As housing costs soar nationwide, addressing the housing shortage is urgent. Housing affordability is now a topic of presidential campaigns, but no matter the approach to increasing the housing supply, the federal government will need to get creative to tackle one of the most significant barriers: local land-use laws.
Federal transportation funding could be a significant avenue for the federal government to better meet housing needs across the US. Policymakers could require that federal transportation funding align with housing needs based on analyses conducted by regional bodies, called Metropolitan Planning Organizations (MPOs). These changes could promote nationwide land-use reforms that increase housing supply and ensure new housing is located where it’s most needed in communities.
Why use federal transportation funding to drive housing development?
Transportation policy and housing policy have implications for each other. Where a person lives affects their transportation access, and a community’s transportation options affect where people choose to live. This has prompted researchers to advocate for better connecting transportation funding to local land-use and zoning that will support needed housing development.
Federal transportation funding can be a powerful tool for increasing housing supply because it’s significantly larger than federal housing funding. The amount of funding available means it’s highly sought after by states and localities that are motivated to comply with funding requirements, even when such requirements mean changing state and local policies.
There are two types of federal transportation funding. Competitive funding, which states, localities, and other organizations can apply for can impose various requirements and set scoring based on federal goals and policies. These programs tend to have far more demand than available funds. Formula funding is the other funding type. It flows to states automatically based on a specific formula, rather than requiring a competitive application. Formula funding is critically important to states and localities, which is why in the 1980s, the federal government threatened withholding formula funds to create a national minimum drinking age.
Learning from competitive funding requirements around land use to create formula funding requirements
The US Department of Transportation has recently begun prioritizing land use as a scoring criteria for certain competitive funding programs. For example, the Rebuilding American Infrastructure with Sustainability and Equity program includes a land-use analysis as part of the scoring criteria.
Although competitive funding has been promising in influencing local land-use laws for more housing, it accounts for only 21 percent the Bipartisan Infrastructure Law’s transportation funding, one of the largest streams of federal funding. That means many states and localities won’t be affected by competitive incentives and could choose not to apply. To drive broad changes around land use, formula funds must similarly be used as a policy tool. Yet formula funding flows to states, and housing policy is made at the local level.
MPOs play a critical role in linking transportation and housing planning
Fortunately, MPOs are regional bodies that close the gap between state-level funding and local-level policy. They coordinate local governments to provide data and develop regional plans, including for transportation. They receive federal funding to review, analyze, and approve long-term transportation plans required for projects to receive federal formula transportation funding.
The Bipartisan Infrastructure Law acknowledges the critical connection between state transportation funds and regional land use by encouraging MPOs to complete a housing analysis for regional transportation planning. These analyses can demonstrate how proposed transportation projects align with housing development. Currently, however, regions don’t have to assess their housing needs as they relate to transportation investments to access federal funds.
Requiring housing analyses can incentivize local zoning reform
Requiring MPOs to conduct housing analyses would encourage localities to review and update their zoning codes to align better with housing need to receive coveted federal transportation funding.
Consider a growing region with a significant need for new housing that has two proposed transportation projects. One of the projects supports housing development in a part of the region where land-use laws allow for additional housing, and the other is in an area with restrictive zoning that doesn’t support additional housing. The housing analysis would lend support to the former project because it’s more aligned with the housing needs for that region and locality.
Yet the latter area would have a financial incentive to adjust zoning to ensure access to those transportation funds. This approach would lend support to states looking to reform local zoning to overcome local exclusionary policies.
The housing analysis would also encourage zoning to allow for more housing near jobs, activity centers, and transit. This requirement would help better align future transportation infrastructure funding with regional needs for both the amount and location of housing.
The housing analysis requirement would remain flexible, allowing each state, locality, and MPO to decide the best strategies for housing production. In some areas, allowing larger multifamily buildings near transit would be effective, but in others, increasing density along commercial corridors would be more appropriate. In areas that aren’t experiencing growth, the analysis could help show how transportation can revitalize vacant housing.
Because of limited federal influence over local land use and housing, transportation funding is the best approach for policymakers to support broad reforms. By tying formula funding to housing analyses conducted by MPOs, the federal government can change our systems to facilitate more housing development and responsible land use while recognizing that every region has different needs requiring different approaches.
Let’s build a future where everyone, everywhere has the opportunity and power to thrive
With your support, the Urban Institute can continue working in communities to equip leaders with the evidence and data they need to build long-lasting solutions. Make your gift today.