June 12, 2012
Inclusionary Zoning is Hard
A few years ago, Washington D.C. passed an ordinance that requires residential developers to price 10 percent of units in new buildings at below market rates. You might think these units would sell out within days of hitting the market, but that isn't the case. Many sit empty. Lydia DePillis examines the dark underbelly of D.C.'s attempt to diversify its fancy neighborhoods:
The very first two condos created through inclusionary zoning are in a building at 2910 Georgia Ave. NW. While the rest of the units have sold out, these two have been on the market for almost a year now. [...] The problem is, you can't get a mortgage—or not very easily, at least. Most low- to moderate-income buyers want to get a Federal Housing Administration-backed loan. But the banks that FHA works with don't want to issue loans on properties that can't be resold at market rates in the event they go into foreclosure.
June 12, 2012 | Permalink
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This issue is larger than IZ - it would apply to properties in, for example, a CLT (Community Land Trust) or any property with back-end price re-sale restrictions, or most other forms of "equity sharing" mortgages. For example, see: http://www.cltnetwork.org/index.php?fuseaction=Blog.dspBlogPost&postID=223
Just a note to correct the misperception in the language of the linked Slate article: the article implies it is the reluctance of the banks, when in fact the problem is with FHA.
Posted by: Kurt Paulsen | Jun 12, 2012 12:37:12 PM