Every morning in San Francisco, before most of us are awake, janitors unlock office towers. Child-care workers welcome families. Bus drivers ferry nurses, cooks, and clerks to their shifts. These workers keep the city running—but increasingly, they can’t afford to live in it.
A janitor earning about $22 an hour—roughly $3,800 a month before taxes—faces an average rent of $3,400 for a one-bedroom apartment. That math doesn’t work. And when new luxury buildings rise without taking those workers into account, the math gets worse: demand for service workers increases, but the housing they need slips further out of reach.
This is the context for inclusionary housing. At its core, it requires developers of new residential buildings to set aside a portion of units at affordable prices for working families or contribute to affordable housing funds. The principle is simple: when development produces growth, it should also produce inclusion.
Who’s Attacking Inclusionary Housing—and Why Now
Yet inclusionary housing is under attack. A coalition of libertarian legal groups, real estate industry lobbyists, and supply-side pro-development advocates are working to dismantle it, casting it not as a policy tool, but as an obstacle to growth.
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Leading the charge is the Pacific Legal Foundation (PLF), a libertarian law firm that explicitly labels these requirements “exactions”—a legal term that implies a government shakedown. By using this language, they aim to trigger strict constitutional scrutiny under the Fifth Amendment’s Takings Clause.
This is not an idle threat. In a recent Substack analysis titled “The Death Knell of ‘Inclusionary’ Zoning,” pro-development advocate Jeremy Levine warns that the legal landscape has shifted. He argues that recent court rulings have exposed a fatal flaw in how these policies are justified, leaving them uniquely vulnerable to being struck down.
The “Death Knell” and the “Tax” Argument
The turning point was the Supreme Court’s 2024 ruling in Sheetz v. County of El Dorado, which declared that even legislated fees must be “roughly proportional” to the specific impact of a development.
Levine takes this argument further in his more recent piece, where he bluntly argues that inclusionary requirements are simply a “tax on new housing.” His logic is straightforward: by taxing new construction to subsidize affordable units, cities make building expensive, which kills projects, reduces supply, and ultimately keeps rents high for everyone.
Opponents are now wielding this logic as a weapon. A prime example is Wesley Yu v. City of East Palo Alto, a 2025 lawsuit filed by the Pacific Legal Foundation. Yu challenged a nearly $55,000 affordable housing fee on his small project, arguing it was an unconstitutional “exaction” unrelated to any harm he caused. The city was forced to retreat, a victory opponents hope will unravel these laws statewide.
The “Abundance” Trap
This attack on inclusionary housing isn’t happening in a vacuum. It is the latest frontier of the “abundance agenda”—a supply-side ideology popularized by pundits like Ezra Klein, which argues that the path to affordability lies in unleashing the market and removing regulatory friction.
In this worldview, equity mandates like inclusionary housing are cast as sand in the gears of the market machine. The premise is seductive in its simplicity: if we just get out of the way and let developers build without fees or requirements, abundance will follow, and prices will eventually trickle down to everyone.
[RELATED ARTICLE: 10 Ways to Talk About Inclusionary Housing, Differently]
This is a dangerous fantasy. The abundance-only approach is effectively Reaganomics, a belief that if we take care of the top end of the market enough, it will eventually reach the poor.
This ideology erases power dynamics. It asks nothing of those profiting from growth—developers, investors, and landowners—and instead asks working people to trust that the market will eventually build them a home. It treats housing as a math problem of efficiency, rather than a moral question of who gets to live in our cities.
The Fatal Flaw in the “Market Solves All” Myth
We must ask the critics of inclusionary housing a specific, uncomfortable question: If we eliminate these requirements tomorrow, will the private market build a single unit affordable to a janitor?
The answer is almost certainly no.
The cost of land, labor, and materials in high-demand cities creates a price floor. Even if a developer pays zero fees and zero “inclusionary taxes,” the cost to build a new apartment unit is so high that the rent must be set at luxury or market levels just to break even. The market cannot profitably build new housing for a family earning $40,000 or $50,000 a year. It is mathematically impossible without subsidy.
Critics claim inclusionary requirements stifle construction. But research shows that well-calibrated policies—especially when combined with subsidies and incentives—can preserve feasibility while ensuring affordability. For example, a study from UC Berkeley’s Terner Center for Housing Innovation found that moderate inclusionary requirements in Los Angeles paired with density bonuses could support both affordable and market-rate production. The key isn’t to eliminate them, but to balance them smartly.
