Key Takeaways
- Congress should pass laws that push localities to allow more housing to be built at market rates.
- Existing discretionary grant programs give Congress a powerful lever to incentivize policy change at the state and local levels.
- Under the proposed legislation, local decision-makers largely remain flexible to avoid hard decisions to allow substantial housing supply growth.
- Some bills also prioritize procedures and planning when the emphasis should be on concrete outcomes closely related to housing production.
Recent bipartisan proposals seek to leverage Congress’ spending power to encourage local and state governments to reform land use and zoning regulations to permit more housing. The three bills, the Housing Supply and Affordability Act, the Build More Housing Near Transit Act, and the Yes In My Backyard Act (YIMBY Act), correctly address high housing prices by encouraging more supply rather than subsidizing demand.
These are not the first efforts at the federal level to overcome regulatory barriers to affordable housing rooted in “Not In My Backyard” attitudes, or NIMBYism —a philosophy that opposes changes to the built environment that supporters see as undesirable. Under Secretary Jack Kemp in 1991, the Department of Housing and Urban Development (HUD) convened an advisory commission to explore regulatory barriers to affordable housing such as land use rules, restrictions on multifamily housing, local environmental rules, and more. Decades later, we are still trying to address the same challenges.
As explained below, Congress can effectively drive housing production by demanding that state and local governments make meaningful reforms without delay. This analysis examines each of the recently proposed bills against that standard.
History of Congress influencing our housing supply
We often consider housing and land use regulations as inherently local concerns. Cities and towns set zoning rules, issue building permits, and manage transportation infrastructure. Therefore, rising housing costs and scarce housing stock are primarily local problems with strictly local solutions.
However, Congress has more influence to increase the housing supply than many realize. Congress is free to collect taxes and spend the money directly on building housing, as it did in the Housing Act of 1949 to build public housing. But Congress can also use its spending power to influence state and local action on various issues. Most famously, in 1984 Congress voted to withhold 10 percent of surface transportation funds from any state that did not set its minimum drinking age at 21.
Some states thought Congress had exceeded its authority and challenged the law in the courts. But in South Dakota v. Dole, the U.S. Supreme Court affirmed Congress’ power to condition funding on reasonably related state and local action. In housing policy, Congress could make existing or new funding for states and local governments contingent on their enacting pro-housing reforms, the same way it encourages the states to establish a uniform drinking age.
Housing Supply and Affordability Act
The Housing Supply and Affordability Act, introduced in March 2021, provides discretionary grants to states, tribes, local governments, and any combination thereof. Grants would fund the planning and implementation of reforms to reduce barriers to housing development near jobs and transit. Jurisdictions would compete for the grants and be evaluated on factors including the availability of outside funding and the likelihood that projects would meet the bill’s goals. The bill was introduced by Sen. Amy Klobuchar (D-MN), and the co-sponsors include Sens. Rob Portman (R-OH), Tim Kaine (D-VA), and Ben Ray Luján (D-NM).
Benefits: The bill exemplifies how legislators can form bipartisan coalitions around reforming zoning and land use regulations to mitigate housing scarcity. It attempts to target the provision of extra housing where it makes sense by prioritizing applications that site dwellings near transit and jobs, putting workers closer to employers and customers closer to businesses while reducing reliance on cars.
Drawbacks: The bill mostly funds planning, not action. Even then, the planning guidance does not significantly reduce procedural housing supply barriers, like potential overreliance on discretionary reviews and aldermanic vetoes. Under a discretionary review system, even projects that meet regulations can be modified or nixed by authorities. Aldermanic vetoes (or councilmanic prerogative) is a system where members of the municipal legislature retain formal or de facto authority over zoning and land use decisions in their districts, independent of the regulations. The bill does not tie reforms to other financial incentives beyond the initial grant funding. Relying only on the one-time grant funding to enact reforms doesn’t seem like enough of a nudge to get a skeptical community to embrace housing production. It is, instead, a reward for places already moving in that direction.
Improvements: The bill could tie housing and governance reforms to higher funding from existing sources like the Community Development Block Grant (CDBG). CDBG funding is provided on a formula basis to states, urban counties, and cities for a wide range of implementation, planning, and technical assistance activities.
Build More Housing Near Transit Act
The Build More Housing Near Transit Act, introduced in April 2021, revises the scoring system for transit capital grants to favor applications where the applicant “demonstrates substantial effort to preserve or encourage affordable housing near the project.” The bill was introduced by Rep. Scott Peters (D-CA) with 19 Democratic co-sponsors and one Republican co-sponsor, Rep. Blake Moore (R-UT). It would modify the Federal Transit Administration’s capital grant program, which provides competitive grants to transit agencies to build, expand, or improve transit infrastructure. Not every application is funded, and each is scored on a complex set of criteria to evaluate its worth as a transit asset and its furtherance of other federal policy goals. Affordable housing is currently not among the FTA criteria.
