Shane Phillips, a researcher at UCLA Lewis Center for Regional Policy Studies, released a tool (using Terner Center at UC Berkeley’s data) that show the trade-off of mandating higher percentages of low-income housing against the production of market-rate housing in privately financed developments. As the percentage of inclusionary units increases in new developments, the number of market homes declines. Most importantly, once an inclusionary requirement reaches 20 - 25%, it ceases to produce additional low-income units and decreases the number of low-income homes built because the volume of market housing overall is less. A higher percentage does not mean the quantity, the real number of low-income homes, is higher. You’d be surprised how many in housing discourse are mathematically challenged by the concept of fractions.

Inclusionary zoning started in the early 1970s in California to encourage suburban communities to integrate by mandating a percentage of low-income housing in new rental developments. When President Nixon froze public housing construction, some urban communities innovated inclusionary zoning as a supplement. It became popular among progressive jurisdictions to make middle-class-oriented rental housing more low-income.

Within ten years of implementation, pundits, researchers and its many original sponsors conceded it didn’t build much low-income housing. Here’s Donald Terner, Housing Director under Jerry Brown and one of Inclusionary Zoning’s original sponsors explaining it’s primary problem upon roll-out.

Local government offers the developer incentives to make [affordability requirements] economically feasible, says Terner. Without greater density, government loans, land write downs or parking regulation waivers, inclusionary zoning was "well-intended nonsense."

— SF Examiner, 2/9/1986

An excerpt from a book on the East Bay Area’s left-wing economic revolution in the 1970s explains how the socialists in Berkeley who introduced one of California’s first ordinances knew their 25% inclusionary requirements weren't feasible.

The requirement that low-to-moderate income housing be provided in any development was included to guarantee that new development would not be exclusively for wealthy residents. But proponents also understood that no private, speculative developer would either desire to provide lower priced housing, or be able to afford such inclusions without subsidies.

Inclusionary zoning is, as Donald Terner said, a well-intended tool sometimes weaponized by exclusionary communities or proponents to act as unofficial housing moratoriums, with voters often none the wiser. Most people when asked what percentage of new developments should be low-income have no idea of the financial feasibility or where funding is coming from, so whoever says the highest number wins.

That’s how you get results like Portland’s, where a 20% inclusionary policy that promised 555 low-rent homes a year resulted in only 189 a year. In 2016, San Francisco voters passed a nice sounding 25% affordability requirement. The Controller’s Office predicted it would create fewer low income homes, but many politicians and activists dismissed this as neoliberal fearmongering. Like clockwork, the city had a 75% reduction in low income housing funding because the revenue they get from housing construction tanked just two years later. Finally admitting it didn’t work, the Board of Supervisors had to reverse this policy last year as homelessness skyrocketted and construction was completely unfeasible. A painful lesson in mathematics that making percentages higher does not inherently make the quantity higher.

While San Francisco’s case was unintended by voters, some exclusionary communities intentionally abuse inclusionary zoning knowing exactly what they’re doing. Atherton, the wealthy Silicon Valley suburb, mandated 25% inclusionary as a way to subvert state law forcing them to build homes. Republican-run Huntington Beach has announced its intent to do the same. 

Let's be honest: there’s nowhere in the United States or any city on Earth where unfunded mandates for subsidized housing in new developments produce a lot of low-income housing. Most places with high inclusionary rates are among the most unaffordable cities in the world and produce the fewest homes.

Inclusionary zoning higher than 5% or even 10% is only feasible or profitable in very expensive markets. San Francisco’s own Planning Department found that with high inclusionary requirements, the only place building housing will not be a net-negative in revenue is in the highest of high rent neighborhoods, only. Rents are set by the market, translated from what enough people are willing to pay, and market rents must provide enough revenue to exceed the cost of construction, debt service and profit margin.

Anything approaching 20% inclusionary housing mandates mostly materialize in places where projects are profitable enough to subsidize those inclusionary units, and those projects are usually expensive luxury housing. That’s why most of the yield from inclusionary zoning is coming from places like downtown Los Angeles or San Francisco rather than middle class areas. The latter’s rents aren’t high enough to cross-subsidize 1/5th of the homes.

