The Biden administration is steering the federal government toward housing market deregulation in an effort to boost supply and lower prices.
A provision in President Joe Biden’s infrastructure proposal calls for a new $5 billion grant program to reward local governments that cut back land use regulations to allow for more construction of housing.
The measure is just part of the housing portion of the plan, which also calls for hundreds of billions of dollars in subsidies for new housing and generally stretches the common meaning of “infrastructure.” But it is different in that it targets the supply side of the housing market rather than the demand side.
And, notably, it is one of several signs that officials within the administration see the regulatory barriers to housing construction as a serious problem that needs to be addressed.
The shortage of housing is a “dire” crisis, the National Association of Realtors declared earlier this month, citing an underbuilding gap of 5.5 to 6.8 million housing units since 2001. The group called for a “once-in-a-generation” policy response, including the easing of zoning and permitting rules to allow for more construction.
With housing costs and rents rising, increasingly pricing middle-class families out of the country’s most productive cities, opponents of restrictive land-use policies are hopeful that the Biden administration is joining their cause.
They see the zoning reform provision in the infrastructure plan as an indication that Biden is siding against local-level opponents of construction, often criticized as practicing “Not In My Back Yard,” or NIMBY, and with the proponents of density and construction, known as “Yes In My Back Yard,” or YIMBY.
Laura Foote, the executive director of YIMBY Action, a network of pro-housing activists, described the Biden proposal as a modest step toward encouraging lower-level governments to allow more construction.
The plan, Foote said, is a “reasonable, good step in the right direction.”
“There’s going to have to be bigger thinking on this from the federal level,” she said.
Indeed, Biden’s campaign plan was more aggressive. In addition to proposing grants for towns that reduce land use regulations, it called for conditioning existing federal grants from the Department of Housing and Urban Development on recipients agreeing to “eliminate regulations that reduce the availability of affordable housing and contribute to sprawl.”
Still, support has been growing in both parties for having the federal government weigh in against restrictive zoning and permitting.
For example, this March, Sens. Todd Young, an Indiana Republican, and Brian Schatz, a Hawaii Democrat, reintroduced the Yes In My Backyard (YIMBY) Act, which would require localities that receive HUD Community Development Block Grants to lay out policies deemed “pro-affordability,” such as expanding by-right multifamily zoned areas and reducing minimum lot sizes. Some of the most left-wing members of the Senate, such as Sen. Elizabeth Warren of Massachusetts and Cory Booker of New Jersey, have backed similar ideas.
A similar idea briefly gained purchase in the Trump administration. Ben Carson, the conservative secretary of Housing and Urban Development, moved in 2018 to overhaul an Obama fair housing rule, one that had been aimed at discouraging segregation, to tie grants to land-use deregulation. The effort was abandoned, though, when President Donald Trump began attacking the Obama version of the rule as a war on the suburbs.
The Obama fair housing rule, known as Affirmatively Furthering Fair Housing and meant to implement part of the 1968 Fair Housing Act, drew heated criticism from many conservatives and libertarians, who saw it as a federal intrusion into local governance.
The Obama rule, though, which the Biden administration this month partially restored, was aimed at segregation, not housing supply or zoning policies in general.
Emily Hamilton, a researcher at the libertarian Mercatus Center, said that the federal government has a legitimate interest in reducing exclusionary zoning at the local level given its past involvement in encouraging minimum lot sizes and single-family housing through regulatory guidance, court cases, and federal mortgage programs that subsidize single-family housing.
“The federal government would be taking relatively small steps to reverse course now that some of the problems of housing supply constraints are widely recognized,” Hamilton said of the Biden proposal.
In general, economists maintain that land-use restrictions hurt growth, especially by limiting workers’ abilities to move to hotbeds of productivity, such as New York City and the San Francisco Bay Area. The economists Chang-Tse Hsieh and Enrico Moretti concluded in a 2019 journal article that housing constraints lowered economic growth by 36% between 1964 and 2009.
Biden’s Council of Economic Advisers framed the issue in terms of race in a June blog post, saying that exclusionary land-use policies create “racial disparities in the housing market.”
“Exclusionary zoning laws enact barriers to entry that constrain housing supply, which, all else equal, translate into an equilibrium with more expensive housing and fewer homes being built,” the economic advisers wrote.
Whether or not Biden’s grants proposal is enacted as part of an infrastructure program, it appears the White House is becoming a force, at least in terms of messaging, in favor of land use deregulation.
