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Implementation of Exclusionary Zoning in New Jersey Allowed High-Income Areas to Avoid Economic Integration

An article in Housing Policy Debate, “Exclusionary Zoning: Policy Design Lessons from the Mount Laurel Decisions,” reports that inclusionary zoning incentives offered by New Jersey’s Council on Affordable Housing (COAH) succeeded in encouraging high-income municipalities to create housing policies to meet state-defined affordable housing goals, but the initial policy design also encouraged them to pass off affordable housing obligations to low-income municipalities. The author argues that a mandatory inclusionary zoning program could have done more than New Jersey’s voluntary program to integrate neighborhoods economically. 

The study examines New Jersey’s inclusionary zoning program, which was the result of the Mount Laurel decisions by the Supreme Court of New Jersey and the 1985 Fair Housing Act passed by the New Jersey state legislature. As a result of those laws, every municipality across the state has a constitutional obligation to make an “appropriate variety and choice of housing” available. Municipalities that failed to meet obligation and refused to allow affordable housing to be built could be sued by developers. Subsequent suits ruled that a municipality’s development approval decisions could be overridden by the courts. The Council on Affordable Housing (COAH), which set specific affordable housing requirements, offered municipalities protection from lawsuits if the municipality submitted and COAH approved their affordable housing plans. Participating municipalities could also participate in regional contribution agreements (RCAs), in which one municipality could transfer up to 50% of its new affordable housing requirement to another municipality at a fixed price per housing unit. 

The paper addresses two questions about COAH’s program. First, did the structure of incentives succeed in encouraging municipalities with the greatest need for affordable housing to create housing plans to meet the need? Second, was there a pattern of high-income municipalities using RCAs to send housing units to low-income municipalities? (Notably, the use of RCAs was ended in 2008 after advocacy by fair housing groups on this very issue.) The author gathered the affordable housing requirements of New Jersey municipalities from COAH’s published reports, municipality data from the 1990 and 2000 Decennial Census (including median household income, population demographics, and unemployment rates), and data on RCAs that took place between 1987 and 1999. 

To answer the first question—whether the inclusionary zoning program attracted high-income municipalities—the author examined which municipalities joined the program. Of the 566 municipalities in New Jersey, 317 (about 56%) joined the program during either the first or second round (1987-1993 and 1994-1999). Results indicated that every 10% increase in a municipality’s median income increased the probability that it joined by roughly 1.53%, so higher-income municipalities were in fact more likely to join the program. Municipalities with the greatest need for more affordable housing were slightly more likely to join the program. A 10% increase in new construction needs led to an increase of 0.24% in the probability of joining, and a 10% increase in rehabilitation needs led to a 0.7% increase in the probability of joining. Municipalities under a court’s jurisdiction, already undergoing some form of a housing lawsuit, were substantially less likely to join the program. The author speculates that these municipalities may have viewed joining the program as unnecessary, since they were already given court-ordered remedies for their lack of affordable housing. 

The author also examined the 98 municipalities that used RCAs to transfer their affordable housing requirements to a different jurisdiction between 1987 and 1999, as well as the 42 municipalities that were on the receiving end of those agreements. The study found that the richest and poorest municipalities were most likely to engage in an RCA. High-income municipalities and those with large new construction obligations were very likely to send units elsewhere. A 100% increase in the median income of a given municipality was associated with a 24% increase in the likelihood they would send units elsewhere, and a 100% increase in the new construction obligation was associated with a 6.4% increase in the likelihood it would send units elsewhere. Receiving municipalities were poorer and had relatively larger Black populations. 

The author concludes that the use of RCAs, while they were allowed, allowed richer municipalities to avoid constructing as much affordable housing. While the incentive-based structure drew in some municipalities, the author argues that stricter enforcement of building requirements may have created more opportunities for economic integration for lower-income families in New Jersey.  

The full article can be found at: https://bit.ly/3j40tPu