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It seems to be in vogue these days to attack inclusionary zoning. Josh Barro did it yesterday in Business Insider. Georgetown Business Improvement CEO Joe Sternlieb did it in our recent “How to Fix Everything” issue. And the low-income housing group Manna is out with a new report highlighting everything that’s wrong with D.C.’s IZ program.
On its face, the program appears to be a neat solution to the affordable housing crunch. The problem, in short, is this: D.C. (like other cities) needs more affordable housing, but it’s expensive to build. So rather than just build it, the city—-through the inclusionary zoning program—-requires developers of new, large residential buildings to set aside a certain percentage of the units for low-income residents, in exchange for a density bonus that allows the building to be larger than zoning would otherwise permit. D.C. residents get affordable housing, the city doesn’t spend a cent, and everyone wins.
Except it doesn’t work out quite so neatly. Everyone seems to have some gripe or other with the program. I’ve noted before that four years after the IZ program took effect, the city has been struggling mightily to get for-sale IZ units sold and occupied. Through December, zero IZ units had been sold, and the program had earned the city a lawsuit from the developer of the first two (unoccupied) for-sale IZ units. Last month, the first IZ unit finally sold, and the program does appear to be very slowly picking up.
Sternlieb’s complaint is that IZ is expensive for developers, and it’d be cheaper for the city simply to buy apartments and put affordability covenants on them. Barro also rails against the economic inefficiencies of IZ, arguing that cities should simply require cash from developers in exchange for more density, and use that cash to subsidize affordable housing elsewhere.
Manna’s central argument is not a new one for the organization: It finds it unfair that owners of IZ units aren’t allowed to sell their units at a profit if they appreciate in value. But the report also contains an instructive comparison of D.C.’s IZ program to those of other major American cities.
Manna draws a few lessons from these comparisons. Like San Jose, Manna writes, D.C. should have a “recapture” model that allows IZ owners to pay back the initial city subsidy for the IZ unit upon sale but pocket the profit. Like San Francisco, D.C. could allow developers to spend extra to build affordable units offsite rather than in the same building as the market-rate units. And like Boston, D.C. should have a more flexible system to maintain affordability.
Except that none of these cities looks like a great model for D.C. In San Jose, a more expensive city than D.C. according to the report, residential developers can get away with pegging their IZ units to 80 and 120 percent of area median income. In other words, people making up to 120 percent of the average income in the area get to claim some of the so-called affordable units; people making up to 80 percent get the rest. Defining 80 percent of AMI as low-income is a stretch: In D.C., that’s $86,000 a year for a family of four. But 120 percent is just ridiculous.
San Francisco likewise defines affordability as limited to families making up to 120 percent of AMI. San Francisco’s median income for a family of four, according to the report, is $101,200. That means a family of four earning $121,000 can claim these “affordable” units. And the report states that the city’s off-site IZ units often suffer from “shoddy” construction—-one of the principal reasons that D.C. requires the units to be in the same building as market-rate units, where shoddy construction presumably wouldn’t be tolerated.
Boston suffers from the same lax affordability standard as the two California cities. IZ ownership units there are split between 80 and 100 percent of AMI.
Certainly, D.C.’s IZ program is far from perfect. But compared to these so-called model cities, it actually comes off looking pretty good.