Inclusionary Zoning Has Untapped Potential to Expand Affordable Housing in DC

The Numbers

It’s impossible to miss the construction cranes that dot the District and seem to spring up everywhere you look. Most of them are building housing to meet the demands from a growing population. New housing construction in the District is the highest it’s been in 25 years and will create over 16,000 new apartments. Unfortunately most of them will be high-end rentals – out of reach of the growing number of DC families struggling with rising housing costs. DC’s private market simply isn’t producing apartments that moderate- or low-income families can afford.

The good news is that the District has a program – called inclusionary zoning – to harness market-rate housing production to create affordable housing. The bad news is that, as currently designed, inclusionary zoning tends to create housing for people who actually don’t need much help finding affordable housing.

That’s why it is important to take steps – now – to strengthen inclusionary zoning so that it produces new homes for the residents most in need.  

How to Create Affordable Housing without Tax Dollars?

Inclusionary zoning, also known as IZ, has created over 900 below-market homes throughout the District over the past few years. Here’s how the program works. Developers are allowed to build residential units larger than zoning rules normally allow. That is a financial gain to them. In return, a share of the building’s apartments or condos must be rented or sold for more affordable prices. The value of the added density covers the cost of making some units affordable.

It’s a program with lots of potential. Because IZ works wherever new development happens, it can create affordable housing in neighborhoods otherwise out of reach to low-income residents, where access to public transportation, good schools, retail amenities, and job opportunities are likely to be best (See Figure). Research shows that when low-income families have access to such neighborhoods, their lives improve: better health, lifetime earnings, and family stability. So not only does IZ help create affordable housing in economically diverse neighborhoods, it also improves economic mobility – all without requiring tax dollars.

IZ Is Not Helping Families Who Need It Most

But this potential has so far been untapped. DC’s IZ program now mostly creates housing that’s too expensive for those who need it. Most IZ homes rent for over $1,600 a month for a one-bedroom – close to market-rate prices in most neighborhoods, and affordable only to households with incomes close to $80,000 for a family of three. Yet most families at this income level, while not wealthy, are not facing severe housing affordability problems. The DC families most likely to struggle to afford housing are at lower incomes. 

That’s why a group of affordable housing advocates and supporters (including the DC Fiscal Policy Institute) asked the Zoning Commission to strengthen the IZ program. We recommended that future IZ rentals should be set aside for residents with incomes below $59,000 for a family of three, and priced at a level those families can afford, about $1,100 a month. 

Real estate developers and Mayor Bowser have opposed making the changes – despite the fact that economic analysis from the Bowser administration shows IZ hasn’t hurt DC’s real estate market. In fact, IZ has made some projects more profitable because of the extra housing it allows developers to build. That added value should go to help more DC residents in need of affordable homes, instead of to developers’ bottom lines. We can make IZ homes more affordable without hampering new development in DC – the numbers show real estate projects will pencil out under our proposal too. 

With tens of thousands of DC families struggling to pay the rent and get by, the city can’t afford to leave this important affordable housing tool sitting on the shelf. We hope the Zoning Commission will decide to adopt our proposed changes. If they do, the DC Council would likely join in support. The council passed a resolution last year calling for strengthening IZ’s affordability.

Now is an opportune time to ensure IZ fulfills its potential. The cranes rising over the city should signal not only a booming real estate market, but new housing opportunities for low-income DC families as well.

Claire Zippel is a policy associate at the DC Fiscal Policy Institute (www.dcfpi.org). DCFPI promotes budget and policy solutions to reduce poverty and inequality in the District of Columbia and to increase opportunities for residents to build a better future.