For years, Maine Policy Institute has warned that Portland’s inclusionary zoning policy would make the city’s housing shortage worse, not better.
Last December, when Portland commissioned yet another study on the subject, MPI noted that the evidence was already clear: Inclusionary zoning acts like a tax on housing development, raises the cost of building, and discourages the very housing production that Portland desperately needs.
The city wanted its own study anyway. Now that the results are in, even Portland’s own analysis reaches the same basic conclusion.
That is exactly what makes this report so important. It is not a free market think tank study, but was instead commissioned by the City of Portland — a city that has long embraced heavy regulation, rent control, climate mandates, and aggressive housing restrictions.
Yet even this study shows that Portland’s current inclusionary zoning rules are too harsh, are pushing projects into financial infeasibility, and have contributed to a serious slowdown in housing production. The Portland Press Herald, too, has quietly acknowledged the same reality, reporting that the city’s study suggests stricter regulations have stalled production and that councilors are now considering scaling back the policy.
Inclusionary Zoning in Portland
Portland’s inclusionary zoning policy was first adopted in 2015. Under the original version, known in the report as IZ 1.0, developments of 10 or more units had to make 10% of units affordable to households at 100% of area median income for rentals, or 120% for ownership units. Developers could also pay a fee in lieu of providing those units, which started at $100,000 per required affordable unit.
That policy changed dramatically in 2020, when Portland voters approved the city’s Green New Deal referendum. Under the current version, known as IZ 2.0, developments of 10 or more units must make 25% of units affordable to households at 80% of area median income. The fee in lieu was also raised to a $150,000 base amount, adjusted annually, which the study calculates has now reached $182,000 per required inclusionary unit. For a 100-unit project, that means the effective regulatory cost rose from about $10,000 per unit under IZ 1.0 to about $45,500 per unit under IZ 2.0. On market-rate units, the effective cost rose from $11,111 per unit to $60,667 per unit.
In effect, IZ 2.0 made new housing projects far more expensive, less feasible, and harder to justify in Portland’s already-strained housing market.
The Numbers Tell the Story
The study found that over the 10-year history of Portland’s inclusionary zoning ordinance, the policy has applied to 58 projects. Those projects have produced 161 affordable housing units and about $3.47 million in contributions to the Jill C. Duson Housing Trust Fund. Another eight affordable units were under construction at the time of the report, with about $577,067 in pending fee-in-lieu payments.
Supporters of inclusionary zoning may point to those numbers and declare success. But the study correctly notes that raw output is not enough. The real question is what the policy did to overall housing production. Because inclusionary zoning depends on market-rate development to subsidize below-market units, the policy only works if the city still gets enough market-rate housing built. If the requirement is so expensive that projects stall, expire, shrink, or never get financed, the city may gain a small number of affordable units on paper while losing far more total housing in practice.
That is exactly the problem the study identifies. During IZ 1.0, 40 projects triggered the policy, resulting in 2,065 approved — although not necessarily built — units, and 164 designated inclusionary units. During IZ 2.0, only 18 projects triggered the policy, resulting in 1,453 approved units and 326 designated inclusionary units. In other words, the number of proposed projects triggering inclusionary zoning fell by 55% after Portland adopted the stricter version.
The completion numbers are even more revealing. Under IZ 1.0, completed projects produced 1,436 total units, including 118 inclusionary units, and generated $3,467,237 in fee-in-lieu contributions. Under IZ 2.0, completed projects have produced only 167 total units and 43 inclusionary units, and the city has received no fee-in-lieu contributions from completed IZ 2.0 projects.
So the fact of the matter is that stricter inclusionary zoning policies may have generated more promised affordable units on paper, but far fewer affordable units have actually been built.
Approved Housing is Not Getting Built
Looking at the broader set of housing projects, including both IZ and non-IZ projects, the study reviewed 188 projects approved between 2010 and 2025. The key finding is not that Portland stopped approving housing altogether; it is that approvals increasingly are not turning into completed homes.
At first glance, Portland’s approval numbers may make the city’s housing pipeline look healthier than it really is. But approvals are not homes. A project that is approved but never built does not house anyone, does not lower rents, and does not help Portland families. The study found that while approval volume has remained strong, the rate at which approved projects actually become completed housing has collapsed. The report says delivery dropped from an average of more than 80% from 2011 through 2020 to under 10% over the last five years.
That is the heart of the problem. Portland has not solved its housing shortage and has created a backlog of approved projects that may not get built. The study says projects are taking longer to break ground, taking longer to reach completion, and expiring at higher rates than in the past. It also notes a trend toward fewer, large projects with smaller units, a greater reliance on outside subsidy, and more complicated compliance to satisfy inclusionary zoning requirements.
The Lesson for Portland
The lesson from Portland’s own study is simple: You cannot mandate affordability into existence by making housing harder to build. Inclusionary zoning appears attractive because it lets politicians promise affordable housing without directly raising taxes or appropriating money. But the cost does not disappear. It is shifted onto new housing, onto market-rate renters and buyers, and ultimately onto the city’s housing supply.
The study’s conclusion is clear that current market drivers, especially construction costs and interest rates, are outside the city’s control. But Portland’s local rules are within the city’s control. When the city layers a 25% inclusionary requirement at 80% of area median income on top of already difficult market conditions, it creates what the report calls a structural misalignment. The result is not more abundance; it is stagnation, stalled projects, smaller units, more complex workarounds, and a pipeline of approved but un-financeable housing.
Portland should not wait. It should substantially scale back, or better yet repeal, its inclusionary zoning mandate, remove other barriers that make housing more expensive, and allow more homes to be built.
Yet the city appears poised to move slowly even as projects remain stalled. After receiving this report, the Housing and Economic Development Committee chose to effectively do nothing for the near future. City Councilor Ben Grant said, “This guarantees that nothing will happen for six months, and I’m pretty frustrated by that.” He is right to be frustrated. Portland’s housing shortage is not a problem that can be studied, delayed, and managed around indefinitely. Every month of inaction means more stalled projects, fewer homes, and higher costs for the people trying to live and work in the city.
Maine Policy warned that this study was unnecessary because the evidence was already clear; Portland commissioned it anyway. Now the city’s own study has confirmed what critics have said all along: Inclusionary zoning is not good policy. In Portland it has made housing harder to build, and the people paying the price are the renters, families, workers, and young Mainers who need more homes.