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February 11, 2006

Inclusionary Zoning: Here we go ‘round again

Madison's inclusionary zoning (IZ) ordinance, which requires developers to include units affordable to people at 80% or less of the Area Median Income (AMI) in any development they build, has been the topic of much discussion lately. Passed in spring of 2004, IZ is designed to create long term, affordable housing throughout the city, instead of allowing it to concentrate in certain neighborhoods or not be built at all. Such dispersion has been linked with increased school performance and decreased crime. Dispersion counteracts suburban style "flight," gated communities and the ghettoization of poor neighborhoods.

The evidence so far shows that Madison's IZ ordinance is working. According to a city report, in the 18 months the ordinance has been in effect 360 affordable units were approved. In addition, projects including IZ units are dispersed around the City, projects with IZ have progressed at the same rate as non-IZ projects, and there is no sign that developers have "fled" the City or that development outside of Madison is impacted by the ordinance.

Despite its success, IZ has faced continual opposition, most notably from developers, realtors, and a handful of alders who are calling for its repeal. While the idea of repeal is controversial, there is general agreement that the existing ordinance is not perfect, and that certain parts of it need improving. Regularly discussed changes include: 1) the incentives for developers, 2) the equity model, and 3) how and when the units are marketed.

The ordinance is designed for the public to pay for the affordable units through the provision of incentives which provide considerable value to developers. Developers, however, complain that the ordinance is not "cost neutral" and that they bear the cost of the affordable units because the incentives do not offer them real value. In response to these concerns, amendments have been introduced to add new incentives, including the ability to have "IZ-free" zones – such as penthouse floors, and the ability to have limited duplex IZ units intermixed with market-rate single family homes.

There are concerns about the division of equity gained in IZ units. In return for being able to buy an IZ unit, homebuyers agree that the amount of equity they are able to earn is limited. This keeps the unit affordable for the long term. The chief problem with the current equity model, which resulted from political compromise, is its complexity - the percentage of equity the homeowner receives upon sale of the unit changes each year, creating perverse incentives to sell in some years and not in others, and causing great confusion among all stakeholders.

There are also concerns that the units are not being adequately marketed. The ordinance requires developers to keep an IZ unit available for 240 days at an IZ price; however that time period may start before they have even broken ground. After 240 days, the developer can make the unit available to buyers with higher percentage of the AMI, and eventually the unit can be made available to the general public at market rate. This creates several problems with marketing: First and foremost, it gives developers a strong incentive not to market their IZ units, but rather to wait until they can sell them at market rate. Second, it means that buyers interested in IZ units may not be able to actually look at them when they are available for sale – a problem for most first time homebuyers.

At the moment, the IZ ordinance is still in force in Madison. Ald. Jed Sanborn's move to repeal was tabled, meaning that the City Council can reconsider it in the future. The Housing Committee, Economic Development Commission and Plan Commission have all rejected repeal. A package of amendments addressing the issues outlined above has been considered and approved at Housing Committee and Economic Development Commission, and was scheduled to be considered at Plan Commission, but as of this printing has not yet been discussed in full there.

There is now word that a new committee, convened by the Mayor, that will reopen the entire IZ debate, with everything on the table except repeal. At this point, it is unclear when or how any of these things will move forward, or how the public can be involved in them. What is clear, however, is that if you care about having affordable housing in Madison, you should contact your alder and tell them so. You can email all alders at council@cityofmadison.com. Other helpful actions and opportunities to get involved include writing a Letter to the Editor in support of IZ to the Capital Times, Wisconsin State Journal, Daily Cardinal, Badger Herald or Madison Times.

This debate isn't going away, and our progressive voices need to be heard.

This article was written by Satya Rhodes-Conway and appears in the February 2005 edition of the PD newsletter. To recieve the print version of this newsletter monthly, please join PD. You can also request 3 free issues by clicking here.

Posted by prodane at February 11, 2006 05:53 PM