What do you get when you have some of the most stringent affordable housing requirements in the United States? You might think that you get lots and lots of affordable housing, but that is not the case in San Francisco. Paradoxically, you still get some of the most expensive housing in the United States. And part of the reason for this -- according to this inclusionary zoning review committee -- is as follows:

Of all 40 scenarios, only four, all of them ownership-based, penciled out while satisfying the inclusionary program. Many of the projects that were designated as feasible, or came close to it, were smaller. That could be because larger structures use more expensive union labor and tend to contain advanced safety systems, like elevators that can operate during fires, said Strachan Forgan, principal at SCB, an architecture and design firm.

Among the 20 that were rental projects, only one was shown to be feasible, but it did not satisfy the city’s mandatory inclusionary policy. While not yet ready to make recommendations, the committee members accepted the findings as accurate. Multiple development experts who reviewed the analysis for The Chronicle said it appeared to be well done.

What is often missing from analyses about inclusionary zoning is how many projects it makes infeasible as a result of the requirement. It is not no-cost affordable housing. There are real costs and real impacts. But we like to tell ourselves that this isn't the case because, at the end of the day, we're not really that serious about building more housing and building more affordable housing. Too inconvenient. Too disruptive.

Here's the thing about housing:

The delegates insisted on one hand that “housing is for living not speculation”, but on the other, emphasised the critical importance of real estate to China’s economic growth.

In other words, things are complicated. We want housing to be affordable to more people, but at the same time, we recognize that housing appreciation is kind of useful for overall economic growth. So we're a bit conflicted. And that may be why we tend to take contradictory actions.

Broadly speaking, the current playbook in Canada seems to be as follows: heavily tax new housing, force those who can afford new market-rate housing to subsidize those who can't, and then tax/ban foreign buyers.

Canada's new foreign buyer ban came into effect on January 1 of this year. And for the next 2 years, it prohibits companies and people who are not Canadian citizens or permanent residents from acquiring non-recreational, residential property in Canada. (What is the definition of non-recreational?)

While this may sound good to some -- finally, more homes for Canadians -- we're talking about a relatively small portion of the market, which is likely why there's also little evidence that any of our foreign buyer taxes have been all that effective.

It's really hard to imagine this one working much better. But it certainly sounds like something.

Here is a housing study that looked at housing supply -- in the US from 2000 to 2020 -- relative to median housing values. And here is the key takeaway:

What this chart is saying is that new housing is rarely added in cities with the lowest-value homes. The bar on the left represents municipalities whose median housing values are less than 50% of the metropolitan average. And this makes sense. If values are low there is likely little to no incentive to build. The math just doesn't work.

However, as home values increase, the incentive to build and the ability to finance new projects also increases, and that is what we see in the above chart. This also makes sense.

But something interesting happens in the highest-value cities -- housing supply once again starts to fall off. And it turns out that there is a bit of a sweet spot. Municipalities whose relative housing values are 110 to 130% of the metropolitan average actually produce the most overall housing. Any higher than that and things start to decline.

Why is that? The answer likely has to do with restrictive land-use regulations. The highest-value cities (and wealthiest suburbs) often have a lot of large single-family lots, as well as policies to ensure that this kind of built form doesn't change. This has the effect of both limiting supply and enshrining values.

So when it comes to housing supply, what you don't want are low-cost areas. But you also don't want the highest-value areas. What you want are areas that are doing well, but no so well that they start really restricting new entrants. This is what our industry often refers to as exclusionary zoning.

Now, one of the most common ways to respond to this problem is to develop an opposing policy, namely inclusionary zoning. But usually what this policy doesn't do is direct more supply to these high-value and low-density areas. Instead what it typically does is force the segment that is producing the most housing -- let's call it the 110 to 130% band -- to deliver more affordable housing.

It's a neat trick that sounds pretty cool, but it is not at no cost.