The Truth About Inclusionary Zoning (Part 2)

In our March publication of The Ledge, we discussed inclusionary zoning (IZ) and whether it is a viable “solution” to the housing affordability and supply issue. We specifically shed light on the Town of Chapel Hill, NC which in 2010 enacted a quasi-IZ ordinance despite the fact that “the legal ability to implement the requirement was unsettled.” The ordinance took effect on March 1, 2011. Chapel Hill’s IZ policy applies to for-sale housing only. The Town is prohibited from applying its requirements to rental units because again Dillion’s Rule won’t allow it. Doing so would be considered a form of rent control and local governments in North Carolina cannot enact any form of rent control.

In this Part 2 article, let’s take a look at whether Chapel Hill’s IZ policy has worked. In my research I only found one deep dive assessment into the effectiveness of Chapel Hill’s IZ ordinance. That report conducted by The Indy News 8 years after the ordinance was instituted, concluded that the policy had “failed”. Why? Because just eleven affordable for-sale homes plus an additional 10 units after $800,000 was collected through payments to the Town’s affordable housing fund had been constructed after the ordinance went into effect in 2011. Reasons noted for the failure include regulatory restraint, too many opt-out options, and the fact that more regulations = higher housing costs.

It has been difficult to ascertain how many affordable homes have been built to date as a result of the IZ ordinance. According to the Town’s current affordable housing progress tracking report it has 338 owner subsidized homes. However, the report does not provide the timeline for this progress, so, it’s unclear how many of these 338 homes can be attributed to the IZ ordinance. When contacting the Town of Chapel Hill’s Affordable Housing department, staff was unable to provide the total number of homes constructed because of the Town’s IZ policy. There are many lessons other cities and states considering inclusionary zoning can take from this.

The biggest lesson is to conduct due diligence and understand what would make it successful in your community.