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Eliminating Land-Use Barriers to Build More Affordable Homes

Land-use restrictions and other regulatory barriers reduce and delay construction, limiting the supply of affordable homes. This, in turn, raises housing costs, increases income inequality, and reduces economic growth. The Trump administration launched a new interagency council to eliminate such regulatory barriers. Yet it will face what previous administrations—both Democratic and Republican—have encountered: exclusionary, local land-use practices are politically challenging to tackle as a matter of national policy, despite their national implications. Though state and local governments have the most effective policy levers for eliminating exclusionary land-use practices, this blog reviews regulatory barriers to building more affordable housing and outlines policy options for the White House council to consider.

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Regulatory Barriers to Housing Development

Demand for affordable rental units far outnumbers existing supply. In 2015, there were 11.3 million extremely low-income renter households—defined as those earning less than 30 percent of area median income nationwide or $17,050 per year for a family of four. Yet there were only 4.3 million available and affordable rental units for these households.

Source: Adapted from U.S. Department of Housing and Urban Development data.

Research has shown that exclusionary or restrictive land-use regulations, and other regulatory barriers lengthen project permitting, reduce and delay home construction, raise housing prices, increase income inequality, and reduce economic growth1. The imbalance between the available supply of affordable homes and high demand has led to pervasive and severe rent burdens, housing instability, and the increased risk of falling into homelessness.

Local communities, directly and indirectly, restrict housing development in many ways—for example, by requiring minimum parking lot sizes, imposing building height limits, and having lengthy permitting or environmental review processes. Single-family zoning is one obvious way that communities limit the development of denser, more affordable neighborhoods, by excluding construction of apartment buildings, duplexes, older adult housing, public housing, student housing, and other multifamily buildings. Single-family zoned neighborhoods are relatively common in the United States. Cities as diverse as Charlotte, NC, and San Jose, CA, zone 84 percent to 94 percent of city land, respectively, for detached, single-family homes.

Source: New York Times

Their Social and Economic Impacts

Exclusionary land-use and other regulatory barriers are often implemented with the intention of advancing important policy goals. However, in the aggregate, they have costly and wide-reaching economic and social impacts.

  1. Exclusionary land-use and regulatory barriers contribute to a too-limited supply of affordable housing, which pushes up rents for low-income families.2 Paying too much in rent makes it more difficult for black families, in particular, to accumulate wealth and afford homeownership. Yet home equity is the largest component of family wealth. As such, there is a wide disparity today between the white homeownership rate at 73.1 percent and black homeownership rate at 40.6 percent. This imbalance helps to perpetuate a longstanding and dramatic racial gap in family wealth. For every $100 in white family wealth, black families hold just $5.04.
  2. By restricting the supply of housing in dynamic labor markets, regulatory barriers limit the number of workers with access to the most productive American cities. This, in turn, impedes economic growth and contributes to rising inequality. By limiting mobility to productive economic centers, exclusionary zoning practices are estimated to have lowered GDP by more than 50 percent between 1964 and 2009. Loosening restrictive land-use laws in just three of the most productive cities in the United States—San Francisco, San Jose, CA, and New York City—would increase the average U.S. worker’s salary by almost $9,000 a year.
  3. Exclusionary land-use and regulatory barriers entrench patterns of segregation and work to concentrate both wealth and poverty. In the past, systemic and legalized housing discrimination segregated American cities. While federal civil rights legislation worked to end these discriminatory practices, research has shown that zoning decisions made many decades in the past can still be traced to observed racial inequities today.3 Zoning and land-use regulations, intentionally or unintentionally, help wealthier Americans “protect” the value of their homes by preventing new housing development and pricing out minority—usually black—and low-income families.

State and Local Deregulatory Efforts

Recognizing these impacts, some state and local governments have sought to reform land-use and regulatory barriers. Their efforts provide lessons for other communities and a guide for federal policymakers on best practices to promote.

California: Some lawmakers in California have tried to advance zoning reforms with Senate Bill 50, the MORE Homes Act. The bill would “upzone” or override local zoning laws that prohibit higher-density housing construction near major job centers and transit hubs. With 80 percent of California currently zoned for single-family homes, S.B. 50 would allow more neighborhoods to have taller buildings with more units and require that a certain number of those units be rented at below market rates. Despite attempts to address gentrification and other concerns, plan skeptics have argued the bill lacks sufficient safeguards to ensure that additional housing construction and development around transit hubs does not only benefit wealthier households.

