Across the country, many cities have settled on the same fix for housing shortages: order developers to include affordable units in every new project, or charge a fee if they don’t. Boston does it. So does San Francisco, Chicago, and Denver. The pitch is that affordability comes free, paid for by the market-rate units next door. What actually happens is far more simple and far less effective: developers who can’t make the math work don’t build. The clearest effect of these mandates isn’t that they raise the price of new housing, though they do. It’s that they stop new housing from getting built at all.
The mechanism is nearly identical everywhere it’s tried: a project above some size threshold (usually 10 to 20 units) must rent a share of its units at below-market rates to lower-income tenants for years or decades, or pay the city a fee instead. New Orleans’ version, Article 28 of its zoning code, is typical of the genre. Projects of 10 or more units within the defined zones set by the ordinance must set aside 5-to-10 percent of units at 60 percent of area median income for 99 years, or pay $304,810 for every unit skipped.
Here is why that math fails. A developer builds when projected rent from the project successfully covers the cost of land, construction, and financing; as well as providing a reasonable return. Ordering a share of units to rent for less lowers the revenue expected to cover these costs. Something has to close that gap: whether it be a thinner return, higher rents on the remaining units, or, most often, a failure to get the project off the ground. Longer mandated terms, such as New Orleans’ Article 28, make this worse. New Orleans’ 99-year term is a cost baked permanently into what the building is worth on appraisal day–a restriction that long turns what would likely be a marginally profitable project into an unfinanceable one.
New Orleans’ own pre-adoption analysis put numbers on this. City consultants modeled the projected growth of 10+ unit housing projects within the city and found that outside downtown and the French Quarter, a 10 percent set-aside left most projects with a shortfall of hundreds of thousands to several million dollars, even after incentives. A 60-unit building choosing the fee instead would owe over $1.8 million just for a permit. Developers responded exactly as the math predicted: many didn’t build, built under the 10-unit threshold to dodge the rule, or built outside the mapped area entirely. By the city’s own November 2025 count, the mandate had produced zero completed mixed-income units since taking effect in 2021. Nor did it spread affordable housing evenly. The same analysis found the costs created by the mandate could only be absorbed in the city’s highest-rent submarkets, while the neighborhoods most in need of new housing–Mid-City particularly–were flagged as unable to support it under any combination of added incentives.
These mandates are also on shakier legal ground than they used to be. For decades, courts let broad ordinances like these avoid the scrutiny the Supreme Court applies to case-by-case permit conditions under Nollan v. California Coastal Commission and Dolan v. City of Tigard, on the theory that legislatures deserved more deference than planners. In 2024, Sheetz v. County of El Dorado closed that gap, ruling unanimously that legislative fees get the same nexus-and-proportionality test as any other exaction. A developer is already suing Denver over its version on exactly these grounds.
With any luck, ordinances like the ones in Denver and New Orleans may be found to be an unconstitutional exaction in violation of the 5th amendment.
Supporters of these mandates call them a free lunch: affordable housing paid for by rich developers, not taxpayers. New Orleans’ own record shows there is no such thing as a free lunch–only a slower, thinner one. Cities that actually want more affordable housing should remove the barriers that make said housing expensive to build. Ordering developers to build it at their own expense has a track record now, and the record is skipped projects, dodged thresholds, and years where their policy’s biggest achievement is the production of nothing.