INCLUSIONARY : Six insights from international experience By Martine August and Giuseppe Tolfo

n April 2018, the Province of Ontario SUMMARY RÉSUMÉ passed legislation enabling Inclusionary zoning (IZ) is Le zonage inclusif (ZI) est de plus en Ito craft inclusionary zoning (IZ) policies. increasingly viewed as a best plus considéré comme une pratique Ontario now joins British Columbia, Quebec, practice in planning, and a potential exemplaire en matière de planification and Manitoba in having authorized some form solution to crises in housing et une solution potentielle aux crises of IZ. In Ontario, IZ is viewed with hope as a affordability. For jurisdictions de l’abordabilité du logement. Pour potential solution to crisis. considering this approach, we les territoires qui envisagent cette While increasingly viewed as a best practice offer six insights into IZ from the approche, nous offrons six points de in planning, enthusiasm for IZ often draws on international experience. IZ was vue sur le ZI à partir de l’expérience limited research-based evidence, which can originally conceived as a suburban internationale. Conçu à l’origine comme easily be misinterpreted or misunderstood. policy, and is far from monolithic, une politique suburbaine, le ZI est loin With this article, we share insights into IZ with a vast range of potential designs d’être monolithique, avec une vaste that will guide planners and policy makers in that influence its effectiveness. gamme de conceptions potentielles making better sense of this policy. European adaptations of IZ are qui en influencent l’efficacité. Les To begin, what is IZ? It is a tool used in based on different conceptions of adaptations européennes du ZI sont planning to require that affordable housing property that may inspire Canadian fondées sur différentes conceptions be provided in new residential developments, planners. As a market-driven de la propriété susceptibles d’inspirer and it can be implemented in various ways. policy, IZ is limited in its potential les urbanistes canadiens. En tant IZ can be voluntary or mandatory. Policies to produce affordable housing and, que politique axée sur le marché, differ in the quantity and type of affordable in areas with hot property markets, le ZI présente un potentiel limité de units required, the depth and duration of IZ has the paradoxical potential production de logements abordables affordability, and in the thresholds that to be exclusionary, generating et, dans les régions où les marchés trigger IZ requirements (e.g., 10 or more and displacement. immobiliers sont très actifs, le ZI peut units in Ontario). In addition, they may paradoxalement avoir un effet exclusif, include incentives, cost offsets, in-lieu entraînant embourgeoisement et payments, and off-site provision of affordable déplacements. units. While the expected outcomes of IZ policies will differ depending on local

6 PLAN CANADA | WINTER • HIVER 2018 priorities (as we will describe), one measure A second goal was to shift the costs of new reasons – to provide deeply affordable of “success” is that IZ produces affordable affordable housing onto private developers. housing, and to do so in all areas of the city. housing that would not otherwise be built. A third goal was to “open up the ” to Transferring a policy conceived for the IZ is a market-based affordable housing lower-income families and racial minorities, suburbs into an urban context, and expecting program, which accounts for its popularity in providing access to opportunity in amenity- it to produce deeply affordable units, may a context of declining government funds for rich communities, while dispersing poverty not work; indeed it can have unexpected housing. It works by tapping into real estate away from inner cities. consequences. In new-build suburbs, inflation and leveraging market pressure to What did these early policies look like? displacement is a minor concern. In cities, promote affordability goals. In practice, this One of the first in the US was launched in by contrast, new developments – even with means linking the construction of affordable Montgomery County, Maryland, a bedroom IZ-required affordable units – can remove housing to market-rate development, and community outside of Washington, D.C. with existing affordable units from the market. shifting the responsibility for affordable 950,000 residents. Responding to growth Development may also spur property value housing to private market developers. pressure and up-market development, increases that intensify gentrification and Because it mandates developers to produce the county launched its now-famous exclude lower-income households. affordable units, IZ is a polarizing policy. Moderately-Priced Dwelling Unit (MPDU) Housing advocates point to its potential to program to produce workforce housing. For (2) IT’S