Without inclusionary housing, the market will continue to build abundance—but only for the top of the market. The janitor, the bus driver, and the teacher will be left with nothing but filtered housing that never actually trickles down to them.
A Tool Born of the Civil Rights Movement
This is why the critics’ framing misses the deeper truth: inclusionary housing didn’t emerge to maximize production. It emerged to remedy exclusion.
In the wake of the Fair Housing Act of 1968, advocates recognized that markets, left alone, reinforced segregation. New construction often priced out working families and deepened racial and economic divides. Inclusionary zoning was the response. The principle was straightforward: if you profit from growth, you share responsibility for making that growth inclusive.
That’s not charity. It’s mitigation. Just as environmental laws require builders to prevent flooding or pollution, inclusionary requirements ensure development doesn’t deepen inequality.
Why the “Exaction” Narrative Gets It Wrong
When groups like the Pacific Legal Foundation call these requirements “exactions,” they are collapsing decades of purpose into a caricature: greedy cities shaking down noble builders. That narrative is wrong on two levels.
Analytically: The link between new market-rate housing and the rising need for affordability is real. Every luxury tower brings not only new residents but also increased demand for restaurant workers, janitors, child-care providers, and bus drivers. Without safeguards, these workers are priced out—or displaced. Inclusionary policies are calibrated offsets, not arbitrary penalties.
Morally: We already accept that growth must mitigate its harms. We require stormwater controls to prevent flooding. We require traffic improvements when congestion worsens. Why should displacement and exclusion—the most corrosive impacts of all—be exempt?
This isn’t an “exaction.” It’s a shared obligation—a basic expectation that those who profit from the city also help make it livable. Just as we expect developers to help fund public schools or traffic mitigation, we should expect them to contribute to inclusive housing.
The Narrative Stakes
This fight isn’t just about one policy. It’s about the story we tell ourselves about who housing is for.
Some argue that the housing crisis is an abundance-only issue. But a city that grows without inclusionary safeguards is not building abundance for all; it is building exclusion for the vulnerable. It is hard-wiring segregation into the future.
That’s why the “exaction” narrative must be challenged. It reduces a civil rights tool to a developer complaint—and risks dismantling one of the few policies that ensure growth also produces fairness.
California’s Leadership — and What’s at Stake
San Francisco’s inclusionary housing ordinance—crafted over twenty years ago with leadership from the Council of Community Housing Organizations and allies—helped define the statewide model. It reframed inclusionary housing as mitigation, as fairness, as the baseline responsibility of growth.
Across the city, developments like 1180 Fourth Street in Mission Bay stand as proof of concept: mixed-income buildings where nurses, artists, and retail workers live side by side. These are homes that would not exist without the mandate of inclusion.
The lesson is clear: inclusionary housing works best when grounded in its true purpose. It is not a ransom note to developers. It is the bill for the impacts of growth, and the downpayment on a more integrated, more just housing future. But to survive the coming legal storm, advocates must be ready to defend that truth against the dangerous myth that the market alone is enough.
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8 thoughts on “What Critics Get Wrong About Inclusionary Housing”
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Inclusionary zoning has long been in the sniper scope of the realestate industrial complex and it’s associated well funded operatives. The build baby build mentality does not work amid a greed ladden, increasingly unregulated capitalism. Generally a bipartisian commitment to the upward redistribution of wealth hurts us all and our old planet.
You linked to a Terner Center study that really doesn’t support inclusionary zoning. As just one instance, here is the final paragraph of the study:
Different tools have different strengths, and land use policy may be best suited
to improving affordability in the wider housing market, while public subsidies are
best for producing below-market homes. IZ seeks to produce affordable homes by
substituting land use policy in place of broadly shared taxes and public subsidies.
This analysis suggests that the public may be paying either way, and that the costs
of IZ are both higher and more regressive than the alternative.
And that was in the context of a voluntary program in LA.
I’m sure you can find stronger evidence to support the case.