For example, San Francisco’s real estate is dealing with two events: one is high-interest rates meant to deter so-called over-construction, and the second is the outmigration of higher-income professionals from the city. There are enough luxury condos and high-end rentals in downtown S.F. relative to demand, so building went from being small to almost nothing. While middle-class developers can build in cheaper places like Texas or Arizona, only high-end, luxury developers can afford the cost of construction in San Francisco and much of California. When the median new home in San Francisco costs well over $1 million per unit to build, thanks to high material costs, high-interest rates, and an expensive approval process, you cannot price a home any lower than that.

We should look towards Vienna, Austria for how we want to approach integrated housing development. American puff pieces about Vienna never engage with the substance or specifics of how Vienna achieves low-income housing ratios as high as 40% in new developments. Chiefly, it’s not an unfunded neoliberal mandate expecting developers to provide public goods by incentive. Vienna builds social housing via a 1% income tax towards a dedicated housing fund. The municipal agencies then incentivize competition among client developers with these funds. This is also why development looks better in Vienna than in most American cities (that and building regulations are modern and more evidence-based). Whereas inclusionary zoning essentially taxes new housing to pay for subsidized units, Vienna taxes the city’s wealth to pay private developers with loans and land leasing in exchange for high-quality, social housing on the city’s terms.

The unfunded mandates version of inclusionary zoning we practice in expensive U.S. cities doesn’t work at producing sizable amounts of low-income housing, and we knew that within years of its creation. It was a neoliberal solution to dwindling HUD investment of public housing and unsuccessful integration. It’s as silly as mandating grocery stores sell 20% of their food below market prices to solve food insecurity or 20% of gas stations to sell below market fuel to solve transportation. The debate should be on whether to subsidize the market producers, create public goods or subsidize people in need.

I don’t believe inclusionary zoning is bad. Once we acknowledge that subsidized housing requires subsidies and taxing new housing is sub-optimal over taxing income or land, which are the actual instruments of high rents and home prices, we can start to realize some solutions. Realistically, unfunded inclusionary zoning requirements should not exceed 10% of total projects and should be traded for swift approvals, greater density and fee exemptions. Our most successful inclusionary programs are density bonuses, so let’s build off that. In the 1990s, some California cities — including progressive Berkeley — approached inclusionary zoning by offering loans to developers that they would pay back with realized rents. Smart!

Inclusionary zoning is not an affordability policy, it's an integration policy that is constantly misused. Unfunded mandates can’t replace the hard work of taxing monied interests — chiefly landowners and wealthy residents, which includes all real estate holders as well as developers — to pay for public goods. Cities wrongly depend disproportionately on the borrowed capital of multifamily developers, not even house flippers or single-family developers, to subsidize housing. Rents and home prices derive not from who builds housing but who owns housing and land under it. We should subsidize our low-income housing by taxing landowners and the high incomes inflating housing costs, not tax what we lack, which is housing.

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I analyze housing affordability, transportation, culture and urban living. Among other things.

NextCity recently published a hot take by Steffen Berr tying the ways in which the US is failing at reducing pedestrian deaths to the misaligned training that most transportation engineers in the US receive. Berr explains that a transportation engineer “is a really a civil engineer who has received a little exposure to the transportation sector.” Due to the structure of accredited degree programs, “In a best-case scenario, a civil engineer will only take three transportation classes during their bachelor’s degree. In the worst case, they’ll only take one: Introduction to Highway Engineering. To put this into perspective, the most educated professionals we entrust to design and run our roads and streets have received only half of a minor with a handful of credits on the topic.”

Berr goes on to address the reasonable objection that in many fields, people learn on the job. But what transportation engineers learn on the job, per Berr, is not things like how to choose the most appropriate intersection for the desired use, how the road system should be laid out at a network/route level, or how to fix congestion (none of which, he argues, they learn in school either.) Instead, they learn “how to navigate the impressive amounts of bureaucracy that have been built up in the industry, memorize an impressive vocabulary of technical jargon, practice with design software like AutoCAD to produce engineering plans, and how to copy the current engineering standards. There is no exposure to deep levels of theory that can help our future professionals create original solutions to fundamental problems like safety, congestion, emissions and ethics.” 

