Inclusionary zones incentivize homebuilders to rent households to lower-income households for BMR housing development, according to a new a paper using the Terner Center’s Housing Policy Simulator to estimate the potential impacts of different Inclusionary Zoning (IZ) requirements on housing production and the supply of below-market-rate units (BMR). The paper did not address housing expansion.
Through a 10-year research simulation via the Terner Housing Policy Simulator, this paper argues there is a correlation between increasing IZ policies and decreasing aggregate housing production for BMR homes. Increasing these IZ requirements past a certain percentage produces a relative loss in BMR, suggesting a median percentage that is ideal for production.
Based on 2019 data from the Los Angeles Transit Oriented Communities program (TOC), incremental rent growth in existing market rate units will affect 88% of those who pay market rent in the area. A modeled elimination of the IZ requirement suggests a 38% development increase in housing units relative to the IZ requirement. Although the author acknowledges the limits of the simulated research, they recommend the expansion of land use policies for multi-family housing development to indirectly offset the rent increases found in IZs policies.