Deregulation can do more for renters than eviction moratoriums

Deregulation can do more for renters than eviction moratoriums
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Sooner or later, the Biden administration’s federal moratorium on evictions will come to an end, and policymakers will need to get serious about low-income families’ access to affordable housing.

Democrats are likely to pursue an expansion of government subsidies for rental housing assistance in their $3.5 trillion reconciliation bill. But that approach unfairly asks taxpayers across the country to foot the bill for excessive rents that result from burdensome housing regulations in certain areas. For example, the federal government already spends up to around $3,500 per month to put up a family in a two-bedroom apartment in San Francisco County, compared to about $1,200 in Harris County, Texas.

Our latest research shows there’s a different path to expanding housing assistance to more families — without spending any additional federal dollars. We find that relaxing burdensome housing regulations would allow high-cost places like San Francisco and Los Angeles to serve around twice as many families in mainstream rental assistance programs as they do today.

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In some of America’s most expensive and most innovative cities, housing costs climb each year, forcing families to either move away or pay more and more income on rent. Nearly a quarter of renters in 2019 spent more than half of their income on rent and research has found that homelessness is higher in areas where rents make up a larger share of income. California, a state with several of the most expensive housing markets in the country, is “home” to 28 percent of the total U.S. homeless population and slightly more than half of the country’s unsheltered homeless population.

The federal government already spent over $50 billion each year to support low-income renting families before the pandemic began. Despite this level of spending, only one in four families eligible for housing assistance actually receives it. While increasing funding could help more families obtain assistance, increased subsidies would also fuel even higher rents in high-cost cities and unfairly burden taxpayers throughout the country with the cost. 

Deregulation offers an alternative approach. When developers set out to build apartment buildings or single-family homes, they face a host of regulations. Many of these regulations keep us safe, like prohibitions on certain flammable materials and requirements that ensure a building has a strong foundation. Others, however, impose significant costs and end up restricting housing supply without improving safety. 

Consider parking requirements: even in the densest neighborhoods of New York City, builders are required to include 40 to 85 parking spots for every hundred new units constructed. Developers are forced to turn valuable space into a parking garage — then pass this expense to their renters. Examples of other supply-reducing regulations include unreasonable minimum lot sizes, restrictions on multifamily dwellings, excessive environmental standards and permitting delays. Past research has shown how these regulations increase housing costs, increase homelessness, stunt economic growth, reduce mobility to high-opportunity areas and hurt the environment. 

Our research calculates how removing excessive regulations on housing supply could increase the number of families that our existing federal rental housing programs can serve. We use previous research to identify the 11 metropolitan areas in the U.S. with regulatory burdens that substantially and unnecessarily drive up home prices — four of the five most expensive are located in California. We estimate that deregulation would cut rents by between 19 and 55 percent across the 11 supply-constrained metropolitan areas. 

Because families receiving housing vouchers or project-based assistance pay the same fixed share of their income on rent regardless of changes in market rent, all the cost savings from housing deregulation would flow back to housing assistance programs — freeing up an estimated $2.3 billion for Section 8 housing choice vouchers and $1.1 billion for project-based rental assistance. This funding could be used to serve additional families in need. For example, we estimate that San Francisco and Honolulu could more than double the number of families they serve, while Los Angeles could serve 81 percent more families.  

Housing assistance programs treat families unfairly by subsidizing burdensome regulations in a select few cities. Taxpayers in small towns in Maine and West Virginia — and those in well-regulated cities like Phoenix and Atlanta — should not subsidize poor policy choices in San Francisco, New York City and Washington, D.C.  

Rather than piling more money into their $3.5 trillion budget bill, Democrats should first ensure that current spending is helping as many low-income families as possible.  

Kevin Corinth, a researcher and executive director of the Comprehensive Income Dataset Project at the University of Chicago Harris School of Public Policy, served as chief economist and in other positions at the White House Council of Economic Advisers from 2017-20. Amelia Irvine is an economic consultant at Bates White and served as a research economist at the White House Council of Economic Advisers from 2019-20.