Considering the Cost of Inclusionary Zoning and Resale Restrictions in the District of Columbia
Journal IssueVolume 22, 2015
This paper considers the economic impact of the District of Columbia’s Inclusionary Zoning (IZ) affordable housing program, which provides low- and moderate-income families with the option of purchasing housing units below market price. The economic costs imposed by the IZ program include a loss of market surplus and the opportunity cost of capital for low- and moderate-income homebuyers. I evaluate resale restrictions in comparison to the shared equity provision of San José’s IZ program, which allows homebuyers to sell their IZ units at market rates, retain the appreciation value of any improvements to the home, and refund the difference between the two to the San José city government, reducing the loss in market surplus and allowing homebuyers to retain an appreciable asset. I recommend that the DC IZ program relax its permanent resale restrictions and adopt the San José “recapture” model to reduce housing market losses to the benefit of both IZ homebuyers and the DC community as a whole.