Hey Quintin, thanks for quoting my article and sharing some insights into why inclusionary policy matters. I’ll email you to continue this discussion, but for other readers, here is the ending of my most recent piece on Inclusionary Zoning, which Quintin cites:
“If cities want to reduce segregation, increase housing stability for longtime residents, and promote economic mobility for the future, there are two broad strategies they should pursue that in tandem can better deliver on the promise of inclusionary zoning:
1. True inclusionary zoning means allowing housing in every neighborhood. At the very least, multi-family homes should be allowed in the same building envelope as single-family homes. If a property owner can build a 4,000 square foot single-family home, they should be allowed to build four 1,000 square foot multi-family apartments. As neighborhood needs evolve over time, cities should allow progressively more density, height, and other flexible standards to accommodate rising demand.
2. Offset costs by subsidizing housing for lower-income tenants at below market-rate rents. Subsidies could occur directly, such as government funding for market-rate developers to provide more low-income homes (ideally funded by taxes on wealthier land owners!). Such public-private partnerships would resemble the successful so-called “social housing” models of many European and Asian countries, many of which have substantially more housing development than U.S. cities and correspondingly lower average prices. Subsidies could also include indirect strategies, such as reductions of expensive impact fees or property tax breaks for developments that provide more housing at below market rates for lower-income tenants. The 421-a program in NYC funded tens of thousands of lower-income homes with property tax breaks before it expired in 2022.3
The original goals of inclusionary zoning—ending segregation, promoting stability and mobility for lower-income households, creating beautiful cities accessible to people of all backgrounds—still matter.”
I’m interested in how we make “inclusionary zoning” work effectively to achieve its goals, not getting rid of it entirely. We both want the same thing, which is cities where everyone can afford a stable home in a location of their choosing.
Good stuff, brother Quintin. The liberal and progressive market worshippers and their urbanist enablers are a gift to those seeking to profit off of building unaffordable (often low quality) housing. In Seattle, IZ hasn’t been that meaningful and so we have moved toward social housing as the remedy. This way we cut out development fees (that developers want/need) and realize that building affordable, quality housing is not possible without the government (ideally the rich through progressive taxation) filling in the inevitable capital gap required to produce such housing. In addition to this, there is talk of creating a municipal construction company (the way local Indigenous tribes have moved) and helping to fund social housing with public banking. Keep up the great work!
Dear Quinton, thank you for your article! Our organization, Making Housing and Community Happen, played a significant role in adopting IZ in Pasadena in 2001 , 15% set aside and then strengthening it to 20% in 2019. The feasibility studies Pasadena did in 2019, showed that even at a 25% set aside there would still be a 12% return for market-rate developers. That convinced the city to go to 20%. But we had one developer that chose to go to 20% several years prior because they actually made more money by including more affordable units at the very low income levels because of the State Density Bonus laws. The additional market rate units they could build more than off set the cost of the affordable units. I have had developers thank me because by requiring that they do the numbers, they never would have imagined that they could make more money by including affordable units. Of the 1,000 or so IZ units in our city, the only ones that have used subsidies, are about 10 % that have used Section 8 which further increased the income for the developer and opportunity for very low income to be integrated into luxury developments. IZ has been a win win win for our city. For the few that pay an in lieu fee, it has accrued over 30 million, which has been used to support affordable housing developers to provide PSH and affordable home ownership and more. I would love to see you interview some of these developers–almost all opt to include units. This would help to dispel the myth that subsidies are needed to make the affordable units pencil out. Also it could address other concerns that you have mentioned. Please contact me. Thanks, Dr. Jill Suzanne Shook
Thank you for your spirited defense of Inclusionary Housing. I have researched, defended, advocated for and written extensively about IH. I have a few comments:
“Exactions” is a technical planning terms to describe conditions placed on development to offset increased need for public facilities generated by the new development. Development Impact Fees are an example of exactions. Until the 2005 California Building Industry Ass’n v. City of San Jose California Supreme Cour decision, it was unclear whether IH was an exaction or a land use regulation. The Supreme Court decided unanimously that it was a land use regulation.
I believe that IH does create additional costs to development. The question is who pays for it; the so-called “Incidence controversy.”
(See page 152 of the attached article, “Inclusionary Housing in California.”) Inclusionary Housing in Calaifornia: The Experience of Two Decades (1998)
Depending on the market conditions, who pays is one of three parties: 1) The owner of the land who sells to the developer, 2) The developer and, 3) The homebuyer or renter.