I’m less interested in Berr’s point about the wrong degree requirements than I am in his observation about what the job of transportation engineer actually is. As Stafford Beer observed, “the purpose of a system is what it does,” and by analogy, the purpose of a job is not its stated goals but what the people who do it actually do day to day.1 When talking to people who’ve never worked in government, the biggest disconnect is usually a lack of understanding of the actual jobs of public servants. A rather dramatic illustration of this comes from a Mercatus Center podcast with Lant Pritchett in which he shares an anecdote about advocating for evidence-based policy in the Indian bureaucracy. 

After they had done the RCT [randomized control trial] showing that this Balsakhi program of putting tutors in the schools really led to substantial gains and learning achievement and reading outcomes, he took it to the secretary of education of the place in which they had done the RCT. And he said, “Oh, by the way, I have the solution to your problem of low learning levels, or at least part of the solution. Look, we’ve got this powerful evidence that this works to improve leading outcomes by putting these volunteer tutors and pulling their low learning kids out.”

The response of the secretary of education was, “What do you think my job is? Why do you think that this is a solution to a problem I have? Look around my office. See these piles and piles of files that keep me busy 60 hours a week and not one of these files is about a child not learning. I’m under no pressure about that problem. If I try and transfer a teacher, I’ve got a court case on my hand. If I try and close a school, I got a court case on my hand. My job is to administer the existing education policy such that there’s policy compliance. Super kudos to you for this cute little study you’ve done. It has nothing to do with my job as secretary of education.”

Ouch. And that’s a secretary of an agency serving a county with 1.5 billion people. 

I suspect a lot of public servants in the US will read that and think “My job is not quite as bad as that but it sure feels that way a lot.” The people I know maintain enough connection to the actual mission to avoid such a meltdown (though I find the secretary’s frankness refreshing.) But both these stories help explain a conundrum that many who care about effective government (or, shall we say, state capacity) struggle to explain: the contradiction between the dedication, smarts, and creativity of most public servants and the sometimes terrible outcomes they are associated with, like the recent tragic lapses in administering student loans by the US Department of Education. (Or in Berr’s world, the 40,000 traffic deaths we’re stuck with every year while countries like the Netherlands have dropped their own already low number by 46%.2) To be sure, there are often extraordinary outcomes (hello Direct File!), and we notice them far less often, to our own detriment. But while it’s impossible to give government a meaningful overall grade, if its job is to meet challenges we face (national security, climate change, an effective safety net, etc.), we are at risk of falling dangerously short. The problem isn’t that public servants are doing a bad job, it’s that they’re doing a great job — at the wrong jobs.

The (unnamed in this context) Indian Secretary of Education seems to agree: “My job is to administer the existing education policy such that there’s policy compliance.” I highly doubt that’s the job he thought he was getting, or the job he wanted to do. Berr is on the same general theme when he says that what transportation engineers learn on the job is “how to operate in the industry effectively as it has been currently set up.” Note his use of the word effectively. Effective towards what? Not towards reducing traffic deaths or congestion levels. “All the experience in the world of copying and pasting a standard invented fifty years ago is useless when the problems that the standard was invented to resolve have changed,” he says. “Understanding this sheds a lot of light as to why 40,000 people are still dying on our roads every year and why your local city insists on laying down sharrows [which are known to be ineffective and often dangerous] in their latest round of “safety improvements.” Quite frankly, it’s because we have no idea what we are doing.”

This is a useful nuance as I develop a framework for building state capacity. One of my admittedly obvious and oversimplified tenets is that systems have both “go energy” and “stop energy,” much as a car has a gas pedal and a brake. You wouldn’t drive a car without a brake, but you also wouldn’t drive a car in which the brake was pressed all the time, even when you were trying to accelerate. This is a good metaphor for how we’re dealing with the implementation of CHIPS, IRA, and the Infrastructure Bill, for example, where the clear intent is speed and scale but the public servants responsible are held back from that by the brakes of overly zealous compliance functions. I hear a version of this at every agency I visit: “Congress tells us to do something. Then the compliance offices keep us from doing that very thing.” (And side note for further discussion: This is an issue of representation, voice, and democracy.) The stop energy in our government is currently a lot bigger than it should be. We’re hitting the gas but we’re not accelerating because we’re pressing the brake at the same time. 

