Inclusionary Housing Ordinance

About the Ordinance

Inclusionary zoning is a local zoning ordinance or land use policy that either requires or encourages housing developers to include a specified percentage of low and/or moderate income housing in new residential developments. The City's Inclusionary Zoning Housing Ordinance was originally adopted in 2004. As part of the City’s certified Housing Element which was adopted October 1, 2002, the City included Program 13.23 to “study and adopt an inclusionary housing program and ordinance” with a start time of 2002-2003. The City of Walnut Creek has adopted an Inclusionary Housing Ordinance in February 2004, and it is currently in effect.

On October 19, 2010, new revisions and recessionary relief measures were approved by City Council. In 2013, the relief measures expired. One of the relief measures was extended by Council, which is to allow ownership projects of any size to pay the impact fee.

 

What is an Inclusionary Zoning Ordinance?

Inclusionary zoning is a local zoning ordinance or land use policy that either requires or encourages housing developers to include a specified percentage of low and/or moderate income housing in new residential developments. It has gained recognition more recently around the state as the number of cities and counties with inclusionary zoning has grown to 107 jurisdictions, or almost one-fourth of all cities in California.

An inclusionary ordinance is one of the strongest tools available to cities for implementing affordable housing policies and creating new affordable units. While many cities, such as Walnut Creek, have Affordable Housing programs that provide subsidies to developers to facilitate the development of affordable housing, existing programs only create a limited number of new units, given that a typical subsidy needed is between $30,000 and $50,000 a unit. With an inclusionary ordinance, if vacant and underutilized land identified in the Housing Element were developed at midpoint density, an inclusionary requirement of, say 20%, could result in an almost 40% increase in the affordable housing stock in the City. There are now roughly 580 restricted affordable rental units in the City, which is about 4% of the multifamily housing stock, or 1.9% of overall housing stock.

An inclusionary ordinance also can much more effectively produce affordable housing units for the City’s very-low, low and moderate-income residents, than, for example, the City’s existing practice of negotiating for some additional affordable housing units in projects on a case-by-case basis, for several reasons. As the California Affordable Housing Law Project’s 2002 report points out:

  1. An inclusionary ordinance is the most legally defensible mechanism because a regulation enacted as legislation with general applicability to all developments is better protected from a legal attack under the takings clause of the state and federal constitutions than a general policy that is applied on an ad hoc basis by staff. The inclusion of options, such as allowing payment of in-lieu fees, or dedication of land for housing, also improves the legal standing of an ordinance.
  2. It facilitates maximum compliance because an ordinance provides clear obligations, standards and monitoring procedures that ensure that the affordable housing will be built, either on-site or through some other form of contribution by developers, by making the requirement part of the locality’s zoning laws and application process.
  3. It provides the greatest certainty for developers, because it allows the developer to incorporate all requirements before they submit their development application and also saves time in the entitlement process, by eliminating back and forth negotiations. Furthermore, it enables developers to negotiate their land purchases with an understanding of the City’s requirements for the project.
  4. It enables cities to conform to State Housing Element law, even in localities with very limited housing funds, such as Walnut Creek, by showing that standards will be consistently applied, and illustrating that requirements will actually result in an increase of affordable housing in the jurisdiction. State law requires that each city and county in California prepare a Housing Element to provide a strategy that establishes goals, policies and programs to meet their jurisdiction’s housing needs, as projected by the Association of Bay Area Governments. The State has encouraged jurisdictions to adopt inclusionary zoning ordinances to help cities meet their goals.
  5. It essentially requires that affordable units be built concurrently and in an integrated manner with market-rate housing. This reduces issues around concentration of low-income units, and provides a greater array of housing options, resulting in increased economic diversity.

Inclusionary zoning (IZ) has been in practice in California and other parts of the country since the Seventies. It has gained popularity due to successful creation of new affordable units. One recent study estimates over 34,000 new units have been created in California through inclusionary requirements. This is possible because the overall impact of an ordinance may be absorbed by adjustments on a variety of levels, including a reduction in developer profit, City concessions that reduce costs, or, over time, a decrease in land costs. IZ ordinances have also been made more possible by the extraordinary profit developers have realized in California’s hot residential development market.

In addition to inclusionary ordinances, cities have used commercial linkage fee ordinances to distribute the public benefit requirement to all types of development beyond residential. This fee allows cities to increase the pool of funds available for housing subsidies by demonstrating the link between the jobs that businesses are creating and the need for more affordable housing for the workforce. As required by the City’s Housing Element, staff will be researching the commercial linkage fee option and returning with a study later this year.

Density Bonus laws have also been enacted by the State, requiring cities to provide density bonuses and an additional incentive to developers if they meet certain affordability target levels in their project, and it is shown that affordable housing cannot be produced in an alternative way. Density bonuses will be discussed later in this report. The City can become compliant with State law by including the criteria for allowing a density bonus within the elements of an inclusionary ordinance.

Finally, in addition to helping meet State housing goals, an ordinance is a strong tool for the City of Walnut Creek to assist its lower income population, particularly, households under 25 years of age and over 75 years of age, in obtaining affordable rental or ownership units. According to the 2000 Census, and based upon federal income definitions, 42% of the city’s households in 2000 would have fallen into the low or very low-income categories, earning below $45,000.