Answers are needed quickly on Cambridge’s inclusionary law, which requires big homebuilders to set aside 20 percent of their space as low-cost units, city councillors said Monday. They sent the issue off to their Ordinance Committee, responding to the arrival of a report with recommendations first asked May 12, 2025.
There’s a clamor that the law is a loser because developers avoid requirements by building to just below the threshold of 10 homes or more than 10,000 square feet of residential floor area, and two developers have sued the city to say the law is unconstitutional and violates the Massachusetts Declaration of Rights. Cities near (Malden and Chelsea) and far (San Francisco) have recently lowered their inclusionary housing requirements.
The percentage may be part of the problem, but lowering it is not much of an answer, according to RKG Associates, the consultants that prepared Cambridge’s report.
Committee discussion is likely to look at letting developers buy out of some of their affordable requirements, such as through contributions to the city’s Affordable Housing Trust, which helps pay for below-market-rate homes elsewhere in Cambridge; and giving property tax abatements. Steps are likely to be proposed as temporary, according to a report summary and response by Community Development staff.
Another idea coming to committee: Offers city loans to finance construction at below-market interest rates or with low-cost equity to projects.
Many factors at work
Lowering the affordable floor area set-aside requirement of 20 percent is another area of consideration, CDD said – but this could be tricky to navigate when Cambridge’s affordability issues are worsening, continuing to dislodge even the workforce that make a city function and serves the renters and owners who can afford market-rate homes.
Between 2014 and 2024, the city’s share of low-to-moderate-income households declined – for renters, to 43 percent from 48 percent – even though nearly a quarter of new homes were income restricted, the reports said. To keep Cambridge’s income diversity where it is, nearly 35 percent of all new housing units would need to be affordable to newly arriving households at a time market forces move the city to lowering its inclusionary requirements.
“Many economic factors are impacting new development, including the city’s inclusionary housing requirements,” said city development officials Melissa Peters and Chris Cotter, summarizing RKG’s report. “Reducing the inclusionary housing rate has an impact on financial performance, but the improvement is marginal and not enough to make all types of projects viable,” the report says.
Economic modeling looked at everything from keeping the 20 percent to cutting it as low as 10 percent and found it did “not have a significant impact,” RKG said. “The set-aside should therefore be understood as one lever among several.”
“Our economic system is broken”
Macroeconomic and local market conditions – elevated construction costs and high interest rates – are the biggest factors in a housing slowdown, RKG says. “Interest rates, which appeared to be going down, are now going up. Construction costs remain elevated from global uncertainty and tariffs. And we are seeing the impact: experienced developers that have shut down permitted projects even after significant time and investment because they can’t get financing, representing hundreds of units of housing that will not be built,” city manager Yi-An Huang said. He called the pace of housing production “significantly” below historical levels, with 2024 and 2025 marking the lowest rates of new construction in the past decade.
That’s despite inclusionary housing’s past success and the city’s more recent efforts to encourage building, including rezoning major corridors and multifamily zoning threat ended single-family-only zoning in residential neighborhoods. “Our economic system is broken,” Huang said.
“We have seen around the country, in places where housing is built, housing costs less,” Huang said. “We need to build.”
The city is also working on making it easier and faster for developers to permit their projects and get them built.
Councillors look ahead
Among the ideas coming to committee, the loan fund drew interest – “If we can help developers develop and pay less to borrow money, that would be a great thing,” councillor Cathie Zusy said – and the lower inclusionary percentages looked more complicated.
“We’re essentially below what our own study says is needed,” councillor Ayah Al-Zubi said. “Lowering our percentage helps only at the margin, if at anything … the report seemed clear that the biggest problems lie in the interest rates and the construction costs, which we don’t really have control over.”
Councillor Patty Nolan acknowledged the concern and interest in “ensuring that the percentage of affordable units continues, and we could justify that as the goal.”
The report is also “clear that the city does not have the ability to make every project feasible,” Nolan said. “But if we do nothing, it’ll make a difficult situation worse.”
