Inclusionary Zoning in New York and Paris

This study addresses the question of whether inclusionary zoning impacts disadvantaged neighborhoods by serving as a signal for an up-and-coming neighborhood, thereby triggering gentrification. We attempt to answer this question by analyzing data from two cities, New York City and Paris, respectively—two superstar cities where gentrification has spread beyond the ripest neighborhoods for development. Overall, although inclusionary zoning does appear to encourage new development, it does not appear to be a Trojan horse that, in the guise of bringing in affordable housing, also serves as a catalyst for rising housing prices and rents, thereby spurring gentrification.

We contrast subjects exposed to the policy intervention with subjects that were not, both before and after the policy has been implemented. The assumption underlying our Difference-inDifferences (DiD) approach is that whatever the trend in the relationship in the outcomes of interest between the treatment and control groups, if the policy intervention has no impact on the outcomes of interest, that trend should continue. To the extent the relationship in the trends changes contemporaneously with the policy intervention, we can make credible causal claims about the policy intervention’s impact on the outcomes of interest.

In both New York City and Paris, we found evidence that the incentives offered by inclusionary zoning programs impacted new development in both cities, with new development in inclusionary zones outpacing development in the comparison areas. We found no strong evidence in either New York City or Paris that the adoption of inclusionary zoning had led to increases in the price of homes sold in the inclusionary zones themselves. Instead, in Paris, sales prices actually increased more slowly in the inclusionary zones. In New York City, we did not see any strong evidence that rent levels in inclusionary zones had accelerated after the adoption of inclusionary zones. In Paris, there was some evidence that rents rose more quickly in inclusionary zones.

A key takeaway from our analyses is that, despite New York and Paris being very different cities, with the former much more market-driven, and the latter more beholden to centralized state planning, their inclusionary zoning programs performed similarly in terms of incentivizing new development. In both cities, policymakers were able to thread the proverbial needle and require developers to provide affordable housing, while refraining from being so onerous as to discourage any development at all. The impact on housing costs were mixed, with New York witnessing no discernible change in housing costs in inclusionary zones, while Paris saw declines in sales prices but increases in rents. Our results, which will be strengthened by further research, show that inclusionary zoning—even when implemented in more disadvantaged neighborhoods—can be evaluated on its own merits as a tool that can produce affordable housing, without necessarily serving as a catalyst for gentrification.