A small group of dedicated people: Madison's Inclusionary Zoning Ordinance
Housing Policy is School Policy
by Judith Adrian

A far-reaching inclusionary zoning ordinance has been operating in Madison, Wisconsin since February 2004. A small ad hoc group of citizens worked together as a virtual organization to deepen the community discussion on balanced housing. Recently the group met to reflect on various elements of the process including history, motivation, relationships, process and what was learned. This is the story.

DEFINITION

The goal of the proposed ordinance was to create affordable housing in the City of Madison through passage of a voluntary, incentive-based inclusionary zoning ordinance.

The ordinance was developed with input from City of Madison staff, educators, builders, Realtors, landlords and developers so as to be as comprehensive a plan as possible.

HISTORY

In the late 1990s there was a renaissance in Madison that accompanied the dramatic symbiotic rise in business and investment. City government realized it could proactively direct growth and development, or planned stability, in agreement with the city's vision for its future. At the same time there was a rising minority enrollment in city schools and increases in the numbers of people who could not afford housing.

A 1993 county veto of un-skewered subdivisions was also an impetus. It was a line in the sand that coalesced political groups on two sides and raised questions of how land use decisions were going to be made in the future in the county and the city.

An organization that led community and political discussions opted to make "land use" a topic in 1995. There was fear that this would be a deadly issue but it was discovered that in fact there was great interest. The discussion focused on the Portland, Oregon, model and the group 100 Friends of Oregon. Land use continues to be a high profile topic in the area.

And, housing lot costs in the area went up ten fold in the years from 1992 to 2002 from a countywide average of $3000 to $30,000. In Madison, during the same period, lots went from an average of $10,000 to near $50,000. Home ownership was quickly moving beyond the reach of many people in the community, particularly the increasing minority populations.

MOTIVATION

Enlightened self-interest. This was the answer to the question of why people got involved in the push to bring inclusionary zoning to Madison. There was an understanding that everyone benefits from a healthy and inclusive city.

Why have Inclusionary Zoning?

For Children -- Inclusionary zoning promotes the economic integration of neighborhoods. Impoverished children from economically integrated neighborhoods perform as well as their economically advantaged peers. What changes in school resource levels and teaching practices can't do, inclusionary zoning can. Inclusionary zoning is the most affordable and humane approach to equalizing attainment in our schools.

For Our Neighborhoods -- Inclusionary zoning protects our neighborhoods by dispersing economically impoverished residents through out the community. Crime rates do not rise in economically integrated neighborhoods as they do in areas of concentrated poverty. And, property values do not suffer from the presence of affordable housing constructed under inclusionary zoning rules.

For Our Region -- A countywide program of inclusionary zoning promotes the economic balance among area communities, ensuring that each community has a mix of residents. Having a mix of residents, in terms of economic status, means that each community is home to the balanced workforce needed to keep that community healthy and viable.

For the Economy -- Every local economy relies on teachers, skilled laborers, small merchants, and childcare providers. In the coming decades, our regions' ability to develop, attract, and maintain healthy businesses depends upon making affordable housing available to the workers who make those businesses productive. Without and adequate supply of attractive, affordable, dispersed housing our economy will suffer.

For Our Humanity -- Each of us develops compassion and understanding for the people and things we get to know and know well. Economic segregation fuels racial segregation. We need communities where all kinds of people live together, sharing friendships, carpools, cookouts, and ideas.

GROUP STRUCTURE

The leaders who initiated the community conversation on inclusionary zoning were aware that the complexity of such issues required that a diverse group of people participate in the dialogue. The no-name group that began the conversation had varied backgrounds and experiences, including media, elected office, non-profit work, environment, community leadership and education. From years of engagement in the community, this seasoned group brought a wide range of personal connections.

The group's diversity and the fact that they were advocating for an open-ended discussion rather than a backing a single point-of-view meant that they could not be politically pigeonholed and, therefore, were less vulnerable to criticism. They could not be politically pigeonholed. This engaged, veteran group's connections and noteworthy community relationships meant they were trust-worthy. That opened many doors and allowing the balanced housing discussion to expand and deepen.