A MARKET-BASED PROGRAM THAT produce affordable units, detractors fear it developments of 20+ units, the program PRODUCES LIMITED AFFORDABLE HOUSING will suppress the market, and researchers required 20% be set-aside as ownership and In order to produce affordable units, IZ argue that both its effects on delivering rental housing affordable to people earning works best in places with strong real affordability and cooling down markets have 65-70% of the area-median income (AMI). estate markets. Even in hot markets, there been grossly over-stated.1 MDUP did not provide incentives or offset are limits to the quantity and depth of For this article we share insights from developers’ costs, but did allow for greater affordability it can generate. scholarly literature on IZ with readers of development density in return for extra Plan Canada. Rather than reproducing affordable units. Program elimination and reduced funding excellent work on recommendations and In , IZ was first launched for social housing has put pressure on best practices,2, 3, 4 we have pulled out six in the small city of Palo Alto in 1973. affordability in Canadian communities insights into IZ learned from international Like many suburban communities, it since the mid-1990s. Today, IZ is seen by experiences, for planners to consider as was experiencing ‘spill over’ inflationary municipalities as a potential silver bullet municipalities in Ontario craft their own housing market pressures, and adopted IZ – it relies on the private market to deliver policies, and as jurisdictions across the to ensure workforce housing for middle- affordable housing with little or no public country consider this approach. income residents would be built. Since expense. In part, municipal decision makers then, 170 communities in California and have come to view IZ with hope because it is (1) IT’S A SOLUTION 400 communities across the US have the only game in town. As a market-based BUILT IN THE SUBURBS followed suit with their own policies. Most solution, however, there are limitations on its IZ is a policy designed in the American of these are small and mid-sized cities or effectiveness in delivering affordability. suburbs to provide moderately-priced suburban communities, aiming to produce The first limitation is that IZ requires workforce housing in the face of moderately-priced housing. a strong real estate market in order to ‘exclusionary’ practices and policies. It Because IZ was designed to provide work, a pattern identified not only in North may not easily transfer to urban contexts affordable options in the suburbs, early America, but in Australia, New Zealand, and or produce deeply-affordable housing. advocates believed it had no role to play in England.5, 6, 7, 8 According to Emily Paradis the inner-city. From their perspective, the (2018), the policies that have provided the Canadian planners can better understand IZ goal was to get lower-income people out of most affordable housing and at deeper with some knowledge of its history. IZ is often poor communities into the suburbs. levels of affordability, are in places with seen as a big-city policy tool used to harness Using IZ in inner cities seemed nonsensical rapid growth and strong development development pressure in heated markets because housing was already cheap. pressures, like New York City. to create affordable housing. In fact, IZ was The urban context today has changed. Strong real estate markets, however, originally designed in the US in the 1970s as Affordability crises are ubiquitous across are not present everywhere, and cannot a suburban policy. It has largely been adopted the US and Canada, and gentrification is be counted on forever. For this reason, IZ in smaller places and suburbs, with a goal to putting pressure on inner-urban housing delivers affordability unevenly. It favours overcome exclusionary suburban practices in cities of all sizes. These pressures strong markets over areas with weak markets like large-lot zoning, NIMBY-ism, and are driving lower-income and racially- that may equally need affordable housing. restrictive ordinances barring lower-income marginalized residents from central areas Depending on economic growth in order to and often racialized residents. where housing costs are high. At the same deliver affordability is also risky, in that it Early IZ policies had three early goals. The time, cuts to social housing programs have links the provision of an important social first was to thwart homeowner resistance to left municipalities scrambling for ways to good to volatile real estate markets. If new affordable housing proposals by making provide affordable accommodation. In this markets soften, planned units can be cancelled it a requirement for all developments. context, municipalities are turning to IZ for and IZ programs can lose their appeal.

