Blog: What is Inclusionary Zoning?
by Brandi Panbach, Steering Committee Member & Newsletter Chair
Inclusionary zoning has a long history in Montgomery County, and has led to the production of more than 17,300 affordable homes since the program began in 1974. But what does inclusionary zoning actually mean? Learn more in this short primer!
Defining inclusionary zoning
Inclusionary zoning is a policy that requires or incentivizes affordable housing in new developments. A municipality may create a mandate by requiring that a certain percentage of units in a new development be affordable, or may require that a developer contribute to a fund that creates affordable housing.
A municipality may also create an incentive by allowing more density than is typically permitted by zoning, providing tax breaks, or offering other benefits in exchange for affordable units.
How does Montgomery County do inclusionary zoning?
Montgomery County’s main inclusionary zoning effort is the Moderately Priced Dwelling Unit (MPDU) Program. An MPDU is a housing unit that is income-restricted and must be affordable to households earning up to 65% of Area Median Income (AMI) for garden-style apartments, and up to 70% for high-rise apartments and for-sale units. The MPDU program offers both affordable rental and affordable homeownership opportunities. Rental units are rented below market rates based on tenants’ incomes, while for-sale units are sold at below-market prices based on construction and development costs, with deed restrictions designed to maintain long-term affordability.
New residential developments of 20 units or more in Montgomery County must set aside a minimum of 12.5 % of the units as MPDUs (15% in some higher-income areas of the county, and in other areas where required by master plans). Developers can qualify for optional incentives like bonus density and additional height in exchange for providing more MPDUs above this requirement.
Residential projects with 11 to 19 units are not required to include income-restricted units, but must contribute to the Housing Initiative Fund—which funds affordable housing production—an amount equal to 0.5% of the purchase price of each unit.
What makes Montgomery County special?
Montgomery County MPDU Program was the first jurisdiction in the country to successfully implement an inclusionary zoning program in 1974. Our MPDU program is widely recognized (and often replicated in jurisdictions across the country) as the preeminent inclusionary zoning program in the United States due to its success in both longevity and number of units created. As of 2024, the MPDU program has resulted in more than 17,300 affordable units.
A 2010 study by RAND for The Century Foundation found that lower-income school children have made strong educational gains thanks to the opportunity to live in mixed-income neighborhoods provided by the MPDU policy and other Montgomery housing initiatives.
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Sources
Montgomery Planning, Overview of Moderately Priced Dwelling Unit (MPDU)
Program and Designation of 15 percent MPDU Planning Areas (2023)
Montgomery Planning, Moderately Priced Dwelling Unit (MPDU) Program
Department of Housing and Community Affairs, Annual Report on the Moderately Priced Dwelling Unit (MPDU) and Workforce Housing Programs (WFH) Covering Calendar Year 2024 (2025)
The Century Foundation, Housing Policy Is School Policy (2010)