New Inclusionary Zoning Tool Available for NAHB Members

Combating the housing affordability crisis requires comprehensive strategies at the federal, state and local levels to reduce building costs, boost supply and empower home buyers with a mix of housing choices. One strategy that many communities have adopted is inclusionary zoning (IZ) — local government ordinances that require a certain percentage of new residential construction to be sold or rented at below-market rates.

IZ is often adopted under the assumption that it is a simple, expedient method to address affordable housing. However, IZ is far more complicated, and there is conflicting evidence on the extent to which IZ discourages development, raises the price of market-rate homes, creates adequate affordable housing supply, or encourages economic opportunity.

Some evidence over the past decade has shown IZ to be an ineffective tool at promoting affordable housing as it acts as a tax on housing and shifts costs either to market-rate renters and home buyers, or causes developers to build elsewhere.

NAHB has created an empirical tool, the Inclusionary Zoning Calculator Tool, which aims to supplement these conflicting policy studies with concrete data of how IZ requirements impact development choices, including whether or not a developer proceeds on a project. The IZ Calculator Tool uses a sample developer's pro forma as the template, and allows the end user to input and manipulate certain variables to show how different incentives and cost inputs may be used to create an economically feasible development.

NAHB's IZ Calculator Tool comprises two Excel spreadsheets designed to show the effects of IZ on the pro forma for a development consisting of homes built for sale:

• Acquisitions, Development and Construction (AD&C) Calculator Tool: AD&C has inputs and requires cost data for development of lots and construction of housing units.
• Acquisition and Development (AD) Calculator Tool: AD has inputs and requires data for the development of lots only.

Both spreadsheets allow the user to input acquisition and development costs (A&D version), and one of the tools give you the added control of inputting housing unit construction costs (AD&C version). Both versions start with a sheet of general instructions containing links to each page that requires inputs from the user.

The tool can be used by developers, local governments and other stakeholders with an interest in increasing the supply of affordable housing.

To access the tool, and other resources, visit nahb.org.