Inclusionary housing is a zoning mechanism that either requires or incentivizes developers to include below-market-rate affordable units in exchange for approval or additional density.

In NYC, there are two versions. Mandatory Inclusionary Housing (MIH) kicks in when a property gets rezoned, permanently requiring 25-30% of residential floor area to be affordable (no opt-out). Voluntary Inclusionary Housing (VIH) works the opposite way rewarding developers who include affordable units with a FAR bonus that allows more total square footage than base zoning permits. City of Yes (December 2024) expanded where VIH applies.

Owners assume inclusionary requirements always hurt land value, but VIH bonuses can increase buildable SF enough to offset the affordable unit cost and actually improve a developer's returns.

Example: A developer agrees to make 20 units affordable and receives a density bonus allowing 140 units instead of 100. The extra 40 market-rate units cover the revenue lost on the affordable ones. The developer builds more and the neighborhood gets affordable housing.