“Beginning in 2017, the city began enforcing a requirement that new apartments of 20 units or more include “affordable” housing units, which are rented at money-losing, below-market rates to lower-income tenants.
The results were predictable. Developers shrank the size of projects to avoid having to comply with the costly mandates. Overall, permitting fell.
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It’s certainly true that “funding” inclusionary zoning to offset developers’ losses helps to mitigate the negative impact the policy has on new supply. It would also go a long way toward making inclusionary zoning constitutional. (Critics periodically argue in lawsuits that unfunded inclusionary zoning is an unconstitutional, uncompensated taking.)
Even so, there are still many problems with “funded” inclusionary zoning that make it an inferior policy to simply having no inclusionary zoning at all.
For starters, funded inclusionary zoning does not remove a regressive tax on housing. The tax, in the form of the mandated affordable units, is still in effect. It is just offset by a countervailing subsidy intended to prevent housing production from falling.
Funded inclusionary zoning thus still has a suppressive effect on overall housing supply that must be mitigated with government subsidies/tax breaks.
Instead of spending tax dollars on schools, police, or lowering tax rates, city hall must spend that money just to keep housing production flat. The tradeoff of funded inclusionary zoning then is no new housing and fewer public services (or higher taxes).
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That YIMBY worldview would therefore seem to suggest that housing subsidy dollars should be spent expanding supply even more, not zeroing out the effects of supply-killing affordable housing mandates.
If a city has a housing shortage, boosting housing production, and not tinkering with the mix of incomes in new buildings, would seem to be the priority.”
https://reason.com/2026/02/24/the-flaws-of-funded-inclusionary-zoning