Few housing policies are as inherently controversial as inclusionary zoning — the requirement that market-rate home builders provide a certain percentage (usually 10% to 20%) of their new units for very low-, low- or moderate-income families. Inclusionary zoning is commonly a way that cities and counties propose to meet their fair-share housing requirements.

Typically, for-profit homebuilders strongly oppose inclusionary policies because, the builders argue, market-rate builders and buyers end up subsidizing homes for people of more modest means. Affordable housing advocates and non-profit builders just as strongly endorse inclusionary zoning as one important way to provide housing for low- and moderate-income families.

But last year, when the Non-Profit Housing Association of Northern California (NPH) announced it had received grants from seven foundations for the purpose of accelerating adoption of inclusionary housing policies, the Home Builders Association of Northern California (HBANC) asked to start a discussion.

“It seemed like we had a lot of common areas we could explore,” NPH Executive Director Dianne Spaulding recalled of the initial meeting.

So six representatives of each group met intermittently for about a year. The end result was the release in August of a report, “On Common Ground: Joint Principles on Inclusionary Housing Policies.” The report contains a number of recommendations for planners and local governments.

More than anything, “On Common Ground” emphasizes flexibility in how market-rate builders satisfy inclusionary requirements. The report recommends permitting builders to provide differing types of for-sale units, donate land to local government or a non-profit developer, construct units off-site under certain conditions, and pool or transfer credits for providing affordable units.

“To the extent that communities have affordable housing policies, we should make sure those policies are as efficient as possible,” said Joseph Perkins, President and CEO of the home builders group. “Many jurisdictions have just a one-size fits all approach as to how to provide for affordable housing.”

For an example, Spaulding pointed to a joint venture in Hayward involving the for-profit DeSilva Group and the non-profit Eden Housing. Under the city’s policy, DeSilva would have had to provide 26 houses in its project for moderate-income buyers to satisfy the inclusionary zoning requirement. Instead, the two developers worked out a deal with the city in which DeSilva donated three acres elsewhere in town for development of about 75 apartments for very low- and low-income residents. DeSilva got to build the project it wanted, Spaulding said, while about three times as many restricted units were provided, and for the poorest families.

“Our problem is not development at the market rate. That’s historically the situation in the Bay Area,” Spaulding said.

The flexibility provisions might be the easy part of the report. Harder to sell will be the funding recommendations. The report urges local governments to raise money via bonds or other measures, waive or subsidize processing and impact fees for inclusionary units, and devote at least 50% of redevelopment tax increment to affordable housing. The law now requires 20% of tax increment go to housing.

Perkins said he expects a negative initial reaction to the funding recommendations. But, he contended, local funding has a multiplier effect that makes other policies and funding more productive.

“This is a burden that should be shared by all,” Perkins said. “Local jurisdictions need to share the burden with the home builders, the for-profit and the non-profit builders.”

A number of changes, Spaulding emphasized, would cost cities and counties very little: adopting more flexible policies, pre-entitling land, providing greater density bonuses, and excluding affordable units from building permit caps.

According to Spaulding, 55% of the Bay Area’s 110 cities and nine counties have inclusionary zoning. The two organizations will now press the other 45% to adopt inclusionary policies, and will ask the 55% with existing policies to make changes.

Dianne Spaulding, Non-Profit Housing Association of Northern California, (415) 989-8160.
Joseph Perkins, Home Builders Association of Northern California, (925) 820-7626.