Lots of people in government have “stop energy” jobs. We need them, and we need them to be good at them. I don’t want to live in a country where our government doesn’t exercise “stop authority.” I try to remember not to complain when my flight is delayed because I really don’t want to die in a plane crash, and a rigidly implemented checklist is a big part of how we keep safe (the current epidemic of doors and engine cowlings blowing off notwithstanding). I also really like being pretty confident that a pill I’m taking has been tested and not tampered with. I like thinking our nuclear arsenal is protected. You know, little things like that.

Stop energy is critical. Rigid adherence to protocol is usually lifesaving. But it must exist in balance. I recently learned the Navy concept of “front of sub/back of sub.” The back of a nuclear submarine, where the nukes live, is run by the book. You don’t deviate from the checklist. You don’t innovate. You don’t question. The front of the sub, on the other hand, is responsible for navigating through dark waters. You have to improvise. You have to make judgment calls. There are manuals and checklists, for sure, but the nature of the work calls for a different approach, and the Navy recognizes that the cultures of front and back have evolved appropriately to meet distinct needs. 

There are times, of course, when you’ll need front of sub judgment in a back of sub context. If the plane I was on was about to be bombed by an enemy combatant (unlikely in my life, I hope), I would be okay with the pilot using her discretion to cut a corner or two on the takeoff checklist, because the very thing that checklist is there to protect (the lives of the people on board) would under threat from a different vector. Taking every precaution in that scenario could be reckless. That’s a bit how I feel about the NEPA reviews and other bureaucratic processes that are holding back building the infrastructure we need to move to a low-carbon economy. I wish for the public servants in charge to see the threat of inaction – those species the checklist is trying to protect are threatened by temperature rise as much or more than they are by the project in question – and make good judgment calls about getting the plane off the runway a lot quicker, so to speak. This feels like a domain where back of sub culture has more hold than it should given the circumstances. And to Berr’s point, we can’t rely on back of sub culture when the checklist and protocols it uses no longer serve the purpose.

Of course, “stop energy” roles can themselves be balanced – if only I had a dime for every discussion about the value of lawyers who get to yes and the frustrations with those who seem to do nothing but block. The analogy breaks down a bit here because the items on a pre-flight checklist are binary – they are either red or green – whereas the ad hoc checklists that lawyers assemble to ensure compliance before signing off on an action are almost always shades of gray – they can be open to lots of interpretations. Any given lawyer, or compliance officer, or ethics cop can treat their role with appropriate balance, reserving their stop authority only when the risks truly outweigh the benefits. But getting the culture of a team, department, or agency to balance stop and go correctly at a macro level is extremely difficult. It’s rare to see leadership really change that balance, or for it to stick. It’s a retail approach, hugely dependent on personalities and circumstances.

What would a wholesale approach to getting back into balance look like? One answer should be a simple matter of top-down workforce planning, of the kind our Office of Personnel Management should be empowered to do: fewer stop energy jobs relative to go energy jobs. Hire more doers than brakers, both in how the position is defined and in the characteristics of the people selected for the job. But that proposal needs several important caveats. Of course, every great employee is some mix of these energies – a “go only” employee would be exhausting and dangerous in all but the most extreme circumstances – so we’re talking about a general orientation. More importantly, having fewer brakers will only result in enormous backlogs if they have the same stopping power. But there are plenty of functions where its possible to safely move from default no to default yes, possibly with an after the fact correction mechanism.3 Instead of requiring form redesigns to go through a long White House approval process before they can be made available to the public, for instance, allow agencies to apply the appropriate level of scrutiny and sign-off for the form at hand and develop a process for catching and quickly fixing anything determined to be detrimental. This example speaks to the issue of multiple levels of safeguards. Loosening a safeguard that operates at the top level of federal government may not make much difference to overall stop energy if agencies, or in turn their subcomponents, or even teams, react by strengthening their own safeguard processes. There might be something like a Law of Conservation of Safeguards at play here. But it’s still worth considering the value of moving to default yes processes where appropriate. 

