The Impact of Inclusionary Zoning on the Location and Type of Construction Activity

This paper models the impact of an inclusionary zoning ordinance on a local housing market. Markets are segmented spatially and by the mix of housing characteristics. The paper develops a framework which explains how households and builders make rational choices among alternative segments. This implies that they can react to inclusionary zoning by relocating away from the impacted sector. Therefore, the introduction of inclusionary zoning should be preceded by a study of alternative market segments. For example, the presence of attractive alternatives will allow developers and households to exit the market segments impacted by inclusionary zoning. This would cause a decline in construction activity in the covered sector. Copyright American Real Estate and Urban Economics Association.