Study Finds Inclusionary Zoning Feasible for Los Angeles
Inclusionary zoning is a requirement on developers to include some affordable
units in their housing developments. Over 100 cities and counties across
California have some kind of inclusionary requirement.
In March 2003, the City of Los Angeles released a study it commissioned
from David Paul Rosen Associates on the economic feasibility of inclusionary
zoning locally. The study contained two major findings:
- that inclusionary zoning requirements did not have a negative effect
on housing construction in other California cities; and
- that inclusionary zoning is economically feasible for most residential
building types in Los Angeles when developers receive some benefits
to offset the cost.
Impact on Housing Construction
Rosen looked at 28 California cities in Los Angeles, Orange, San Diego,
San Francisco and Sacramento counties, both with and without inclusionary
zoning, and concluded that inclusionary zoning did not have a negative
impact on housing production. Interestingly, Rosen noted that decreases
in housing production most closely tracked unemployment rates and that
the 1986 Tax Reform Act coincided with a sharp decrease in building.
Financial Feasibility
Working with a group of for-profit and non-profit developers
of affordable and market rate housing, Rosen developed 10 prototypes –
six rental and four homeownership. Rosen did a residual land value analysis
using inclusionary requirements and a set of developer benefits (incentives).
Not all building prototypes were feasible in all parts of Los Angeles,
with or without inclusionary zoning. In fact, the high-rise steel frame
construction over 75 feet is not financially feasible in Los Angeles even
without an inclusionary requirement. However, Rosen concluded that an
inclusionary requirement of 10% of units with rents affordable to people
at 45% of median income ($25,000/yr for a family of four) was feasible
for most prototypes if cost off-sets to the developer were included. Likewise,
Rosen concluded that an inclusionary requirement of 20% of homes or condos
with selling prices affordable to people at 90% of median income ($50,000/yr
for a family of four) was also feasible with developer off-sets.
To read the full report, visit the LA Housing Department website at:
http://www.ci.la.ca.us/LAHD/inclusio.htm
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