While S.B. 50 has not yet passed, California has had some success in growing the number of accessory dwelling units (ADUs). ADUs can be in-law units, granny flats, basement apartments, garage conversions, or backyard cottages that add to the existing housing supply. Because the construction of these units does not typically require additional land purchases or new infrastructures like parking and utility build-outs, ADUs can be relatively affordable housing options. In 2016 and 2017, California reformed the ADU permitting process, design and parking requirements, and fees as a part of a broader effort to address the state’s housing crisis. As a result, applications for ADUs in California jumped from 80 in 2016 to 1,970 in 2017. Other cities, such as Portland, OR, and Austin, TX, have also made strides in increasing ADUs.

Minneapolis, MN: The city council approved a plan to eliminate single-family zoning and allow for the construction of duplexes and triplexes throughout the city. In addition to approving a plan to rid Minneapolis of restrictive zoning laws, the city council authorized $40 million in affordable housing funds. As the first major city in the country to pursue such an ambitious plan, many housing advocates and experts are following closely to measure its impact.

Oregon: Lawmakers passed a law requiring cities with more than 25,000 residents to permit duplexes, triplexes, fourplexes, and “cottage clusters” for areas previously zoned only for single-family dwellings. In cities with 10,000 residents or within metro areas, the law allows duplexes. While the law did not directly eliminate all the state’s single-family zoning, it left very few areas in the state where single-family zoning is permittable. The bill was intended to work in concert with a law that caps annual rent increases to 7 percent and bans “no-cause” evictions.

Utah: S.B. 34, sponsored by state Sen. Jake Anderegg (R), was signed into law in March 2019. The legislation requires that cities plan for housing affordability and make a good faith effort to facilitate new housing construction, or risk losing state transportation funds. However, it gives cities flexibility to support housing development as they see fit, whether by waiving development fees, allowing ADUs, or rezoning to allow for higher-density neighborhoods near transit.

Past Federal Deregulatory Efforts

Over the years, many federal efforts have been launched to identify and reduce restrictive zoning and unnecessary regulations and grow the supply of affordable rental homes, by both Democratic and Republican administrations.

In 1990, then-Housing and Urban Development Secretary Jack Kemp established the Advisory Commission on Regulatory Barriers to Affordable Housing to address federal, state, and local laws, regulations, ordinances, and codes that acted as barriers to the development of affordable housing. The commission released a report that identified exclusionary zoning policies, excessive development fees, and specific regulations that slow the permitting processes. It further concluded that not-in-my-backyard sentiments are often intentionally exclusionary and growth-inhibiting. Yet, in the years following its publication, more and more communities have adopted the regulatory barriers the report identified as detrimental to low-income households, with a spike in the late 1990s and early 2000s.

In 2000, the American Homeownership and Economic Opportunity Act was signed into law to expand homeownership. In response, HUD launched a Regulatory Barriers Clearinghouse to collect, process, and disseminate information on state and local policies affecting affordable housing. The clearinghouse continues to store information on judicial decisions, ordinances, research papers, state and local government reports, and other information on regulatory barriers and strategies to build affordable housing.

The Obama administration attempted to crack down on restrictive zoning with its Affirmatively Furthering Fair Housing regulation. The rule and an accompanying tool for local governments were designed to expand the scope of the Fair Housing Act to overcome historic patterns of segregation, promote fair housing choice, and foster inclusive communities, free of discrimination. The Obama administration also provided guidance to local communities on how to address regulatory barriers in its Housing Development Toolkit, released in 2016.

These efforts have been met with limited success. In fact, research—such as one innovative measure of land-use regulation drawn from state appeals court records—has shown that regulatory barriers to housing development have continued to increase over time.

Policy Options for the White House Council

President Trump issued Executive Order 13878, establishing the White House Council on Eliminating Regulatory Barriers to Affordable Housing. The council, chaired by HUD Secretary Ben Carson, is tasked with:

  • Identifying federal, state, local, and tribal laws, regulations, and practices limiting affordable housing development
  • Identifying successful practices and strategies for removing them
  • Evaluating and quantifying the impacts of existing barriers
  • Accessing potential administrative actions that can be taken under existing authorities to address regulatory barriers
  • Recommending policies and encouraging their adoption at all levels of governments

To most impactfully deliver on these aims and grow the supply of affordable homes, the White House council could consider the following:

  1. Using both carrots and sticks to incentivize change. Regulatory barriers like land-use restrictions are implemented locally, and often to the benefit of entrenched and powerful local interests. Though heavy-handed federal intervention can be controversial and politically fraught, the council should consider all options on the table, both carrots and sticks, if it wants to succeed where previous administrations have not. Importantly, land-use and other regulatory barriers also have national implications. For example, exclusionary land-use practices:
    1. Raise housing prices, thereby raising the cost to the federal government to provide low-income housing assistance through programs like housing vouchers
    2. Entrench historic patterns of segregation and perpetuate racial inequities
    3. Limit geographic mobility, which increases income inequality and reduces economic growth

The federal government can influence local governments by either incentivizing them to change—for example, by providing bonuses or preferences in the distribution of HUD and other discretionary federal funds when communities meet housing supply goals—or by reducing federal funding to communities with highly restrictive land-use and regulatory policies.

