A Surprising Payoff in California

Inclusionary housing (also called inclusionary zoning) is gaining popularity in California. It requires for-profit developers to build a percentage of affordable housing in all new developments. Yet some housing activists are skeptical of inclusionary programs, assuming that they only create moderate-income homeownership opportunities. A recent study by the Nonprofit Housing Association of Northern California (NPH) contradicts this widely held assumption. NPH, along with Sacramento Housing Alliance, San Diego Housing Federation and California Coalition for Rural Housing, surveyed all of the jurisdictions in the state that have inclusionary programs to find out what type of affordable housing has been developed by income level.

Inclusionary-housing programs in California created a wide range of housing options. From 1999 until mid-2006, 47 percent of new inclusionary homes were built for low-income households-(those earning 50-80 percent of area median income [AMI]), 29 percent for very low-income households (less than 50 percent AMI) and 21 percent of for moderate-income households (80-120 percent AMI). Virtually all of California’s jurisdictions with inclusionary housing, now report having formal mechanisms to keep housing produced through these programs affordable for many years. Controls range from periods of 10 years to in perpetuity, with the mean term for rental housing being 42 years and homeownership being 34 years. Permanent affordability is required in at least 20 percent of the inclusionary-housing programs.

One reason so many lower-income units are being created is the flexibility in many California programs. For example, a more rigid policy mandating that 20 percent of the homes be affordable might require a developer planning to build 100 single-family homes to sell 20 houses to moderate-income homebuyers. In cities and counties that allow for flexibility, the same developer may donate land and some additional funding to a nonprofit. The nonprofit may choose to build 40 duplexes for sale to low-income buyers or build 85 apartments available to wide range of families including extremely low-income families. Through the partnership of the for-profit and nonprofit, the jurisdiction is able to get more housing at a deeper level of affordability. In practice, partnership developments or homes constructed within or adjacent to the market-rate development by local government of a nonprofit created 68 percent of housing for families earning less than 30 percent AMI. Inclusionary housing can be an effective tool for creating affordability if the policy is crafted in a way that provides options for partnerships with nonprofits and local government.

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