The effect of inclusionary zoning on the housing market : evidence from California
Thesis (M.P.P.)--Georgetown University, 2010.; Includes bibliographical references.; Text (Electronic thesis) in PDF format. Inclusionary zoning (IZ) has become a popular method for local governments to promote affordable housing production at little direct cost. However, critics argue that the policy actually worsens the housing affordability crisis by acting as a tax on new development. This study adds to existing research on inclusionary zoning by examining the housing market effects of both the inclusionary zoning policy requirements as well as embedded regulatory relief mechanisms.; Using data on California jurisdictions from 1980 to 2008, the analysis focuses on whether different levels of policy stringency, flexibility, and incentives have successfully offset the tax imposed by IZ. A fixed effects model isolates the impact of IZ on housing prices and production within jurisdictions.; The results show that for jurisdictions with IZ at any point in time, an additional year of IZ decreases permits 4.9 percent and increases prices 3.9 percent, holding market and demographic factors constant. However, when all California jurisdictions are included in the analysis, the effect on permits disappears and the effect on price becomes negative. This suggests selection bias. Further, the policy's stringency and number of alternatives and incentives offered to developers have no statistically significant effect on housing permits or prices in any of the models produced.; This surprising result may be due to the fact that IZ's importance in determining the housing market is small compared to other land use regulations or market forces. However, policymakers may nonetheless wish to implement IZ in order to produce affordable housing. They should reevaluate the usefulness of any alternatives or incentives in their policies, and opt for budget-neutral choices. Future research should focus on why jurisdictions adopt IZ and what other factors may be obscuring the IZ tax, as well as how the policy affects the rental market. Overall, any costs associated with IZ must be weighed against its benefits in terms of affordable housing production.
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