Inclusionary Zoning: A Misguided Attempt at Affordable Housing

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By Len Tylka, President, Florida Home Builders Association

For Americans, buying a home is generally considered our largest personal investment. Homeownership is not only a source of financial wealth, but also it represents security, independence and opportunity.

Because of Florida’s dynamic and diverse economy, our state’s housing market has experienced phenomenal growth. In fact, Florida has been one of the most active housing markets in the country.

An increasing demand for more housing stock, a scarcity of already expensive land, and rising labor and building material costs have all contributed to the increased cost of homes. But one of the most expensive factors contributing to rising home prices is regulatory barriers.

Recently, another barrier to affordable housing was added that will soon send prices higher than they already are. The city of Tallahassee, home to Florida’s capitol, recently passed Florida’s first mandatory inclusionary zoning ordinance. Now, local governments across Florida are considering imposing mandatory inclusionary zoning.

Just weeks ago, a coalition of builders and Realtors filed suit in Florida’s Second Judicial Circuit Court in Leon County challenging Tallahassee’s mandatory inclusionary zoning ordinance as an unconstitutional mandate. We believe the ordinance violates both the U.S. and Florida constitutions.

Tallahassee’s mandatory inclusionary zoning ordinance requires that 10 percent of new homes in a development with 50 or more homes (single- or multi-family homes) be sold for $159,378, despite what the actual market-rate price for the new home might be. The ordinance identifies specific locations within the city where mandatory inclusionary housing is to be developed – areas that include some of the most expensive land in the city.

Sounds good, right? Think again.

If land cost $100,000 per lot to develop, that only leaves $60,000 to cover the cost of building the home – an impossible feat. Logically, the only way to build and sell a house at $159,378 is to share the cost with the remaining 90 percent of market-rate homebuyers in an inclusionary zoned development. And that’s when home prices escalate.

A study by Reason Public Policy, a national nonpartisan public policy organization, shows that inclusionary housing increases the price of market rate homes by $22,000 to $44,000 per home. That’s because homes in an inclusionary zoned development are increased to subsidize the lower priced homes.

Inclusionary zoning will result in an even wider gap between the “haves” and “have nots.” Lower incomes will qualify for the inclusionary zoned homes, higher incomes will qualify for the market-rate homes, but middle-income families will effectively be squeezed out of realizing the American dream of homeownership.

While groups like the Florida Home Builders Association (FHBA), Tallahassee Builders Association and the Tallahassee Board of Realtors oppose inclusionary zoning, we do not oppose affordable housing.

FHBA is one of the founding members of the Sadowski Coalition, which was instrumental in creating Florida’s Affordable Housing Trust Fund. Since 1992, more than 160,000 working families have obtained affordable housing through this remarkable program. FHBA builders are among the largest suppliers of affordable homes, and they are among the largest contingency of builders of Habitat for Humanity homes. FHBA members know what affordable housing is. Inclusionary zoning is not affordable housing; it is a misguided attempt to achieve affordable housing.

Inclusionary zoning will effectively increase the price of homes throughout the community. When the 90 percent of market rate homebuyers pay more for their homes to subsidize the 10 percent of below market rate inclusion homes, the net result is that prices throughout the community increase to adjust for higher priced market rate homes. That’s basic economics.

A national proponent of inclusionary zoning tells the public that more affordable housing will be achieved but, among friendly audiences, refers to inclusionary zoning as an “economic de-segregation” plan, not a mechanism for affordable housing.

Affordable housing is the responsibility of the entire community, not just builders or Realtors. Mandating how builders sell a percentage of their homes at below-market rate makes about as much sense as requiring Publix to sell a percentage of milk and bread at below market rate, or have an auto dealership set aside a given number of cars and trucks to be sold for less than it actually cost to build the car.

Builders and Realtors are hopeful that, through the state court system, we can resolve our concerns and help ensure that regulatory barriers like inclusionary zoning don’t further increase the cost of housing. Meanwhile, we’ll continue to do our part in building affordable housing and in helping local governments identify realistic solutions to solving Florida’s overall affordable housing shortage.

The 19,700-corporate member Florida Home Builders Association is dedicated to creating a better educated and trained construction industry workforce and protecting the best interests of Florida home builders.

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