Part III in our Housing Policy Series

In the previous post in this series, we discussed vouchers and income-restricted affordable housing as two principal ways policymakers can make new housing available to low-income households. 

Inclusionary zoning ordinances (“IZOs”) that require income-restricted apartments as a condition of new construction are one way that cities attempt to create apartments for low-income households. While there are over 1,000 IZOs in the US according to a database by Grounded Solutions Network, the IZO label masks huge differences among policies. These differences have meant the difference between IZOs that have produced little or no affordable housing while raising rents for renters (New Haven, Boston, San Francisco), and IZOs that have managed to produce some affordable housing without hurting broader affordability [Inclusionary Housing Map].

During last year’s mayoral campaign, Jersey City Mayor James Solomon proposed that 20% of all apartments in new buildings over a certain size be set aside as affordable housing, including in buildings that request no abatements, zoning changes, or other help from the city [Solomon Housing Policy Paper]. Here we put the mayor’s IZO proposal in context.

Montgomery County, Maryland adopted one of the first mandatory universal IZOs in 1974. After 52 years, about 1% of its housing stock is affordable housing.
Median household income stands at about $129,636 per year. [Montgomery County]

Types of IZOs

When it comes to IZOs, details have important consequences on outcomes. Grounded Solutions Network’s database of over 1,000 IZOs nationwide as of 2023 categorizes IZOs along several dimensions. Some common ways in which IZOs differ include:

• Universal mandate vs triggered mandate vs voluntary: Mandatory IZOs ban new market-rate housing unless it can cross-subsidize apartments at below-market rents. An IZO can be universal, meaning it applies to all new construction over a certain size in the entire city–regardless of whether projects conform to existing zoning or not, and whether they seek incentives from the city or not.  Boston, San Francisco, and Cambridge MA are examples. Alternatively, an IZO can apply only to projects that receive extra zoning rights (upzoning or variances). Examples include of this include NYC’s Mandatory Inclusionary Housing, Jersey City’s current IZO, and Chicago’s Affordable Requirements Ordinance. There are also voluntary IZOs that allow bonuses or abatements for projects that have income-restricted units (NYC’s Voluntary Inclusionary Housing and 485x abatement programs are examples).   
• On-site vs off-site: An IZO can require all of the required income-restricted apartments be on-site, or they can allow off-site options, such as allowing a payment in lieu of providing apartments, or the construction of the apartments in another building. According to the Grounded Solutions Network database, only 32% of plans require all units to be on-site.
• Funded or unfunded: An IZO is considered “funded” when the city offsets the cost of producing affordable housing through either a direct subsidy or through city financial incentives. The primary form of city financial incentive is long-term tax abatements, commonly called a Payment In Lieu Of Taxes or (“PILOT”), though tax-increment financing and redevelopment area bonds are other ways that cities can subsidize development of affordable housing.
• Density bonuses: Many IZO programs give an allowance of extra floor area, height, and/or bulk for projects with affordable housing. A less common category of plan allows more units in a project than would otherwise be allowed but no height or other bulk allowances. Jersey City’s Affordable Housing Overlay allows more units in a project but no height or bulk concessions.
• Income levels: IZOs specify what household incomes are eligible for apartments (and therefore what the rents must be set to to be affordable to households with those incomes). The lower the income levels required, the more costly the plan is to subsidize, and the fewer the number of households that are eligible to apply. Jersey City’s IZO specifies income bands between 30% and 80% of Area Median Income (AMI), with an average of 53% AMI.

What We Know About What’s Proposed For Jersey City

The proposal for Jersey City would appear to be a 20% universal IZO applying “to all new developments governed by the existing redevelopment plans” according to the Solomon campaign’s policy paper. Although the paper suggests the plan would include city financing incentives, as councilman, Solomon routinely voted against entering into PILOT agreements to fund affordable housing production. The most recent example was his vote against a PILOT to support 15% affordable housing at 177 Grand Street, despite zero affordable units breaking ground downtown with the 15% mandate since it was implemented in 2021 [Hudson County View].

Although more than 70% of IZOs nationwide allow off-site units or payments according to the Grounded Solutions Network database, in 2021, Solomon and council ally Rolando Lavarro were fierce critics of the city’s 2020 IZO for allowing some affordable apartments to be off-site, calling this a “loophole” [nj.com]. If this stance remains unchanged, the affordable housing proposal would be an on-site-only IZO. Finally, as we mentioned in the previous post in this series, inclusionary zoning in Jersey City follows state Uniform Housing Affordability Controls (“UHAC”) standards that require the average affordable apartment to be affordable at 53% of Area Median Income; under these standards no affordable apartment can be initially rented to any household above 80% of Area Median Income.

Assuming the plan is in fact a citywide, unfunded, on-site IZO with a 20% set-aside, conforming to the UHAC standards, Mayor Solomon would be proposing that Jersey City adopt the most expensive unfunded citywide IZO mandate in the country. Only three of the over 1,000 IZOs listed in the Grounded Solutions Network database are universal, unfunded, on-site IZOs with 20% set-asides. And those IZOs have higher rent and income levels than the UHAC standards Jersey City uses. Jersey City would enter the ranks of Hamden, CT, Hopkinton, RI, and Concord, MA — hardly bastions of affordable housing development.

But even at a lower 10% set-aside, a Jersey City mandatory IZO would be an outlier nationwide–only 21 IZOs nationwide are citywide, unfunded, on-site at any set-aside percentage with eligible income levels below 80% of Area Median Income. Unlike Jersey City, all of these are wealthy, ultra-expensive, exclusionary suburbs in Massachusetts, Connecticut, and Westchester that build very little, if any, affordable housing. And each of those examples have household incomes much higher than Jersey City.

As we will discuss in the next article in the series, this is not a coincidence–unfunded inclusionary zoning both requires high housing costs, and pushes housing costs higher, pushing out the middle class, immigrants, and the vast majority of working-class people who don’t succeed in winning housing lotteries.