The City Council, the Department of City Planning, and housing developers have started hashing out a policy that could affect the next generation of affordable housing built in New York.

Known as inclusionary zoning, the policy would give incentives to builders in exchange for inclusion of an affordable housing component in rezoned neighborhoods. Incentives are already available to developers who build in Manhattan, but they are not as easily accessible in the other boroughs. The inclusionary zoning proposal could impact development in the outer boroughs, where much of the discussion about rezoning is now happening.

Brooklyn’s Greenpoint/Williamsburg waterfront neighborhood is at the forefront of the debate over inclusionary housing. The neighborhood, which has a rich history of being home to working-class communities and manufacturing, is slowly transforming into an area with luxury loft buildings and artist enclaves. The city, which is looking to rezone the neighborhood, started this summer on a public review process. Planners are conducting an environmental impact study. The entire process is expected to be completed in late 2004 or early 2005.

As part of the city’s study, it is considering offering a voluntary incentive program to developers that would give them a floor-to-area ratio bonus to construct larger buildings in return for including affordable-housing units. The percentage of affordable units would correspond with the FAR bonus, so if 10% of the building were affordable, it would translate into a 10% FAR bonus. For a developer who can build 100 market-rate units under the rezoning, the incentive would allow him to build 99 market-rate units and 11 affordable housing units.

Inclusionary zoning is taking center stage as a number of the city’s affordable-housing programs dwindle. The Mitchell-Lama program, under which developers receive subsidies and tax breaks in return for building affordable housing, is winding down. There are also a diminishing number of rent-stabilized units in the city, and contracts from the federal Section 8 program are expiring.

In the past 10 years, half a million residents have moved to the city, matched by only 85,000 new houses and apartments. Nearly half of renters in the city pay more than 30% of their income for shelter, and about 75% use more than half their income for rent. The result is that city workers such as firefighters and police officers, who are required to live in the city, are being priced out of traditionally working-class neighborhoods.

Inclusionary zoning “could be the next generation of affordable housing,” the president of the Partnership for New York City, Kathryn Wylde, said.

The Real Estate Board of New York, the powerful real estate industry lobby, favors the proposal, but would like to see developers be able to put the affordable units in a separate building from the market-rate units. According to the Real Estate Board’s plan, the affordable housing units would be built within the boundaries of the same community board, or within one-half mile of the market-rate units.

This change would mean that a developer who can build 100 market-rate units under the rezoning could now build 110 market-rate units, with 11 affordable housing units built off-site. For the Brooklyn waterfront, it would mean the pricey land abutting the water could be saved for market-rate apartments, while the affordable units could be built on less expensive property inland.

“This would make it more attractive and practical for developers to build affordable housing,” said the head of research for the Real Estate Board, Michael Slattery.

Developers seem open to the idea of exchanging affordable housing for additional development rights. “I’m in favor of including affordable housing in return for more FAR,” said the developer Alan Friedberg, who owns a 7-acre site on the Williamsburg waterfront. He hopes to build a housing complex on the site when it is rezoned for residential. The land is now zoned for manufacturing.

Another proposal garnering attention is one from council member David Yassky. It mandates that a percentage of affordable-housing units be included in any new development in areas the city is rezoning. The amount of affordable units would be determined on a sliding scale from 10% to 40%, depending on how large a subsidy the units receive.

Mr. Yassky pushed for inclusionary zoning last year when the city was rezoning Park Slope, but the proposal garnered little attention. This time around, however, the proposal has legs, real estate experts say. Even City Council Speaker Gifford Miller, who rebuffed Mr. Yassky’s attempt last year, is listening.

“The speaker would be supportive of plans to establish much needed affordable units that would include provisions for additional inclusionary zoning,” said Mr. Miller’s spokesman, Paul Rose.

The development community has panned the Yassky proposal over the issue of mandatory inclusionary zoning. They worry that requiring developers to build affordable housing could backfire and stifle development in neighborhoods that have already taken years to attract builders, such as the Brooklyn waterfront.

“Yassky’s plan is flawed considerably, and is not workable,” Mr. Slattery said. “In emerging neighborhoods, which is largely where the city is rezoning, mandatory affordable housing will decrease housing production and create a level of risk developers won’t want to take.”

“It is important that the zoning not be mandatory – that it be a carrot and not a stick – so it can be flexible and match the needs of the market,” Ms. Wylde said.

While the Yassky proposal makes affordable units mandatory, he said he is open to discussing a voluntary program like the one the city is considering, as long as it offers adequate incentive to developers. As it stands now, a proposal that would allow a developer to build 99 market-rate apartments and 11 affordable housing units, instead of just 100 market rate units, is not sufficient incentive.

“I talked to a dozen developers, and none of them would take that deal,” Mr. Yassky said. “I would agree to a voluntary program if the incentive is adequate, and right now the city’s proposal does not give developers enough incentive to build affordable units.”

The Real Estate Board’s Mr. Slattery said he found Mr. Yassky’s flexibility encouraging. Mr. Slattery said, “If he said he would consider a voluntary program, that is a positive sign.”