IZ done right—balancing new requirements with equal benefits to homebuilders, called “offsets” by urban planners—holds immense promise, because although where you shop does not matter much to how your life unfolds, where you live certainly does. Empirical research now demonstrates that among the best things society can do for families with lower incomes and wealth, and especially for their children, is to enable them to live in “high-opportunity neighborhoods”: neighborhoods with excellent public schools, access to good jobs, high levels of public safety, and public amenities such as parks and libraries.
The two main obstacles to getting IZ done rightThough the argument for IZ with benefits to balance costs that we’ve just summarized is not controversial among most housing analysts and economists, it is deeply at odds with popular perceptions. Many people active in local politics—including many neighborhood groups, social justice advocates, politicians, and ordinary voters—seem convinced that developers make so much money they can easily absorb the costs of subsidizing rent for a share of their tenants. Go to any community meeting on housing in a prosperous city in Cascadia or beyond, and you’re likely to hear statements along the lines of: “Developers make huge profits and need to pay their fair share.” “If landlords weren’t gouging tenants, we wouldn’t have to force them.” “We need affordable housing, and they’re just going to have to pony up.”
No, real estate developers don’t win many popularity contests, and sticking it to them holds great appeal for many. The truth is, though, imposing IZ not balanced with offsets sticks it to the community, not developers. IZ without offsets will cause developers to build fewer homes—but only temporarily. When the paucity of construction yields a worsening shortage of housing, the heightened competition for homes pushes rents up that much faster. Once housing prices rise enough to make up for the expense of the new IZ rules, developers resume construction. But now every home-seeker in town has to pay more for her home, not just during the slowdown in building but ever after.
Other IZ advocates make a more nuanced argument. They do not criticize developers or landlords, do not assume outsized profits, and do not aim to punish them for their purported greed. Rather, they argue that homebuilders can cover the full costs of inclusionary zoning by paying less for development sites. This argument has just enough truth in it to require examination. But in the end, it—just like the developers-are-rich-so-make-them-do-it argument—collapses under scrutiny. In this article, we take these arguments apart, piece by piece, but first, we fill in some details about how IZ works.
