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Mixed Income and Inclusionary Housing Strategies Attract Growing Interest
02.02.2015 - HPP

Prior to the housing crash in 2008, HPP promoted Inclusionary Zoning, also called inclusionary Housing, as a promising policy tool to accomplish two goals—gaining more affordable units beyond the limits of public funding, and creating more mixed income housing.   IZ, or IH, accomplishes these goals by incenting or mandating market rate developers to include affordable units in market rate developments.   Because this is a tool which primarily works in strong housing markets, once the crash came, discussion of IZ/IH faded.

That discussion is now back, and attracting more interest than ever.  Inclusionary housing policies are on the books in over 400 cities across the country, and in most cases have proven effective in either producing mixed income developments, or generating more funding for affordable developments.  These policies range from mandatory (developers are obligated to include affordable units) to voluntary (developers are incented to include affordable units by offers of density bonuses, reduced parking, fee waivers, and accelerated processing), with a range of approaches in between.  

HPP has led much of this discussion by promoting the advantages of the strategy, analyzing the legal issues in applying it in Minnesota, and gathering examples of Minnesota cities that are already employing elements of IZ/IH.  As a result, discussions are underway on multiple fronts.  The Met Council committed in the Housing Policy Plan to help lead discussions on where and under what circumstances IZ can work in the Twin Cities.  HPP worked with Hennepin County to secure technical assistance from national IZ experts to help cities along the Southwest LRT Corridor evaluate this strategy.  The City of St. Louis Park has already committed to adopting some form of IZ/IH and is now working through the details.  The City of Minneapolis enacted a resolution calling for city staff to review options for new affordable housing policies, including IZ.   The City of Rochester decided it needed a new affordable housing strategy to complement its Destination Medical Center plan for downtown Rochester, which led to a request from HPP to draft a section explaining IZ.  Rochester is now actively exploring how it could adopt this approach.  

IZ/IH strategies are complicated, and often controversial, because market rate developers often oppose them if they are not purely voluntary (at least at first).  But when the circumstances are right, the case for IZ can be compelling.  In many cases, the strong market conditions that have now set the stage for a booming real estate market in luxury housing are due in part to government investments, transit corridors or other infrastructure.  Under those circumstances, it is reasonable that the public wants to capture some of the value of its investment by expecting the private market to help with affordability.

In 2015 HPP will be continuing to work with others for the adoption of workable forms of IZ/IH wherever feasible.