Inclusionary zoning is an increasingly popular policy tool designed to address housing affordability challenges in urban areas. By requiring or incentivizing private developers to include affordable units within new residential developments, inclusionary zoning aims to create mixed-income communities and reduce economic and racial segregation. On May 9, 2023, the City of Worcester passed its inaugural Inclusionary Zoning Ordinance. This landmark policy is designed to expand affordable housing options and foster diverse, mixed-income neighborhoods throughout the city.

What is Inclusionary Zoning?

Inclusionary zoning refers to regulations or policies that require or encourage developers to set aside a portion of new housing units as affordable homes for lower income households. These policies are often embedded within a municipality’s zoning code and can be either mandatory or voluntary. Mandatory inclusionary housing programs compel developers to include affordable units as a condition of project approval, while voluntary programs offer incentives such as density bonuses or expedited permits to encourage participation.

The core goal of inclusionary zoning is to integrate affordable housing into market rate developments, ensuring that lower income residents have access to housing options in neighborhoods that might otherwise be unaffordable. This approach helps counteract exclusionary zoning policies that have historically contributed to housing shortages and economic segregation by limiting where low cost housing can be built.

The Worcester Inclusionary Zoning Ordinance applies to residential development projects that result in a net increase of twelve (12) or more housing units.

How Inclusionary Zoning Works

Inclusionary zoning policies generally mandate that developers allocate a portion of new residential units as affordable housing, which are legally bound to remain accessible to households earning below specified income thresholds, often measured against the area median income (AMI).

In Worcester, developers are encouraged to commit affordable units under deed restrictions lasting at least 30 years. The ordinance offers three main compliance options:

• Providing a minimum of 15% of the units to households earning up to 80% of the AMI.
• Allocating at least 10% of units for households with incomes not exceeding 60% of the AMI.
• Offering a combination of affordable units at both the 60% and 80% AMI levels in proportion.

For rental properties, rents must not surpass 30% of the tenant's annual income or the fair market rent, whichever is lower. For homes intended for sale, prices should be at or below the median sales price listed in the Multiple Listing Service (MLS) or the maximum mortgage amount a lender would approve based on the household's income, whichever is less. These income limits and rent caps are updated regularly in accordance with federal guidelines and prevailing market conditions.

Alternatively, developers may choose to fulfill their inclusionary zoning obligations by making a one-time payment calculated as 3% of the total construction cost of the project.

This flexibility allows local governments to tailor programs to their housing market conditions and community needs.

Inclusionary zoning ordinances often specify income requirements, affordability periods, and monitoring mechanisms to ensure that affordable units remain available to eligible households over time. These regulations strike a balance between promoting new affordable housing and maintaining financial viability for private developers.

Projects that dedicate at least 5% of their units to households earning no more than 60% of the AMI, while fulfilling baseline affordability standards, are designated as "Eligible Developments." These projects become eligible for valuable incentives, including:

• Automatic Density Bonuses: Permitting an increase in building density, allowing more housing units to be constructed within the same footprint.
• Reduced Parking Requirements: An automatic 25% reduction in parking mandates for developments with Transportation Demand Management Programs, with the possibility of up to a 50% reduction granted through special permits issued by the Planning Board.

Benefits of Inclusionary Zoning

One of the primary benefits of inclusionary zoning is its ability to increase the supply of new affordable housing without relying solely on public funding. By leveraging private development, communities can create affordable homes in high-demand areas, helping to alleviate housing shortages and reduce the financial burden on lower income families.

Inclusionary zoning also promotes social and economic integration by dispersing affordable units throughout market rate projects, which can help reduce economic and racial segregation. This mixed-income approach supports diverse, vibrant communities where lower income residents have better access to amenities, schools, and employment opportunities.

Moreover, inclusionary zoning can generate revenue for local governments when developers opt to pay fees in lieu of building affordable units. These funds can then be reinvested in other affordable housing initiatives, amplifying the impact of the program.

Challenges and Criticisms

Despite its advantages, inclusionary zoning faces several challenges. Developers often argue that mandatory inclusionary housing requirements increase costs and reduce profitability, potentially leading to fewer new housing projects or higher prices for market rate units. Balancing these concerns requires careful program design, including reasonable income requirements and incentives like density bonuses that allow developers to build more units overall.

Another criticism is that inclusionary zoning alone cannot solve housing affordability issues, especially in areas with severe housing shortages or high land costs. It is most effective when combined with other strategies such as increased housing production, rent control, and subsidies for low income housing.

Additionally, monitoring and enforcing compliance can be complex, requiring resources and expertise from local governments to ensure that affordable units remain deed restricted and occupied by eligible households.

Implementation Strategies

Successful inclusionary zoning programs depend on clear regulations and collaboration between local governments and private developers.

Incentives such as density bonuses, expedited permits, or reduced fees can encourage voluntary participation in inclusionary zoning policies. These incentives help offset the costs of building affordable housing and make projects more attractive to developers.

Local governments must also establish robust monitoring systems to track income qualifications, rent levels, and compliance with deed restrictions. Engaging community stakeholders and providing education about the benefits of inclusionary housing can foster broader support for these programs.

International Examples of Inclusionary Zoning

Inclusionary zoning is not limited to the United States; many countries have adopted similar policies to address housing affordability. For instance, cities in Canada, the United Kingdom, and Australia have implemented inclusionary housing requirements with varying degrees of success. These international examples highlight the adaptability of inclusionary zoning policies to different housing markets and regulatory environments.

By studying global best practices, local governments can refine their approaches to maximize the production of new affordable housing while minimizing unintended consequences.

Conclusion

Inclusionary zoning represents a vital tool in the effort to build affordable housing and create inclusive, equitable communities. By requiring or incentivizing developers to include affordable units within new residential developments, these policies help address housing shortages, reduce economic and racial segregation, and provide housing options for lower income families.

While challenges remain, thoughtful program design, effective incentives, and strong enforcement can make inclusionary zoning a cornerstone of urban development strategies. As housing affordability continues to be a pressing issue in many cities and counties, inclusionary zoning policies offer a promising path toward sustainable, mixed-income neighborhoods that benefit all residents.