 At a glance...
A new California study finds that inclusionary-zoning requirements can reduce housing production when the affordable-housing obligation absorbs too much project revenue. Cambridge should not simply import the study’s estimates, but its central lesson is directly relevant to the city’s current 20 percent rule. • Cambridge requires projects of 10 or more units to devote 20 percent of residential floor area to income-restricted housing. • On many parcels, developers now receive no additional height, floor area, unit allowance, or approval benefit in exchange for that obligation. • With Cambridge’s unusually high land, demolition, construction, and financing costs, a 20 percent requirement can make smaller projects infeasible or encourage developers to stop at nine units. • Demolition means the city must count net new homes—and the existing units, bedrooms, rents, and residents lost—not merely the gross number of units proposed. • A graduated policy—10 percent for smaller projects, rising toward 20 percent for larger projects or those receiving added public value—would better balance production, affordability, and preservation. Bottom line Cambridge should retain inclusionary housing, but modify the present one-size-fits-all rule. A flat, uncompensated 20 percent requirement beginning at 10 units is too blunt for a city where development often requires purchasing and demolishing extremely expensive existing homes. A lower requirement for smaller projects, combined with stronger demolition, replacement, and tenant protections, is more likely to produce both additional housing and meaningful permanent affordability. _______________________ A new working paper on inclusionary zoning should prompt Cambridge to take a fresh look at its own affordable-housing requirements. In Inclusionary Zoning and Housing Supply: Evidence from California’s Palmer Fix, economist Noah Kouchekinia examines local rules requiring private developers to reserve part of a new building for below-market-rate housing. His central finding is straightforward but important: the more costly the inclusionary requirement, the greater the apparent reduction in housing production. Read this June 11, 2026 article: HERE. Kouchekinia estimates that the typical binding California ordinance reduced annual housing permitting by roughly one-third. Less stringent requirements had smaller and statistically uncertain effects, while the largest reductions were associated with the most demanding ordinances. The paper also estimates that inclusionary zoning can raise market rents: households fortunate enough to receive an affordable apartment benefit substantially, while lower-income households that do not receive one may be harmed by the resulting reduction in housing supply. The paper is a working draft, and California is not Cambridge. Its precise estimates should not simply be transferred to Massachusetts. But its central principle is highly relevant: Inclusionary zoning should be evaluated according to its actual financial burden, not simply by whether a city has such a policy. That question has become particularly urgent in Cambridge because the economic rationale underlying the city’s 20 percent requirement has changed. Cambridge’s current requirement: Cambridge requires residential developments creating at least 10 units—or more than 10,000 square feet of residential space—to devote 20 percent of their residential floor area to income-restricted housing. The requirement applies to floor area, not merely to the number of apartments. That distinction matters. A developer cannot substantially dilute the obligation simply by dividing a building into more, smaller apartments. Twenty percent of the residential space must remain affordable. The affordable units created through this program are valuable. They are integrated into privately owned developments and provide permanently restricted homes in a city where ordinary market rents are beyond the reach of many households. Cambridge reported 9,021 income-restricted affordable homes in 2025, out of approximately 58,966 permitted or completed housing units citywide. For the households that obtain these apartments, the benefits can be life-changing. The question is not whether these homes are worthwhile. They plainly are. The question is whether requiring 20 percent at the 10-unit threshold is the most effective and equitable way to produce them under Cambridge’s new zoning system. The original bargain has largely disappeared. Cambridge’s inclusionary program once operated as something resembling an exchange. Developers subject to the requirement could receive a 30 percent increase in permitted floor area and unit count. The city’s earlier program generally produced an effective affordable share closer to 11 or 12 percent after accounting for that bonus. In 2017, Cambridge increased the affordable requirement to 20 percent. But Cambridge subsequently transformed its residential zoning. The 2025 citywide multifamily amendments removed general residential unit-density limits and made multifamily housing permissible throughout nearly the entire city. Cambridge itself has acknowledged that the old density bonus is no longer generally applicable because multifamily residential density is no longer capped citywide. On parcels where six-story market-rate residential construction is already permitted as of right, a project receives no extra stories for providing the required affordable units. It does not receive an additional unit allowance. It does not receive an additional residential floor-area allowance. And it does not receive a special as-of-right process unavailable to an entirely market-rate project. In those circumstances, the 20 percent requirement no longer functions principally as a trade of affordability for added development capacity. It functions as a mandatory cross-subsidy imposed on new housing. What does 20 percent cost? The answer depends on the difference between market rents and the rents produced by the affordable apartments. Suppose, for illustration, that an inclusionary apartment generates 60 percent of the rent of a comparable market-rate apartment. Under a 20 percent floor-area requirement, the building would produce approximately 92 percent of the gross residential revenue of an entirely market-rate building:
