An “inclusionary zoning” calculator can help you determine how much affordable housing your town should require that developers build in their new construction residential buildings.

I learned about Grounded Solutions Network’s Inclusionary Housing Calculator at the second-ever YIMBYtown conference in Oakland, California, two weeks ago.

YIMBY (yes in my back yard) is a movement to reduce barriers to building more housing in order to be able to house everyone at a level they can afford. It’s a movement for other things, and it means a lot of different things to a lot of different people but the end result is that more housing needs to be built.

An interested person inputs a lot of values relevant to their local housing market into the IHC and it will calculate the cost of construction per unit and the rental income from those units, and then will figure the profit margin for the developer. What makes this “inclusionary” is that one also needs to enter the desired portion of units that are set aside as “affordable” (to people making a certain income) and subsidized by the developer’s rental income.

I put the IHC through a real world exercise by inputting as much data as I knew about a rejected proposal in Pilsen.

The first proposal from Property Markets Group had 500 units, and 16 percent of them were set aside (news on this and their subsequent proposals). Chicago’s Affordable Requirements Ordinance, or ARO, requires that 10 percent of the units are affordable, and that 25 percent of those 10 percent must be built on site. The other 75 percent can be built on site, or the developer can pay an in-lieu fee per unit.

Needless to say, 16 percent on-site is much, much higher than 25 percent of 10 percent. A neighborhood organization, the Pilsen Land Use Committee, however, requires 21 percent in the area, and the city council member, Danny Solis, 25th Ward, adheres to.

PMG said they couldn’t go that high, and that’s what I wanted to test.

According to this Inclusionary Housing Calculator, could the developer make enough profit (considered as 10 percent) if the building had 21 percent of units as affordable?

In this exercise, the answer was “no, PMG could not make a profit if they had to set aside 21 percent of the units as affordable.”

But the calculator showed that they could earn a 12 percent profit if 16 percent of the units were affordable. 

Some of the inputs are actual, like the sale price of the land (found in the Illinois Department of Revenue’s transactions database), but I had to make up some inputs, including the apartments’ bedroom mix, and the future rental prices of those apartments.

Further reading

  • It’s tough for people to move into one of these set-aside apartments in Chicago (DNAinfo Chicago, July 28, 2017)
  • Inclusionary zoning cannot create enough affordable units (City Observatory, February 11, 2016)
  • Other housing cost calculators like this one (City Observatory, July 26, 2016)