Housing Mandates May Hit Los Angeles

City Council needs to understand that inclusionary zoning doesn't work

With some members referring to a “housing crisis,” the Los Angeles city council recently voted 15-0 to request that the City Attorney’s Office draft an inclusionary zoning ordinance. This would place L.A. among roughly 100 municipalities that require developers to charge below-market prices for a certain percentage of units for low to moderate income families.

At first blush, the proposal sounds reasonable. The cost of housing has been continually rising in L.A., and those lacking high incomes feel the pinch the most. Moreover, advocates claim that inclusionary zoning will promote more environmentally-friendly development and reduce congestion by placing employees nearer to their jobs. Some even argue that there might be an economic benefit for some communities, since such laws would attract a more diverse cross-section of income brackets, thus creating “income-integrated communities.”[1]

Yet in spite of these seemingly good intentions, inclusionary zoning simply doesn’t work-see Reason’s recent report Housing Supply and Affordability (../ps318.pdf). Moreover, inclusionary zoning entails costs far beyond what advocates are willing to admit, and, worse, it is borne out of the unwillingness of planners to learn from their mistakes, stop fighting the market, and allow individuals to make their own choices sans interference.

A costless subsidy, or a phantom tax?

One advantage often attributed to inclusionary zoning over say, direct subsidies to low-income families, is that it costs local taxpayers very little. This, however, is not actually the case. Although inclusionary zoning generally does not expend much in the way of public funds, it shifts costs to homebuyers, landowners, other renters, and even low-income workers generally – the very people this policy is supposed to help.[2]

This is because inclusionary zoning, by providing below-market rents, must therefore pass the costs somewhere. They don’t simply disappear. Dr. Arthur O’Sullivan, an economics professor with Oregon State University, wrote that “[t]he requirement of subsidized housing has the same effect as a development tax,” and as such, “housing consumers and landowners pay for inclusionary zoning.”[3]

What’s truly troubling, however, is that these individuals are probably not aware that they’re paying. In this way, inclusionary zoning is analogous to the Value Added Tax (VAT) which has come to such popularity in Europe. Unlike a sales tax, which is levied at the time of purchase, the VAT tax is assessed on products at various times during production. Thus it increases the price of goods before they even reach the shelves, and consumers have absolutely no idea exactly how much they’re paying.

Politicians no doubt depend on this. By creating a zoning restriction that levies only an implicit tax onto housing consumers and landowners, they rightly believe that the existence of the tax, as well as the amount being paid, will not be known. This differs from direct subsidies, which have easily documented costs.

Accordingly, it would not be inaccurate to label inclusionary zoning as a kind of political subterfuge, a brand of which is simple to institute and difficult to abolish.

Reducing congestion, or reducing quality of life?

L.A. City Councilman Ed Reyes recently claimed that the implementation of inclusionary zoning will “mean that people who clean up buildings, people who assist our doctors, people who attend to public safety will not have to drive between two and four hours a day just to get to work.” Thus Reyes contends that “[i]t will mean a relief of congestion and traffic.”[4]

One can quickly identify Reyes’s unfounded premise – that inclusionary zoning, by encouraging poorer workers to move to high-density areas, must therefore lessen the overall traffic load. In reality, cities with higher population densities tend to have higher rates of congestion. Wendell Cox, a Los Angeles native and founder of the Wendell Cox Consultancy, has shown that there is a solid positive relationship between population density and traffic volumes, which leads to an uptick in congestion.[5]

According to Cox, this trend even applies internationally. “The higher densities of urban areas outside the United States,- Cox writes, “are associated with much higher traffic volumes per square mile (despite their usually far superior transit systems).”[6] London’s legendarily horrendous traffic, for example, is primarily the result of high density combined with an automobile-oriented society. Just imagine the implications for California!

Now this is often regarded as counterintuitive, but the data speaks for itself. Greater density, far from cutting traffic, actually slows down traffic by confining it to a smaller area. As expected, this causes travel times to increase and a marked decrease in air quality. Overall, it constitutes a net loss for quality-of-life issues.

Helping the poor, or a wider agenda?

By raising the issue of density, Councilman Reyes makes clear he has invested himself in the ideology of smart growth, which holds in its crudest form that higher population densities are always better. Alas, this is more an article of faith than of reason. It is also usually a matter of one group attempting to force their personal living preferences on society at large. Regrettably, the very nature of zoning accommodates this kind of localized tyranny.

Yet in this case, Reyes is attempting to exercise that control in a way that benefits a select few low and middle-income workers at the expense of virtually everyone else. Although the housing costs are slight in apartments regulated by inclusionary zoning, the vacuum created leads to higher rents for all other tenants, the poor included. It is unlikely that this fact has escaped Reyes or the rest of the council.

Hence the claim that inclusionary zoning is designed to help the poor is more of a ruse than anything else. It—s about molding a city in an image desired by city planners, an image that must invariably collapse under the weight of its own impossibility.

The poor simply don’t fit into this. If the L.A. city council truly desired to assist the indigent, they would instead abolish zoning entirely. It is zoning, after all, that commonly allows communities to ban multi-family dwellings. It is zoning that stifles the market and restricts residential living to certain areas. It is zoning that allows anyone with political power to manipulate development in whatever way and for whatever purpose.

The Los Angeles city council is acting like a fool trying to get out of a deep hole. Instead of trying to climb their way out, they’re digging deeper with hopes of reaching the other side. The sooner they realize that this strategy doesn’t work, the sooner the citizens of L.A. can finally solve their own problems. They have little need for this brand of “help.”

Owen Courrèges is a research fellow in urban and land use policy at the Reason Foundation


[1] Burchell, Robert W. and Catherine C. Galley, “Inclusionary Zoning: Pros and Cons,” New Century Housing 1 (2000).

[2] Jerald W. Johnson, “Issues Associated With the Implementation of Inclusionary Zoning in the Portland Metropolitan Area,” The American Dream Coalition 1 December 1997: 8.

[3] Ibid.

[4] Stewart, Jocelyn W. and Jessica Garrison, “Affordable Housing Set for Debate,” Los Angeles Times 6 Apr. 2004.

[5] Wendell Cox, “How Higher Density Makes Traffic Worse,” The Public Purpose 57 (2003).

[6] Ibid.