Funded Inclusionary Model Legislation

What is Funded Inclusionary Model Legislation?

Inclusionary zoning policies require developers to reserve a portion of housing units for low- and moderate-income tenants. But without public subsidies, these policies can result in financial strain, legal challenges, or underproduction. 

This model legislation solves that problem by creating a state-enabled High-Impact Housing Gap Reimbursement Program. Local jurisdictions can grant an annual, nonrefundable property tax credit that offsets the difference between market and restricted rents, provided developers maintain affordability covenants for at least 30 years.

By creating a durable, flexible, and fair reimbursement structure, this bill makes it easier for cities to adopt and expand meaningful inclusionary housing policies.

MAP partnered with Sightline Institute to develop this model legislation.

Executive Summary

This model legislation establishes a state-level framework to support and fund local inclusionary housing programs by providing a predictable financial mechanism for developers to produce affordable units.

What is funded inclusionary housing and why does it matter?

Inclusionary zoning (IZ) laws require developers to set aside a share of new housing units for lower-income households, typically by placing long term rent restrictions on those homes through affordability covenants. These policies are critical for expanding access to housing in high opportunity areas, but they often face legal and financial challenges when mandates are not accompanied by funding. In softer markets or during economic slowdowns, unfunded IZ requirements can stall development or result in fewer affordable units, undermining both production and equity goals. This legislation addresses those challenges by pairing inclusionary requirements with a reimbursement mechanism, in this case, a local property tax credit –  making it more viable for jurisdictions to expand and sustain inclusionary housing programs.

Why is a state legislative framework necessary?

Many local governments want to implement inclusionary housing but lack a fiscal tool to compensate property owners for foregone rent revenue. This bill creates a standardized funding pathway for jurisdictions to subsidize affordable rents through a High-Impact Housing Gap Reimbursement Program. It also sets baseline definitions, eligibility criteria, compliance procedures, and enforcement authority to ensure that units created are high-quality, well-distributed, and maintained over time. States like Maryland (e.g., Baltimore’s tax credit program) and Oregon have pioneered similar models at the local level, but state action is needed to unlock broader adoption and ensure consistency.

What does the legislation say?

Section 4 sets the applicability rules: Covered Projects are rental developments with 20 or more units that meet a locally determined construction cost threshold.

Section 5 establishes the High-Impact Housing Gap Reimbursement Program. It authorizes local jurisdictions to provide an annual, nonrefundable property tax credit equal to the gap between restricted and market rents for each affordable unit. The credit is renewable annually for the life of the affordability covenant, which must be at least 30 years.

Section 6 outlines unit comparability and distribution requirements, mandating that affordable units be similar in size and quality to market-rate units and spread proportionately across unit types.

Section 7 requires that each project submit an Inclusionary Housing Plan for review and approval by a designated agency.

Section 8 details enforcement, oversight, and tenant protections. Local governments must monitor compliance, enforce affordability covenants, and safeguard tenants from retaliation for asserting their rights under the Act.

Section 9 mandates an annual rental registry and market-rate/affordable rent reporting, allowing jurisdictions to track affordability outcomes.

By pairing local inclusionary housing policies with dedicated funding, this legislation creates a durable structure to promote affordability, minimize displacement, and integrate low-income renters into high-opportunity communities.

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Parking Benefit District Model Legislation

Section 1. Title.

This Act shall be known and may be cited as the “________ Act.”

Section 2. Purpose and Intent.

The purpose of this Act is to promote equitable access to housing opportunities by establishing new mechanisms to create covenant-restricted affordable rental housing within developments that benefit from public support, thereby increasing the supply of affordable homes in opportunity rich areas.This Act establishes a framework for inclusionary housing requirements, affordability standards, funding mechanisms, enforcement procedures, and ongoing compliance monitoring.

Section 3. Definitions.

1. “Affordable Housing Unit” means a rental dwelling unit reserved for occupancy by and affordable to households earning no more than a designated percentage of the area median income (AMI), as defined by the U.S. Department of Housing and Urban Development and adopted by the local jurisdiction.
   
2. “Covered Project” means any newly constructed rental development that is subject to an inclusionary housing ordinance and:
   
   1. Contains twenty (20) or more dwelling units;
      
   2. And meets or exceeds a local construction cost threshold, to be determined by the jurisdiction and adjusted periodically. (Baltimore)
      
3. “Inclusionary Housing Plan” means a document submitted by the applicant that outlines how the project will comply with the inclusionary housing requirements of the jurisdiction. The Plan shall include, but is not limited to: the total number of dwelling units in the project; the number and bedroom mix of affordable units; the targeted income levels for affordability; the proposed location and configuration of affordable units within the development; a rent schedule for the affordable units; an explanation of the unit comparability; a timeline for construction and occupancy; the method for income verification and tenant selection; and a plan for long-term compliance and reporting. (Baltimore; Portland) detailing the number, size, affordability level, rent schedule, and location of affordable units, as well as a compliance plan.
   