If affordable rents equal 70 percent of market rents, the gross reduction is about 6 percent. If they equal 50 percent, it is about 10 percent. These figures may sound manageable until they are considered against the full cost of development. The affordable units do not cost 50 or 60 percent as much to build. They require the same land, foundations, structure, plumbing, utilities, fire protection, elevators, finishes, maintenance and financing as the rest of the building. A loss of 6 to 10 percent of gross revenue can therefore consume a much larger share of the developer’s expected return. On a marginal project, it can be the difference between financing and cancellation. That is precisely the distinction emphasized in Kouchekinia’s paper. Mild requirements may have limited effects, while a requirement consuming a larger share of anticipated revenue can substantially reduce production. Why Cambridge land costs make this especially difficult: Cambridge development rarely begins with inexpensive vacant land. A developer commonly must purchase an existing house, two-family home, triple-decker or small apartment building. The sale price reflects not only the value of the existing structure but also the anticipated value of the redevelopment opportunity. The developer must then pay for design, legal and engineering work, financing, demolition, environmental remediation, construction, insurance and sometimes tenant relocation. The acquisition expense is already exceptionally high before a single net new apartment is created. Cambridge has itself identified land, construction and financing expenses as major impediments to new development. It has also noted that structured parking can cost $100,000 or more per space, illustrating the scale of the fixed expenses that can affect multifamily feasibility. A 20 percent rent restriction does not reduce any of those costs. It reduces the income available to pay them. This burden is particularly difficult for a 10-, 12- or 15-unit project. Smaller developments must absorb many of the same acquisition, professional, demolition and construction expenses as larger projects, but have far fewer apartments across which to distribute them. *The 10-unit cliff Cambridge’s requirement also begins abruptly. A nine-unit project may be entirely market rate. Add one more apartment, and 20 percent of the entire residential floor area becomes subject to affordability requirements. This is not a gradual contribution. It is a cliff. The predictable result is that some owners will stop at nine units, even when the permitted building envelope could accommodate more. Others may keep a project below 10,000 square feet. Some projects may be postponed until market rents rise enough to carry the additional burden. A policy intended to create affordable housing can consequently produce the following outcome:
Reducing the requirement to 10 percent would not eliminate the cliff, but it would make crossing it considerably less punitive. Using the same illustrative rents, a 10 percent requirement would reduce gross project revenue by approximately 3 to 5 percent rather than 6 to 10 percent. That difference can be decisive for a smaller project. Would reducing the requirement eliminate affordable housing? No. But it would create fewer affordable apartments in each project. In a hypothetical 100-unit-equivalent building:
To produce the same number of inclusionary apartments under a 10 percent rule, qualifying construction would need roughly to double. No one should assume that this would happen. A lower requirement would probably make more projects feasible, but construction costs, interest rates, land prices and physical constraints would remain. The most likely result of reducing the requirement would be:
That is the real tradeoff. It should be acknowledged rather than obscured. Demolition changes the equation. Should one choose 10% or 20%? For a small project of 10–19 units that must purchase and demolish existing Cambridge housing, I would generally choose 10%, accompanied by tenant, replacement, and preservation protections. My reasons are:
For a large project on a commercial, institutional, parking, industrial, or substantially underused site, I would be more inclined to retain 20%. Such projects can spread costs across many units, usually produce a much larger net housing gain, and do not necessarily destroy existing homes. Cambridge’s redevelopment pattern adds another complication: many new projects require demolition of existing homes. A proposal to replace a two-family house with 10 apartments does not create 10 net new homes. It creates eight. Cambridge now properly measures housing growth on a net basis, accounting for units removed through demolition or consolidation. But even net unit count does not tell the whole story. An existing two- or three-family property may contain relatively moderate rents, large apartments, family bedrooms, yards, porches and long-established tenants. These homes may not be legally classified as affordable, yet they may cost considerably less than the new market-rate apartments replacing them. A redevelopment project therefore needs to be evaluated in at least three ways:
Under a 20 percent requirement, the rough result might be:
But suppose the 20 percent requirement instead causes the owner to stop at nine units. Cambridge might then receive:
