Ep 79: Who Pays For Inclusionary Zoning with Shane Phillips
Oct 16, 2024
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Shane Phillips, a housing policy expert from UCLA, is joined by Mike Lenz, a former public policy professor at USC. They dive deep into the complexities of inclusionary zoning (IZ) in Los Angeles, challenging conventional beliefs about who bears its costs. Rather than developers, they argue all renters share the burden. Insights from a development simulator reveal potential impacts on housing production. The duo also reflects on the nuances of research data and the need for localized policy changes to truly address the affordable housing crisis.
Inclusionary zoning policies often distribute the financial burden of providing affordable housing across all renters, not just developers or high-income residents.
Increasing inclusionary zoning requirements significantly decreases overall housing production, highlighting the unintended consequences of such policies on affordability.
Critics of inclusionary zoning advocate for alternative approaches, such as tax incentives and direct subsidies, to foster effective housing production strategies.
Deep dives
Background on Inclusionary Zoning
Inclusionary zoning (IZ) refers to policies that require or incentivize developers to include affordable housing units within their market-rate projects. These policies usually aim to balance the needs of different income groups within communities and increase the availability of affordable living spaces. The podcast discusses how IZ often places the financial burden of providing affordable units on developers, landowners, or higher-income renters in mixed-income housing. However, it questions this assumption, suggesting that the costs are distributed more widely, impacting all renters across the income spectrum.
Analyzing the Costs of Inclusionary Zoning
An in-depth analysis using the Turner Housing Policy Simulator illustrates the complex trade-offs involved in varying IZ requirements. When examining scenarios from 0% to 40% IZ, the findings indicate that even a small increase in affordability requirements significantly decreases the total number of housing units produced. As requirements rise, this decrease becomes more pronounced, underscoring the essential point that higher IZ rates can simultaneously reduce the total supply of both affordable and market-rate housing. This phenomenon exemplifies the potential unintended consequences that can arise when local governments impose strict affordability mandates without adequately considering market dynamics.
Simulation Findings and Real-World Implications
The analysis points out that increasing IZ requirements leads to a notable drop in housing production, particularly for lower-income units. For instance, moving from a 0% to 1% requirement could reduce overall housing production by more than 70,000 units. Furthermore, the simulation reveals a concerning trend where too high an IZ requirement not only limits market-rate development but also starts to erode the number of affordable units being produced. This indicates a critical balance that local government policies must seek to maintain in order to avoid exacerbating housing shortages.
Who Benefits and Who Pays?
The podcast explores the beneficiaries of IZ, focusing on the limited number of low-income households that receive subsidized housing. While those in affordable units enjoy significant savings, the analysis highlights the proportion of costs that ultimately fall onto a much larger group of market-rate renters. If rents increase even slightly due to reduced overall housing production, the financial burden can quickly outweigh the benefits experienced by those within the affordable units. This sheds light on the broader socio-economic consequences of IZ policies, illustrating that the impacts extend beyond developers and affluent renters to include lower and middle-income households.
Alternative Solutions for Housing Affordability
The discussion culminates in a critique of IZ as a primary tool for achieving housing affordability, suggesting it often replaces necessary direct public funding for affordable housing. Effective alternatives could include policies that provide tax incentives to developers or facilitate a more direct approach to housing subsidies, as evidenced by successful programs seen in other cities like Portland. By removing burdensome restrictions from developers and offering incentives for building affordable units, cities may foster a more conducive environment for housing production. Ultimately, achieving widespread housing affordability requires a multi-faceted approach that prioritizes substantial investments in affordable housing and reexamines the role of land-use policies.
Inclusionary zoning policies use the market to produce affordable housing, but nothing comes for free. So who pays? Shane takes the guest seat to discuss his analysis of IZ in Los Angeles, making the case that it’s not developers or high-income renters who bear the cost, but all renters — poor, middle income, and wealthy alike.