What is an inclusionary ordinance and how does it affect affordability in housing?

by Brian Addison

The Californian housing crisis has been one of the century's most dire issues, prompting skyrocketing living costs that have spurred displacement and homelessness to rare levels—and one of the many ways cities are combating the detrimental effects of the crisis is through inclusionary policies that require developers, on some level, to include affordable units in their developments.

The City of Long Beach had been looking into an ordinance of its own for over three years before finally settling on its formal ordinance, with the council instructing city staff to look into it in May of 2017. The first draft of that ordinance faced the Planning Commission in early 2020 before it was handed off to City Council and approved in July of 2020.

What's that number, precisely? It depends on whether the project are rental units or condos for ownership.

But first...

Who do inclusionary ordinances benefit?

Firstly, like the creation of affordable housing itself, there is no "silver bullet" or even exemplary model of how an inclusionary ordinance or zoning law should be implemented because each city is different.

But one thing is clear: states across the country are increasingly enacting laws that limit or preempt local action in things such as inclusionary housing, often using the argument that local regulation is either inefficient or, more commonly, "overly burdensome."

Research on the extensive effect of inclusionary zoning or ordinances is, admittedly, varied—and that is because it has to focus on geographically-specific cities which have implemented such zoning or ordinances. Long Beach, however, may not necessarily be comparable to, say, counties in Maryland and New York where it was shown that inclusionary housing helps exacerbate racial disparities.

But some studies in California have shown:

• Inclusionary zoning increases affordable production of housing, as exemplified in a focus in Santa Monica by the Journal of Housing Studies
• Inclusionary housing policies provided a major source of funding for affordable housing in seven California cities that were analyzed by the Southern California Association for Nonprofit Housing
  
• 29,281 affordable units were estimated to have been created through inclusionary policies from January 1999 through June 2006 in the state, compared to 34,000 over the prior three decades according to a collaborative study between the Non-Profit Housing Assocation of Northern California, the California Coalition for Rural Housing, San Diego Housing Federation, and the Sacramento Housing Alliance.
  

Other studies have shown that lower-income families have received economic benefits from inclusionary housing but the private market has suffered; this argument is one often touted by both housing advocates and landlords: On one side, the most marginalized are benefitting; on the other, affluent groups are not gaining the affluence they feel is appropriate for their supposed investment.

This is typically why states step in: Private sector powers, often those very power which fund campaigns—including local campaigns here in Long Beach—lead state leaders toward limiting or outright diverting inclusionary housing policies on a local level.

In full disclosure, this publication believes housing a human right, not part of an economic system; if inclusionary housing is benefitting our most marginalized while slightly decreasing the profits of landowners, the ordinance is working.

How is development required to act in terms of the Long Beach ordinance?

If the project is a rental building, 11% of a project's total rental units and would be reserved solely for families which are federally defined as very-low income households, meaning a family of four makes 30-50% of the average median income in a given area.

For condos intended to be sold to individual owners, 10% of units would be required to be set aside for moderate income households, often called the "missing middle" in housing discussions. This refers to households who make too much to be federally-defined as low-income but do not make enough money to afford market-rate apartments.

How was the ordinance developed?

The study which sparked the formal ordinance analyzed 64 other cities in California with inclusionary ordinances as well as various laws regulating such policies.

For example, the California Building Industry Association sued the city of San Jose in 2015. San Jose's inclusionary ordinance includes a common “in-lieu fee” where, if a developer decides they do not want to include affordable units in their development, they instead pay a fee that typically goes toward a public housing fund. The association felt that this was “confiscatory,” meaning they were not being deprived of a fair and reasonable return on their investment. The court ruled in the favor of the city: Inclusionary ordinances are a planning tool and are well within a city's zoning power.

This was one of many laws and examples used to bring the study to Long Beach with as specific analysis as possible: We have not met our housing needs according to our state-mandated Regional Housing Needs Assessment that our city must submit every eight years. This, in turn, has created two problems: overcrowding (due to a lack of development) and increased rent (due to an increased demand, housing costs have skyrocketed).

To put this into perspective, the 7,048 affordable units needed to be built in Long Beach between 2013 and 2021 according to our assessment, only 1,650 building permits have been issued as of December 2017. That means 77% of the affordable housing we said we have to build by this year hasn't even had a permit issued.