Denver is considering a law that would require developers to include below-market rate housing in new projects in order to obtain city approval. Known as inclusionary zoning, the proposed law is being modeled after a similar ordinance in Atlanta. Both laws are providing an example of the poor decisions that are made when the context is dropped.
Both laws allow developers to pay a fee in lieu of offering below-market rate housing. Offering below-market rate housing or paying the fee will impose a financial loss on developers. A vice president at the Apartment Association of Metro Denver noted that developers will need to raise the price of market-rate units to make up for the loss. So, while some units will remain affordable for low-income households, other renters will bear the cost. This is but one example of what happens when the context is dropped.
A report issued by the Atlanta Apartment Association found that inclusionary zoning curtailed development in the impacted area. A spokesman said that “new developments were being permitted just outside the overlay and in other high demand areas of the city while projects stalled within the (inclusionary zoning) program overlay….”
In nearly three years, the Atlanta program has produced 362 units affordable to low-income households. City officials undoubtedly tout this number while ignoring the hundreds or thousands of other units that weren’t built. When the context is dropped, policy makers look only at what is easily seen. They evade the other consequences that are less easily seen.
Rather than remove the regulations that make housing for low-income families unprofitable to build, officials in both cities want to coerce developers to do the bidding of government. Rather than allow the profit motive to provide impetus for low-income housing, city officials threaten to withhold permission for new projects.
Good policy decisions require us to consider the full context—all of the relevant information. Unfortunately, policy makers seldom do this. When the context is dropped, bad decisions are guaranteed to follow.