  1. Meaningfully engaging the public, advocates, and congressional leaders in its work. Given the complexities of this issue and the political capital required to overcome entrenched local interests, the council should consider seeking input from and coordinate broadly with key stakeholders. It should also consider frequently updating members of Congress on its findings and progress to secure political champions for council policy recommendations.
  2. Educating and assisting local governments and communities. States and local communities have more effective policy levers than the federal government to address local regulatory barriers. However, they often lack the institutional capacity to adopt best practices in planning, land use, and housing development. The federal government can do more to help. For one, it can better identify local barriers to affordable housing development and disseminate information on best practices. The federal government also has a long an history of supporting state and local agencies with technical assistance, e.g., like HUD’s Section 4 program. The council could consider identifying and coordinating existing technical assistance programs, and assess whether they need additional funding, to better assist state and local governments looking to break down regulatory barriers to affordable housing development.
  3. Coupling deregulatory efforts with additional subsidies for housing construction and rental assistance. While it’s important to tackle exclusionary land-use laws and other barriers to the development of affordable housing, it’s equally important to increase federal funding for affordable housing construction and rental assistance.

Conclusion

Finding new ways to break down barriers to affordable housing development has bipartisan support and is sorely needed. The White House council is well-positioned to elevate and scale best practices, make its agenda a centerpiece economic and civil rights priority, and advocate for broader, consensus-driven policy solutions to grow the supply of affordable rental homes.

End Notes

1See, for example, Devin Bunten, “Is the Rent Too High? Aggregate Implications of Local Land-Use Regulation,” 2017. Available at: https://www.federalreserve.gov/econres/feds/files/2017064pap.pdf. Vicki Been, “City NIMBYs,” 2018. Available at: https://furmancenter.org/research/publication/city-nimbys. Peter Ganong and Daniel Shoag, “Why Has Regional Income Convergence in the U.S. Declined?” 2017. Available at: https://www.nber.org/papers/w23609. Edward Glaeser, Joseph Gyourko, and Raven Saks, “Why Have Housing Prices Gone Up?” 2005. Available at: https://www.nber.org/papers/w11129. Edward Glaeser and Joseph Gyourko, “The Economic Implications of Housing Supply,” 2017. Available at: https://www.nber.org/papers/w23833. Joseph Gyourko and Raven Molloy, “Regulation and Housing Supply,” 2014. Available at: https://www.nber.org/papers/w20536. Edward Glaeser and Bryce Ward, “The causes and consequences of land use regulation: Evidence from Greater Boston,” 2009. Available at: https://scholar.harvard.edu/files/glaeser/files/the_causes_and_consequences_of_land_use_regulation_evidence_from_greater_boston_2009.pdf. John Quigley and Larry Rosenthal, “The Effects of Land Use Regulation on the Price of Housing: What Do We Know? What Can We Learn?” 2005. Available at: https://urbanpolicy.berkeley.edu/pdf/QR2005.pdf. Jeffrey Zabel and Robert Paterson, “The Effects of Critical Habitat Designation on Housing Supply: An Analysis of California Housing Construction Activity,” 2006. Available at: https://doi.org/10.1111/j.0022-4146.2006.00433.x. Joseph Gyourko, Albert Saiz, and Anita Summers, “A New Measure of the Local Regulatory Environment for Housing Markets: The Wharton Residential Land Use Regulatory Index,” 2006. Available at: http://realestate.wharton.upenn.edu/working-papers/a-new-measure-of-the-local-regulatory-environment-for-housing-markets-the-wharton-residential-land-use-regulatory-index/. Chang-Tai Hsieh and Enrico Moretti, “Housing Constraints and Spatial Misallocation,” 2017. Available at: https://www.nber.org/papers/w21154. Edward Glaeser and Joseph Gyourko, “The Impact of Zoning on Housing Affordability,” 2002. Available at: https://www.nber.org/papers/w8835.
2Ibid.
3 Allison Shertzer, Tate Twinam, Randall Walsh, “Race, Ethnicity, and Discriminatory Zoning,” 2014. Available at: https://www.nber.org/papers/w20108. Allison Shertzer, Tate Twinam, and Randall Walsh, “Zoning and the Economic Geography of Cities,” 2016. Available at: https://www.nber.org/papers/w22658.

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