Local governments across the country have costly and exclusionary land use laws, building standards, and permitting processes. Coupled with a shortage of developable land, the result is that housing prices often exceed the means of even moderate-income families. A 2006 Brookings Institution study of the nation's largest metropolitan areas found that the share of middle-income families is shrinking and middle-class neighborhoods are vanishing even faster, according to Where Did They Go? The Decline of Middle-Income Neighborhoods in Metropolitan America by Jason C. Booza et al.
But removing regulatory barriers to affordable housing production is complicated and often difficult to achieve. Communities and local leaders, operating under short-term thinking, often do not want new housing. Barrier removal does, however, have big payoffs. The possibilities are great, in part because local and state governments that want to make changes can do so without having to rely on federal or state funding.
A number of mayors recognize that their cities' economic futures depend on increasing the supply of housing for residents at all income levels. Chicago's Richard Daley, New York's Michael Bloomberg, and San Francisco's Gavin Newsom have led highly public campaigns to boost housing production. Upzoning land, speeding permit approvals, and other barrier reduction efforts have been key to these initiatives.
In their efforts to review barriers, local governments should take advantage of the resources and leadership provided by the U.S. Department of Housing and Urban Development. As a strong champion of barrier removal, HUD identifies and shares local best practices, rewards innovation, and recognizes local leaders. The Advisory Commission on Regulatory Barriers to Affordable Housing's 1991 report, "Not In My Back Yard: Removing Barriers to Affordable Housing," exposes the regulatory obstacles to housing and fosters ongoing efforts to study solutions. According to the commission, "exclusionary, discriminatory, and unnecessary regulations" raise housing costs by as much as 20?35 percent in some communities.
In a 2005 follow-up report, "Why Not in Our Community? Removing Barriers to Affordable Housing," HUD considers a policy or procedure a barrier when it prohibits, discourages, or excessively increases the cost of new or rehabilitated affordable housing without sound compensating benefits. The report provides important leadership and outlines ways that some state and local governments are responding to the commission's call to action and tackling such counterproductive regulations.
The America's Affordable Communities Initiative supports HUD's commitment to barrier reduction by providing technical assistance and model regulatory approaches to governments and housing advocates. As part of the initiative, HUD has commissioned multiple studies on the different types of regulatory barriers, from subdivision rules to obstacles to land assembly.
HUD's Regulatory Barriers Clearinghouse (www.regbarriers.org) is a database of state and local strategies, guides, and other publications. To further encourage innovation, the agency has elevated barrier removal to a policy priority in its Notice of Funding Availability processes and is conducting research to develop new regulatory tools and guidance for local governments. Another initiative provides guidance to local partnerships that are also working on aspects of regulatory barrier reduction.
Encouraged by these efforts, a growing number of local and state governments are taking a meaningful look at addressing the factors that drive up production costs. While these are heartening signs of progress, more widespread barrier reduction efforts are necessary. Across the U.S., local officials who bemoan the lack of housing for even moderate-income residents need to turn their concerns into action by enacting policies that stimulate new construction and reduce prices.
Local zoning ordinances commonly include provisions that limit density, raising per-unit land costs and increasing home prices. In some suburban jurisdictions, zoning laws restrict apartments, condominiums, townhouses, and irregularly shaped or small lots–indeed, any kind of housing that could be affordable.
In "Regulation and the Rise of Housing Prices in Greater Boston," Edward L. Glaeser et al report that a 2005 study by the Pioneer Institute for Public Policy Research and the Rappaport Institute for Greater Boston attributes a decades-long decline in residential construction and increases in housing costs in the greater Boston metropolitan area primarily to land use regulations that limit housing density. For example, more than 80 of the 187 communities studied had zoned between 91 percent and 100 percent of their land for single-family housing.
Some regulations, of course, serve a legitimate purpose. Officials do need to ensure that existing homeowners and local budgets do not suffer inordinately from new development. Overly protective land use controls that constrict housing for lower- to moderate-income workers, however, lead to such problems as traffic congestion, business flight, and other conditions that diminish quality of life.
State and local governments should revise their land use laws to reduce exclusionary zoning and allow greater density and a diversity of housing choices. This includes provisions for multifamily and other affordable housing types, such as accessory dwelling units/in-law apartments and manufactured housing. In-law apartments provide not only affordable homes for tenants but also income streams that help buyers obtain a mortgage.
