Do Affordable Housing Mandates Work? Evidence from Los Angeles County and Orange County

Publication Date: June 2004

Publisher: Reason Foundation

Author(s): Edward Stringham; Benjamin Powell

Research Area: Social conditions

Type: Report

Coverage: California

Abstract:

California and many urban areas nationwide face a housing affordability crisis. New housing production has chronically failed to meet housing needs, causing housing prices to escalate. Faced with demands to "do something" about the housing affordability crisis, many local governments have turned to "inclusionary zoning" ordinances in which they mandate that developers sell a certain percentage of the homes they build at below-market prices to make them affordable for people with lower incomes. Inclusionary zoning has failed to produce a significant number of affordable homes due to the incentives created by the price controls. Even the few inclusionary zoning units produced have cost builders, homeowners, and governments greatly. By restricting the supply of new homes and driving up the price of both newly constructed market-rate homes and the existing stock of homes, inclusionary zoning makes housing less affordable. Inclusionary zoning ordinances will continue to make housing less affordable by restricting the supply of new homes. If more affordable housing is the goal, governments should pursue policies that encourage the production of new housing. Ending the price controls of inclusionary zoning would be a good start.