Inclusionary Zoning: The Pros, The Cons, and Whether It Actually Works
Why is housing in the U.S., especially near job centers on the East and West coasts, so expensive?
There’s a laundry list of culprits, and depending on somebody’s expertise or ideology, you’ll hear different ones.
But one that I think just about everybody who looks at housing can agree on is that exclusionary zoning is one of the reasons why.
Exclusionary zoning is when towns or cities exclude what type of housing can be built in certain areas, or “zones.”
Think of bans on apartments, strict minimum lot sizes, or height limits that only allow detached single-family homes.
These rules limit housing supply, even if there’s demand. This drives up prices. Everyone loses except for the homeowners, whose home is now worth an extraordinary amount.
Inclusionary zoning sounds like the opposite, so it must be good, right? Well, it’s more complicated than that.
In this article, I’ll share the logical pros and cons of inclusionary zoning (IZ). More importantly, I’ll look at some of the research to see whether it works as intended.
Based on what I’ve read, I’m not convinced it’s a great idea.
What The Heck is Inclusionary Zoning?
Inclusionary zoning is a rule of a different type.
It either requires or encourages developers to include “affordable” housing units in new developments.
(“Affordable” can mean a lot of things, but usually it means housing that goes for less than what it would if it went to the highest bidder.)
In practice, this might mean that a percentage of apartments in a new building must be rented at below-market rates, or that developers contribute to an affordable housing fund.
This builds more housing and sets aside some of that housing to be more affordable.
The Pros of Inclusionary Zoning
First, let’s share the case for it.
Creates Affordable Housing Without Public Spending
The appeal of inclusionary zoning is that it can create affordable units without cities having to spend public money.
The city says: “Hey developer, if you want to build housing here, you have to make some of the more affordable, and you pay the difference.”
I see the appeal. The developer is not a sympathetic character in American politics.
The other way it can create affordable housing is by making this housing a trade-off with developers in exchange for permission to build more units. These are called “density bonuses.”
Promotes Mixed-Income Communities
Instead of concentrating low-cost housing in a few neighborhoods, inclusionary zoning mixes affordable units into new market-rate developments. The theory is that this can reduce segregation, give families access to better schools and services, and help create more economically diverse communities.
In a neighborhood concerned with gentrification, this can make sense, especially if the new “affordable” units are set to levels that those who live there can afford. In practice, they’re often not.
The case for IZ is simple: more units for less cost to renters.
The Cons of Inclusionary Zoning
Here are the counterarguments.
If the Math Doesn’t Work, Housing Doesn’t Get Built. Everybody’s Home is More Expensive
It’s easy to throw developers under the bus. Yes, they build homes to make money. But we also all NEED HOMES TO LIVE.
So if they can’t make money because IZ increases their costs, then housing projects get killed altogether.
With less supply, prices go up on what’s available, and everyone loses.
Even if projects don’t fail, there’s still a math equation about how many fewer units get built because of inclusionary zoning, and how this affects home prices overall.
Less supply with the same demand means higher prices.
“Affordable” Is Still Often Expensive
“Affordable” housing and “luxury” housing have to be two of the most abused terms in city politics today.
Both can mean very different things. The $10 million townhouse overlooking Central Park is luxury. A one-bedroom isn’t “luxury” just because it’s new and has a hotel-level gym downstairs. With “affordable,” the question is, “affordable for whom?”
The affordability levels in inclusionary zoning usually target moderate-income households, not very low-income families. For the people most in need, those units are still far out of reach.
In that sense, inclusionary zoning often helps the working class more than the poorest residents. In my building, which has tax-subsidized inclusionary zoning, there are “affordable” units that are $3000 a month, which is basically market-rate. And definitely not “affordable” to the average person who lives in my neighborhood.
Risk of Higher Market-Rate Prices
Because developers need to cover the costs of discounted units, they may raise the rents or sale prices on the market-rate homes in a project. That can make housing even less affordable for middle-income renters or buyers who don’t qualify for subsidized units.
Limited Scale
Even in cities where inclusionary zoning has been in place for decades, the total number of units produced is often modest compared to the scale of the housing shortage. At best, it’s a tool.
Whether Inclusionary Zoning Works Depends on The Math
Inclusionary zoning only works if the financial trade-offs balance out. Developers are essentially being asked to provide below-market units while still covering land, labor, and construction costs that are already high.
So Does It Work? Let’s Look at the Research
All right you have the theory. Pros and cons. Like many political arguments, there are rationale cases for both. But what about real life? How has this played out?
I read a bunch of academic papers about zoning so that you don’t have to.
First there are studies that exist to affirm what you want to be true.