Communities that technically allow such units but effectively preclude development with off-street parking, large-lot, and other requirements should reconsider making such housing available.
Communities often oppose higher-density housing on the grounds that it will decrease nearby property values. However, many studies have shown that higher-density housing does not in and of itself depress property values and, in some instances, may increase values.
State and local governments should also enact laws prohibiting unequal treatment of manufactured homes in zoning. Manufactured housing on a permanent foundation and underwritten with a conventional mortgage should be allowed in any residential zoning district, as long as it meets standards applicable to other forms of housing. Dramatic quality and design improvements have made manufactured housing an increasingly attractive option for affordable housing developers, especially in areas with skyrocketing construction costs such as the Gulf Coast region as it recovers from the 2005 hurricanes. Manufactured homes cost approximately 25?55 percent less than site-built homes of comparable size, according to HUD, because producers realize economies of scale and because there are no weather delays or construction site theft. Faster construction time also translates into lower carrying costs for developers.
Properly sited new manufactured homes are architecturally compatible with stick-built homes, and they are as sound. Research shows that manufactured homes on fee-simple land appreciate reliably, at rates just slightly lower than those for site-built homes.
Requirements Consume Land and Budgets
Site development requirements such as minimum street, sidewalk, and lot widths; yard setbacks; and other infrastructure requirements effectively exclude affordable housing by eating up land and boosting construction costs. In "Study of Subdivision Requirements as a Regulatory Barrier," a draft report for HUD, the NAHB Research Center found that excessive site development requirements increase housing costs by 5 percent at minimum and often by much more.
Lend A Helping Hand
The lack of developable sites and difficulty assembling large tracts drive up costs considerably in many communities. Local public officials should ease land pressures by identifying available parcels and streamlining the process for getting parcels into developers' hands. In the case of surplus public land, jurisdictions can convey land at lower cost in exchange for commitments to affordability. For land that is not "project-ready," local governments should use tax increment financing (TIF) and other tools to build roads, install sewers, and bring other needed infrastructure and enhancements to the site.
Accelerate Adaptive Reuse
In many jurisdictions, authority over such tasks as reclaiming and reusing vacant and abandoned land is dispersed among many agencies, adding time and cost to the development process. To accelerate the reuse of such properties, jurisdictions–in some cases, working with state government–should update tax foreclosure, condemnation, and title clearing procedures.
To expand the supply of developable land, local governments should consider rezoning parcels from other uses. For example, some communities have rezoned industrial lands and smaller privately owned airports for housing development. Others have alleviated the pressure on home prices by opening former agricultural lands to development. Reclassifying land from one use to another is a good time to consider agreements under which builders with access to formerly off-limits land must include some affordable housing.
In many markets, removing exclusionary land use laws and assembling land are essential but incomplete tools for enabling affordable housing production. Local governments operating in costlier markets should use density bonuses (permission to build at higher-than-allowed densities), fee waivers, and other incentives to encourage developers to build housing for low- and moderate-income working families. By leveraging market-rate development, such programs allow governments to direct higher-density housing to targeted areas and integrate affordable homes into the community.
Cast A Wider Net
Inclusionary zoning should not be the first or only approach to providing affordable housing in a community. According to home builders and developers, the laws often amount to a de facto tax on development and constrict supply, increasing housing prices overall while helping a small number of home buyers or renters. Inclusionary zoning should therefore be used only as part of a comprehensive strategy that also allows greater density or provides density bonuses, streamlines the building approval process, and modifies building codes to reduce costs. Local officials cannot rely solely on inclusionary zoning to accomplish what can only be achieved through the harder work of the various barrier reduction strategies outlined in this chapter.
Streamline the Approvals Process
Lengthy and convoluted permitting processes delay construction, adding significant costs to development. In some jurisdictions, residential development reviews take years. The delays come from multiple approval processes, cumbersome decision-making procedures, permitting inconsistencies, local administrative discretion, multiple public hearings, and citizen opposition. In many cities, responsibility for various aspects of a project is dispersed among multiple agencies, with no one person or agency in charge.
Municipalities serious about producing more housing of any kind must devise more business friendly approaches. City staff must work with developers to negotiate the regulatory gauntlet rather than stick to hard-and-fast rules. Efforts should be made to cut the number of public hearings required for approvals. In their dealings with developers and community residents, city staff should emphasize conflict reduction and consensus building. Staff should also receive training on how to deal with new types of development.
Learn more about markets featured in this article: San Francisco, CA.