Image courtesy Pixabay.

Inclusionary housing requires or incentivizes developers to set aside a portion of new housing units for low- or moderate-income residents. In Florida, local governments have explored inclusionary zoning as a way to increase affordable housing availability. It has been a recommendation from the Sarasota County Affordable Housing Advisory Committee in the past and was included in their report this year.

However, inclusionary housing policies in cities like Pittsburgh and elsewhere reveals several negative effects that may also impact us here, such as reduced housing supply and increased housing prices.

Affordable housing is a market problem; there is not enough housing supply to meet demand. In short, you need more development of housing. One significant concern with inclusionary housing as a policy is its potential to decrease the construction of new housing.

According to a study on Pittsburgh's inclusionary zoning policies, developers often respond to mandatory affordability requirements by decreasing the total number of units they build. This occurs because the cost of providing affordable units often makes projects financially unfeasible. As developers struggle to balance profitability with affordability requirements, some may abandon projects that require affordable housing even with increased density or scale back their ambitions.

Here, where housing demand is already high, mandating inclusionary housing in order to get increased density can actually reduce new housing if the builder does not find the mandate feasible or is unable to secure lending due to the requirement. The lower density construction can exacerbate the housing shortage, leading to fewer homes being available for all income groups, not just low-income residents.

In addition to decreasing the overall housing supply, inclusionary housing policies may lead to higher prices for market-rate units. Developers, in an effort to recoup the costs of providing affordable housing, may increase rents or prices on the remaining market-rate units.

The Pittsburgh study highlighted this limited “filtering,” which “describes the chains of moves that result from higher-rent units being built while creating vacancies for lower-rent units.” The market-rate units saw price hikes as developers sought to offset the financial burdens imposed by inclusionary zoning which therefore limited filtering and locked people into affordable housing as opposed to allowing them to move up in housing, which would have freed up lower-priced units.

Our booming real estate market could see similar outcomes, where market-rate renters and buyers face higher prices as developers pass on the costs of affordability requirements causing limited movement upward in housing.

While inclusionary zoning policies aim to create a more equitable housing market, the negative effects seen in Pittsburgh and elsewhere demonstrate that these policies may have unintended consequences that worsen housing affordability and reduce the availability of housing overall. We must consider these outcomes and seek solutions to the housing crisis that do not exacerbate the problem.

Christine Robinson is Executive Director of The Argus Foundation.

Image courtesy Pixabay.