WINTER • HIVER 2018 | PLAN CANADA 7 As a case in point, researchers Mukhila and government’s Low-Income Housing Tax As Canadians consider best practices, it’s colleagues (2015) found that the market Credit (LIHTC) program. To take the state of important to realize that there is no single crash in 2008 “dented the zeal” of policy California as an example, only 29,000 units IZ policy. There are many different ways makers to implement IZ in and were produced by IZ policies between 1999 to design IZ and to evaluate its success. Orange Counties. Across California, falling and 2006 – just over 4000 units per year in Policies differ in the type and tenure of real estate values reduced the power of a state of 35 million.9 These low numbers housing delivered. Montgomery County’s municipalities to negotiate programs with cannot be attributed to program design, program delivers both homeownership more rigorous affordability requirements. but to the realities of relying on developer and rental housing, ’s policy A second issue with market-based profits to fund social goods. Because delivers ownership units for the middle programs is that there are natural limits profits themselves are finite, there are class, while New York City’s delivers only to how much affordable housing they can hard limits on how much can be diverted affordable rental housing. The duration of deliver. IZ cannot rival the output achieved to affordable housing, keeping output affordability can differ too: in Montgomery through public provision of subsidies and necessarily low. County, ownership units must remain affordable housing, and will never come affordable for 30 years and rental units for close to meeting contemporary demand. (3) IT’S NOT A SINGLE POLICY 99 years, while in New York units must be In a review of several programs, Schuetz IZ can mean different things to different affordable in perpetuity. Programs differ in and colleagues (2011) found that “only people, and it can be designed in a wide what thresholds trigger IZ. Toronto’s “large modest amounts of affordable housing variety of ways to achieve different policy sites” policy is triggered for developments have been produced through IZ programs,” goals. This makes it challenging to issue of 5 or more Hectares, while IZ in Vancouver far below the quantities built under the US blanket statements on “what works.” and Montreal is triggered for developments

8 PLAN CANADA | WINTER • HIVER 2018 This flexible nature of IZ has also contributed to its growing popularity. Because it can be interpreted in so many ways, IZ is something of an empty vessel – an idea that stakeholder groups can shape according to their own goals.

with 200+ units. IZ can be either voluntary aims for units at 80% of average market affordable to moderate-income home-buyers or mandatory, with mandatory policies rent, and New York City targets households and do not ensure long-term affordability. not surprisingly leading to greater levels earning between 40-120% of AMI. So while this policy succeeds in expanding of affordable housing production. Some These variations make it hard to evaluate housing options for certain groups, it fails policies provide incentives to developers, IZ or issue blanket statements on its to provide deeper levels of affordability for provide subsidies to offset costs, or allow “effectiveness.” Part of the challenge is that lower-income households, and to ensure the for in-lieu payments in place of affordable limited data is available; many municipalities long-term affordability of what is built. housing production. do not monitor program outcomes, or This flexible nature of IZ has also There is still more diversity. Required even articulate what those would be. More contributed to its growing popularity. set asides also vary from places to place. fundamentally, policy makers with different Because it can be interpreted in so many Most American IZ policies require 10-15% goals will also view success and failure ways, IZ is something of an empty vessel – of a development be set aside as affordable. differently. Policies deemed successful an idea that stakeholder groups can shape Vancouver and Toronto’s policies require 20%, by certain criteria will fail by others. according to their own goals. Housing and New York mandates that 25-30% of floor Montgomery Country’s MPDU serves again advocates may envision IZ as a program area be affordable housing. Finally and most as a good example. The MPDU is often that will provide deeply affordable rental significantly, affordability requirements vary considered America’s most successful IZ housing, while developers may lobby for IZ, dramatically, targeting households ranging policy, having produced about 10,000 units envisioning an opportunity to build taller from very low-income to moderately wealthy. between 1980 and 2000 – the highest volume buildings and receive subsidies for market- New Jersey’s policies target households in the US.10 While this seems like a clear rate rentals. This leads to broad support for earning 80-120% of AMI. Toronto’s policy success, critics note that these units are only IZ from different stakeholder groups who

