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Inclusionary Housing Policies, Stigma Effects and Strategic Production Decisions

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Abstract

Inclusionary housing policies enacted by municipal governments rely on a combination of legal mandates and economic incentives to encourage residential real estate developers to include affordable units in otherwise market-rate projects. These regulations provide a means of stimulating the production of mixed-income housing at a minimal cost to the public sector, but have been hypothesized to slow development and put upward pressure on housing prices. The results of the theoretical models presented in this paper suggest that inclusionary housing policies need not increase housing prices in all situations. However, any observed impact on housing prices may be mitigated by density effects and stigma effects that decrease demand for market-rate units. The results additionally suggest real estate developers are likely to respond to inclusionary housing policies by strategically altering production decisions.

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Acknowledgments

The authors would like to thank the Belk College of Business at UNC Charlotte for the faculty development grant awarded to support this research and Dr. Richard Buttimer for his comments and suggestions.

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Authors and Affiliations

  1. University of North Carolina at Charlotte, 9201 University City Blvd., Charlotte, NC, 28223, USA

    W. Keener Hughen

  2. University of North Carolina at Charlotte, 320 E. 9th Street, Suite 720, Charlotte, NC, 28202, USA

    Dustin C. Read

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  1. W. Keener Hughen
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  2. Dustin C. Read
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Correspondence to Dustin C. Read.

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Hughen, W.K., Read, D.C. Inclusionary Housing Policies, Stigma Effects and Strategic Production Decisions. J Real Estate Finan Econ 48, 589–610 (2014). https://doi.org/10.1007/s11146-013-9402-7

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