The Effects of Inclusionary Zoning on Local Housing Markets: Lessons from Bostonarea suburbs and San

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The Effects of Inclusionary Zoning on Local
Housing MarketsLessons from Boston-area suburbs
and San Francisco area

• Jenny Schuetz, Rachel Meltzer Vicki Been

National Inclusionary Housing Conference San
Francisco CA November 1 2007
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Furman Center for Real Estate and Urban Policy
Since its founding in 1994, the Furman Center for
Real Estate and Urban Policy has become the
leading academic research center in New York City
devoted to the public policy aspects of land use,
real estate development and housing. The Furman
Center is dedicated to

• Providing objective academic and empirical
  research on the legal and public policy issues
  involving land use, real estate, housing and
  urban affairs in the United States, with a
  particular focus on New York City
• Promoting frank and productive discussions among
  elected and appointed officials, leaders of the
  real estate industry, leaders of non-profit
  housing and community development organizations,
  scholars, faculty and students about critical
  issues in land use, real estate and urban policy
  and
• Presenting essential data and analysis about the
  state of New York Citys housing and
  neighborhoods to all those involved in land use,
  real estate development, community economic
  development, housing, urban economics and urban
  policy.

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Study overview and research questions

• IZ spreading rapidly, but little empirical
  research on affordable housing production or
  housing market impacts
• Conducted extensive study of IZ in Boston-area
  suburbs and San Francisco metropolitan area
• Study examines four main research questions
• How are local IZ programs structured in each
  area?
• How do jurisdictions with IZ differ from those
  without?
• How much affordable housing has been produced
  under IZ?
• What are effects of IZ on price and production of
  market-rate housing?

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Data and research methods

• Used several existing surveys of IZ
• Local Housing Regulation Database 2006 NPH/CCRH
  2003, 2006, 2007 Calavita Grimes 1994 Vandell
  2003 Furman Center 2007
• Combined with data on population and
  demographics, building permits housing sales
  prices other land use regulations (Boston-area
  suburbs)
• Conducted multivariate regression analysis
  controlling for determinants of housing supply
  and demand, other regulations (Boston-area
  suburbs), location and time fixed effects

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1) How are IZ programs designed?
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2) Which jurisdictions adopted IZ?

• Larger, more affluent jurisdictions more likely
  to adopt (or adopt sooner)
• Probability of adopting IZ positively correlated
  with pct of jurisdictions in same county with IZ
• Suburban Boston positively correlated with
  having cluster zoning or growth management
• Harder to predict who adopts IZ in CA than in MA
• How does state regulatory framework change
  incentives for adopting IZ?

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3) How much affordable housing has been built
under IZ?

• Boston-area suburbs
• 43 of jurisdictions with IZ have not produced
  any units.
• Over one-third unable to report how many units
  produced.
• San Francisco MSA
• Almost all report having built some units
• Median annual production 9 units/yr
• Region 9,154 IZ units (compared with 29,636
  LIHTC units)
• Older IZ programs have produced more affordable
  units
• In SF, programs with density bonuses and
  exemptions for smaller projects have produced
  more units

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4) How has IZ affected housing prices and
production?

• Suburban Boston some evidence that IZ has
  constrained production and increased prices of
  single-family houses
• San Francisco MSA no evidence of effects of IZ
  on either prices or production
• Fairly serious data limitations suggest that all
  results should be interpreted cautiously
• Estimated size of impact and amount of
  affordable housing produced relatively modest
  for our sample areas
• Highly regulated, expensive markets
• Mostly small suburban jurisdictions

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Questions still be to answered

• How do effects vary by IZ characteristics?
• How does IZ interact with other regulations?
• What is role of informal/alternate affordable
  housing policies?
• How does IZ affect different housing markets?
• Large cities, multifamily housing, less regulated
  areas
• Why and when do jurisdictions choose to adopt IZ?
• Implications for enforcing policies on the books
• How can jurisdictions with IZ better evaluate
  their programs?
• More accurate and detailed accounting of
  affordable housing production
• What share of developments are actually subject
  to IZ?
• Size of density bonuses achieved, value of other
  cost offsets
• Costs of administering IZ program

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Conclusions and policy implications

• Rapid proliferation of IZ in response to high
  overall price levels, shortage of housing for
  low- and moderate-income households
• Economically efficient policy would be to relax
  underlying zoning to allow higher-density,
  lower-cost housing
• Politically IZ may be more feasible
• Need more empirical research to compare costs and
  benefits of various policy options, specifically
• Effectiveness at producing affordable units
• Relative per-unit costs of producing affordable
  housing
• Distribution of effects who benefits and who
  pays?
• With substantial cost offsets, IZ could reduce
  costs of developing housing in highly regulated
  markets and produce some below-market units.
• But IZ alone will not solve fundamental problem
  of high housing prices, and if designed too
  rigidly, might exacerbate affordability problem.

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Contact information

• Jenny Schuetz
• SchuetzJ_at_juris.law.nyu.edu
• Tel. [phone]
• Full study will be available shortly at
• http//furmancenter.nyu.edu