Of the group, David Rusk wrote, "...the other unique dimension of this process may be only best known by me. I commented tonight that I have never done so much work in any community with such a fuzzy idea of who my client really was. The ad hoc group that first came together for the Nolen in the 21st Century Conference really pulled off the city IZ campaign from soup to nuts. And I could never describe to my business manager (and wife) just who you were. All we know is that the invoices did get paid. Your success has been a remarkable demonstration of a 'virtual organization' at work in the true spirit of Democracy in Action."

RELATIONSHIPS

Early on the no-name group realized that building relationships among various groups was critical to expanding the conversation on balanced housing. Grant funds were available to bring consultant and author, David Rusk , to Madison repeatedly. He spoke with Rotary groups, at local community centers in low-income areas, to elected officials at a City Council meeting and the City Plan Commission, with county school superintendents, developers and builders, and at general public open sessions. One of the public sessions was repeatedly broadcast on the local citywide cable TV station. The goal was not advocacy for a specific ordinance but rather it was about deepening the discussion and bringing out pros and cons - and more.

The Realtors and developers, for example, were initially concerned about the push toward inclusionary zoning, which we called balanced housing in order to avoid using the sometimes-divisive word inclusionary. As it became apparent to groups that our no-name group was not advocating for a position on balanced housing but was seeking to deepen the conversation, the discussions became more open. Trust deepened when David Rusk suggested inviting a local seasoned Montgomery County, Maryland, developer to accompany him and talk directly to Madison builders and developers. In a long and comfortable meeting, developer talked to developers. Straightforward questions were raised and discussed. Topics included increasing working relationships with city government, streamlining building approval processes, offsetting the cost of building affordable units through allowing higher density, and insuring profit margins.

PROCESS

NOLAN CONFERENCES

Inclusionary zoning in Madison began with the two Nolan Conferences held over the course of several years. People involved in both planning and attending the conferences included environmentalists, developers, elected officials, educators, business people, and the media. John Nolan was the visionary planner who, in about 1900, designed the layout of the Wisconsin capitol city. The first conference explored the meaning of Nolan's vision to Madison today and the second conference expanded the discussion to look at countywide implications for Nolan's vision. David Rusk spoke at both conferences about his experiences in Montgomery County, Maryland, where the Housing Opportunities Commission (the county's public housing authority and housing finance agency) owns, rents, or administers an inventory of over 40,000 housing units (most in mixed-income neighborhoods), or about 12 percent of the total housing supply. Montgomery County has one of the nation's most progressive, mixed-income housing policies.

Three central topics emerged from the Nolan conferences:

1. A concern about the availability of mixed use and affordable housing throughout the county.
2. Increasing white flight to suburban areas and what that meant to equity.
3. Connections between children's educational test scores/achievement gaps and housing patterns in the city and county.

NO-NAME GROUP

Many in the no-name group had been involved in planning the two Nolan conferences. The group continued to gather after the second conference and decided to intentionally expand the city conversation on inclusionary zoning. Members of the group were deeply connected in the Madison community and knew first hand the issues the city was facing such as increasing immigrant populations, stressed educational system, narrowing land availability, the growing suburban development, and the processes used in the city to make decisions. The group decided to highlight one of the issues that emerged from the Nolan Conferences: the link between balanced housing and educational achievement. David Rusk was invited back to Madison for a series of meetings. Funds for these community meetings came through a grant from the Quixote Foundation, formerly located in Madison.

David Rusk knew that linking balanced housing with the quality of education and achievement gaps would capture the general interest and when he spoke to groups in Madison; he brought statistics on rising test scores in mixed income schools in the Montgomery County area and in Madison & Dane County. He was able to show that the improved educational opportunities for lower achieving students did not diminish test scores for higher achieving students. He also addressed concerns about the quality and visibility of affordable housing units in mixed income neighborhoods with a series of slides showing side-by-side housing units where the private homes were indistinguishable from multi-family apartments.

As the community discussion deepened, it became a campaign issue. "Making good on a campaign pledge, Mayor Dave Cieslewicz is drafting a new proposal that would require developers to include affordable units in housing projects... Cieslewicz said he crafted guidelines for his ordinance after meeting with housing advocates and nonprofit housing developers and reviewing ordinances from other cities." (Capital Times Newspaper of May 21, 2003). Several other groups were also developing proposals and all were brought to the table for discussion. the process remained open and inclusive.

