The one program that’s been building affordable homes west of Rock Creek Park

Since 2015, DC’s various housing agencies have built or preserved about 11,600 affordable housing units, according to the District’s data portal. But in Ward 3, where single-family zoning and sky-high housing prices have historically kept out lower-income residents, just 53 units have been built — less than half a percentage point of the total.

Building affordable housing west of Rock Creek Park has long been a goal, and a challenge, for DC officials. Rock Creek West (a planning area that encompasses mostly Ward 3, along with some parts of wards 4 and 2) is a key part of Mayor Muriel Bowser’s plan, launched in 2019, to build 12,000 new dedicated affordable housing units by 2025. The plan emphasized the need not only to build affordable units, but to build them equitably in all eight wards.

Thus far, the plan to bring affordable housing west of Rock Creek is just that, a plan. Rock Creek West is the only planning area that has met 0% (yes, zero) of its affordable housing production target.

So it’s worth asking: how did that small handful of affordable units get built? The answer: DC’s Inclusionary Zoning program. Here’s how it did it.

Inclusionary zoning, explained

Inclusionary zoning programs require developers to set aside a portion of new residential units for households with low or moderate incomes. In return, those developers often get density bonuses, allowing them to build more housing on their land.

“It’s a zoning trick,” said Cheryl Cort, Policy Director at the Coalition for Smarter Growth, who has long been involved in IZ advocacy. She said the idea in DC is for the increased density to offset the cost to the developer of providing subsidized units. The jurisdiction doesn’t actually pay to build any of the housing itself; instead, Cort said, “we’re hitching a ride on the power of the housing market.”

The term “inclusionary zoning” positions the program as an antidote to the policies that for years have kept housing expensive and neighborhoods segregated by income, such as minimum lot size requirements and multifamily housing bans: in other words, exclusionary zoning.

IZ is a tool built for two very specific goals: first, to provide affordable housing to people who aren’t getting public assistance (such as vouchers or public housing) but struggle to afford market rate rents; second, to promote mixed-income neighborhoods, school districts, and even buildings.

Inclusionary zoning isn’t one dish, it’s a menu of options. Some programs offer density bonuses; others don’t. Some jurisdictions require inclusionary zoning when five units are built; others trigger it at 50. Some require units to be set aside for those with very low incomes; others target the lower middle-income bracket. Here are the general specs for DC’s program:

• The program applies to new buildings with 10 or more units, or projects adding 10 or more units to an existing building.
• Developers are required to set aside between 8 and 10% of the residential floor area
• The affordable units are set aside for, and priced to be affordable to, households making 50% to 80% of the Median Family Income (MFI) — today, up to $100,800 for a family of four.
• Prospective tenants or buyers within those income limits enter a lottery. Then the selected tenant pays the property owner rent that is set at affordability limits — today, that family of four at 80% MFI would pay no more than $2,530 for a three bedroom apartment. Cost limits are also set for IZ purchases, and there are price restrictions on reselling the unit.

IZ has a long history in the Washington region. The first IZ ordinance in the US was passed in Fairfax County in 1971, though it was overturned by the state Supreme Court for a time. Montgomery County’s Moderately Priced Dwelling Unit (MPDU) program was introduced in 1974 as part of an effort to “affirmatively further fair housing” a directive from the 1968 Fair Housing Act. Today it is the longest-running existing inclusionary zoning program in the country.

Today, among the 56 permitting jurisdictions in Baltimore-Washington Combined Statistical Region (including counties, cities that issue permits, and DC) 23 have implemented IZ ordinances, according to research by Emily Hamilton, a research fellow who leads the Urbanity Project at George Mason University’s Mercatus Center. Interestingly, Hamilton writes that Prince George’s County used to have an IZ program, but repealed it in 1996 because officials said the county had “more than its fair share of the region’s affordable housing.”

