Housing Reform Popular on Federal Level, But Where Are Cities and States?
Housing costs are increasing well above what most Americans can afford and while this crisis has been ongoing, policy proposals to address affordability are starting to catch up, but not from the government entities that matter the most.
Recently, elected officials from the President all the way down to presidential hopefuls have released policies aimed at tackling the affordable housing crisis, and rightfully so.
Residential development has lagged for years, failing to keep up with demand, and much of that can be blamed on the regulatory burden levied by local governments.
“By restricting the supply of land available for higher-density development, regulatory constraints and not-in-my-backyard (NIMBY) opposition may also add to the challenges of supplying more affordable types of housing,” read a recent Harvard study on housing affordability.
The report argues the rising costs of labor, land, and materials, all of which are exacerbated by increased regulation, make it unprofitable for developers to build housing for the middle market, the housing being built is for the higher-end market.
This squeezes out a population of would-be homeowners, and while renting has often been viewed as the affordable housing option, at least until one is prepared to buy, even that has changed.
New research shows affordable housing units in America’s fastest-growing cities declined significantly, roughly one-third, between 2010 and 2017, while their populations increased, on average, more than 15 percent.
“Cities that have experienced aggressive population growth have struggled to build enough rental housing to meet the increased demand,” wrote Steve Guggenmos, the lead of Freddie Mac’s Multifamily research and modeling team.
Austin, Texas, according to the research, is the nation’s fastest-growing city with a 22.5 percent population increase in the seven-year span previously mentioned. Within that time, the city’s affordable housing stock decreased by nearly 35 percent, seven points below the national average.
The report also notes the percentage of multifamily rental units that are affordable to households making 50 percent of the area median income fell from 55.7 percent to 39.1 percent in 2017.
During this time, 85.9 percent of metros experienced a loss of affordable units, so this issue isn’t confined to cities like Los Angeles, New York City, or Miami, where residents have long paid a larger share of their income to housing. The issue is spreading to what were once considered affordable metro areas, like Raleigh, North Carolina which saw a 17.4 percent population increase and 40.1 percent decrease in affordable housing stock, and Houston which had a population increase of 15.9 percent and affordable housing decline of 22.7 percent.
The National Low-Income Housing Coalition wrote that for a worker making minimum wage in Texas – $7.25 per hour – they would have to work 91 hours to afford a 1-bedroom apartment or 112 hours for a 2-bedroom. Nationwide, workers making minimum wage have to work nearly 127 hours a week to afford a 2-bedroom rental and with only 37 affordable units for every 100 low-income renter households, options are scarce.
Needless to say, housing affordability is a crisis that has caught national attention.
Four of the 20 Democratic presidential hopefuls have released detailed housing plans, and three of those propose a renter tax credit.
While the plans vary in specificity, they hinge on the idea that renters would receive a credit for any amount of rent they pay that is more than 30 percent of their income. None of the candidates have placed a price tag on this subsidy. The subsidy, however, only addresses the symptom of the underlying problem – prohibitive local regulations are stymieing the growth and development of the housing supply.
Sen. Todd Young (R-IN) introduced the Yes In My Backyard(YIMBY) Act to address housing supply. Young’s bill would tie strings to Community Development Block Grant funding from the federal government and force local governments that receive the funding to address why they are still adopting strict development regulations. Policies like parking minimums, minimum lot size requirements, and overall zoning codes would fall under that category.
President Trump has also taken notice and recently signed an Executive Order creating a council on eliminating barriers to affordable housing. The commission’s goal is to identify ways, and hopefully remove barriers, that artificially raise the cost of housing development, which is ultimately passed on to the consumer.
While it’s helpful to the overall affordability fight to have them shed a light on the problem, until local and state governments get on board, neither Young nor the President’s effort will truly reduce housing costs. At the same time, the Democratic contenders’ plans are costly and do not address the underlying issue either, that’s why state and local governments need to act.
States have the preemptive power to stop local policies that delay development and stop supply from meeting demand.
In Texas, Governor Greg Abbott pushed for permitting reform as a way to preempt local governments’ tendency to slow-roll the permitting process and effectively cap the amount of new housing development.
Rather than continue to allow subsidies for affordable housing, cities and states need to use the tools they have to scale back regulatory framework and actually allow for a free housing market.
With the increased attention from the federal level, and both parties finally agreeing there is an affordability crisis, there is some hope we can start to see the overregulated state of housing in cities and urban areas liberalized.