Another part of the strategy was to widen the community discussion with the aid of the local media. For example, David Rusk wrote the lead story in the Sunday, August 3, 2003 Wisconsin State Journal, "Will we live together? Local housing policies dictate educational success." And the editorial page continued the discussion by asking if there is an affordable housing crisis in Madison and is inclusionary zoning a solution? What other options, if any, might be pursued by local governments?

Neil Heinen, WISC-TV Editorial Director, gave the following television editorials on February 3, 2003 and on August 7, 2003:

2/3/03 WISC-TV Editorial: This Wednesday night the city's Housing Committee will consider a proposal meant to guarantee a broad range of housing options in all new housing developments.

It goes by a variety of names: inclusionary zoning, open communities and balanced housing to name a few. But what it is about is ensuring that a mix of housing, affordable to well off and less off together, be available for Madison citizens.

There is a debate over whether to make the plan mandatory for all developers. There is concern over other communities failing to adopt similar measures.

Here's what we want you to think about. Mixed income communities seem to be healthy with stable property values, strong academic and social achievement for kids, and safe neighborhoods. There's a need for affordable housing. There's a need for workforce housing.

We support efforts to provide a mix of housing options that result in balanced housing in every community in Dane County. We want to see these efforts move forward.

8/7/03 WISC-TV Editorial: Having expressed optimism at the potential for a significant inclusionary zoning ordinance in the city that all sides can agree to, we need to state that our support for an ordinance is based first and foremost on the impact we believe it will have on school achievement.

As housing expert David Rusk says, housing policy is school policy. Even without the research statistics, we intuitively believe that economically integrated schools are healthier environments for successful learning than schools with high concentrations of poor kids. The details have yet to be worked out. The goals remain: affordable housing and successful developers. But the result of that will be healthy learning environments and more successful kids.

And that's the prize upon which we are keeping our eye.

Other media stories included:

• The Key to good schools? Housing Policy by David Rusk (Isthmus, 11/23/01)
• Evaluating Inclusionary Zoning Policies by David Rusk
• Zoning can help students, by Naomi Patton (Wisconsin State Journal, 6/20/02)
• Housing policy is school policy by Lee Sensenbrenner (Capital Times, 6/20/02)
• Mayor to spend day on low-cost housing by Brenda Ingersoll (Wisconsin State Journal, 4/21/03)
• Cheaper Housing A Tough Sell Suburbs Prefer High-end Homes (Capital Times, 8/2/03)
• Expert backs mayor's push for housing by Tim Ruzek (Wisconsin State Journal, 8/5/03)
• Affordable housing incentives urged: Builders need cost offsets, expert says by Bill Novak (Capital Times, 8/5/03)
• Madison should take the lead (Isthmus, 8/15/03)
• Housing consensus lacking: Affordability mired in politics (Capital Times, 10/16/02)
• Classmates Count (article and executive summary based on Rusk's Madison school study) by David Rusk
• Mayor: City will get housing law by Matt Hagengruber (Wisconsin State Journal, 10/24/03)
• Deal near on low-cost housing: Mayor's push appears to satisfy sides by Dean Mosiman (Wisconsin State Journal, 11/15/03)
• Zoning law hailed as model: Council OKs housing plan by Judith Davidoff (Capital Times, 1/21/04)

(See more at www.madison.com)

Individual letters were sent to the groups Rusk was to talk with inviting them to meetings designed to address their issues. The groups invited included elected officials from Madison and Dane County, educators starting with the Superintendent of the Madison Schools and including the teacher's union and other official education organizations, Village presidents & Township chairs, and builders and developers. Time was built into each event for informal discussion. In addition to the letters of invitation, members of the no-name group made personal phone calls. Lists of names were divided up according to who knew the people on the list. The calls were based on relationships.

These targeted meetings allowed each group to talk about their own issues. For example, the builders and developers wanted to talk about specific questions like their desire to streamline building approval processes and negotiate cost offsets like greater density in new constructions.

