Inclusionary zoning allows municipalities to work with the private sector to build a long-term stock of affordable housing at little expense to taxpayers. It takes the form of either a mandatory or a voluntary (opt-in) ordinance, in which private developers incorporate a certain percentage of affordable units in exchange for non-monetary entitlements from the municipality, such as density bonuses, fee waivers, or relaxed parking restrictions. Inclusionary zoning is a flexible tool that can take many forms to address the specific needs of a residential population, local zoning regulations, and development climate.

Inclusionary zoning requires existing demand for market-rate housing to be successful. Requirements that are overly burdensome or fail to offer adequate incentives for affordable housing construction risk developers going elsewhere and worsening housing affordability over the longer term due to inadequate supply. Since affordable units are generally just 20 percent of a total development, inclusionary zoning will rarely fill all affordable housing needs on its own—especially since in many municipalities the number of households in need of affordable housing is far greater than the number of households that can afford a new high-end unit. Within inclusive developments, care must be taken to ensure that subsidized units aren’t inequitably designed, such as being clustered together or given separate entries or common areas from market rate units. Tying the subsidy to a specific unit may limit the beneficiary’s ability to move in order to gain access to opportunity.