For decades, Massachusetts communities have relied on private developers to build much of their affordable housing.
The exchange goes like this: If a developer wants to build a fancy new condominium building or a big new apartment complex, they must agree to set aside a certain number of units in their development at rates affordable to working- and middle-class residents, as a condition of receiving a building permit.
That policy, known as inclusionary zoning, has generated thousands of affordable homes across a state that is starved for them.
But now, a developer in Cambridge has claimed the system may be illegal, in a lawsuit that seeks to do away with one of the leading tools used to create new affordable housing.
The developer — Patrick Barrett, a Cambridge zoning attorney who has well over 100 apartments and condominiums planned across several developments in the city — along with the Pioneer Legal Foundation, sued Cambridge in December over the city’s inclusionary housing rule. The suit claims the city is illegally requiring developers to surrender rights to their land, damaging their bottom lines, and making building in the city far too expensive.
The foundation, the legal group of the Pioneer Institute, a free-market think tank, said it has bigger aims beyond Cambridge: It hopes the suit could help dismantle inclusionary zoning policies statewide, in hopes of making it easier and less expensive for developers to build.
“Inclusionary zoning is a wrong-headed policy,” said Pioneer Legal president Frank Bailey. “It restricts development, which actually hurts the very consumers it is supposed to be helping. More development will result in decreased costs for consumers, both renters and buyers. That’s like economics 101.”
Inclusionary zoning has become the affordable housing policy of choice for cities and towns in Massachusetts, largely because it can generate income-restricted units without any direct spending from municipalities. At least half of the cities and towns in Greater Boston have some form of inclusionary zoning on the books, according to the Metropolitan Area Planning Council. Together, they’ve created thousands of income-restricted apartments.
Policies like these are popular in many US cities and have faced several legal challenges in recent years, none of which has been successful.
In Cambridge alone, inclusionary housing has generated around 1,600 units of affordable housing, according to the city’s community development department. Cambridge first passed its policy in 1998, mandating developers set aside 15 percent of units in rental projects 10 units or larger at rates that are affordable to people making 80 percent of the area median income or less, and 90 percent of the AMI in condominium projects. In 2018, amid a real estate boom, the City Council hiked that to 20 percent, one of the steepest rates in Massachusetts.
“Communities don’t have the capital to build all of the affordable homes we need,” said Jennifer Raitt, executive director of the Northern Middlesex Council of Governments, a regional planning agency based in Lowell. “It’s an extremely valuable policy, and one we’ve had pretty widespread agreement for a long time that this is one of our best tools for affordable housing production.”
Still, many local inclusionary zoning policies were written years ago, when the economic climate for construction was easier. As housing costs have soared and fueled growing fears of displacement, cities such as Cambridge, Boston, and Somerville have increased their requirements, leveraging their hot markets to create more desperately needed affordable units.
But lately, amid soaring costs for building materials and higher interest rates, developers have grown increasingly impatient with inclusionary policies. In some instances, they say, reduced rents from set-aside affordable units prevent developments from being built.
In the complaint filed in state land court, Barrett, identified as Columbia Street LLC, said Cambridge’s rule would eat into the bottom line of his planned redevelopment of a group of residential buildings on Columbia Street near Inman Square, which he plans to turn into a 90,000-square-foot condo project at a cost of around $57 million.
Under Cambridge’s 20 percent requirement, some 13,000 square feet of the development must be set aside for affordable housing, which Barrett estimates would be sold for just $3.6 million, as opposed to the $15 million that those units could fetch at the market rate, according to the complaint.
In other words, the complaint says, inclusionary zoning “will impose on [Barrett] an uncompensated cost of approximately $11.4 million.”
Other developers in the city have said the inclusionary policy has set their projects back. The local group North Cambridge Partners, for example, said that the policy would reduce their revenue on a 60-unit condo project at 2400 Massachusetts Ave. by about $18 million, making it impossible to finance.
Development in Cambridge has slowed dramatically in recent years, though the pace of building remained strong for the first few years after the city’s 20 percent rule went into effect. Between 2011 and 2021, builders in the city permitted an average of 790 units annually. That number dipped significantly in 2022 and 2023. As of late 2025, Cambridge had only permitted 68 units, according to city data, and few housing projects are starting construction.
The main culprit of the slowdown has been higher interest rates and construction costs. And developers say the added expense of inclusionary units can prevent projects from ever breaking ground.
In a statement, Jeremy Warnick, a spokesperson for the city, said it would fight the lawsuit.
“The city’s Inclusionary Housing Zoning Ordinance has become a model for other communities looking to create affordable housing for low- and moderate-income residents and ensure the socioeconomic diversity of the community is reflected in new housing,” Warnick said.
Developers have similarly complained about Boston’s Inclusionary Development Policy, which Mayor Michelle Wu increased to 20 percent in 2022, up from the 13 percent it had been under her predecessors. That increase went into effect last year.
The lawsuit has set off alarms for affordable housing advocates, who worry a ruling in Pioneer’s favor could invalidate inclusionary ordinances across the state. Many communities, they say, do not have the funding to finance affordable housing projects themselves. And it makes sense, they say, that developers should have to contribute something valuable to the communities they build in, given that developers can profit significantly from their projects.
“I don’t think the fact that some projects aren’t penciling out invalidates the value of the tool at all,” Raitt said. “Of course, we want to be realistic and create policies that still allow us to meet our housing supply goals. I think we can certainly build the housing we need while maintaining inclusionary zoning.”
Finding a policy that generates affordable units without slowing development can be tricky, opponents of the inclusionary zoning said.
Too often, said Andrew Mikula, a senior housing fellow at the Pioneer Institute, the policies achieve the opposite of what they intend to, slowing housing production and worsening the state’s affordability problem.
“In really strong, resilient markets like Lexington and Wellesley, inclusionary zoning can work,” Mikula said. “But for most other places, these policies just haven’t been responsive enough to shifts in the economy to keep working when it gets harder to build. They do more harm than good in a lot of cases.”
Andrew Brinker can be reached at andrew.brinker@globe.com. Follow him @andrewnbrinker.