Study: Inclusionary Zoning Helps Some, but Can Jeopardize Broad-Based Affordability

Policies often force developers to raise market-rate prices to compensate for losses on affordable units

BOSTON--(BUSINESS WIRE)--A new study published by Pioneer Institute finds that inclusionary zoning (IZ) policies help address urgent, short-term housing needs for a few families, but can also jeopardize long-term, broad-based affordability by discouraging new supply and necessitating higher market-rate prices.

Inclusionary zoning either requires or incentivizes developers to provide some income-restricted housing units in otherwise market-rate projects. Massachusetts has among the nation’s highest concentration of IZ policies.

“Except in Boston and Cambridge, most of these policies have produced a paltry amount of affordable housing,” said Andrew Mikula, the author of “Inclusionary Zoning in Massachusetts: A Solution to Exclusion or Short-Sighted Delusion?” “It’s extremely difficult to find a scalable way to align the math behind real estate development with programmatic mandates for affordable housing.”

In Massachusetts, 141 communities implement some form of IZ, 71 of which mandate a set percentage of below-market units per development. Another 43 require a certain percentage of affordable units in select districts or project types. In the remaining 27 communities, IZ is voluntary, with most offering developers “density bonuses” to allow for extra units beyond what is allowed in non-inclusionary projects.

Municipal IZ programs have produced more than 1,000 affordable units each in Boston and Cambridge. But as of 2019, a third of Massachusetts IZ programs hadn’t generated any new units.

Research shows that mandatory IZ policies frequently force developers to raise market-rate prices to offset monetary losses on income-restricted units. Evidence is mixed on whether IZ suppresses supply growth by discouraging new development overall.

"It's clear that inclusionary zoning can come with some harmful second-order effects,” said Brian Golden, former director of the Boston Planning and Development Agency. “Cities and towns need to counterbalance affordability mandates by reducing other cost barriers to see the best results."

Last October, Boston raised the required percentage of income-restricted units from 13 percent to 17 percent and lowered the average income threshold for affordable rental units from 70 percent of the area median income to 60 percent. The city also required an additional 3 percent of units to be set aside for households using Housing Choice Vouchers. The findings of a 2024 Harvard study suggest that these changes could lead to a 5-12 percent decrease in the number of new units created.

Mikula concludes that IZ works best in areas that have expensive housing; strict traditional zoning; and strong political support for affordable housing, large-scale development, and growth. In affluent communities, IZ can reduce segregation by enabling some low-income families to move into areas that offer better economic opportunities.

Ironically, IZ projects often depend on high market-rate housing prices for their viability, thus limiting their potential to broadly improve housing affordability while providing select moderate-income families access to newly built housing.

To maximize IZ’s positive impacts and minimize adverse consequences, Mikula recommends tailoring IZ policies to local market conditions and regularly updating market feasibility studies to inform policymaking such as the application of generous density bonuses and streamlining permitting.

Andrew Mikula is a Senior Fellow in Housing at Pioneer Institute. Beyond housing, Andrew’s research areas of interest include urban planning, economic development, and regulatory reform. He holds a Master’s Degree in Urban Planning from the Harvard Graduate School of Design.

About Pioneer Institute

Pioneer empowers Americans with choices and opportunities to live freely and thrive. Working with state policymakers, we use expert research, educational initiatives, legal action and coalition-building to advance human potential in four critical areas: K-12 Education, Health, Economic Opportunity, and American Civic Values.