Pro-Housing Pittsburgh

Jan 27, 2025 Edit: We recently released our study on Inclusionary Zoning in Pittsburgh

This is the fourth entry in our ongoing Policy series. Pittsburgh is in the midst of a severe housing crisis, with many neighborhoods becoming increasingly out of reach for many families. While the causes for our housing problems today are many, the goal of Pro-Housing Pittsburgh is to advocate for each and every change that can lessen the extent of the crisis. Each entry in this series describes a specific Policy that can be undertaken by the local government to help with the housing crisis in Pittsburgh.

What is Inclusionary Zoning?

Inclusionary Zoning (IZ) is a policy that requires developers to set aside a certain percentage of units of new construction as affordable. Affordable is defined as a function of the “Area Median Income” (AMI) for households.

IZ is a policy that many policymakers pursue because it seems like a great deal to the public - it's pitched that developers will, at their expense, cover the cost of building affordable housing for the city whenever they build a new building. We'll take money out of developer’s pockets, and the public will get all the benefits.

The reality, however, is quite the opposite. IZ is de facto a tax on new residential development (Schuetz et al, 2011). The incidence of that tax falls on both developers and renters. By requiring a developer to set aside some units to rent or sell at below market rate, it decreases the amount of revenue a project can earn. Since a developer decides to build based on the revenue of a project versus its costs, IZ will cause some projects to not be viable - i.e. the costs will exceed the revenue, and the project will not be built. This also means that IZ requires high market rents for anything to be built to subsidize the IZ units - in neighborhoods where rents are lower, or if market rents moderate, IZ projects will never get built because projects won’t be financially viable.

From a housing affordability perspective, IZ policies constrain housing supply, which pushes up overall prices. As we noted in our post on filtering, every 100 new market-rate homes creates 45-70 homes affordable to those with below median incomes, including 17-39 homes affordable to the bottom quintile. (Mast, 2023)

While IZ can create a small number of immediately affordable units in buildings that would not otherwise have affordable units, the tradeoff is that for every 20-25 newly affordable units created by IZ, 100 new market-rate units are lost. ()