Income, Very Low
Income, and Extremely Low Income
households, or some combination of each
categories. (See
pop up window for definitions of
these categories.) |
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Most cities’
apply inclusionary housing policies
universally in all areas of their
community, while a few apply inclusionary
housing selectively, targeting areas that
are experiencing rapid residential or
commercial growth, areas near transit hubs
or corridors, or areas that have been
identified for redevelopment or upzoning. |
To learn more
about which components of the above inclusionary
housing strategies will be the most successful
in your community, see the next section (‘Is
This the Right Tool for You?’) or jump to
‘How to
Put this Tool into Action in Your Community’.
 
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