Mandatory vs Voluntary Programs

Inclusionary programs can be divided into two broad types:  mandatory and voluntary.  Although they share many characteristics, they differ in one fundamental aspect that significantly affects how effective they are in providing affordable housing.

The fundamental difference between the two is this:

  • Mandatory programs require the developers to provide affordable housing as a condition of receiving development approval, and then typically provide some form of regulatory concessions in return for that housing.
  • Voluntary programs (also called incentive-based or negotiated) encourage the developers to provide the affordable housing by using regulatory concessions as incentives.

This fundamental difference can be looked at it another way:   in the mandatory programs, the developers have no choice but to provide the affordable housing if they wish to build anything; while in the voluntary, they have the choice to build something but not all they might if they accepted the incentives.

Developers, who have consistently opposed mandatory programs, often have portrayed voluntary programs as an effective alternate. They argue that they could provide ample affordable housing on a voluntary basis, if only they were given sufficient concessions and favourable conditions.

Both approaches have been widely tried in the US, and after years of experience, there is ample and convincing evidence that the voluntary programs don’t work. The vast majority of voluntary programs have produced very little affordable housing, and generally much much less than the mandatory programs. As a consequence, voluntary programs are now generally dismissed as  a credible option.

It is true that a handful of voluntary programs have been productive but this can be explained by particular local conditions not replicable elsewhere or by other demanding policies or regulations. For example, some voluntary programs are coupled with growth management policies that place a heavy-weighting on the provision of affordable housing when determining what developments are allowed to go-ahead.

New York City’s voluntary program is relevant here. It has been the most productive of the voluntary programs to date, but it success have been tied particular circumstances: its extraordinarily high housing prices. These prices have induced some developers to offer the provision of affordable housing in return for the right to build a few more expensive units. Nevertheless, the city’s newly elected mayor has proposed changing it to a mandatory program because it has produced insufficient housing, and then only in certain parts of the city.

It also must be said there are many mandatory programs that also are not productive. They are unproductive when there is little or no housing development activity. They are also unproductive when the programs are poorly designed. For example, this can occur when smaller projects (say, those smaller than 30 or 50 units) are exempted, or developers are allowed to pay fees-in-lieu.

California Surveys

Two surveys of the inclusionary programs in California contain some relevant findings on this issue. Although these surveys do not cover the whole country, they are instructive because the state has about a third of the country’s total, including many of the earliest.

2006 Findings

The survey conducted in 20061 looked at the 170 then-known programs in the state.  These programs had been implemented in 32% of the local jurisdictions of the state.  Out of these programs, 130 (76%) were described as mandatory.  See the survey.

The survey found that 24 of these programs had been able to produce 10% or more of their new units as inclusionary housing. Of these programs, 22 were mandatory. (Although not stated by the survey, the 2 productive voluntary programs relied on growth management policies to produce the affordable housing.)

The 8 top-producing programs were mandatory. Although they represented less than 5% of the sample, they had produced 28% of the inclusionary units identified in the survey.

The report associated with the survey contains five recommendations for achieving an effective program. The first of these is to adopt a mandatory policy.

2003 Findings

The 2003 survey2 obtained responses from the 98 or the107 then-known programs. Out of these, 92 (94%) were found be mandatory.  See the survey.

All of the 15 most successful programs were mandatory.

Of the 6 voluntary programs, 3 had reported no production at all. Two of these specifically blamed the voluntary nature of their programs for the poor production despite the housing boom in their communities.

The report contains these two relevant conclusions:

  • “In general, jurisdictions with voluntary or incentive-only policies report that their policies did not produce the desired affordable housing.”
  • “In general, …. the voluntary programs do not cause market rate developers to build or facilitate affordable units unless including affordable housing makes an applications more competitive in the permit approval process.”

Expert Opinion

A number of major organizations in the US have endorsed the use of mandatory programs instead of voluntary programs. These include the following:

  • American Planning Association (APA);
  • PolicyLink;
  • National Institute for Housing;
  • Innovative Housing Institute;
  • Pratt Institute Centre for Community and Environmental Development;
  • Business and Professional People for the Public Interest (BPI); and
  • Urban Land Institute.

Many recognized experts (some writing for the above organizations) are also on the record for endorsing mandatory programs, include these:

  • David Rusk;
  • Alan Mallach;
  • Nico Calavita; and
  • Nick Brunick (BPI and APA).

Here are some of their comments:

  • David Rusk3: “Lesson #1: Enact a mandatory, not voluntary, IZ law. Voluntary programs don’t produce much inclusionary housing. They simply give spineless public officials political cover that “they’ve done something” while it’s “business as usual” for builders.”  See the speech.
  • Nicholas J. Brunick4: “Experience and research indicate mandatory inclusionary housing programs are more effective at generating a larger supply of affordable housing than voluntary programs… mandatory programs have produced more affordable units overall, as well as more units for a wider range of income levels within the affordability spectrum.”  See the paper.
  • PolicyLink5: “While voluntary programs receive less opposition from developers,
    mandatory policies have produced far more affordable units. Indeed, an analysis of programs nationally reveal voluntary programs only produce affordable units if they offer substantial subsidies to the developer, or function as a mandatory policy by making it difficult for developers to obtain discretionary building permits without including affordable units in their projects.”
  • Pratt Institute6: “An analysis of existing IZ programs nationally reveals the superior delivery power of mandatory inclusionary zoning… Jurisdictions that apply mandatory inclusionary zoning requirements to all residential development produce significantly more affordable units.”
  • Alan Mallach7: “From time to time it has been argued that the provision of affordable housing under inclusionary programs should not be required, but rather should be a voluntary decision by the developer… This approach, however, has a number of serious deficiencies. It is ineffective as a means of producing lower income housing, while simultaneously significantly compromising the predictability and rationality of the broader municipal planning process. Such studies that have been done on inclusionary zoning have consistently found that – in the absence of deep Federal housing subsidies – voluntary programs remained largely unutilized by developers.”
  • Urban Land Institute8:  “The program should be mandatory. Voluntary programs do not produce affordable housing.”

 RD/6May10 (rev 10Sep14)

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  1. Non-Profit Housing Association of Northern California (NPH), California Coalition of Rural Housing (CCRH), Sacramento Housing Alliance and San Diego Housing Federation: “Affordable by Choice: Trends in Inclusionary Housing Programs”, 2007.
  2. CCRH and NPH: “Inclusionary Housing in California: 30 Years of Innovation”; 2003.
  3. David Rusk: “Nine Lessons for Inclusionary Zoning”; Keynote Remarks to the National Inclusionary Housing Conference; 5 October 2005.
  4. Nicholas J. Brunick: “The Inclusionary Housing Debate: The Effectiveness of Mandatory Programs over Voluntary Programs”; Zoning Practice, American Planning Association; September 2004.
  5. ‘Equitable Development Toolkit: Inclusionary Zoning’ on the PolicyLink website (www.policylink.org/EDTK/IZ).
  6. Pratt Institute Center for Community and Environmental Development and PolicyLink: “Increasing Housing Opportunity in New York City; The Case for Inclusionary Zoning”; Fall 2004.
  7. Alan Mallach: “Inclusionary Zoning in Burlington Vermont: Laying the Groundwork for an Inclusionary Zoning Ordinance”; prepared for City of Burlington; Aug 1988.
  8. John McIlwain (ULI Senior Research Fellow): “Inclusionary Zoning, Cure or Curse”; The Urban Land Institute (www.uli.org); 2005.
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