WHAT WE LEARNED

• PARTICIPANTS: Bringing all interested people into the conversation and thinking expansively about all who is affected by the issue.
• NO-NAME GROUP: Recognizing that a small group of dedicated people can make a difference. All members of the no-name group were volunteers (and all had day jobs that were unrelated to the project). The group's dedication to this issue was a motivator. The diversity and community-connectedness of the group was essential.
• OUTCOMES: Having no pre-determined outcome in mind led to an authentic democratic process where caring, engaged citizens came forward with ideas and innovations. Letting go of any expectations no-name group members individually held as to what the outcomes of the effort might be.
• TRUST PROCESS: Allowing the groups to make decisions; trusting democracy to work. Although the no-name group sought to bring in neighborhood and citizen voices, that wasn't completely successful. The inclusionary zoning ordinance came through the work of elected officials in final estimation.
• LINK ISSUES: Linking educational and housing issues together brought educators and parents into the conversation. David Rusk was the glue that brought many diverse people into the conversation and that allowed the building of relationships and seeing shared benefits.
• MEDIA: Involving the media was a key element.
• AREAS OF AGREEMENT: Seeking areas of agreement among diverse populations allowed the conversation to deepen.
• COUNTY-WIDE: Moving the discussion county-wide earlier in the process would have been more inclusive and might have led to more suburban IZ ordinances being passed too.
• WRITINGS: Creating more published materials and showing the need for workforce housing in the city and county would have been beneficial. Show how the effects of a lack of affordable housing ripple through the economy and society.
• DATA: Having local data on education and housing and the relationships was important.
• DESIGN: Paying attention to housing design; an important factor for many people concerned about moving affordable housing into wealthier neighborhoods.
• CONCERNS: Addressing concerns head on-such as NIMBYism about who may be living in "your" neighborhood. "An inclusionary zoning policy is not going to fill your neighborhood with the sweepings off of skid row. These are good people, who are just not making as much money as their neighbors." (Bill Novak, Affordable housing incentives urged, Capital Times, August 5, 2003)
• NEXT STEPS: A potential next step would be to work on expanding inclusionary zoning countywide. But so far there is not evidence that Madison's ordinance is pushing development out of the city.

CONTINUATION

And the discussion and assessment of the ordinance continued. The Apartment Association of South Central Wisconsin has challenged the Madison ordinance and filed suit February 12, 2005, alleging that the city's inclusionary zoning ordinance violated a state law prohibiting localities from regulating the amount of rent charged in rental units.

On the other side of the ordinance, however, is a December 13, 2004 article in the Wisconsin State Journal, Lower-cost Housing Law An Early Success. Supporters Of Madison's Controversial Inclusionary Zoning Law Say About 24 Projects Show The Law Is Working.

Yehuda Elmakias can't wait for the smile. A prominent builder, Elmakias is raising a three-bedroom, single-family home in West Madison that will sell for far less than other market-rate houses in the same 46-lot project. On the other side of town, developer Scott Lewis is working with nonprofit Common Wealth Development to offer six lower-cost condos in a 36-unit project on the 800 block of Williamson Street. Those efforts are among roughly two dozen projects that show Madison's controversial inclusionary zoning law is working, supporters say.

The law, requiring developers to include 15 percent lower-cost units in projects, is supposed to help working families making less than the Dane County median income. "It's giving a smile," said Elmakias, who has also built elegant housing shown in the Parade of Homes. "It's not just business only on this lot. It's helping somebody to own a home."

Although the law appears an early success, it's not easy to create lower-cost units, especially downtown, where land costs are high and developers must contend with height limits and other restrictions. There are concerns ranging from the practicality of the law to paperwork. After 10 months of planning for development under the law, two developers are seeking the first waivers from the requirements.

Under the law, developers can get density bonuses and other incentives to build lower-cost housing. But if it's proven that lower-cost units would make a project financially infeasible, a developer can:

• Build the lower-cost units off site;
• Assign responsibility for them to a third party;
• Pay cash equal to 10 percent of the sales price of a market-rate unit for every required lower-cost unit, with the money going to a special fund for other inclusionary zoning projects;
• Seek a reduction in the number of lower-cost units required.

