Here's how to make President Biden's housing initiative work

Here's how to make President Biden's housing initiative work
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Centrists in the Senate remain in talks with the Biden administration in an effort to reach a bipartisan compromise on an infrastructure bill. Meanwhile, some House Democrats are preparing to move forward with no Republican support. One point of bipartisan agreement could be the White House’s call for a federal grant program encouraging localities to allow more housing construction at lower costs.

In the past, legislators from both parties have introduced bills to encourage localities to reduce barriers to housing construction. Something needs to change: Since the 1960s, the median renter has spent an increasing portion of income on rent, in large part due to increasingly rigid zoning, which stands in the way of housing construction that working people can afford. Getting the details right will determine whether any new grant program succeeds.

First, a federal program must be carefully targeted to all – and not just some – of the local policymakers with direct authority to reform zoning restrictions and permit-approval processes. Second, it must accurately measure which localities are truly making low-cost housing available, and which ones only appear to be doing so. 

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At the local level, the policymakers who enforce rules limiting housing construction and affordability don’t always have the political motivation for reform. Bipartisan support for the status quo, often in the form of “NIMBYism”, is simply too strong. 

The costs of construction (noise, new traffic, more people using local services) are highly localized and frequently unpopular. The benefits, in contrast, are spread out. The identities of the people who will live in a new development generally aren’t known.

Fortunately, at the federal level, a bipartisan recognition of the problems that restrictive zoning causes exists. When locality after locality throws up obstacles to housing construction, entire regions become unaffordable. This burdens new and longtime residents alike and makes it difficult for many people to live where the best opportunities exist.

Democrats and Republicans have introduced bills that would encourage reform by tying existing grants to zoning reform efforts. But the potential upside of these bills is limited, because some jurisdictions, including some of the most exclusionary suburbs, don’t receive these federal grants to begin with.

The White House plan wisely suggests a “new competitive grant program that awards flexible and attractive funding to jurisdictions that take concrete steps.” A race-to-the-top style program is the best way to encourage more localities to continually improve the conditions for lower-cost housing construction over time.

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Targeting the right jurisdictions isn’t enough, though. A successful federal program to encourage local zoning reform must also be based on the right metrics of success. Prior proposals have relied on measuring tweaks to zoning rules that look good on paper, but don’t necessarily improve real-world outcomes like affordability and the number of homes built. A line in a zoning ordinance that sounds like it permits lower-cost housing doesn’t always indicate construction feasibility. 

For example, many localities permit single-family homeowners to build “accessory dwelling units” such as backyard cottages, English basements or garage apartments on their properties. This, in theory, should lead to more housing being available to those of modest means. But few localities have bothered to make the rules simple and realistic enough for homeowners to build these units. 

In 2016, local officials in Washington, D.C., passed an accessory dwelling unit ordinance with lots of fanfare about improved opportunities for lower-cost housing construction. But through 2019, the city (with nearly 700,000 residents) permitted fewer than 100 such units. Rules on ceiling heights for basement apartments, distances of detached units from property lines and other barriers continue to stand in homeowners’ way. 

Rather than rewarding changes on paper, federal policymakers should use a formula to rank localities based on their housing affordability and the number of new homes they permit. The key is to offer the largest grants to the highest-performing localities, and none to those that obstruct low-cost housing construction the most.

Beyond rewarding communities that create genuine housing opportunities with federal dollars, ranking localities creates transparency by showing which jurisdictions are using zoning to exclude new residents. It creates a tool to “name and shame” the worst offenders where zoning rules are the greatest burden for low-income residents. This may be one of the best tools available. Pointing out some of the most-restrictive localities (from Palo Alto, Calif. to Greenwich, Conn.) could draw attention to the harms that land use regulations cause in places where policymakers and voters consider themselves to be progressive.

The White House proposal is a welcome opportunity to enable more people to live in the regions of their choice at prices they can afford. But effective federal grants must be based on metrics that reflect localities’ actual openness to lower-cost housing construction, rather than superficial reforms that may not lead to real-world results.

Emily Hamilton is a senior research fellow with the Mercatus Center at George Mason University, director of its Urbanity Project.