As the price of housing continues to rise in many cities, one popular progressive policy idea to address it is inclusionary zoning. Inclusionary zoning requires that a certain percentage of units in a building be priced at below market, targeted at people who earn some fraction of the area median income. Often this set aside is required in exchange for density bonuses or other things the developer might want.
Portland passed one of these, and according to a report in the Portland Mercury, construction fell off a cliff:
A year ago, Portland City Council enacted “Inclusionary Housing” (IH), a new policy requiring any apartment building of 20 units or more to rent a portion of them below market rates—from 30 to 80 percent of the city’s median family income, depending on the option a developer selects.
When the city implemented the policy, detractors warned the new rules would simply ensure developers stopped building here. City officials argued IH would force the private market to create much-needed affordable units in Portland’s building boom.
A year into the policy, the detractors seem to be winning. Apartment construction in Portland has fallen off a cliff, though there’s still ambiguity as to whether IH or other market forces are the key reason. Meanwhile, Mayor Ted Wheeler is planning to sweeten the deals that the city offers developers to convince them to build.
So far, IH’s results are underwhelming. According to the city’s Bureau of Development Services, 12 qualifying buildings with a total of 682 units have applied for permits since the IH policy went into effect on February 1, 2017. Under IH, those projects could bring in anywhere from 55 to 170 below-market units, depending on the options their owners select (not all developers have decided, so an actual number of affordable units isn’t clear).
Whatever the case, 682 is a huge drop off for a housing market that from 2013 to 2017 typically built between 3,000 and 6,000 new units per year. And the number doesn’t give the complete picture.
“We’ve seen the spigot turned off so completely, so fast,” says Kurt Schultz, a principal at SERA Architects, who notes that his clients who’ve worked with similar policies in other cities often blanch when told of Portland’s strict IH rules. “I’ve never seen it turned off so fast before, and I’ve been doing this for 30 years.”
I don’t have any real analysis to give on this, but the reporting is pretty stark. Click through to read the whole thing.