Washington, D.C.—If you are a developer who thinks zoning is a dirty word, you will hate the newest regulatory plan being implemented in an increasing number of cities. It’s called inclusionary zoning, and it may be coming soon to a city council near you.
In a nutshell, inclusionary zoning requires builders putting up large developments to include a certain percentage of “affordable” units.
To some of you, it may sound like some sort of socialist experiment cooked up in Berkeley, Calif., but guess what?
Inclusionary zoning laws are catching on all over the country. True, they are most popular in California, but they are well established in Massachusetts, Maryland, and Virginia. And they are starting to find influential supporters in such unlikely places as Denver, Atlanta, and Tallahassee, Fla.
Even some of the nation’s largest and most influential developers are now saying publicly that inclusionary zoning is an essential way to address an ever-worsening shortage of affordable housing. Leading the charge in the Atlanta market for enactment of such a law is none other than J. Ronald Terwilliger, CEO of Trammell Crow Residential.
Housing developers are not going to turn their energy toward addressing the need for affordable housing unless there’s a profit to be made or a legal requirement to do it, said Terwilliger at an Editorial Forum here sponsored by this magazine.
Terwilliger is deeply involved in addressing the nation’s affordable housing needs, providing leadership through the Urban Land Institute, the National Association of Home Builders (NAHB), and as vice chair of Habitat for Humanity.
In Atlanta, he is co-chairman of Mayor Shirley Franklin’s housing task force. In that capacity, he argued that the city should enact a mandatory inclusionary zoning law, which would mean that developers of certain projects would have no choice but to make affordable housing part of their plans.
Recognizing there were obstacles to a mandatory program, the task force has since focused on a voluntary inclusionary zoning program, in which developers would receive incentives, such as a density bonus, for including affordable units.
The idea is to provide sufficient incentives to offset the cost of land and neutralize the impact of the affordable housing requirement on a builder’s profit margin.
With land and construction costs rising faster than the incomes of most households, Terwilliger thinks developers will feel even more pressure to help deliver housing for America’s workforce.
The NAHB strongly opposes inclusionary zoning. But builders and government leaders in many regions are beginning to accept it. In California, the Homebuilders Association of Northern California joined forces with the Nonprofit Housing Association of Northern California to agree on a set of principles to guide cities in enacting inclusionary zoning.
In Denver, after a bitter fight, inclusionary zoning was enacted several years ago, and now it’s under active consideration in several suburban communities.
Finally, in Chicago, suburban communities with a long record of resisting affordable housing development are beginning to discuss taking an active role in encouraging it.
When suburban governments start to consider laws recognizing the need for affordable housing, you know the world is changing. And like Terwilliger, you should consider the possibility that you can be part of the solution without giving up your ability to make a good return.
Look for more detailed coverage of Apartment Finance Today’s Editorial Forum on inclusionary zoning in the next issue.