In a report prepared for HUD by The Urban Institute (UI), two case studies of inclusionary zoning (IZ) programs yield several key findings on the nature of IZ development and the effectiveness of IZ programs in creating affordable housing. In Montgomery County, Maryland and Fairfax County, Virginia, mandatory IZ programs have required developers to set aside a certain percentage of affordable housing units in market-rate developments for the last 40 and 20 years, respectively. Located in the Washington, D.C. metropolitan area, the two counties studied are similar in population size, and both have high housing costs, high median incomes and low vacancy rates. Montgomery County’s Moderately Priced Dwelling Unit (MPDU) program requires MPDUs in new developments with 20 or more housing units. Rental MPDUs built following a 2005 amendment have affordability terms of 99 years. Households must earn a minimum of $30,000 to a maximum of $81,500 to rent an MPDU (the maximum income limit is based on household size and apartment type). For-sale units have 30-year affordability terms that can be renewed if the unit is sold to a new household within the price-control period. In order to purchase a for-sale MPDU, household income must be between $35,000 and $81,500. Although Montgomery County has created an average of 368 MPDUs per year, productivity of the program is limited. The report finds that, from 2000 to 2011, MPDUs represented only 6.6% of all issued building permits (40,291). Still, the program is nationally recognized as one of the most successful IZ ordinances and has produced more than 13,000 units from 1976 to 2011 (9,300 for sale and 4,000 rental units). Fairfax County’s Affordable Dwelling Unit (ADU) program requires affordable units in developments with at least 50 total units, with a few exceptions. The number of affordable units required is based on a sliding scale. Both rental units and for-sale units have 30 year affordability terms. One-third of rental ADUs must be reserved for households that make 50% of area median income (AMI) or less, while all for-sale and the remaining two-thirds of rental ADUs must go to households with incomes of 70% of AMI or less. Fairfax County produces an average of 122 ADUs per year, with a total of 2,448 units produced from 1992 to 2011(1,336 for-sale and 1,112 rental units). In Fairfax County, buildings in high-density areas near transit options tend to be high-rise developments. However, high-rise developments are exempt from the county’s ADU regulations. A separate Workforce Dwelling Unit (WDU) program targets households earning 80% to 120% of AMI for high-rise buildings close to transit. The authors find that economic conditions and the political environment have a big impact on how effective these IZ programs have been in producing affordable housing. Although housing demand and production has been high in the areas of study, there were still years when relatively few units could be added due to poor economic conditions. The authors predict that the rate of development of affordable housing through an IZ program would be lower in weaker housing markets and higher in stronger housing markets.Click here to read Expanding Housing Opportunities through Inclusionary Zoning: Lessons from Two Counties.