WINTER • HIVER 2018 | PLAN CANADA 9 may have very different ideas of what they are amounted to an exaction: a taking of private same constitutional restraints as the US, supporting. Meanwhile, powerful voices often property. Cities, as legal defendants in these and can join countries like England, the end up shaping the design of IZ to their ends. cases, had to demonstrate how economic Netherlands, Italy, and Turkey that seek to In Baltimore, for example, local government viability of land was affected, and were often recapture developer profits for social good. bowed to pressure and designed a lucrative forced to compensate landowners for what Philosophical viewpoints aside, program for developers that was ineffective had ‘been taken’.12 researchers do not find that policies that in providing affordability.11 In order to get a In other places, government regulation is include developer compensation lead to program that delivered better affordability not legally interpreted as an imposition, and more affordable housing production.13, 14 outcomes in , housing activists developers are not presumed to have rights Studies from Canada, the US, Australia, New and their coalitions worked doggedly to to make profit from land. In some European Zealand, and England report that it is more overcome developer opposition, and are countries, cities are understood to constitute important for programs to be mandatory, vigilant in evaluating the policy as it rolls out. social wealth – they are created and made consistently-applied, and predictable. valuable over many years by public and (4) IT CAN BE BASED ON NOVEL private investments, the labour of countless (5) IT CAN BE EXCLUSIONARY CONCEPTS OF PROPERTY AND VALUE people, and the collective social activities IZ can be paradoxically exclusionary, Not all IZ policies rest on American-style of a broad public. With this perspective, by kick-starting price increases that assumptions about property, profits, and the public has a fair claim to a share of the generate displacement and the loss of the need to compensate developers. IZ can value created through private development, affordable housing. be understood alternatively as a way to because social investments have made it capture value created through collective valuable. Indeed, it’s easy to understand how A surprising outcome of IZ programs is efforts and used for social benefit. a building on a desirable and vibrant street that they can be exclusionary, by initiating corner in a Canadian city is valuable not only gentrification processes and displacement IZ policies present planners with an resulting from investments by its current that exclude low-income families from opportunity to re-think how we conceptualize owner, but also due to the involvement of formerly affordable communities. This is property and value. As Canadian planners countless public and private actors over the paradoxical problem facing New York’s craft our own policies, we don’t have to many years. Mandatory Inclusionary Housing (MIH) policy, implement US-style IZ based on American Based on that style of thinking, many billed as the most rigorous IZ program of any culture and legislation. European municipalities use IZ to re-capture major US city. This policy requires developers In the US, a narrative has emerged windfall profits from landowners. These building in 13 specific areas to provide around IZ that “powerless” developers profits are seen as an unearned benefit permanent, affordable housing accounting who are forced to build affordable housing that developers don’t inherently deserve, for 25-30% of residential floor area, and should be compensated for lost profits. This and that should rightfully contribute to serving families earning between 60-80% of narrative is rooted in the particularities of the social good. In crafting IZ policies, area median income (AMI). The city may also US constitutional law and histories of early planners in Canada have the opportunity apply a “deeper affordability” (for households legal challenges brought by landowners to reflect broadly about what makes land in the 40% of AMI income category) or against municipalities with IZ policies. The valuable and who should benefit from its “workforce” housing options (in the 115-125% landowners argued that IZ requirements development. Canada isn’t bound by the of AMI income band).

