Inclusionary Housing Calculator

Inclusionary housing policies require that a certain portion (typically 5-15%) of units in new developments be affordably priced. This is a common tool for increasing affordable housing supply.

However, there are limits to the portion of affordable units that can be required without reducing the number of new units that can be built, and therefore future housing affordability. Don’t kill the golden goose!

The new Inclusionary Housing Calculator can help evaluate development costs and the impacts of various factors, including parking regulations and inclusionary housing policies would have on development profitability in a particular situation. This free tool incorporates various factors including land and construction costs, parking requirements and costs, and market conditions (e.g. strong or soft). The Calculator includes typical default values and can be adjusted by users to reflect a community’s specific circumstances.

This analysis can help policy makers and planners determine how cost burdens, such as inclusionary policies and parking requirements, affect project feasibility. In one example, the Calculator indicated that a large housing project in Chicago could be profitable if regulations required 16% of units to be affordable, but not if this was increased to 21% of units.

Requiring more affordable units than the market can bear tends to reduce the total number of new units built, particularly moderate-priced units. For example, if the cheapest housing units cost $200,000 to build, and regulations require that 10% be priced at $100,000, each of the nine non-qualifying units bears an additional $11,111 ($100,000/9) cost, or about $20,000 including overhead and financing expenses. This is a small increase for high-priced housing (2% for a million dollar unit) but a large increase for lower-priced housing (10% for a $200,000 unit). Since lower-priced tend to be least profitable, they are most likely to be eliminated. In this way, inclusionary zoning tends to reduce production of moderately-priced housing which would become affordable housing in the future.

There is no single best way to create an inclusionary housing policy; such policies should reflect specific local needs and conditions.

Inclusionary Policy Design

 

Inclusionary requirements are no substitute for development policy reforms that support affordable infill housing development, such as increased allowable densities and reduced parking requirements.

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