Producing affordable housing requires more sugar, less vinegar – Marin Independent Journal
California is short of about 1.2 million affordable housing units for low-income people.
An important approach to meeting this need is to incentivize developers to include affordable units in market-priced multi-family housing developments. The policies affected by this result are commonly referred to as “inclusive zoning”.
These policies take two forms: mandates requiring the inclusion of such units (deed-restricted units that must be offered to eligible households at below-market rents, often for 55 years or more) in any new development, or voluntary incentives rewarding the inclusion of these units with increased density allowances (more apartments in a given development), reduced or eliminated parking requirements, and other compensation for reduced revenue that a project may generate when it includes affordable units.
Recent evidence from Los Angeles suggests that voluntary incentives promote increased production of affordable housing, while mandates alone increase the cost of housing production, dampening both affordable and market-priced housing production. In 2016, Los Angeles created a natural experiment comparing these approaches when voters adopted Measure JJJ, a ballot initiative that created two approval paths for new housing developments:
Mandatory component: For projects using rezoning or master plan modification, JJJ required specified shares of affordable units or payment in lieu of $50,000 to $100,000 per apartment.
Voluntary Incentive Component: The voluntary component of JJJ (called “transit-oriented communities”) targeted projects located near transit hubs, offering a menu of incentives that grew with the share of units affordable built. The most important of these was a sharp increase in the allowable density (up to 80%).
An additional goal of JJJ was to have developers hired locally and paid union-level wages. Again, the mandatory trail required it, while the transit-oriented program rewarded developers for voluntarily adopting these measures.
When JJJ was introduced to voters in November 2016, the mandatory component was clarified, but the voluntary component was not finalized; these incentives would be fixed after the adoption of the measure. In the six months before the election, developers rushed to apply for building permits at three times the average rate for the past two years to avoid mandatory requirements, according to a 2019 report.
When the transit-focused program launched in 2017, it quickly became the single most important approval pathway for new housing. Last year, 33% of all housing units offered citywide used the scheme, despite the fact that only about 9% of land in the city is eligible for the maximum incentives. Another 23% followed a similar but less generous citywide voluntary incentive route (a density bonus program). Only 1% used the citywide trails covered by the mandatory inclusionary zoning component.
And how many affordable units were produced? At the end of 2019 (most recent data available from the city):
• 294 affordable apartments have been authorized under the transit-oriented program
• 219 using the density bonus program, and
• 11 units per inclusive zoning.
Admittedly, these numbers are a drop in the bucket compared to LA’s staggering housing needs. Even turbocharged incentive programs may be insufficient to meet California’s affordable housing needs, but such an approach probably represents our best chance of getting things done.
New York City had a similar experience. The city has two inclusive zoning programs to encourage the production of affordable housing: one, a mandatory program introduced in 2016, and the other, a voluntary program already in place.
Between 2016 and 2019, around 2,000 affordable housing units were authorized under the mandatory scheme, mostly in low-income neighborhoods and often requiring additional government subsidies.
Despite this and other evidence, mandatory inclusion zoning remains popular among policy makers. Mandatory policies are in place in San Francisco, San Diego, San Jose and elsewhere in California. Four Los Angeles mayoral candidates have endorsed the idea of requiring all new housing developments to include affordable housing. Los Angeles is studying the feasibility of an inclusive citywide zoning mandate.
It is high time to recognize the evidence and focus on adopting voluntary programs that encourage the rapid creation of dense, infill housing available at both affordable and market rents. Both types of housing are essential to ensuring a livable and prosperous future for California.
Jason Ward is Associate Economist at the RAND Corporation and Associate Director of the RAND Center on Housing and Homelessness in Los Angeles. Distributed by CalMatters.org.