Inclusionary Housing Delivers Diverse Neighborhoods and a Better New York
In responding to Edward Glaeser’s post about inclusionary housing, let me start with a point of agreement. For reasons set out below, I think cities should strive for economic and racial diversity across all neighborhoods. Thus I appreciate Professor Glaeser noting the “abundant evidence on the downsides of city-wide segregation.” However, in weighing what policy approach best enhances freedom for low-income people, Professor Glaeser fails to account for important benefits of inclusionary housing strategies.
The housing market in some neighborhoods in New York is increasingly out of reach for low- and even moderate-income households and the new construction taking place in those neighborhoods only brings more unaffordable units. In the Park Slope/Carroll Gardens neighborhood, a Furman Center report indicates the 2012 median rent among recent movers was $2,054, the rent burden among low-income renters was 52.5 percent and the 2013 median sales price was $691,000.
Under these circumstances, while low-income people may not necessarily want to live in a luxury building, inclusionary housing may be the only way to allow them to stay in or enter such expensive neighborhoods. Inclusionary housing requirements mean developers must set aside as affordable housing a portion of new units that they construct, either in the building or in close proximity. (“Poor doors,” which I find morally repugnant in no small part because of their similarities to Jim Crow era measures, are separate entrances for residents of inclusionary affordable units and thus lie somewhere in between on-site and off-site housing.)
The conclusion that inclusionary programs are an effective policy tool for ensuring diversity across neighborhoods finds support in a 2012 RAND study of 11 such programs. That study found that 75 percent of the affordable units created through the programs were located in low-poverty areas, compared to a range of 8 to 34 percent for other types of affordable housing programs.
Research also shows that inclusionary housing programs, which are currently in place in nearly 500 cities and counties across the country, create demonstrably positive impacts for low-income families. A 2010 report regarding Montgomery County Maryland’s inclusionary housing program (established in 1973) found that the program succeeded in integrating low-income children into low-poverty neighborhoods and schools for sustained periods of time, resulting in improved academic outcomes. Further, a 2005 analysis found that the program had substantially promoted racial integration in the county, with people of color occupying significant percentages of the inclusionary units interspersed with market rate units.
A 2010 review of the literature on inclusionary programs found that low-income residents of mixed-income communities experienced a range of benefits such as more job contacts, more race and gender diverse job networks, higher levels of occupational prestige with their housing, reduced stress, greater levels of self-esteem, and improved health and educational outcomes. These benefits did not arrive through social interaction with upper-income neighbors, which occurred infrequently, but because of the environment and amenities (such as low-poverty schools) made available through inclusionary programs.
Of course, the policy details matter. As the Real Affordability for All campaign in New York City has noted, set-aside units need to be affordable to families at all income levels, especially those for whom the housing needs are greatest. Similarly, off-site affordable units need to be built just as quickly as market rate units.
I suspect Professor Glaeser and I also agree that all residents of a city benefit when low- and moderate-income people have more economic freedom to make choices about where they live. When people aren’t at risk of displacement because of housing costs, neighborhoods are more stable, businesses are better able to retain employees, and schools have lower turnover rates. When people can afford to live near where they work, they are able to drive less, which reduces traffic and air pollution.
There are many potential routes to providing these choices, including preserving the stock of existing restricted affordable housing and public housing, which is critical. Fees on market rate development to finance new affordable housing development offer another valuable tool increasingly in use in cities. But in places where rising rents and luxury development predominate, inclusionary housing strategies may be essential to ensuring that these neighborhoods remain a choice for some of low-income households.
 Unfortunately, other affordable housing programs tend to create units in high-poverty areas, perhaps especially in high-cost areas. As the Furman Center recently reported, “[s]ince 2000, just six percent of new subsidized affordable rental units have been located in Manhattan below 96th street, compared to 17 percent of subsidized rental units built in the 1970s.”
 A study of Davis, California’s inclusionary program reached a similar conclusion about racial integration.