Local Tools to Address Housing Affordability: A State-by-State Analysis is the fifth annual report produced in partnership with the 49-state municipal leagues. This post is part of a series highlighting findings from this new report.
The United States is in the midst of a housing crisis — there are not enough homes available for residents across the income spectrum.
One tool that some cities and states are using is inclusionary housing policy. Often referred to as “inclusionary zoning,” this policy has been implemented at state and municipal levels and requires or incentivizes the development of affordable housing alongside market-rate units.
Inclusionary housing policies have been employed in more than 800 cities since the 1970s, with significant evidence that they’ve impacted the creation and expansion of below-market rate units.
These policies can be either voluntary or mandatory. Mandatory inclusionary housing programs require developers to include affordable units in their building plans in order to obtain development rights. In voluntary programs, developers earn incentives like tax breaks and density bonuses in exchange for including units for sale or rent below the market rate.
Given the significance and breadth of inclusionary housing policies, we assessed whether cities are either permitted, limited or preempted in their authority to implement inclusionary housing.
Cities in 20 states and the District of Columbia are either expressly permitted to create all forms of inclusionary housing policy or they have home rule authority with no state restrictions on local inclusive housing. Cities in 10 of the “permitted” states face no legal barriers to inclusionary housing. These include Alaska, Delaware, Hawaii, Maine, Montana, New Jersey, New York, Ohio, Pennsylvania and West Virginia.Cities in these states have home rule authority, which grants them the power to pass laws and govern themselves. In these states, at least one city has implemented a mandatory inclusionary housing policy.
22 states impose either limitations on city inclusionary housing policies or legal barriers to implementing inclusionary housing policies, particularly mandatory programs. Cities in limited states are either governed by Dillon’s Rule with no state statute expressly authorizing inclusionary housing measures, or state law prohibits rent control. In rent control cases, courts have interpreted prohibition on rent control as a de facto ban on inclusionary housing programs that require the development of affordable rental units.For example, North Carolina has a state prohibition on rent control that has made it difficult for cities to enact mandatory inclusionary policies for rental housing. The state of Minnesota, on the other hand, prohibits cities from enacting rent control policies but allows cities to establish sales prices or rents for affordable housing for low- and moderate-income households. It also includes equity sharing to maintain the long-term affordability of the affordable units. These provisions make it possible to implement inclusionary housing policy but limit it to projects receiving public subsidy or a zoning change.
Eight states expressly prohibit cities from enacting local inclusionary housing measures where at least some form of inclusionary housing is strictly prohibited for both ownership and rental housing, either by statute or by court decision. Many preempt mandatory local inclusionary housing policies but allow voluntary programs.In Indiana, the state prohibits municipalities from requiring developers to follow any requirement that would control rental or purchase prices, and they may not establish it in lieu of a fee.Some states permit cities to establish voluntary policies where developers can be incentivized to create more affordable housing. For example, the city of Austin, Texas, offers developers waivers, density bonuses, tax breaks and development agreements if they set aside affordable rental and ownership housing for low and moderate-income households.
Cities and states must work together to offer their residents a safe place to call home. As more cities and states implement inclusionary housing policies, it is important for city leaders to learn from the successes and failures in order to implement policies that can be make housing as affordable as possible.
About the Author:
Domenick Lasorsa is the associate for Veterans and Special Needs in the NLC Center for City Solutions.