The voices of Urban Institute's researchers and staff
October 3, 2016

Why (and how) localities should say yes to housing

September 30, 2016

This post originally appeared on How Housing Matters.

Every town and city needs to know that its essential workers—such as teachers, firefighters, mechanics, police officers, home health aides, grocers, and food prep workers—can find a place to live within a reasonable commuting distance. Communities also need room for retirees to stay, new families to grow the next workforce, people with disabilities to live stably with access to services and supports, and our struggling friends and family to recover from life’s traumas. Yet, the rules and regulations on the books in many communities create barriers that reduce the housing supply, drive up prices, and make it difficult for people to access the foundation for a healthy life—a stable and affordable home.

“There is no question that local leaders are best positioned to choose the right mix of modern housing approaches that meet their goals, but this is also a national issue with national impacts,” says Luke Tate, special assistant to the president for economic mobility. The high cost of housing in some of the highest-productivity regions impedes employers’ capacity to attract the best workforce and workers’ capacity to access a suitable job.

One reason affordable housing is scarce is that, in a typical market, an apartment complex with rents affordable to middle-income workers costs more to build than the developers can recoup through rents. Creating affordable housing for people with below-median income is even harder. Why is this so, and how can it be changed? A substantial part of the problem and solution is in local control.

New housing doesn’t just require land, materials, and labor; it has to get through a local approval process. Approvals can be lengthy, which adds to the cost of the development through interest on predevelopment loans. When the new development intends to provide multifamily or affordable housing, approvals are often contentious and uncertain, which can reduce supply and add costs. Local and state regulations that address health, the environment, or other factors may further add to housing costs or limit supply, and those impacts should be part of the deliberation about benefits and trade-offs.

Housing supply constraints create a drag on the national economy and exacerbate income inequality. According to research by Chang-Tai Hsieh and Enrico Moretti, loosening the constraints to housing development in high-productivity cities would increase the nation’s gross domestic product by 9.7 percent.

A new housing development toolkit from the White House offers 10 strategies for local governments to improve housing affordability through modernizing zoning codes, housing permit processes, and other land-use policies. Some of the tools reduce interference in housing development, and others use government power to provide incentives for affordable or multifamily developments. Among the former are tools that establish by-right development, streamline permitting, eliminate parking requirements, and allow accessory dwelling units. Among the latter are density zoning and density bonuses, inclusionary zoning, and tax incentives.

The toolkit, through which the White House offers information rather than goals or incentives, comes as many states and localities grapple with rental demand that exceeds supply. “This is an issue that you’re seeing local leaders across the country tackling right now,” according to Tate. “They see that when families in their cities and their regions can’t afford rising housing costs—that are rising so much faster than wages or salaries—that is a problem they need to tackle head on.” The tools can also assist communities in increasing access to low-poverty areas, allowing children to access a ladder to opportunity and allowing jurisdictions to meet federal fair housing requirements.

Creating healthy housing markets that offer a lifetime of opportunities is possible with engagement across all levels of government. Local governments can improve the predictability of approvals and encourage residential density, inclusion, and broader community connections. States can encourage and reinforce local action while allocating state-controlled resources for affordable housing. And while the federal government has tools to bridge the affordability gap for the nation’s poorest households, the tools’ effectiveness can be supported by state and local rules that prohibit discrimination against voucher holders or people hampered by supply constraints. By focusing on a healthy housing market, communities can be more economically productive, workers can apply their skills where they are most needed, children can obtain a quality education no matter their parents’ income, retirees can access the community and health supports they need, and all people can have the backbone for all other successes—a place to call home.

Photo via Shutterstock


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