In 2021, Kansas City passed an ordinance requiring large market-rate apartment developments to either set aside 20% of units at 60% of area median family income (MFI) or pay $100,000 per unit into the city’s Housing Trust Fund. Yet a recent investigation by the Kansas City Business Journal (KCBJ) found that not a single new affordable unit has been built under this mandate.
That result should raise alarms—but not eyebrows. Set-aside requirements like this often function less as solutions and more as stumbling blocks. Rather than spur construction, Kansas City’s policy has become something to work around. Developers have leaned on other incentive-granting agencies or opted for minimal in-lieu payments instead. Meanwhile, regulation continues to inflate costs and suppress supply. As I’ve written before, regulation can be a root cause of unaffordability.
The KCBJ analysis looked at 114 development incentive applications since 2021. None resulted in affordable units under the set-aside rule. Many projects qualified for exemptions—using low-income housing tax credits (LIHTCs), being historic rehabs, or receiving incentives from agencies outside the city’s economic development corporation (EDCKC).
Examples:
- Of six qualifying EDCKC projects since August 2022, just one plans to meet the 20% set-aside (16 of 78 units at 60% MFI).
- Larger developments often went through the Port Authority of Kansas City (Port KC) or other entities, thereby sidestepping the requirement entirely.
The result is a policy with good intentions but poor results—and plenty of incentive for developers to seek workarounds.
Two themes stand out.
First: Incentives, not mandates, are doing the real work. Port KC has become the go-to agency for developers. Since mid-2023, it’s reviewed 17 housing proposals totaling over 5,000 units and $2.6 billion in investment. Because Port KC isn’t bound by the set-aside ordinance, many developers simply pay a lower in-lieu fee and move forward. A city spokesperson even admitted that some of these workarounds were done “at the request or with the blessing of city leaders.”
Second: Regulation continues to push costs up. Developers cited permitting delays, costly energy codes, and other burdens as key barriers. As one put it, requiring reduced rent on top of high costs is a “double negative.”
This tracks with previous findings: When regulation increases costs, it restricts the market’s ability to deliver lower-priced housing. If the goal is more affordability, then cities must lower the baseline costs—not just impose mandates.
