The Political Economy of Inclusionary Housing: Adoption, Implementation, and Neighborhood Effects

Author: Constantine E. Kontokosta

Dissertation School: Columbia University

Abstract:

Inclusionary zoning is a policy that either mandates or encourages developers to include a specified percentage of housing in a particular residential development that is affordable to low- and/or moderate-income households. Despite limited research on its adoption, implementation, and effects, inclusionary zoning has become one of the most popular tools used by local municipalities to address escalating housing affordability challenges. My dissertation examines whether inclusionary housing policies increase access to housing for lower-income households by meaningfully contributing to the affordable housing stock and providing housing to those most in need. Specifically, my dissertation will explore: the determinants of adoption and implementation of inclusionary zoning policies; the economic effects of inclusionary zoning on the price of housing and the supply of affordable housing; and the impacts of inclusionary zoning on the level of income and racial integration and neighborhood transition in Montgomery County, Maryland, and Suffolk County, New York.

First, my work will investigate the political economy of the adoption and implementation of inclusionary zoning programs. Understanding why, where, and when a program is adopted will help to explain the motivations for using inclusionary zoning in relation to other low-income housing programs. Barriers to the effective implementation of inclusionary zoning programs include a lack of political will, ineffective or nonexistent public advocacy, and negative attitudes and actions of community and neighborhood groups, as well as land use characteristics such as land available for development and zoning that allows for multifamily housing (Fischel 2001, Pendall 1999).

Using economic models of politics (Downs 1957, Glaeser et al 2005, Olson 1965, Peltzman 1976, Stigler 1971) and policy diffusion (Brueckner 1998; Feiock 1994; McDonald and McMillen 2004), the determinants of policy adoption will be studied using a logistic regression model with a binary dependent variable for the adoption of inclusionary zoning (Feiock and West 1993; Man 1999; McHone 1987). Explanatory variables will include socioeconomic, demographic, and political characteristics of the jurisdiction, presence of other land-use regulations, housing market indicators, and proximity to other jurisdictions that have adopted inclusionary zoning.

Second, my research will examine the effect of inclusionary zoning on market-rate house prices and the supply of market-rate and low-income housing in a specific jurisdiction. This analysis will determine whether inclusionary zoning is effective in creating low-income housing, and how housing affordability is affected for the entire range of income groups in a jurisdiction. Studies of the impacts of land use regulations and growth controls, and more recent empirical work on inclusionary zoning, have found that these policies tend to increase the price of housing as a result of a decrease in current and expected supply (Been et al 2007; Green 1999; Knaap et al 2008; Malpezzi and Vandell 2002; Mayer and Somerville 2000).

Price and supply effects will be analyzed using multivariate regression models with cross-sectional time-series data (Beck and Katz 1995; Beck 2001; Berry and Berry 1990; Card and Krueger 1994; Galster et al 2004, Glaeser and Gyourko 2002, Malpezzi 1996; Quigley and Rosenthal 2005). The dependent variables will be the natural log of single-family house prices and housing starts, respectively. A quasi-experimental research design will be employed, using a pretest-posttest comparison between treatment and control groups (Campbell and Stanley 1963; Cook and Campbell 1979; Schwartz et al 1986). The model will be estimated using OLS techniques with panel-corrected standard errors (Beck and Katz 1995; Beck 2001). Control jurisdictions will be selected using propensity score matching techniques (Rosenbaum and Rubin 1985; Rubin and Thomas 1996).

Third, my research will analyze the effect of inclusionary zoning on neighborhood socioeconomic transition. If inclusionary zoning produces low-income units and they are properly allocated, it can be expected that neighborhoods will experience a shift in income and racial characteristics (Ellen 2000; Freeman and Rohe 2000; Schill and Wachter 1995). Given invasion-succession theories and empirical evidence of residential preferences, this shift may lead to an acceleration of neighborhood change beyond what is caused by the low-income units themselves.

Racial and income transition will be examined using OLS techniques with the dependent variable as the difference between the proportion of non-Hispanic Whites and the difference in the proportion of households earning a specified income, respectively, between 1980 and 2000 for a given census tract. The independent variables will include indicators for the presence of inclusionary zoning, the number of low-income units produced, demographic and housing characteristics, and land use and spatial controls (Can 1990; Freeman and Botein 2002, Ellen 2000, Galster 1990, Schelling 1969).

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