Hamilton estimates that 26,733 units have been built under IZ programs since the start of programs in the 1970s, more than half of those units in Montgomery County (in part because it had a long head start). In some places including DC, the demand for affordable units exceeds the pace of construction: in DC, about 1,000 affordable units had been built under IZ as of 2019, but more than 8,000 households entered the lottery to compete for those units. In other words, for every IZ unit on the market, eight households were competing to get it.

Still, IZ is seen as an important part of meeting DC’s housing construction goals. On March 12, DC’s zoning commission approved an expansion of the IZ program to make it apply to more development projects, a move touted as progress toward that 36,000-unit goal. More expansions are in the works.

Does IZ do enough?

Critics of inclusionary zoning come from a handful of directions. One branch of criticism says IZ doesn’t go far enough — it largely doesn’t provide housing affordable to very low-income households; and as evidenced by DC’s mismatched number of units and applicants, it doesn’t result in enough units to meet demand. Some of these arguments overlap with those who are skeptical of private development and its potential to displace longtime residents.

Andrew Trueblood, Director of DC’s Office of Planning, thinks many of these critics are judging IZ on outcomes it wasn’t built for. The program, he said, is just one of the many policy tools officials can and should be using to make housing affordable, from deeper rental subsidies to public housing to rent control.

“Overall, it’s a good program,” Trueblood said. “It’s not a Swiss army knife, and not even a hammer … it’s maybe a Phillips head screwdriver. It meets its purpose.”

The fact that IZ units are built alongside new units in high-demand areas, and that they are built by-right (as opposed to going through an approval process) means that IZ can do something Cort said is unique to DC programs: build mixed-income communities. Plenty of programs have resulted in affordable units across DC in recent years; only IZ has gotten any built in Rock Creek West.

“The economic integration benefit of inclusionary zoning is hard to find in any other housing investment,” Cort said.

Trueblood, as well as Cort, also point out that IZ came online soon before the start of the Great Recession, which slowed down overall development. In the last few years, as development has heated up, so has IZ production.

Then again… does IZ do too much?

Another major branch of arguments against IZ comes from the economic side: some economists think the programs are a type of market interference or function as a “tax” on development, potentially driving costs up in the rest of the housing market.

In its annual IZ reports, DC examines whether the program is adversely impacting housing production in the District, finding in its 2019 report that it is not. That report, however, only looks at the number of units being built, rather than the overall cost on the market.

Hamilton, the Mercatus Center researcher, recently published a paper in HUD’s Cityscape journal studying IZ programs in the Washington region. Her analysis found that for each year an inclusionary zoning program is in place, jurisdictions can expect to see median housing prices rise by 1.1% more than they would have otherwise.

Hamilton calls that number “concerning.” Others aren’t quite sure; Trueblood says it’s “almost a margin of error” — a number that pales in comparison to upward pressure on the market from land use regulations, labor costs, construction material tariffs, and so on.

In Hamilton’s view, a better way to build affordable housing would be to subsidize it directly, and to remove the underlying zoning restrictions that make IZ valuable in the first place.

“As I see it, inclusionary zoning can never be a remedy for exclusionary zoning, because what gives density bonuses their value is underlying exclusionary zoning that prevents home builders from building as many houses as they would like to,” Hamilton said.

Other housing policy people, as well as Trueblood, agree that upzoning and subsidies need to be in the toolbox. But there isn’t consensus on removing IZ from that toolbox — particularly given its unique ability to facilitate some economic integration.

Eliana Golding, a housing policy analyst at the DC Fiscal Policy Institute, said she would be hesitant to draw conclusions about IZ’s effects on the overall market without knowing the specifics; for instance, if IZ drives up the cost of high-end housing but not low-end naturally affordable units, that might matter less to policymakers than if it is helping price out low-income renters.

Trueblood said OP hasn’t evaluated Hamilton’s methodology, but that even if the 1.1% rise is true, it might be outweighed by other benefits.

“If a little more at the market rate means more accessible units for moderate-income households and a more equitable city, I think those are probably decent trade-offs,” Trueblood said.