AHURI BRIEF

Understanding Inclusionary zoning

Utilising land use planning systems to deliver affordable housing

Last updated 17 Mar 2017

Inclusionary zoning is a land use planning intervention by government that either mandates or creates incentives so that a proportion of a residential development includes a number of affordable housing dwellings.

Types of Inclusionary zoning

There are two main approaches to building affordable housing through the planning process.

The first is the mandatory model which requires that a number of affordable homes are included in developments as a condition of planning approval. The number of potential affordable homes developers are obliged to build is determined by either negotiated agreements made between a developer and planning authority during the planning assessment process, or fixed requirements specified as a proportion of housing or development value.

The second approach is the voluntary incentive model, where new affordable housing is encouraged by reducing costs for developers. Types of incentives include:

  • modifying planning standards based on performance criteria—for example, increasing site yield to encourage low cost housing like boarding houses, student accommodation, and retirement villages in designated areas
  • bonus systems which relax specified development controls, typically height, density, setback or parking controls, in exchange for constructing dedicated affordable housing
  • planning process incentives where projects that include affordable housing attract special treatment in the planning process such as fast track approvals, reduction, exemption, or refund of application fees, infrastructure charges or rates.

Use in Australia

Inclusionary zoning has been been implemented, in varying capacities, in South Australia, New South Wales and the Australian Capital Territory.

The Housing Plan for South Australia, introduced in 2005, mandates that 15 per cent of new dwellings in all significant development projects be affordable, including at least 5 per cent for high-needs groups. Initially, the affordable housing requirement was applied to government land releases on the urban fringe; however, the policy is now being applied to urban renewal sites. At 30 June 2014, the South Australia Inclusionary Zoning scheme had delivered 1,489 affordable homes, with a further 3,300 committed.

Currently the City of Sydney has mandated an affordable housing component (of around 2%) in specified zones such as Ultimo/Pyrmont. In these areas, developers either include affordable housing within developments or pay an affordable housing levy. Inclusionary zoning is anticipated to deliver 330 affordable units in the Green Square redevelopment area of central Sydney.

The ACT Government introduced its Affordable Housing Action Plan in April 2007. While not strictly an Inclusionary zoning scheme, it does require that at least 20 per cent of all new estates include affordable housing, implemented programs to support affordable house and land packages, and introduced a land rent scheme to reduce upfront costs for purchasers.

International use

In 2004, London introduced a target for 50 per cent of new housing across the region to be affordable. The plan stipulates that affordable housing requirements be applied to sites with 15 or more residential units, although there are proposals to reduce the threshold in London to 10 units, reflecting the limited availability of larger sites. The preference is for onsite affordable housing contributions but in exceptional cases the borough and developer negotiate an offsite or cash-in-lieu contribution. Since then London’s affordable housing plans have gone through a number of changes, however the current Mayor was elected on a platform that included having 50 per cent of new housing to be affordable housing.

In New York, new developments, or enlargements constituting more than 50 per cent of existing floor area, within Inclusionary Housing designated areas that allocate at least 20 per cent of their residential floor area for affordable housing can receive a floor area bonus of 33 per cent above the base floor area permitted. This floor area bonus, combined with a variety of housing subsidy programs provides an incentive for the development and preservation of affordable housing.

In 2016 New York proposed that Inclusionary zoning be mandatory in specified areas.