Can inclusionary zoning be an effective and efficient housing policy? Evidence from Los Angeles and Orange counties

Abstract

Inclusionary zoning-requiring and encouraging developers to build some affordable housing in market-rate projects-is a growing but deeply contested practice. We evaluate the experience of inclusionary zoning programs in Los Angeles and Orange Counties, including their structure and elements, effectiveness in delivering affordable housing, and effect on housing markets and supply, to address the debate. We find that the programs vary but are not heavily demanding and include cost offsets. Low in-lieu fees, however, can be the weak link. Many of the mandatory programs are effective, if effectiveness is measured by comparing the affordable housing productivity of inclusionary zoning with other affordable housing programs. We found no statistically significant evidence of inclusionary zoning's adverse effect on housing supply in cities with inclusionary mandates. We conclude that critics underestimate the affordable housing productivity of inclusionary zoning, and overestimate its adverse effects on housing supply. Nonetheless, inclusionary zoning is no panacea and needs to be part of a comprehensive housing strategy. © 2010 Urban Affairs Association.