Developer Dave Keller, who is proposing the mixed-use Monroe Commons project on the former Ken Kopp's site on Monroe Street, is seeking a waiver. The development would need a $1.39 million public subsidy to build just eight lower-cost units in the project, Keller said in a letter to the city. So Keller is instead seeking a waiver to pay cash for the units -- and is asking for public tax increment financing to pay the $300,000 fee, city real estate development specialist Joe Gromacki said. The request is under review.

So far, no lower-cost units have been completed since the law went into effect on Feb. 15. But the city has approved plans for 65 lower-cost units in six projects and is considering plans that would create at least 309 more units in 19 other projects. "I think the numbers point to the success of the program," said Mayor Dave Cieslewicz, who pushed the law.

Importantly, developers haven't gone away, added City Council President Brenda Konkel, another champion of the law who estimates about 200 lower-cost units will be approved or built in the first year of the ordinance in projects that would otherwise most likely not have them. "That's pretty good, given that this was the end of the world and development was never going to happen," she said.

The law thus far hasn't chilled homebuilding, city planning unit director Brad Murphy said. "At this point, I don't think there's really a significant difference in terms of the pace of development," he said.

The three-bedroom home Elmakias intends to build under the law won't be cheap, costing about $180,000. But it will be built amid market-rate housing costing $300,000 and more in the Southern Ridge development at High Point and Mid-Town roads.

That's how the law is helping teachers, firefighters and other working-class families afford their first home, Cieslewicz said. The discount is possible because the site developer, Gorman & Co., charged more for the market-rate lots and Elmakias will spend less furnishing the interior by, for example, using carpet instead of hardwood floors. On the outside, the home will look like others in the project.

Delora Newton, executive director of Smart Growth Madison, which represents developers, said the industry is warming to the law, although some now look outside the city for projects. The concerns are varied, Newton said. For owner-occupied housing, some developers are geared to building high-end housing and don't want to change, she said. Others are worried about the market impact of mixing high-end and lower-cost housing. And some question whether people will buy lower-cost units because buyers can keep no more than half of the equity when the property is resold.

And for rental units, some don't want to restrict the income stream potential for decades, she said. "There's a lot of extra paperwork," said Doug Nelson, who is creating five lower-cost units at the 33-unit Starkweather Square project at Furey and Commercial avenues. During the first year, developers mostly proposed owner-occupied housing that must be sold to people making less than 80 percent of the Dane County median income, or $51,750 for a family of three. Rental units must be for people making less than 60 percent of median income, $39,540 for the same family. The difference may be due to a soft rental market, developers said.

In any case, the law requires creativity, Newton and others said. At the Williamson Street project, Lewis is selling six units to Common Wealth at a discount, and the nonprofit is arranging special financing for the buyer. It will result in six units selling for from $90,000 to $123,000, compared to the $145,000 to $180,000 price tag for market rate units, said Common Wealth director Marianne Morton.

Developer Todd McGrath is considering many approaches to overcome land cost and other challenges to deliver 60 lower-cost units among 400 condos at his proposed Union Corners project on East Washington Avenue. The possible moves include using tax increment financing support, working with nonprofits or having buyers use "sweat equity" to improve basic units. "I'm hoping we can become an example of how you can work with it," McGrath said. "I'll know more in a year."

The city, which forged the law with the help of some developers, has already adjusted it to help senior citizens qualify for housing and is considering more technical changes. The test will come when the city starts considering waivers for Monroe Commons and others, Newton said. "The person who (seeks waivers) will expose flaws we don't know about," she said.

WHAT IT IS

Passed in January and effective Feb. 15, Madison's inclusionary zoning ordinance is designed to increase housing that would be affordable for working families making less than Dane County's median income. It requires developers to include 15 percent lower-cost units in housing projects of more than 10 units.

EARLY RESULTS

City Council President Brenda Konkel estimates that more than 200 lower-cost units will be approved or built in the first year of the ordinance in projects that otherwise would not have had them.

Number of lower-cost units:
Approved: 65
Submitted: 176
Under discussion: 133

FIRST TESTS

Developers say a test of the ordinance will come when applications for waivers from the requirement are made. So far, two developers are seeking waivers.