10 PLAN CANADA | WINTER • HIVER 2018 While this appears on its face as a very topics including mixed-income public housing http://www.wellesleyinstitute.com/wp- progressive program, communities targeted redevelopment, and the rise of financial content/uploads/2013/01/ResourceUS_ for MIH (largely low-income communities of investment in multi-family apartments. APA_IZ-PracticesOct04.pdf colour) have uniformly protested the program, 6 Patricia Austin, Nicole Gurran, and whether in East Harlem, East New York, Giuseppe Tolfo is a Master of Arts candidate Christine M. E. Whitehead, “Planning the southwest Bronx, or Inwood in northern in the School of Planning at the University and Affordable Housing in Australia, New Manhattan. Meanwhile, developers have of Waterloo. He studies gentrification and Zealand and England: Common Culture; lobbied strongly in favour of MIH. The reason neighbourhood change and is interested in Different Mechanisms,” Journal of Housing for this is that MIH is tied to rezoning in these how shared understandings of displacement and the Built Environment 29, no. 3 (2014). targeted communities, and is intended to change over time, and to what extent this 7 Nicky Morrison and Genna Burgess, kick-start private development, and then affects policy solutions. “Inclusionary Housing Policy in England: harness a portion of that development to The Impact of the Downturn on the create new affordable housing. Community ENDNOTES Delivery of Affordable Housing Through coalitions fighting these plans argue 1 Jenny Schuetz, Rachel Meltzer, and Vicki Section 106,” Journal of Housing and the that rezoning will set off price increases Been, “Silver Bullet or Trojan Horse? The Built Environment 29 (2014): 423-438. and gentrification that will make their Effects of Inclusionary Zoning on Local 8 Stockton Williams, Ian Carlton, Lorelei communities un-affordable, and that will push Housing Markets in the ,” Junctunen, Emily Picha, and Mike them out. To add insult to displacement, the Urban Studies 48, no. 2 (2011): 297-329. Wilkerson, The Economics of Inclusionary city’s definition of “affordable” is out of reach 2 Emily Paradis, Inclusionary Zoning – Development. Washington, DC: Urban for the vast majority of residents currently US Evidence and Implications for Ontario. Land Institute, 2016). residing in areas targeted by the policy. (Toronto: Social Planning Toronto, 2018). 9 Sturtevant, 2016. Retrieved from: http://inclusionaryhousing. 10 Nico Calavita, “Inclusionary Housing in the (6) IT’S A NECESSARY BUT NOT ca/resources-canada/ US and Europe” (presentation, ISoCaRp SUFFICIENT TOOL IN AN 3 Lisa A. Sturtevant, Separating Fact from Congress, 2006). AFFORDABLE HOUSING TOOLBOX Fiction to Design Effective Inclusionary 11 Audrey McFarlane and Randall K. All jurisdictions should create IZ policies, Housing Programs (Washington, DC: Johnson, “Cities, Inclusion, and but IZ alone will not produce affordable Center for Housing Policy, 2016). Exactions,” Iowa Law Review 2145 (2017). housing at the volumes and depths of 4 Richard Drdla, National Housing Strategy: 12 Brian R. Lerman, “Mandatory Inclusionary affordability that are needed to address Inclusionary zoning – Domestic and Zoning – The Answer to the Affordable contemporary crises. international Practices (Ottawa: Canada Housing Problem,” Boston College Mortgage and Housing Corporation, 2016). Environmental Affairs Law Review. 33, no. We suggest that IZ be considered a 5 Nicholas J. Brunick, “Inclusionary 2 (2006). necessary but far from sufficient tool in an Housing: Proven Success in Large Cities,” 13 Paradis, 2018. affordable housing toolbox. While there is Zoning Practice, American Planning 14 Sturtevant, 2016. enthusiasm among policy makers for IZ as a Association 10, no.2 (2004). Retrieved from: 15 Drdla, 2016. silver bullet for building affordable housing, the research shows that IZ is a modest tool that is incapable of producing the quantities Featuring West Block, Edmonton, AB needed at the depths of affordability that are A project of InHouse by Beaverbrook required to make a dent in community need. Canadian municipalities should, however craft mandatory IZ policies, because these will produce some affordable housing as-of- right in all housing developments,15 which is a good outcome. But municipalities and other orders of government cannot stop there, if there is true interest in building inclusionary communities. IZ will only ever be one small component of larger affordability programs, which must dedicate real resources for building and operating non-market affordable housing. ¢ TRANS Martine August, PhD, is an Assistant FORMING YEARS Professor in the School of Planning at the CITY AND TOWN Calgary | Edmonton | Vancouver | Victoria University of Waterloo. She studies planning, Transit-oriented development for a brighter future www.bunteng.com social justice, and housing, focusing on

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