Zoning Practice — November 2004

Ask the Author

Here are reader questions answered by Nicholas J. Brunick, author of the October 2004 Zoning Practice article "Inclusionary Housing, Part II: Proven Success in Large Cities."

Question from Adam Wolff, Brooklyn, New York:

In New York City, a coalition of community planners, affordable housing advocates and community development professionals have argued for mandatory inclusionary zoning only in areas affected by widespread upzoning policies (mostly from manufacturing to residential) promulgated by city planning. At the core, this argument rests on the notion that affordable housing should be a public benefit derived from public action that produces windfalls for private landowners and developers. It also seems to try to correlate, at least geographically, areas of increasing land value and gentrification, with the need for affordable housing, while leaving other areas of the city unaffected. Could you please comment on this approach to inclusionary zoning. Also, do you think this approach could be replicated in other cities or is it unique to the circumstances of New York City?

Answer from author Nicholas Brunick:

I have heard about your campaign and I think it is very compelling. The case for inclusionary zoning is definitely strengthened in the context of upzoning policies that are significantly increasing the value of land and providing the current owners with an effective "windfall" due to changing governmental policy. In these cases, opponents cannot drag out many of their usual arguments in opposition.

Developers will not be unfairly burdened. Developer often argue that under IZ, they bear the full burden of addressing a social problem. Of course, if an IZ ordinance contains real cost offsets (e.g. density bonuses, fee waivers, etc.), then the burden is shared. However, in the NYC case, If the developer already owns the land, they are receiving what is probably a very significant windfall profit from the upzoning. This windfall profit will be offset to some extent by the inclusionary housing requirement imposed. If the developer purchases the land after it is upzoned with the inclusionary housing requirements in place, they will be aware of the required affordable housing component and will take that zoning regulation into account when they bargain for the price of the land (as they do for any other zoning regulation or requirement). In either scenario, the inclusionary housing requirement is a reasonable request given the public benefit that has been bestowed on the developer. No cost offsets are needed — the upzoning serves as the cost offset.

Landowners will not be unfairly burdened. As stated above, if they already own the land, the rezoning grants them a huge windfall totally unrelated to any improvements that they themselves have made to the property. The inclusionary housing requirement moderates this windfall but does not unfairly deny them an expected return. Again, no offset is needed, the inclusionary housing requirement is "paid for" or "offset" by the public action of upzoning, which increases the value of the land.

Because the inclusionary requirement is only imposed in places where the public (through the zoning change) has provided a significant benefit, any potential legal challenges that the inclusionary zoning policy is a taking are largely eliminated and any policy arguments that the regulation will deter development or harm the property tax base are effectively muted.

In many ways, the New York example is similar to situations in other communities where developers must include some affordable housing when they receive a zoning change or when they receive public subsidies or when they receive a write-down on city-owned land. For example, in Chicago, right now, the city requires developers that receive a write-down on city-owned land to include 10 percent affordable housing in the development and developers with receive Tax Increment Financing dollars to include 20 percent affordable housing in the development. Unfortunately, this provision does not cover many developments and thus does not generate many units (approximately 100 units last year — not much for a city like Chicago that is experiencing a development boom). Also in Chicago, many aldermen in North Side neighborhoods require developers who need any assistance from the alderman (zoning change, etc.) to include 10 percent or more affordable housing in the development. This practice has created much more affordable housing than the city's broad policy on TIFs and city land, but still falls far short of what an across the board, citywide inclusionary zoning ordinance could produce in the city. Other communities have taken this approach as well. Some of them have taken this approach without passing a formal ordinance or policy.

The New York proposal sounds very promising. If the amount of land to be rezoned is significant, it seems like it could produce quite a lot of affordable housing for the city without any public dollars being spent. That's the beauty of inclusionary housing strategies. At a time when the federal government is abandoning its commitment to affordable housing and almost every state in the Union is struggling to balance its budget, cities must find creative strategies to address the problem without public subsidies. The NYC proposal is a classic example.

It seems to me that the NYC proposal could be replicated in other cities and suburbs. As communities change and the economy changes, land uses eventually have to change as well. And certainly, the redevelopment of warehouse districts and downtown districts in large cities and suburban communities has been occurring for some time. As these changes occur and as local zoning policy changes to accommodate this redevelopment, requiring new affordable homes in developments where an "upzoning" has occurred seems to be a no-brainer.

The success of these upzoning policies could differ widely in different locations. In NYC, it is my impression that you are talking about a significant amount of land, which means a significant amount of affordable housing. Not all communities will have that much land undergoing "upzoning." In addition, in NYC, it is my impression that the land to be upzoned lie in areas ripe for residential development. In cities where the land to be upzoned is located in an area that has trouble attracting any development at all, the requirement to include affordable housing in new development may or may not be a prudent policy to adapt. One would have to take a close look at whether such a requirement would deter development or not. NYC is the only location that I know of where an across the board policy to require affordable housing in all new upzonings has been proposed. Overall, I think it is a very exciting model and one that others should consider.

However, as I understand it, the proposal in NYC has not passed yet even with all of its positive elements. I certainly don't have the knowledge to comment on why specifically passage has not yet occurred. I'm sure that you are in the thick of that battle and I hope that you and your allies will succeed. However, it is a sobering reminder of how difficult it can be to implement inclusionary housing policies even when they make the most policy sense.