Nashville’s Inclusionary Housing Policy Under State Preemption

Inclusionary housing (IH) programs in the United States are more prominently found in states that encourage their local governments to adopt IH policies, such as California and New Jersey. However, some states also restrict their local governments from adopting mandatory inclusionary housing (MIH) policies through legislative action, called ‘state preemption’. While there are national databases on both the prevalence of state preemptions against IH policies and the distribution of IH programs, there is limited case study research on state preemptions and local IH policies. This paper addresses this gap by examining Nashville’s interest and experience in implementing IH policy from 2016-2021 in the face of the Tennessee legislature’s IH restrictions.

Nashville’s IH policy experience offers keen insights into the political economy of IH policies and the overall housing policy ecosystem. One of the key points of dispute unique to the IH policy rhetoric in Nashville is the definition of what counts as a voluntary IH (VIH) policy. Generally, while MIH programs require developers to include affordable housing (or in-lieu fees) in their development, in VIH, developers can choose to opt out of the program. Under VIH, localities provide developer incentives, such as density bonuses, parking waivers, expedited review, and financial incentives to incentivize developer participation in the program. Developers who choose not to participate in the VIH program therefore will not receive any density bonuses and work within the base zoning entitlements applicable to their land. There are 2.5 times more MIH programs than VIH in the United States. MIH programs also produce more IH units when compared to VIH programs.

Nashville’s IH policy opponents have argued that VIH policies cannot make the issue of density bonuses conditional on the inclusion of affordable units. The conditional nature of incentives, they argue, has made them a mandatory policy. This conceptual disagreement also transferred into the legislative language, severely constraining Nashville’s capacity to design a favorable IH program. Due to state preemptions on IH and restrictions on the use of any zoning tools to incentivize the development of affordable housing, Nashville Metro (Metropolitan Government of Nashville and Davidson County, also referred as Metro, or Nashville Metro, or Nashville) had to rely almost exclusively on financial set-asides or use public land for incentivizing the development of affordable housing in mixed-income private developments. This was difficult to implement not only because the Metro government faced severe budget shortfalls, but also because housing advocates were staunchly opposed to compensating private developers for a few mixed-income affordable housing units using limited public resources.

Nashville’s experience also illustrates how some rapidly growing urban areas may have limited administrative capacities in terms of housing policy precedence and staff responsible for initiating and sustaining policy support for innovative housing policies.