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Of course, the question of the nature of the job public servants are tasked with is about much more than just stop vs go. It’s about what kind of work we’ve decided to invest in. I go into some depth about this in Chapter 5 of Recoding America as it relates to our lack of investment in digital competencies and how ideologies about private sector superiority led to a big outsourcing push just as digital was beginning to massively transform society.

…these internal competencies in digital became necessary just as we were jettisoning internal competencies of all sorts, not developing them. Instead of digital competency, government has developed extensive processes and procedures for procurement of digital work, and the ins and outs of procurements sometimes seem more complex and technical than the latest programming languages.

This points to another way to understand the disconnect between high employee performance and the outcomes our government produces (or fails to), especially relative to the investment made.4 Take procurement. I know a lot of people in procurement who are really good at their jobs. Some of them are considered really good because they’re great at the “back of sub” tasks of making sure every box is checked, and a manager might feel compelled to give them a high performance rating because of their thoroughness and dedication, even if the people who need the thing being acquired are frustrated by the slowness and rigidity of the process, and even if the thing that is ultimately acquired has checked all the boxes but doesn’t actually work. (For an example of this, see Chapter 4 of Recoding America.) But many of these procurement professionals operate according to “front of sub” principles, and are enormously creative and mission-driven. The other public servants who rely on them to procure things value them enormously. They may or may not receive high ratings, if the manager is judging them based on a “back of sub” approach. But procurement processes simply should not be as complex and burdensome as they have become. Both of these kinds of procurement professionals are doing a job that simply shouldn’t exist in its current form.

Especially with the looming threat of the return of Schedule F under a possible Trump administration, there’s a lot of talk of public sector employee performance and protections. I agree strongly with Donald Kettl, who has said about the left’s silence on civil service reforms in the face of Schedule F: “You can’t fight something with nothing.” I hope to be part of proposing a something there, something that improves government’s ability to fill many open positions and to effectively and ethically manage the workforce. But we could succeed entirely at that and still fail to meet the challenges in front of us if the jobs we fill are the wrong jobs.

Another of my admittedly obvious and oversimplified principles of how to build state capacity is that there are really only three things you can do:

• You can have more of the right people

• You can focus them on the right things

• You can burden them less.

There is obviously quite a lot to say about each of those things, and they are all deeply intertwined. A big reason we don’t have more of the right people is that we overburden both the people responsible for hiring and the applicants, focusing both on the wrong things. We overburden public servants generally because we have designed too many of their jobs to stop bad things instead of to enable the things we desperately need. We are too often asking if public servants are doing a good job instead of understanding and questioning the nature of the jobs they’ve been hired to do. 

We need a much more robust understanding of how to fix the problem of hiring the right people to do the wrong jobs. We need wholesale strategies for tuning the dial between front of sub and back of sub, between stop and go, between brake and gas, and refocusing the job of public servants on the work that’s most directly meaningful towards the outcomes we want. We need staffers in agencies who act as if the climate crisis is the enemy plane that’s about to bomb us. We need transportation engineers whose actual job – as practiced on a daily basis, at scale – is to reduce congestion and pollution and improve and save lives. We need Secretaries of Education who have time in their day to look at the study on improving learning achievement, and maybe even take action on it. We need all of this now.

Imagine a world in which this — not just enforcing rules, not even just helping agencies fill open jobs, but ensuring that federal government fills the right jobs — was the mandate of an empowered and deeply collaborative Office of Personnel Management. They couldn’t do it alone, of course — it’s agencies that define the jobs they think they need and Congress that throws down law after law they must comply with, feeding the need for compliance. The White House Office of Management and Budget adds its own reporting and compliance burdens. Each would need to buy in on an agenda of building state capacity and do their part. But this is what workforce planning should really be, and in 2025, we will need it more than ever. If Biden gets a second term, this is the kind of ambitious agenda he should set.

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In business, culture eats strategy. In government, culture eats policy. Here we'll talk about the problems of state capacity (government's ability to achieve its policy goals) and how to fix them. From the author of Recoding America.