The blog of the Urban Institute
July 1, 2019

Can We Deregulate Ourselves out of the Affordable Housing Crisis?

July 1, 2019

After decades of the federal government playing a limited role in local land-use regulations, there is renewed interest on both sides of the aisle for a stronger federal effort to rein in restrictive zoning laws.

Last week, President Trump signed an executive order establishing a White House Council on Eliminating Regulatory Barriers to Affordable Housing, which is charged with quantifying the effects of local zoning laws and other regulatory barriers on housing markets and recommending “best practices for removal.” And most of the Democratic presidential candidates who have offered housing solutions in their policy platforms include ideas to ease local land-use restrictions.

The motivation for this renewed interest shouldn’t be surprising: housing costs continue to grow faster than incomes in most metropolitan areas, and no US county has enough affordable housing for its low-income renters. Local zoning laws and other land-use regulations suppress supply and drive up housing costs (PDF), though by how much is hard to quantify because of a lack of reliable and consistent data.

But will deregulatory strategies actually work? State and local governments are increasingly experimenting with zoning and land-use reforms aimed at unleashing housing supply and improving affordability. But many of these reforms are still relatively new, and few have been rigorously studied.

Although oversight of local land-use regulations may bring a contentious debate among researchers and advocates, hope remains for a robust and positive role for the federal government in improving land-use rules and lifting exclusionary barriers, as well as a rich evidence base to draw from along the way. Here are four insights from research that can help guide federal policymaking in this area.

1. Public subsidies are (still) necessary

Even if local regulatory barriers were lifted, public subsidies would still be necessary to meet the housing needs of very low–income families. Although local land-use regulations and zoning practices can affect the ability to build and preserve affordable housing, changes to those regulations will not be enough to solve the affordability crisis.

Households at all income levels are paying a greater share of their incomes on housing than in the past, but the greatest cost burdens fall on very low–income renters. The private market is producing fewer housing units affordable to these households, which means more low-income households are competing for a limited supply of affordable homes.

We need complementary solutions that expand access to subsidies, stretch subsidy programs further, and open more neighborhoods to affordable housing options.

2. Lift exclusionary barriers in the most exclusionary places

Local zoning laws have long been used as an exclusionary tool—helping create and perpetuate racial segregation across US cities and regions. After overtly racist zoning laws were banned by federal courts and statutes, restrictive regulations prevented the construction of affordable housing in wealthier and whiter communities. As a result, we continue to see persistent patterns of segregation and wide disparities in access to opportunity across racial and ethnic groups.

This also means the greatest share of underbuilt land remains in whiter and wealthier communities, whether in exclusive suburbs or in city neighborhoods zoned for single-family homes. Residents of these neighborhoods exert outsize influence over local zoning and planning decisions, protecting the status quo and blocking new housing development. As a result, when cities do undertake major rezonings (as New York City did a decade ago), upzonings tend to be concentrated in lower-income communities of color and downzonings tend to be in whiter and higher-income neighborhoods.

The federal government can play a direct and immediate role in reversing local political dynamics that favor exclusionary policies through rigorous enforcement of existing fair housing laws. Targeting places that have the greatest exclusionary barriers to development would not only address racist policies of the past, but it would expand development access to areas with the most room to build.

3. Not all regulations are created equal

In his executive order, President Trump lists a range of “regulatory barriers” that “hinder the development of housing,” including not only restrictive zoning codes but also rent controls, energy efficiency requirements, labor standards, building codes, and impact fees. To address the nation’s growing affordability crisis, it will be important to untangle these policies and determine whether removing or reinforcing regulations is the right approach.

If local zoning reforms do risk raising housing costs in the near term—as one recent study suggests—well-designed rent control measures and other tenant protection policies may need to be strengthened to preserve affordable housing and ensure families aren’t displaced.

Similarly, energy efficiency standards (PDF) and reasonable impact fees can be effective tools for producing or preserving affordable housing and reducing housing costs for low- and moderate-income families. And healthy housing regulations can protect children and older adults and prevent exposure to toxins that disproportionately affect people of color and residents in lower-income neighborhoods.

As a result, a blanket deregulatory approach is likely to undermine public health, widen inequalities, and exacerbate affordability challenges; instead, smart regulatory strategies should be the goal of reforms at all levels of government.

4. Support bottom-up solutions

Even though housing affordability is a challenge across the US, solutions should be tailored to local economies, markets conditions, political dynamics, and demographic shifts. In some places, low wages, unemployment, and financial insecurity are the primary drivers of affordability challenges, while in others, gentrification pressures are a major contributing factor.

Across such a broad array of communities and markets, it will be challenging for the federal government to prescribe or assess the sufficiency of local regulatory reforms. To do so, it must provide local governments and other stakeholders with necessary data and resources to effectively assess their own housing challenges and regulatory barriers and to develop plans for overcoming them.

Effective policies will also require a strong emphasis on community engagement from the outset, and ongoing monitoring of implementation and evaluation of outcomes. The federal government used this model under the Sustainable Communities Initiative and began to apply it more broadly through the US Department of Housing and Urban Development’s Affirmatively Furthering Fair Housing rule before Secretary Carson suspended its implementation. Mining lessons from each of these efforts will be key to the success of new initiatives.

President Trump signs an executive order to establish a White House council on affordable housing in the Oval Office of the White House in Washington, DC on June 25, 2019. (Photo by MANDEL NGAN / AFP / Getty Images).

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