It is generally understood that, in time, it is the landowner who pays the brunt of the additional cost. It is also true that, as you point out, developers get all sorts of incentives, especially density bonuses. But as Alan Mallach and I point out in nclusionary Housing, Incentives and Land Value Capture (2009) incentives come at a public cost, and it is better to engage in land value recapture to have landowners pay. To make that work, IH requirements need to be phased in to allow for land markets to adjust to the new IH requirements, See:
“Raise inclusionary housing requirement gradually,” San Francisco Chronicle, February 17, 2016
Thanks again
Thank you for your article,
Nico Calavita, Professor Emeritus
Graduate Program in City Planning
San Diego State University66ew3
First, I want to say I really appreciated reading this piece, but I still find myself not agreeing.
For a long time I thought inclusionary housing was the obviously correct policy, but I really struggle to feel that way today.
Instead I find myself thinking that, for any given parcel, whatever maximum “concession” to density, height limit, building offset, or parking requirements that a community would be willing to allow to encourage IH should just be the default that is allowed instead — and importantly I think we should really be judging IH against that maximum envelope policy regime.
One thing that I did find frustrating about this article is that I think YIMBY/Abundance types (like myself) generally understand that the open market is *never* going to create a sufficient amount of deeply affordable housing on its own, certainly not immediately and not even with filtering at some point in the future. I don’t think building will magically accomplish that, but I do think unleashing supply is vitally important to stabilize broader housing prices and that in parallel governments should be making consistent and considerably *direct investment* to create affordable housing through both development and acquisitions of existing properties that takes land and buildings out of the speculative market.
IH almost feels “natural” because the units are created without the government needing to collect taxes and fund specific projects. The developers do the math and the affordable units appear if the project is able to pencil-out. The issue is that IH still constitutes a tax on development that results in fewer overall units because there will always be marginal projects that aren’t able to pencil-out with the tax, and those lost units are difficult to see or appreciate. That “shadow” tradeoff varies based on market characteristics and the intensity of IH requirements but is multiple marker-rate units not created for every affordable unit that is — and every less unit creates upward pressure on rents for the broader area. Very importantly, this increased pricing from constrained supply doesn’t just hurt more wealth households but it also hurts the majority of lower-income households who are renting in the market-rate system and not able to benefit from the always-oversubscribed affordable units that are created through IH and other policies.
I have, for unfortunate reasons, been listening to analysis of REIT earning calls recently. In their topsy-turvy world “rent growth” is the key positive indicator and “supply” (i.e. competition) in a market where they are present is a four-letter word that makes it harder for them hit their rent-growth targets. These people are not all just lying to each other, they understand how their industry works. If we enable more supply and more competition in our cities we will create more overall, nominal profit for these kinds of faceless corporations (which understandably feels gross!) but it will also crush their pricing power, minimize profit *margins*, and help to stabilize overall rents and housing prices — which really should be our ultimate goal even if it means some corporations we don’t like make more money.
Another other issue I have with the argument made in this article is the implicit assumption that the source and endpoint of funding need be directly related — you see this in a lot of places throughout government like paying for spending on roads with a tax on gasoline, or as it is here, the idea that developers should pay for affordable housing because they also enjoy the profits that come from creating market-rate housing.
However, I think it’s important at this point to remember the core premise of housing-first policies — that housing is a primary need and foundational to all other social services and life outcomes. Indeed it’s precisely because I believe housing is so central for individual and community flourishing that I believe we should be eliminating as many of the barriers to housing creation as possible, including IH requirements, and then use every progressive funding sources available to us that does *not* disincentivize housing starts to fund direct, targeted investments that intervene in the market to either create or convert units to deeply affordable housing.
(Final thought, another thing that is mentioned in this article that is genuinely really beautiful about inclusionary housing policies is the anti-segregationist outcome of people of all income levels living alongside each other in the same community. Constructing 100% LIHTC or acquiring buildings to make them fully affordable doesn’t accomplish this goal, but mixed-income social housing as well as master-lease agreements and voucher-type direct funding partnerships are all able to fulfill this very important goal in a way that doesn’t actively disincentivize new housing supply).
If new housing made housing more expensive, places that have the most new housing (like, say, Houston or Charlotte) would be more expensive than the cities that place barrier after barrier to housing and exclude as much housing as possible (like, say, Marin County or Long Island). In the real world, the opposite is the case.