Top 3 Inclusionary Housing Trends of 2015

2014 was a huge year in Inclusionary Housing (IH) Policy. Leaders across the nation grappled with the shadow side of job growth and housing market recovery – rising prices for homes and apartments. Many turned to IH policies with renewed interest, recognizing that they are a small but mighty part of the affordable housing solution.

The Big Stories of 2014

In New York, Mayor De Blasio revealed a plan to replace the City’s current voluntary IH program with a mandatory one as part of a larger strategy to build and preserve 200,000 units of affordable housing over the next 10 years. Cornerstone is helping the City prepare for massive growth of their IH stock by scrutinizing current monitoring practices and advising the city on how to ensure good stewardship of these affordable apartments.

In Seattle, the city council decided to create a linkage fee on new residential and commercial development. The resolution gives developers the option of both on-site and off-site production of affordable units in-lieu of paying the fee, making Seattle a trend-setter in adopting a “fee-first” ordinance with a strong onsite performance option. Cornerstone Partnership advised the city council on designing their fee-first ordinance, and we expect to see more of this model for IH in 2015.

Chicago will be strengthening their IH ordinance as well. As part of his five-year housing plan, Mayor Emanuel is requiring housing developers seeking any type of city funding or zoning changes to build price-restricted units for lower-income families. Under the city’s current IH ordinance, which allows for a flat fee of $100,000 per unit in lieu of building affordable units onsite, too many developers are opting out and the affordable housing shortage is worsening.

What to Expect in 2015

  1. IH Innovation in Mid-Size Cities and Emerging Markets. Last year, IH gained political traction in places with newly “warm” housing markets. Just a couple years ago, these cities were scrambling to court developers, offering tax reductions and local subsidies to entice the skeptical real-estate community. Today, citizens and policy-makers share a growing concern about high-end developments changing the face of their neighborhoods without offering reasonably priced housing opportunities, We expect mid-size cities to pursue real IH policy change and solutions that fit their distinct contexts.
  2. Refinement of Old IH Policies. Inclusionary policy has evolved since the first policy was implemented in Montgomery County, Maryland back in the 1970’s. In order to stay relevant, the oldest and strongest policies in the nation will have do some serious self-examination. Some programs are due for a comprehensive reform but even the nation’s most successful programs will seek smaller refinements in 2015.
  3. Within-Market Variation. In August, Denver amended its IH Ordinance to ask more of developers and added an incentive system based on the location of the development. As we saw in Seattle, within-city variation to accommodate market conditions is a growing trend in Inclusionary. There will be an opportunity in the coming years to examine whether drawbacks of these variations, such as increased program complexity and administrative burden, are offset by greater production of affordable housing.

We are excited about 2015. In 2014 we saw an explosion of interest in Inclusionary Housing and innovations to tailor IH for incredibly diverse markets. We saw policy-makers recognize the need to plan now, just as the economy recovers, for inclusive neighborhoods that have housing for families and workers of modest means. Studies are still wrapping up and political negotiations are still underway, but to all appearances, dozens of new and improved Inclusionary Housing programs will be launched in 2015.

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