Prohibit counties from imposing inclusionary zoning mandates

RE: SB2190 — RELATING TO INCLUSIONARY ZONING

 Aloha chair, vice-chair and other members of the Committee,

The Grassroot Institute of Hawaii supports SB2190, which would prohibit counties from imposing inclusionary zoning requirements on projects offered for sale or rent in perpetuity to residents of the state who do not own any other real property.

This bill is a smart approach to dealing with affordable housing mandates that often stifle homebuilding.^[1]

Affordable housing mandates force homebuilders to raise the prices of their market-rate homes to make up for the so-called affordable homes, and that becomes even more problematic, depending on the percentage of homes that must be so-called affordable.

Think of it this way: If a car manufacturer were required to sell three out of every 10 cars at a loss, the company would make up for those losses by increasing prices on the seven cars they are allowed to sell for profit.

Customers will respond to the higher prices by buying fewer cars, which will prompt the manufacturer to produce fewer cars.

In a real sense, this is what is happening to Hawaii’s housing market: Affordable housing mandates are reducing the amount of housing that gets built.

Research supports this. Carl Bonham at the Economic Research Organization at the University of Hawai‘i pointed out in 2013 that inclusionary zoning “reduces incentives for developers to produce all forms of housing, and will reduce the overall supply of housing units and increase the price of housing.”^[2]

And a 2024 study of a voluntary inclusionary zoning program in Los Angeles found that “increasing IZ requirements may not produce substantially more below market-rate units, and is very likely to reduce future housing production.” The study concluded that land-use reform would be a more effective way to increase the housing supply.^[3]

Grassroot applauds SB2190 for recognizing that inclusionary zoning doesn’t work, and we urge the Legislature to approve this bill.

Thank you for the opportunity to testify.

Ted Kefalas
Director of strategic campaigns
Grassroot Institute of Hawaii
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^[1] Tom Means, Edward Stringham and Edward Lopez, “Below-Market Housing Mandates as Takings: Measuring their Impact,” The Independence Institute, November 2007; Carl Bohnam, Kimberly Burnett, Andrew Kato, et al., “Inclusionary Zoning: Implications for Oahu’s Housing Market,” The Economic Research Organization at the University of Hawai‘i, Feb. 12, 2010; Sanford Ikeda and Emily Washington, “How land-use regulation undermines affordable housing,” Mercatus Research, November 2015;  Arjuna Heim, “We need to talk about inclusionary zoning,” Hawaii Appleseed Center for Law & Economic Justice, Aug. 13, 2025.
^[2] Carl Bonham, “The Unintended Consequences of Affordable Housing Policy,” The Economic Research Organization at the University of Hawai‘i, Sept. 8, 2013.
^[3]  Shane Phillips, “Modeling Inclusionary Zoning’s Impact on Housing Production in Los Angeles: Tradeoffs and Policy Implications,” Terner Center for Housing Innovation, April 2024.