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"Inclusionary Zoning - Gautreaux by Another Pathway,"

by David Rusk January/February 2005 issue of Poverty & Race

What my colleague john powell has termed creating “opportunity-based housing” is the goal of Alex Polikoff’s call for a sustained, Gautreaux-type program of 100,000 federal housing vouchers a year to relocate poor black families from high-poverty, opportunity-poor ghettoes to low-poverty, opportunity-rich communities.

For the next four years we won’t see such a commitment (political or fiscal) emerge from a Republican-controlled Congress and a second Bush Administration intent on further slashing federal taxes paid by corporations and wealthy Americans. Indeed, if the White House succeeds in making its tax cuts permanent, we probably won’t see such a commitment ever. Even if a less conservative federal government develops the will, it won’t have the way to do it in a post-Bush future. By 2004, just four federal programs — the Defense Department, Social Security, Medicare and payments on the $7.2 trillion national debt — accounted for two-thirds of all federal outlays. The first wave of baby boomers becomes eligible for Social Security payments in 2008 and for Medicare coverage in 2011; federal money for most other domestic needs will dry up. With one of the weakest Washington lobbies around, housing subsidies for poor families will be an early victim of a revenue-strapped federal budget.

Achieving Alex Polikoff’s admirable goal requires a strategy that does not rely on federal dollars. Fortunately, that strategy exists — inclusionary zoning laws.

Inclusionary zoning (IZ) uses market forces, not public dollars, to subsidize the creation of affordable housing. In higher-cost markets, homebuilders have a powerful, profit-driven incentive to build the maximum amount of market-rate housing on a given parcel of land. Local IZ laws mandate that 10% or 15% of new housing must be affordable for modest- and low-income families, but they also provide automatic density bonuses allowing builders to put up more homes than the underlying zoning would otherwise allow. The density bonus means that bonus units have zero land cost. A well-designed IZ law provides a large enough density bonus to lower the cost of inclusionary units and also to generate very profitable bonus market-rate units as well. An effective IZ law must be fair to for-profit builders as well as meet community housing needs.

Over 135 county and city governments have enacted mandatory IZ laws since Montgomery County, Maryland created the oldest IZ program in 1973. Most IZ laws have been enacted in high-cost markets like Northern and Southern California, the Washington, DC and Boston areas. However, IZ laws have been passed recently by communities in the Denver area, Illinois, Wisconsin and North Carolina. Some 13 million people — 5% of the nation — live in communities that mandate mixed-income housing development. If the Chicago Board of Aldermen and New York City Council approve pending IZ laws for their rapidly gentrifying neighborhoods, that statistic will double.

Who qualifies for inclusionary housing? Local governments invariably set their income eligibility ceiling as a percentage of the annual, HUD-established Area Median Income (AMI). Several dozen California communities target a portion of their IZ units to 80-120% of AMI. That’s far beyond the income of poverty-impacted ghetto dwellers. (Eligibility for federal housing subsidies tops out at 50% of AMI; the federal poverty ceiling is around 30% of AMI.) But half of all IZ jurisdictions earmark at least a portion of IZ units for families at less than 50% of AMI. And Montgomery County, Maryland and Fairfax County, Virginia pursue an even more targeted policy. By law, their county housing authorities buy one-third of all IZ units produced as a permanent inventory of homes to be rented to very-low-income families.

I’ve calculated what would have been the impact if, by waving some political magic wand, IZ laws had been in effect throughout the 100 largest metro areas over the past two decades. From 1980 to 2000, 30 million housing units were built in these 100 largest metro areas — almost all by private, for-profit builders. Let’s assume that our hypothetical IZ law applies to new housing development of ten or more units (the most common IZ standard); that means about 20% of all new units would be in smaller developments exempted from IZ requirements. Applying a 15% set-aside (also, the most common IZ standard) would have produced 3.6 million inclusionary housing units. That’s three to four times the amount of affordable housing produced nationally through using Low Income Housing Tax Credits, which, HUD claims, were involved in 90% of all affordable housing produced during a comparable period. That’s over ten times the amount of affordable housing aided nationally by LISC and the Enterprise Foundation, the two largest national affordable housing support organizations.

How could a significant proportion of these 3.6 million units best aid very low-income families (less than 50% AMI)? By implementing the policy that a public housing authority buy or rent one-third of the IZ units. Some 1.2 million such IZ units would roughly equal the entire inventory of project-based units owned by the USA’s 3,000 local public housing agencies. If implemented, such a program would cut the level of economic segregation in the USA’s 100 largest metro areas by 40% and meet a substantial chunk of the affordable housing need.

This is all, of course, fantasy math. How do we get from here to there as a matter of practical politics and practical public finance? First, the political challenge. Sell IZ laws not as an issue of social justice but as an issue of sound economic policy. Sell IZ as an answer to the need for “workforce housing.” Arguing for the need for affordable housing for a community’s own teachers, police officers and firefighters (at 60%-80% of AMI) is easy. But IZ advocates have to champion the cause of the entire range of workers. We must change the public image from the stereotype of the “welfare queen and her drug-dealing boyfriend” to the reality of hard-working people you depend on every day in your community: your garbageman (50%-60% of AMI), the ambulance driver who responds to your 911 call (40%-50% of AMI), the nursing home aide taking care of your elderly parent (30%-40% of AMI), the clerk at the nearby dry cleaners or convenience store you’ve dealt with for years (20%-30% of AMI). Our rallying cry is “Anyone good enough to work here is good enough to live here.”

Second, the public finance challenge — a tough issue with federal housing subsidies drying up. However, creative housing agencies like the Montgomery County Housing Opportunities Commission have found a variety of ways to generate capital to purchase inclusionary units: capitalizing federal housing subsidies; using fees earned as the county’s housing finance agency; securing modest county appropriations; using “in lieu of” fees paid by builders when technical site problems prevent producing IZ units; tapping into state housing subsidy programs, etc. It can be done, though it requires creativity and persistence.

Does such a program truly help move poor black residents out of inner-city ghettoes? Over time, yes. Labor markets are far less segregated and more mobile than housing markets or school systems. If the program could be tied partially to state “welfare to workfare” programs, progress would be accelerated.

Promoting “workforce housing” through IZ laws that serve the entire range of the workforce would ultimately achieve Alex’s goal. Indeed, Business and Professional People in the Public Interest (BPI), which Alex founded, is a major advocate of inclusionary zoning. In short, we don’t have to be “waiting for Gautreaux” outside the US Treasury. It’s likely to be a long, long wait.

David Rusk is former mayor of Albuquerque and a New Mexico state legislator. He is author of Inside Game/Outside Game (Brookings Inst. Press, 1999) and Cities Without Suburbs (Woodrow Wilson Ctr. Press, 3rd ed., 2003). He serves as a national strategic partner of the Gamaliel Foundation and is a founding board member of the Innovative Housing Institute. For more information on the inclusionary zoning, contact the Innovative Housing Institute (www.inhousing.org), Business and Professional People in the Public Interest (www.bpichicago.org), or PolicyLink (www.policylink.org). www.davidrusk.com
 
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