During last week’s Democratic presidential debate, former Department of Housing and Urban Development (HUD) Secretary Julián Castro said that under his leadership in 2015, the agency “passed the most sweeping rule to further desegregate our communities in the United States.” He was referring to a rule directing HUD to “affirmatively further fair housing” (AFFH) through integrating neighborhoods and regions based on race and income. Current HUD Secretary Ben Carson has received criticism for suspending the rule. But Carson has proposed revising it to target the restrictive zoning rules that enable residential segregation.
If Carson follows through with this approach, it has a better shot at reducing barriers to new housing construction – and thus allowing for more economically and racially diverse housing in communities across America – than the Castro approach.
Specifically, Carson has suggested that HUD’s Community Development Block Grants (CDBG), which give local politicians wide discretion to spend federal money on their favored projects, should be withheld from jurisdictions that enforce zoning rules that stand in the way of new housing supply. That is, communities would only be able to receive CDBG funds if they respond to an increase in housing prices by allowing more homes to be built.
This approach zeroes in on a key policy that prevents millions of Americans from finding housing they can afford in the places where their best work or educational opportunities are located: restrictive zoning. In job-rich Washington, DC, for example, two-thirds of the land is zoned for either single-family or row houses. The median price of a single family home there is $730,000. The median price for a condo is $468,000—but they can only be built in a tiny portion of the city.
Carson’s proposal has drawn criticism from some conservatives who oppose any efforts by the federal government to limit local control over land-use decisions. But this concern is misplaced.
Local zoning rules across the country often limit or ban the construction of lower-cost housing such as apartments or manufactured homes. In general, zoning limits how densely developers can build and, in the process, increases the cost of housing. When jurisdiction after jurisdiction adopts rules that drive up home prices, entire regions become inaccessible to low-income and even middle-income people.
When localities overstep individual rights, as in the case of jurisdictions that prevent landowners from using their property to provide new housing in the face of population growth and rising demand, higher levels of government have a role to play in encouraging deregulation. Conservatives should celebrate, not denigrate, a proposal to stop subsidizing jurisdictions that actively price people out.
In order to cut off CDBG funds from the jurisdictions with the most exclusionary zoning, HUD would likely need Congress to reform the CDBG statute. Both Democratic and Republican senators have suggested using federal grants as a tool to encourage zoning reform, so Carson may have willing partners on the Hill. Even without Congress, the CDBG statute puts HUD on firm legal ground to increase its oversight of grant spending in pricey jurisdictions that block new housing construction.
Further, CDBG projects are required to benefit low- and moderate-income households. This means that for jurisdictions that use zoning to drive up house prices, HUD could require that CDBG is only spent on projects targeted to low-income residents, such as affordable housing.
In addition to upholding a conservative, market-driven solution to improving housing affordability, Carson’s proposal has plenty for progressives to like. Democrats who support the 2015 AFFH rule should welcome an approach that is, in many ways, much stronger.
The largely symbolic Obama-era rule sought to reduce racial segregation by requiring local and regional governments to gather extensive data about racial and economic integration in their communities and to identify policies that maintain segregation. Jurisdictions that did not meet HUD’s integration goals were then required to develop reports describing how they would improve. Actual increases in integration outcomes were not required.
Merely creating plans for integration was enough for a jurisdiction to keep receiving HUD money. The plans themselves often suggested mere token reforms, such as a new location for subsidized units, rather than a change in the underlying land-use regulations that have played an important role in segregating American neighborhoods.
Carson’s proposal is drawing fire from all sides, with some suggesting that it would be less effective than the 2015 AFFH rule and others suggesting that it’s a federal overstep. In fact, conservatives and progressives alike should take a fresh look at a market-driven idea with real potential to help a lot of people.
Emily Hamilton is a research fellow focusing on urban economics and land-use policy with the Mercatus Center at George Mason University. Follow her on Twitter @ebwhamilton.