4. “Affordability Covenant” means a recorded deed restriction requiring continued affordability of the designated units for a period of at least______ years, or such period as determined by the state or local authority. (Baltimore)

Section 4. Applicability and Thresholds.

1. This Act shall apply to Covered Projects as defined in Section 3.
   
2. The provisions of this Act shall apply equally to privately funded developments and those receiving public subsidies or land use authorizations, provided they meet the criteria outlined in Section 3.
   
3. Local jurisdictions may place a cap on the number of inclusionary units for which reimbursement may be granted in a given fiscal year, subject to local appropriation limits. A jurisdiction shall not require a share of inclusionary units greater than that which is eligible for funding through the High-Impact Housing Gap Reimbursement Program established under Section 5.
   
4. Local jurisdictions shall establish:
   
   1. The minimum share of units required to be affordable under this Act; (Portland)
      
   2. The applicable AMI threshold(s), which may vary by tenure or bedroom size; (Baltimore)
      
   3. The affordability covenant duration, subject to a minimum term of 30 years. (Baltimore)

Section 5. Funding Mechanism.

1. There is hereby established a High-Impact Housing Gap Reimbursement Program.
2. Under this program, the jurisdiction shall provide an annual tax credit to the property owner equal to the difference between the fair market rent and the restricted rent for each affordable unit. (Based on Baltimore’s High-Performance Inclusionary Housing Tax Credit)
3. This credit shall be nonrefundable and may not be carried forward.
4. The credit shall be applied against local property taxes and may be renewed annually for up to the duration of the affordability covenant. (Baltimore)
5. Jurisdictions shall determine the valuation and documentation standards for reimbursement, subject to guidance from the State Department of Housing.

Section 6. Unit Designation and Compliance.

1. Affordable units shall:
   
   1. Be comparable in size, quality, and amenities to market-rate units; (Baltimore)
      
   2. Be proportionally distributed across unit types and building locations; (Portland)
      
   3. Be identified in the Inclusionary Housing Plan submitted at the time of permitting.
      
2. Income verification for initial lease-up and annual renewal, if required, shall be conducted by the developer or a qualified third-party, subject to oversight by the designated housing compliance agency. (Shoreline, WA)

Section 7. Administrative Process.

1. All Covered Projects shall submit an Inclusionary Housing Plan as part of the entitlement or building permit application. (Baltimore)
2. The plan shall be reviewed by the local housing authority or equivalent agency. (Baltimore)
3. Approval of the plan shall be a condition of issuance of any approved development permit.

Section 8. Enforcement and Oversight.

1. The local jurisdiction shall designate an agency or office to:
   
   1. Monitor compliance with affordability covenants; (Shoreline, WA)
      
   2. Receive and verify annual compliance reports from developers; (Baltimore)
      
   3. Administer the reimbursement program established in Section 5; (Baltimore)
      
   4. Investigate and resolve violations, and issue penalties as prescribed by ordinance.
      
2. All affordability covenants shall be recorded in land records and run with the property. (Baltimore)
   
3. Tenants shall be afforded the following rights:
   
   1. Owners shall not engage in any retaliatory action against a tenant for asserting their rights under this Act, including but not limited to, requesting repairs, reporting noncompliance, or participating in compliance reviews. Retaliatory actions may include but are not limited to: refusal to make necessary repairs within a reasonable timeframe consistent with typical standards and practices in the jurisdiction, failure to maintain habitability, or attempts to terminate tenancy without cause.
      
   2. Any violation of this section shall be enforceable through private right of action, in addition to any administrative remedies available under local or state housing law.

Section 9. Rental Registry and Market Monitoring.

1.  The jurisdiction shall maintain a public registry of all affordable units created under this Act. (Baltimore)
   
2. Developers shall report annually to the agency, office, or jurisdiction responsible for monitoring compliance on rent levels for both market-rate and affordable units. (Baltimore)

Section 10. Severability.

If any provision of this Act is found to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be severable and the remaining provisions shall remain in full force and effect.

Section 11. Effective Date.

This Act shall take effect [___ months] following enactment, and shall apply to all Covered Projects that submit a permit application thereafter.