The IZ Compromise
(Update: the amendments to the bill were passed on a 5-4 vote and was then sent to Planning Commission. Pro-Housing Pittsburgh strongly supports the now amended bill.)
On Wednesday, October 15th, Councilperson Erika Strassburger introduced amendments to Council Bill 2025-1545, the “Housing Needs Assessment Bill”. The Housing Needs Assessment Bill allows Accessory Dwelling Units (ADUs) citywide, eliminates minimum parking requirements, and expands Pittsburgh’s Inclusionary Zoning Overlay citywide.
Pro-Housing Pittsburgh strongly supports eliminating parking minimums and allowing ADUs citywide. Mandatory inclusionary zoning, however, reduces housing production, which in turn raises rents and reduces the supply of affordable housing. If we want more abundant and affordable housing in Pittsburgh, our affordable housing program must be voluntary and incentivized.
Councilperson Erika Strassburger’s proposed amendments to the Housing Needs Assessment Bill addresses these issues. The amendments establish a new Affordable Housing Bonus Program (‘AHBP’) citywide except where the current mandatory IZ Overlay exists. Under the AHBP, projects can choose to comply by building affordable units, but it would not be mandated. If home builders either provide affordable units or make a payment-in-lieu to the Affordable Housing Payments Fund at a rate of $25 per square foot of Residential Gross Floor Area, the following bonuses are applied:
Enhanced LERTA ($425k/year) [to be addressed in separate legislation]
3 Performance Points (vs. 2 in existing IZ-O)
Relief from certain zoning rules that limit residential density
Expedited ZBA/PC reviews and permitting [to be addressed in separate legislation]
The AHBP also allows low income families to stay in their home if their income exceeds 50% AMI, with a gradual phase-in of increased rent starting at 80% AMI (never to exceed 30% of income), and then a grace period of no less than 60 days to find a new home when their income exceeds 99% AMI. The amendment will also lower the affordability term from 35 years to 20 years and eliminate the automatic 35-year renewal of affordability term on building sale. This brings the AHBP in-line with other cities policies.
Pro-Housing Pittsburgh supports these amendments. We thank Councilperson Erika Strassburger and the rest of council for working to find a solution to Pittsburgh’s housing crisis and create policies that lead to abundant, affordable housing options for all Pittsburghers.
Mandatory IZ decreases housing production, pushes up rents, and reduces the amount of affordable homes. Economic theory, homebuilders’ pro-formas, and empirical evidence from both Pittsburgh and other cities demonstrate these facts.
A mandatory requirement that homebuilders set aside a portion of their new units to rent or sell for significantly below market rate acts as a tax on new construction, which reduces the amount of new housing built. The mechanism of this reduction is that the mandatory affordable units reduce the value of the potential building, which can cause investors and banks to opt out from financing the project. Without financing, the project cannot be built, so fewer projects are built. The resulting constraint on the housing supply pushes up rents and reduces the number of affordable homes. The opposite of the intended effect of IZ occurs.
If a voluntary program is not sufficiently incentivized, then builders will not voluntarily provide affordable units. Pittsburgh does have a voluntary program at the moment in the Uptown Public Realm District and the Riverfront Overlay District, which has created affordable homes (PCRG, pg 15). The Affordable Housing Bonus Program established in the amendments would expand that voluntary program citywide and provide further incentives for it. These amendments are the broadest expansion of incentives and funding for affordable housing in Pittsburgh’s history. We applaud Councilperson Strassburger for creating a truly inclusionary program while avoiding the pitfalls that cities that have adopted citywide mandatory programs (like Seattle, Denver, San Francisco, Boston, and London) have faced.
We include here an annotated bibliography of empirical papers that causally identify the effects of mandatory IZ programs on housing production and rent.
Mandatory IZ causes construction to decrease and rents to rise
Bento et al (2009) - finds that IZ raised housing prices by 2.2% and lowered house size by 33 square feet (pg 18).