Benefits: The bill elegantly breaks down silos between transportation funding and housing production, both affordable and market rate, while leveraging substantial existing funding streams to incentivize lasting reform. It achieves this by using transit capital funding as a carrot for jurisdictions that enact policies to preserve or grow the quantity of affordable housing near transit stations, while remaining agnostic to procedures. Normally, transit projects are planned in a vacuum. Planners might consider existing housing within a certain radius of the station, but traditionally have not gone out of their way to encourage more or denser housing near new transit stops. Paradoxically, planning practice has been to build lots of parking near new transit stations on the theory that passengers from nearby homes will drive to the station instead of to their final destination.
Drawbacks: The bill’s drafters chose to be overly inclusive of ways that grant applicants could earn preferential scoring.
“(I) providing documentation of policies that allow for the approval of multi-family housing, single room occupancy units, and accessory dwelling units without a discretionary review process;“(II) providing local capital sources for transit-oriented development; or“(III) other methods, as determined appropriate by the Secretary.”;
The drafters could have stopped at “I” and had a more substantial bill. Instead, they included “II,” which could allow applicants to buy their way out of effective reforms, and “III,” which allows the Secretary of Transportation to add additional criteria that could further dilute the bill’s intent.
Conversely, the drafters were overly exclusive by only including non-bus transit projects in the scoring reforms. Instead, they could have also amended the program to include traditional bus transit capital grants. By including the bus and bus facilities program in the reforms, the drafters could have encouraged incremental growth in transit-accessible housing across a more diverse set of communities. For example, regions like Detroit, where the vast majority of transit trips occur on a traditional bus, and college towns like Bloomington, Indiana, and State College, Pennsylvania, would be outside the bill’s reach as proposed since they only have traditional bus service.
Improvements: Limiting the counterproductive flexibility described above will ensure the legislation achieves its purpose. There is also room for more nuance with the scoring preferences. The drafters could further boost scoring for community projects with policies that encourage family-sized apartments or allow single-stair exits for small apartment buildings. Allowing building reforms like single-stair exits would allow multifamily buildings to be made more cheaply, with more architectural flexibility and the opportunity to place windows in every room of an apartment.
YIMBY Act
Introduced in May 2021, the YIMBY Act would require CDBG recipients to adopt (or demonstrate credible plans to adopt) specific land use policies that encourage more housing production, and diverse land uses geared toward new development. The bill was introduced by Sen. Todd Young (R-IN) and the co-sponsors include Sens. Brian Schatz (D-HI), Raphael Warnock (D-GA), and Chris Van Hollen (D-MD).
Policies named in the bill include:
- Expanding zones where developers have presumptive right to build multifamily units,
- Allowing up to fourplexes in single-family residential zones,
- Allowing manufactured homes in single-family zones, and
- Allowing multifamily residential developments in commercial zones.
Benefits: The enumerated policies are action-based rather than procedural. Compared to the Housing Supply and Affordability Act, this should more effectively drive housing production, and this is ideal since communities should generally have flexibility on procedures rather than outcomes.
Drawbacks: The bill’s drafters missed an opportunity for governance reform since most of the prescribed policies open the door to excessive use of discretionary review and aldermanic prerogative. Some wealthy jurisdictions could eschew these reforms and forgo their CDBG funds to retain their economic exclusivity. Still, these will probably be rare cases, and most jurisdictions will comply with the legislation if enacted.
Improvements: The drafters could offer temporary bonuses to CDBG funding for communities that implement governance reforms like limiting discretionary review or aldermanic prerogative, or that boost transit ridership through targeted development near transit stations.
Conclusion
On the positive side, two of the bills (the Build More Housing Near Transit Act and the YIMBY Act) leverage existing grantmaking programs to incentivize more abundant, market-rate housing. These two bills are more likely to foster lasting reforms in communities not already on a pro-housing abundance trajectory. All three bills have bipartisan co-sponsors, and the YIMBY Act was itself introduced by a Republican.
To the extent that these bills yield reforms that grow housing supply broadly, and in strategic areas like near transit stops, they will lead to healthier housing markets. The bills are evidence of growing support for housing abundance on multiple fronts.
On the other hand, the bills generally leave local decision-makers flexible to avoid the hardest reforms, forgoing substantial housing supply growth. Some policy levers prioritize procedures and planning when preference could be given to production-based benchmarks. There are also missed opportunities for governance reform around discretionary reviews, or political vetoes of new or expanded housing.
Each bill has effective and ineffective components. They represent a positive step toward a consensus that market-rate housing should be more abundant and less expensive. Federal efforts to mitigate the housing shortage will work best when they leverage substantial, existing spending to encourage permanent reforms that deliver measurable increases in housing supply.
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