Portland's Warning for Metro Vancouver

In 2016, Portland adopted inclusionary zoning for developments of 20 or more units, with the requirements taking effect in February 2017.

Between February 2017 and February 2024, approximately 49% of applications for projects with at least 12 homes were for buildings with 12 to 19 units, just below the threshold for inclusionary zoning. Before the policy took effect, that share was approximately 24%, according to data presented to the Oregon Legislature.

A policy designed to produce affordable housing was accompanied by a shift toward smaller developments that fell outside its requirements.

That is the risk when affordability requirements are treated as if they have no cost.

The Cost of Unfunded Inclusionary Zoning

Inclusionary zoning sounds like a free lunch: require below-market units in every new building, at no cost to government. But the cost has to go somewhere. It either renders the project unviable, or it lands on every other buyer and renter in the building. Either way, the people it was meant to help can end up worse off.

How CMHC Financing Supports Rental Housing

In Canada, that math has often been supported by federal financing.

According to CMHC's 2025 Mid-Year Rental Market Update, the estimated share of new purpose-built rental apartment starts supported by its construction financing and mortgage loan insurance programs reached 88.4% in 2024, up from 5.4% in 2017.

A huge share of rental housing construction now relies on federal financing support. For projects carrying inclusionary zoning requirements, access to favourable financing can be an important part of making the numbers work.

But financing support is not the same as eliminating the cost of providing below-market units. If that support becomes unavailable or insufficient, the underlying financial gap remains. It falls back onto the project, and potentially onto the same buyers and renters that inclusionary zoning was meant to protect.

How Portland Changed Its Inclusionary Zoning Policy

Portland's lesson was not to abandon affordability. It was to provide financial incentives that help offset its cost.

There are models that show how this can work, but only when inclusionary zoning requirements are calibrated to project economics and paired with meaningful support. First, though, it is worth understanding just how badly the math can break when they are not.

When Inclusionary Zoning Reduces Housing Supply

A 2024 research paper published by UC Berkeley's Terner Center modelled the trade-offs associated with inclusionary zoning requirements in Los Angeles.

The researchers found that increasing affordability requirements beyond what projects can financially support could sharply reduce overall housing production, even while producing additional below-market homes. The modelling also illustrates how poorly calibrated requirements can undermine broader affordability goals.

A requirement meant to help renters can end up working against them.

Portland eventually recognized the need for stronger incentives. In 2024, the city expanded property tax exemptions for qualifying projects subject to inclusionary zoning, helping offset the income developers forgo by renting units below market.

Subsequent application data showed a sharp change in the mix of proposed projects. Between March 2024 and October 2025, the share of applications for buildings with 12 to 19 units fell to approximately 16% of applications for projects with at least 12 homes, according to the Oregon legislative data.

Oregon went further in 2026. Under Senate Bill 1521, jurisdictions in the Portland metropolitan area will be required to calculate and offset developers' expected losses from mandated affordable units. The provisions take effect in 2028 for rental housing and 2029 for all housing.

You can require affordability. But you have to pay for it.

What Metro Vancouver Can Learn from Portland

That distinction is especially relevant in Metro Vancouver. Municipalities across the region are using inclusionary zoning as one tool to secure below-market housing, while project viability remains sensitive to financing conditions and development costs.

Imposing inclusionary zoning without adequately funding it risks transferring costs from government onto builders, buyers, and renters. The cost does not vanish because government did not write the cheque. Someone always pays. Sometimes, it is the person the policy was written to protect.

The unintended consequence of getting this wrong is the erosion of the very affordability we are chasing. When the cost is made up on the backs of other buyers and renters, or when it deters housing from being built at all, affordability does not improve. It gets worse.

Inclusionary zoning is not a tax, and it should not become one. It works best as a shared commitment, where government carries its portion of the cost rather than offloading it onto the market.

Get that part right, and inclusionary zoning can deliver what it promises. Get it wrong, and it can undermine the very thing it was built to achieve.

Jay Chadha is Director of Policy & Advocacy at the Urban Development Institute.