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Inclusionary Zoning Makes Housing Less Affordable

Inclusionary Zoning Makes Housing Less Affordable

I realize this may come as a shock to some of you, but often times legislation results in unintended consequences. And sometimes these unintended consequences negate the whole intention of the legislation. Take for example, House Bill 1334, which would allow Colorado counties to impose “inclusionary zoning” in unincorporated areas. Inclusionary zoning is an attempt to mandate affordable housing.

These laws typically force developers to set aside 10 to 20 percent of the homes they build to sell to low-income families at prices below market rate. Because developers are in business and not charity, they respond to legislation like this by building less in places that have these laws (which lowers supply of housing) and by charging more for the homes they can sell at market rate. In other words, two things that actually make homes less affordable, not more. Oops.

As Randal O’Toole notes in his latest piece for Complete Colorado’s Page Two,

Since the sale price of existing homes depends partly on the price of new homes, when inclusionary zoning causes new home prices to rise, existing home prices rise as well. Thus, inclusionary zoning makes housing less affordable for everyone except the lucky few who get to buy a subsidized home.

Cold, hard economic reality doesn’t care what your intentions are. It is as merciless in asserting itself as the law of gravity.

Read Randal’s whole piece over at Page 2 here.

Justin Longo
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