The policy cannot be evaluated by looking only at the percentage printed in the ordinance. We need to know how the requirement changes actual development decisions. Demolition cuts both ways! The destruction of existing homes strengthens the case for a meaningful affordability requirement. Cambridge should not encourage the widespread replacement of existing houses with buildings containing only very expensive apartments. There are sizable environmental costs of demolitions as well. But demolition also strengthens the case against imposing the same uncompensated 20 percent burden on every project. A 100-unit building constructed on a parking lot or underused commercial property is not economically equivalent to a 10-unit building that must first acquire and demolish an expensive, occupied residential property. The larger project spreads land, design, legal, elevator and construction expenses over many more units. It also creates a much greater net increase in housing. One fixed percentage cannot adequately account for these differences. Why we should favor 10 percent for smaller projects: For projects of approximately 10 to 19 units receiving no additional height or development capacity, I would recommend reducing the ordinary inclusionary requirement to 10 percent. The reasons are practical:
One should not, however, recommend a blanket 10 percent rule for every project. Larger developments can generally spread costs more efficiently. Projects built on parking lots, commercial sites or substantially underused land may be better positioned to support a higher requirement. Projects receiving additional height beyond the normal market-rate entitlement are also receiving real public value and can reasonably be asked to return more of that value through affordability. A more effective and smarter Cambridge policy: Cambridge should replace the flat 20 percent rule with a graduated structure. An illustrative framework might be:
Cambridge should also treat the demolition of existing housing separately from the basic inclusionary percentage. Legally restricted affordable units should be replaced one-for-one before the inclusionary obligation is calculated on the additional development. Projects demolishing occupied or demonstrably lower-rent homes should provide meaningful tenant relocation protections. The city should document the number of units, bedrooms, residents and rents being removed—not merely the number of new apartments proposed. Preservation should also be made a realistic alternative. Additions, rear buildings and designs incorporating sound existing structures should not be placed at a disadvantage compared with complete demolition. Who should pay for affordable housing? The deeper problem is that inclusionary zoning asks new housing to finance a broad public good. Affordable housing benefits Cambridge as a whole. It supports economic diversity, local employment, families, schools and the ability of residents to remain in the city. Yet under the current system, much of the cost is placed on:
Existing homeowners, owners of older apartment buildings and commercial property owners benefit from Cambridge’s prosperity and social diversity but do not contribute to inclusionary housing in the same direct way. Cambridge has demonstrated that it can produce affordable housing through public and nonprofit development as well. In 2025, the city reported 9,021 affordable homes, including significant projects supported through the Affordable Housing Trust and Cambridge Housing Authority. A more equitable system would require a reasonable private contribution—perhaps 10 percent for smaller by-right projects—and use public funds, tax policy or genuine additional development rights to produce deeper affordability beyond that level. Cambridge needs new evidence! Cambridge should not defend its present 20 percent rule using assumptions developed under the former zoning system. The city’s earlier feasibility work examined a program in which a density and floor-area bonus helped compensate developers. Cambridge now acknowledges that the density bonus is no longer generally applicable after the removal of citywide multifamily density caps. The city needs a new study evaluating actual Cambridge prototypes under current conditions. That analysis should include:
It should also examine projects that were proposed but never built. Looking only at completed inclusionary developments tells us that those particular projects were feasible. It tells us nothing about the projects that were downsized, delayed or abandoned. The real choice: The choice is not simply between “20 percent affordable housing” and “10 percent affordable housing.” It is between: a higher requirement imposed on fewer completed projects and a lower requirement potentially applied to a larger number of projects. Nor should Cambridge treat every demolition followed by a larger building as an unqualified housing success. The city must count what is lost as well as what is built. Kouchekinia’s California study does not settle what Cambridge’s percentage should be. But it gives Cambridge a reason to stop treating the inclusionary requirement as costless. A policy cannot provide a large subsidy to some residents without that subsidy being paid for somewhere. On smaller projects built on extraordinarily expensive Cambridge land—especially those requiring the demolition of existing homes—a flat, uncompensated 20 percent requirement beginning at 10 units is too crude. A 10 percent requirement for smaller projects, rising gradually with project scale and with the value of additional development rights, would better balance three goals Cambridge too often treats as interchangeable:
All three matter. A carefully calibrated policy can advance them together. A single rigid percentage cannot.
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