LA needs to ban mandatory inclusionary zoning

Despite obfuscating noise designed to stall it, SB 462 by state Sen. Danny Martiny would ensure efficient use of taxpayer dollars and maximize housing provision for all.

The bill would ban the practice of governments forcing multi-family builders to designate a certain proportion of units to lower-income families for a certain period in order to build at all. New Orleans has the power to mandate this in its zoning decision, although it doesn’t have to impose this requirement.

This causes problems for builders, as with them having to offer below-market units for years on end, given the reduced, if not eliminated, profit margin this could discourage them from building in the first place. Thus, with fewer units on offer, rents across the board actually become less affordable. However, New Orleans interests complain that the state should not hamstring local governments in deciding whether to pursue this policy.

A number of research efforts confirm the negative effects of this policy, so cheerleaders for the practice, called inclusionary zoning, have tried to downplay those results. But such efforts, when surveying two decades of research, tend to rely on older studies and don’t differentiate among the wide variance in implementing the policy along a continuum of incentives. And when these do, often cautionary language, along with ubiquitous calls for more study, emerge instructing that every situation is different, comparisons are difficult, etc.

New Orleans’ current option, among the more than thousand jurisdictions that practice some kind of inclusionary zoning, actually is in the most restrictive category. Most jurisdictions dangle some kind of incentive, such as tax breaks or preferential zoning, for participation. New Orleans simply can command a developer to provide below-market units for a period in exchange for getting permission to build.

The research on those types of programs compared to others tends to show the least helpful effects – a constricted market that will drive up rates. The bill would leave the less-restrictive, incentive-based programs as options, but even incentive-laden programs typically, the research shows, do boost rates market-wide, even with some units’ pricing kept artificially low. The question then becomes whether it’s appropriate to spend taxpayer dollars in this fashion potentially to have more people housed.

As for whether the state ought to override a local potential decision to impose mandatory quotas on unit rents, state government creates local governments for carrying out its purposes. If a lower-level government acts in a way unwise to fulfill the state’s obligation to its citizens, the state is perfectly free to put parameters around what those entities may do.

That’s what SB 462 does, and that’s why the Senate should pass this later today and this should eventually make its way into law.