Schuetz et al (2011) - finds IZ decreased construction by 4.0% and raised prices by 2.1%-2.8% in Boston (table 6, pg 317) and decreased construction by 1.7% and raised prices by 4.8%-4.9% in San Francisco (table 7, pg 319)
Means and Stringham (2012) - uses DiD to identify the effect of IZ on housing production and prices in California. They found an 8% decrease in production and 9% higher prices between 1980 and 1990, and a 7% decrease in production and 12% higher prices in 1990 to 2000. (Pg 61)
Hamilton (2021) - finds that IZ raises house prices per square per year by 1.1% (pg 183) and decreases supply (0.25% increase to -12% decrease) (pg 187).
Li and Guo (2022) - find IZ caused a decrease in units in London above the IZ threshold (pg 93).
Krimmel and Wang (2023) - finds IZ, even with upzoning, caused a decrease in new units in Seattle (tables 9-14, conclusion pg 26)
Lifari and Brown (2024) - Uses DiD to identify the effect of IZ on housing production in Denver compared to Aurora, Salt Lake City, and Boise. Finds a reduction of 33%-35% in housing permits (~3,000 fewer per year) (pg 13)
Wang et al (2025) - finds IZ caused an increase in home prices (2-3%), increase in rents (1-5%), decrease in permits (0.8% to -11.2%) (tables 3 and 4, pg 8)
Billings and Vatz (2025) - IZ caused 317.5 fewer units to be built in Lawrenceville (pg 13) and 908.5 fewer units when including in-development (pg 22). Also identifies 3 examples of “bunching” (projects shrinking to avoid IZ mandate) (pg 24) and extrapolates that IZ has caused a net loss of between 18 and 92 affordable units in Lawrenceville (pg 14).
Heisler et al (2025) - IZ caused 55.5 fewer units to be built in Lawrenceville (pg 26) and 92.5 fewer units when including “in development” projects (pg 28)
Building new market rate homes creates affordable housing
Bratu et al (2023) - 100 new market rate units create 29 bottom quintile income homes (pg 14)
Mast (2023) - 100 new market rate units create 40 bottom quintile income homes (pg 2)
Bento, A., Lowe, S., Knaap, G.J. and Chakraborty, A., 2009. Housing market effects of inclusionary zoning. Cityscape, pp.7-26.
Schuetz, J., Meltzer, R. and Been, V., 2011. Silver bullet or Trojan horse? The effects of inclusionary zoning on local housing markets in the United States. Urban studies, 48(2), pp.297-329.
Means, T. and Stringham, E.P., 2012. Unintended or Intended Consequences? The Effect of Below–market Housing Mandates on Housing Markets in California. Journal of Public Finance and Public Choice, 30(1-3), pp.39-64.
Hamilton, E., 2021. Inclusionary zoning and housing market outcomes. Cityscape, 23(1), pp.161-194.
Li, F. and Guo, Z., 2022. How does an expansion of mandatory inclusionary housing affect housing supply? Evidence from London (UK). Journal of the American Planning Association, 88(1), pp.83-96.
Krimmel, J. and Wang, B., 2023. Upzoning with strings attached. Cityscape, 25(2), pp.257-278.
Lifari, P. and Brown, C., 2024. Unlocking Housing Affordability in Denver: Is Inclusionary Zoning Solving or Perpetuating the Problem? Common Sense Institute Colorado.
Wang, R.V., Kang, W. and Fu, X., 2025. Do inclusionary zoning policies affect local housing markets? An empirical study in the United States. Cities, 158, p.105736.
Billings, J. and Vatz, D., 2025. The Effects of Inclusionary Zoning on New Housing Construction in Pittsburgh. Pro-Housing Pittsburgh.
Heisler, R., Anderson, D., Ptak, M., and Narendorf, P. 2025. Special Report: Inclusionary Zoning and Affordable Housing Financing. Office of the City Controller.
Bratu, C., Harjunen, O. and Saarimaa, T., 2023. JUE Insight: City-wide effects of new housing supply: Evidence from moving chains. Journal of Urban Economics, 133, p.103528.
Mast, E., 2023. JUE Insight: The effect of new market-rate housing construction on the low-income housing market. Journal of Urban Economics, 133, p.103383.
Post Authored By Jack Billings.
