This document analyzes the relationship between inclusionary zoning policies and foreclosure rates in California counties. A linear regression model finds that counties with inclusionary zoning policies have statistically significant higher foreclosure rates per capita compared to counties without such policies. Housing characteristics like higher home prices and smaller sizes in inclusionary zoning counties also correlate with increased foreclosure rates. Economic factors like unemployment, income levels, and eligibility for free school lunch programs further influence foreclosure rates. The findings suggest inclusionary zoning policies contribute to higher foreclosures in California.

1. Inclusionary Zoning and California’s Foreclosure
Kristoffer Garcia
California State University Sacramento
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2. •Introduction
•Previous Research
•Model
•Methodology
•Data And Results
•Conclusions
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3. Does enforcing county level inclusionary Zoning policy in California contribute to
increases in California foreclosures?
Bento, A., Lowe, S., Knaap, G., & Chakraborty, A. (2009) state that “the local government requires housing
developers to sell a certain percentage of newly constructed housing units at below-market rates to lower
income households without raising taxes or providing public funds”.
Hypothesis:
Factors:
˔ Local governments that enforce their county to apply inclusionary zoning laws to housing developers should attract
the low to moderate income target market to purchases these cheaper houses.
˔ The inclusionary zoning policy targets the same low-income minority market demographic as the subprime mortgage
loan industry.
˔ Inclusionary zoning counties will generate an incentive for their low-income target market to acquire subprime loans
to purchase homes under inclusionary zoning.
˔ the higher-fees and the higher-interest loan payback rate of subprime loans compensates for a greater risk of late or
delinquent home repayments (WILLIAMS, R., NESIBA, R., & MCCONNELL, E. 2005).
Disregarding any concrete data on the subprime mortgage industry, the inclusionary zoning
target buyer has the increased income constrained. The liability to payback these higher cost subprime
loans only after purchasing the now cheaper houses correlates to an increase of California foreclosures
since this low-income market will have to pay for both the higher-cost loan and the cheaper mortgage.
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4. Previous Research:
Bento, A., Lowe, S., Knaap, G., &
Chakraborty, A. (2009).
Examines the housing market effects of
inclusionary zoning. Cityscape
Effects:
-Price of Single- Family houses increase
-Size of Single Family Houses Decreases
-Multifamily Housing production increases
-Increases prices of the higher market
priced higher valued homes in the county.
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5. Economic Model:
Dependent:
County level foreclosures per capita
Independents:
(+) inclusionary Zoning Policy
(+) Average Single Family Housing Price
(+)Average Single Family Housing Size
(+) County % of African American Population
(+) County % of Hispanic Population
(-) County % of White non-Hispanic
(+)% of Children enrolled in Free or reduced price meal programs
(+)Unemployment Rate
(+)Poverty Rate % of total population
(-)Personal Income per capita
Equation: County Level foreclosures per capita=
α+D(inclusionary Zoning Policy)+β1(Single Family Housing Price)+β2(Average Single Family Housing Size+ β3(County
% of African American Population )+ B4(County % of Hispanic Population)+ β5(County % of White non-Hispanic
origin)+ β6 (Percent of children enrolled in free or reduced price meal programs)+ β7 (Unemployment Rate)+
β8(Poverty Rate % of total population)+ β9(Personal Income per Capita)+time fixed effects.
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6. Methodology:
˔ The liner regression’s data starts from January 1998 until
December 2008 and informs us of 142 observations. Our
study compares the 13 California counties which impose or
do not enforce inclusionary zoning.
Inclusionary Zoning No Zoning Policy
Alameda Fresno ,Sacramento,
Contra Costa Kern, LA, Orange, Placer,
San Francisco Riverside, San
Bernardino, San Diego,
and San Joaquin
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7. Results:
Variable Coefficients [Std. Err.}
Foreclosures Per Dependent
Capita
Inclusionary .5849991 **
[.3323612]
Average Single Family .590494 ***
Housing Size [.1036286]
Avg. Single Family .256713
Housing Price [.2333386]
A.American pop -.1391304 *
[.0757321]
Caucasian pop 1.504391**
[.4694379]
Hispanic pop -.0756789
[.1377398]
free lunch program 1.112119**
[.4646837]
*significant at 10%, **significant at 5%, *** significant at 1%
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8. Results Continued::
Variable Coefficients [Std. Err.}
Unemployment .4817322**
[1862959]
Per capita income -1.289665*
[.5179342]
Constant -4.615673
[8.23372]
Observations 142
Number of Counties 13
R-Squared .8312
*significant at 10%, **significant at 5%, *** significant at 1%
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9. Conclusion:
Policy Effects and Foreclosures:
-At the 5% confidence interval level, the Inclusionary zoning policies of Alameda, Contra Costa, and San Francisco counties
increases the change on the amount of per capita foreclosure occurrences compared to the 10 counties n :(Fresno, Sacramento,
Kern, LA, Orange, Placer, Riverside, San Bernardino, San Diego, and San Joaquin) that did not have the policy.
Housing characteristics and Foreclosures:
-At the 1% confidence interval level the price celling's effects on the size of the higher valued market-priced single family houses in
Alameda, Contra Costa, and San Francisco increases the change in the amount of per capita foreclosure occurrences compared to
the 10 counties that did not have the policy.
Target Market Assumption Effects and Foreclosures:
-At the 10% confidence level a higher African American population indicates a decrease in the change on the amount of per capita
foreclosure occurrences in an inclusionary zoned city.
-At the 5% confidence level counties that have a higher total population percentage of Caucasian causes the change on the amount
of per capita foreclosure occurrences. Perhaps, the correlation between the increased amounts of foreclosures/capita and a higher
total population percentage of Caucasian within a county are from the housing producers passing on “the increase in production
costs” (Bento, A., Lowe, S., Knaap, G., & Chakraborty, A. (2009) gained from the price celling set on below market price homes
increases these units production cost. This increased cost decreases the housing developers producer surplus and revenues.
Developers compensate these loses by increasing the prices on higher valued Single- Family houses which less financially strained
Caucasian population consume but also foreclose on because of the now higher prices.
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10. Conclusion (cont.):
Economic Variables and foreclosures:
-At the 5% level, a higher student population percentage that qualify for various county school districts government
funded free lunch program increases the of the amount of per capita foreclosure.
-At the 5% level, higher unemployment rates causes increases in the change of foreclosures per capita.
-At the 10% level, higher personal income per capita levels decreases the change of foreclosures per capita.
Final Conclusion:
Inclusionary Zoning policies contribute to increases in California’s foreclosures.
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