I’ll cite a 2009 study on inclusionary zoning in California. The emphasis is mine.
“An early study by Clapp (1981) described the potential reaction of developers to inclusionary zoning programs. Tombari (2005) similarly described the potential adverse effects on housing prices and starts. Powell and Stringham (2004), in their study for the Reason Public Policy Institute, provided quantitative support for the concerns raised by Clapp and Tombari. Specifically, using data from the San Francisco Bay area, they provided evidence to suggest that inclusionary zoning makes market-priced homes more expensive, restricts the supply of new homes, and produces few affordable units. A considerable volume of case study research, however, comes to quite opposite conclusions. Using data from Los Angeles, Rosen (2002) found no correlation between the adoption of an inclusionary housing policy and housing starts in 28 California cities. Multiple case studies by Calavita (Calavita, 2004; Calavita and Grimes, 1998; Calavita, Grimes, and Mallach, 1997) and his colleagues in California and New Jersey concluded that inclusionary zoning is a viable strategy for increasing the supply of affordable housing and mixing low- and high-income residents. The National Housing Conference (2002) drew similar conclusions in case studies conducted in Massachusetts.”
All this tells me is that it depends on the time and the place. There are situations where it’s helpful and situations where it’s not. However, by and large, it doesn’t seem too helpful.
Southern California: 1988-2005
California is a great example of a housing crisis driven by exclusionary zoning. In much of the Bay Area and LA County, it’s illegal to build multi-family homes and tall apartments. This study looked at California across decades.
They said that, “Our findings indicate that inclusionary zoning programs had a small and insignificant effect on total housing starts during the study period.”
In fact, in their data, “inclusionary zoning programs raise housing prices by approximately 2.2 percent.”
So California has had inclusionary zoning in densely-populated jurisdictions since the 80s, and I think it’s fair to say it didn’t lead to an explosion in affordable housing construction.
Study on SF, DC, and Boston Metro Areas: 1980-2005
Another often-studied paper comes from NYU’s Furman Center. They looked at the three areas from 1980-2005.
I think there are a few good takeaways that they outline.
“Each individual ordinance should be considered on its own merits.”
This is academic-speak for saying that inclusionary zoning policy includes many different options and tweaks. Different policies in different places will create different outcomes. In other words, look at specific contexts.
Second, they write that “Many IZ policies produce affordable units, but IZ is not a panacea for solving a community’s housing challenges.”
I think this is a really good summary. Inclusionary zoning has and will produce some number of affordable housing units. But it’s not going to solve the housing crisis.
2001-2023 Data From Across the U.S.
A study published in 2025 looked at Inclusionary zoning across the country and D.C. Their paper goes over a lot of the same pro and con arguments and the dilemma.
They write that “IZ policies had mixed effects on housing market outcomes.” They point out that overall, places with IZ saw home prices go up 2.1%, but this happened in the first five years of adding the policy before leveling out.
Nonetheless, it seems that overall it can make housing prices go up by putting a kind of tax on the construction.
Overall, it seems that inclusionary zoning, at best, has little impact and, at worst, increases overall housing costs.
My Takeaway: Ignores The Failed Lessons of American Zoning
While it may have its place, I think broadly advocating for inclusionary zoning ignores the failed lessons of American zoning.
Restricting what types of homes get built and who those homes are for accelerates housing crises by limiting supply.
Whatever you think about how we view housing as a commodity, the bottom line is that we live in a system where supply and demand are the key factors in housing costs for most of us.
And believe me, I’m no capitalist. If you believe in the public sector investing more into housing, as I do, then inclusionary zoning isn’t really the move either. It’s sort of an in-between measure that does nothing well.
Fund Housing Subsidies
We want rents and home prices to go down for everybody? Make it easier and less expensive to build housing. Want to support low-income people who suffer most because of these housing costs? Don’t rely on inclusionary zoning. Fund public housing or other publicly funded housing projects.
Inclusionary Zoning FAQ
These questions aren’t here because they’re frequently asked, they’re here because I was confused and had to research an answer.
But David, Aren’t Density Bonuses a Good Thing?
Density bonuses are one of the most common “carrots” that cities use to make inclusionary zoning financially workable.
The logic is: if a developer is required to set aside, say, 10% of their units as affordable, the city will let them build more units overall. In theory, those extra market-rate units help balance out the lost revenue from the discounted ones.
My counterpoint to this is that there should never be a need for density bonuses because “exclusionary zoning” that limits density should just be abolished.
If restrictive zoning wasn’t capping how much housing could be built in the first place, developers wouldn’t need a special bonus just to make projects financially viable. Instead of negotiating exceptions one project at a time, cities could simply allow more homes everywhere.
